ShockWave Medical (SWAV) Q1 2022 Earnings Call Transcript

ShockWave Medical (SWAV 0.10%)
Q1 2022 Earnings Call
May 09, 2022, 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 2022 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 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, 2022. 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 9, 2022.

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 2022. While the quarter started out solely with a fairly significant COVID surge, Omicron now seems like a distant memory as procedures recovered steadily since January. Our team has remained focused, which has enabled us to sustain our high level of performance as evidenced by our first quarter revenues of $93.6 million, a 194% increase from the first quarter of 2021.

At a high level, U.S. coronary continues to account for the majority of our growth. However, both our international business and our U.S. peripheral franchise continued to be strong contributors to growth.

Later in the call, Isaac will provide additional details regarding market dynamics. But first, I would like to discuss some key recent accomplishments and drivers of our business. Starting with peripheral. There has been increasing attention paid to our peripheral business of late, and we are encouraged that the significant upside potential of this franchise is being better appreciated.

Last month, we announced the transition from a limited to a full launch of M5+ product, and the customer response continues to be very positive. As a quick reminder, the M5+, which will replace our legacy M5 product over time, has three major improvements: size, reach and speed. By now offering a larger, eight-millimeter version, doctors are noting that they feel better equipped to treat a significant portion of the iliac arteries where our seven-millimeter device felt a bit undersized to them. The longer catheter shaft gives our customers the length they need to reach lesions above the knee via radial access from the wrist, which our old shaft length could not quite accommodate.

And lastly, by doubling the speed of the pulses from one to two per second, the procedure takes half the time. And no one wants to go back to the old version once they've done one case with M5 fast. Size, reach and speed are all resonating strongly during the early days of the launch and confirms that our team is doing an excellent job at identifying the needs of our customers and incorporating them efficiently into our new product development efforts. The big news on the international front is the recent approval of coronary IVL in Japan.

There are over 250,000 PCIs performed in Japan each year and physicians there perform intravascular imaging, particularly IVUS on almost all their cases as standard practice, which enables them to identify calcium more accurately than relying on x-ray. By comparison, less than 10% of U.S. cases is used intravascular imaging. As we have seen in every geography, our safety profile resonates strongly with the Japanese cardiologists.

And remarkably, our CAD IV study in Japan had even lower event rates than the very low rates we have seen in previous studies. So the combination of their use of intravascular imaging to better identify calcium and our consistently low adverse event rates are two of the many reasons why we anticipate that Japan will be among our strongest markets. Our leadership team in Japan is quite strong, and they are now in the process of building out our sales organization to ensure that we are poised and ready as soon as we receive reimbursement, which we believe should come by the end of this year. In order to help the clinical community appreciate the benefits of IVL, we continue to mine the substantial data sets we have created through the rigorous trials we have conducted.

We were pleased to have two publications in the inaugural issue of the Journal of the Society for Cardiovascular Angiography and Interventions, or JSCAI, which just launched in January. Featured in this issue were our CAD III one-year results, as well as our CAD pooled outcomes by gender. The gender studies have been particularly interesting and insightful as they have helped us to highlight the safety and effectiveness of IVL on frail patients with smaller vessels as are generally found in female coronary patients. These data showed that IVL was equally safe and effective in men and women, unlike previous studies of atherectomy devices.

In February, CAD III IVUS outcomes were presented at CRT, and shortly thereafter in March, the CAD IV one-year outcomes were presented at the Japanese Circulation Society by Dr. Shigeru Saito, who was the PI of CAD IV. We anticipate a continued healthy cadence of data being presented and published as our studies continue to prove the acute and long-term benefits of our technology. Finally, a few words on the macroeconomic and global environment.

We believe the next several quarters will be more stable for our customers than the COVID whipsaws that they have lived through over the past two years. And our continued acceleration, as evidenced by the strong Q1 performance suggests that we are -- that we will likely deliver results in a higher range than our prior guidance. We now anticipate delivering top line revenues in the range of $435 million to $455 million for the full year of 2022, representing growth of 83% to 92% from 2021. As our company has matured, we have increasingly made it a priority to be active in sharing our good fortune with those who are not as fortunate.

Our philanthropic priority has recently shifted to supporting the people of the Ukraine as best we can. In addition to other Ukraine-specific donations, our team in Europe has partnered with our distributor in Poland and established a relationship with a hotel near the Ukrainian border, whereby Shockwave is helping to fund the hotel as a temporary housing facility for Ukrainian refugees, almost exclusively women and their children. I've been so impressed by the outpouring of support from our employees across the globe to help personally and financially support this cause. The Shockwave team is not just extraordinary in their ability to pull together and deliver results, but it is extraordinary in a sense of purpose and community demonstrated by the individual team members.

With that, I will turn the call over to Isaac to provide more color on the commercial front, then Dan will share more details on the broader business and financial results. Isaac?

Isaac Zacharias -- Chief Commercial Officer

Thank you, Doug. As Doug mentioned earlier, the year started out with some lingering challenges due to COVID across the globe. However, there was a nice rebound in the second half of the first quarter that has continued into Q2. Our team finished the quarter strong with solid results across the board from U.S.

coronary, U.S. peripheral and our international business. Our U.S. sales team continues to execute at a high level.

Regarding the broader environment, we certainly saw an impact to procedures, especially in peripheral cases, but it was largely contained to January. Our U.S. hospital-based peripheral business recovered well after the January slump. Our customers are continuing to treat their heavily calcified claudicant and critical limb ischemia patients and experienced a return of healthy procedure volumes.

Further, they are increasingly choosing IVL as their tool of choice for their patients. These monthly dynamics seem consistent with what most other companies in our space have reported, a soft January, followed by a strong February and March. In fact, in February, we had the highest U.S. average daily sales in our history for both the coronary and peripheral products.

Fortunately, this record was surpassed in March. During the quarter, 62% of our U.S. accounts purchased both coronary and peripheral products, 21% purchased only coronary and 17% purchased only peripheral. We are pleased to see the continued increase in the proportion of our accounts purchasing both coronary and peripheral products.

Our data show that peripheral IVL use is higher in accounts that also use coronary IVL than it is in accounts that only use peripheral IVL. The same is true of coronary use in accounts that also use peripheral IVL compared to those who do not use peripheral IVL. It is our goal to have all of our customers using both coronary and peripheral IVL. During the first quarter, reorders represented 92% of the C2 revenue in the U.S., indicating that the use of IVL continues to grow with existing customers.

We expect this reorder metric to grow as the number of available new accounts diminishes. We have now launched C2 in over three-quarters of our target accounts, most of which are comprised of high-volume facilities that perform over 750 PCIs per year. Throughout the rest of this year, we will focus on launching the remaining target accounts. To be clear, these centers have not yet been launched.

Said differently, they are not accounts that have used IVL and stopped using the products. These unlaunched accounts will continue to be a tailwind for our coronary business throughout the year. Meanwhile, the focus in our launched accounts will be ongoing customer education and training to help ensure that the entire group of physicians and staff are comfortable with IVL. This will help drive further penetration in those accounts.

Our U.S. peripheral business saw a strong quarter-on-quarter growth of 10% and was supported by the increased reimbursement for outpatient above-the-knee peripheral IVL procedures that went into effect on January 1. While it is hard to quantify the impact of our increased reimbursement, which is now equivalent to the atherectomy reimbursement, the payment uplift certainly removes the economic barrier for our customers and will allow them to use IVL whenever clinically appropriate. As Doug mentioned earlier, we transitioned to a full commercial launch of M5+ in April.

Our launch strategy with M5+ is similar to what you saw with C2. We are working in a very controlled, deliberate manner to roll this product out to the field. Again, the results in the quarter give us confidence that our hospital customers have returned to treating calcified PAD at levels similar to the pre-pandemic period. On the international side, we also delivered record growth.

Again, our new teams in the U.K. and France drove excellent growth to lead these results. Coronary IVL represents the bulk of our international business. However, we continue to increase our focus and efforts on driving peripheral IVL adoption.

The international peripheral market dynamics are different in the U.S., namely that peripheral atherectomy use outside the U.S. is uncommon. So our teams spend their time building a new segment of peripheral calcium modification in those countries. We have traditionally done well in Germany and Italy and more recently, our new teams in France and the U.K.

have made significant progress building our peripheral IVL business. The launch of M5+ will serve as a further catalyst for our international business, both our symptomatic peripheral disease and for large-bore access. We have also increased our marketing efforts for peripheral IVL in Europe and are establishing more programs to teach customers about the mechanism and benefits of IVL. As an example, the team recently performed a workshop with surgeons to demonstrate the impact of IVL in a heavily calcified cadaver model.

The physicians were able to see and feel the impact of IVL on these calcified peripheral arteries. It's a remarkable demonstration of how significantly IVL changes the compliance of a heavily calcified artery, and the surgeons were able to feel the change with their own hands. We expect these efforts will increase our customer base and usage of IVL over time. Turning to Asia.

We are excited about the recent approval of C2 in Japan. We plan to launch the product in Q4 after receiving reimbursement. In the interim, we will perform cases on a limited basis in key centers to help ensure that we are prepared for the full launch. We've approached the launch in Japan in the same method as we have done in other countries, with a focus on training and education on appropriate use.

We expect the launch in Japan to be slower than in the U.S. primarily because of the relatively smaller size of our team in Japan and the lack of existing IVL business in those accounts. And finally, the IVL business in India continues to perform very well as they've emerged from the pandemic. In a short time, they have already enrolled more than 100 patients in what will be a 1,000-patient registry.

These data, along with the data being collected in post-market registries in other countries, including Spain, Italy, France and the Netherlands, will be significant additions to the compendium of IVL data. With that, I will turn the call to Dan to review the financials.

Dan Puckett -- Chief Financial Officer

Thank you, Isaac. Good afternoon, everyone. Shockwave Medical's revenue for the first quarter ended March 31, 2022, was $93.6 million, a 194% increase from $31.9 million in the first quarter of 2021. U.S.

revenue was $78.5 million in the first quarter of 2022, growing 273% from $21 million from the first quarter of 2021. The increase included $51.3 million from the coronary product, Shockwave C2, which was launched in the U.S. in February of 2021. The growth in the U.S.

was also enhanced by continued sales force expansion. International revenue was $15.1 million in the first quarter of 2022, representing a 39% increase from $10.9 million in the first quarter of 2021. The increase in international revenue over the prior year reflects continued growth in customer demand and expansion of our direct sales force in Europe. Looking at product lines, our peripheral products, Shockwave M5, Shockwave M5+ and Shockwave S4, accounted for $22.9 million of the total revenue in the first quarter of 2022, compared to $16.1 million in the first quarter of 2021, a 42% increase.

Our coronary product, Shockwave C2, accounted for $70.3 million of total revenue in the first quarter of 2022, compared to $15.3 million in the first quarter of 2021, representing a 359% increase. In addition, the sales of generators contributed $0.4 million in revenue in the first quarter of 2022, compared to $0.5 million in the first quarter of 2021. Gross profit for the first quarter of 2022 was $80.7 million, compared to $24 million in the first quarter of 2021. Gross margin for the first quarter of 2022 was 86%, as compared to 75% in the first quarter of 2021.

Improvement in gross margin was primarily driven by product mix, as well as continued improvements in productivity and process efficiencies. Total operating expenses for the first quarter of 2022 were $65.4 million, a 58% increase from $41.5 million in the first quarter of 2021. Sales and marketing expenses for the first quarter of 2022 were $36 million, compared to $24 million in the first quarter of 2021. The increase was primarily driven by sales force expansion.

R&D expenses for the first quarter of 2022 were $17 million, compared to $10.3 million in the first quarter of 2021. The increase was primarily driven by headcount growth. General and administrative expenses for the first quarter of 2022 were $12.4 million, compared to $7.2 million in the first quarter of 2021. The increase was primarily driven by higher headcount to support the growth of the business.

Net income for the first quarter of 2022 was $14.5 million, compared to a net loss of $23.6 million in the first quarter of 2021. Basic net income per share for the period was $0.41. Diluted net income per share for the period was $0.39. We ended the first quarter of 2022 with $201.1 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

Thank you, Dan. There is no shortage of progress and exciting news at Shockwave. We're making great strides toward providing patients access to both peripheral and coronary IVL. We have an impressive body of acute and now increasingly long-term evidence supporting the safety and effectiveness of our products.

And we have established infrastructure and capabilities across the globe to support a large and growing customer base. We look forward to sharing more successes throughout this year, driven by continued execution and innovation. Thank you all for joining us today and for your support.

Questions & Answers:

Operator

[Operator instructions] And our first question comes from Adam Maeder -- I apologize, our first question comes from Bill Plovanic from Canaccord.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thanks. Good evening. Can you hear me OK?

Doug Godshall -- President and Chief Executive Officer

Sure. Hey, Bill.

Bill Plovanic -- Canaccord Genuity -- Analyst

Hey. Wow. Just trying to -- some pretty big numbers and just make sure I'm clear. So U.S.

coronary was 51.3%. Is that correct?

Doug Godshall -- President and Chief Executive Officer

Subcomponents. Dan, do you have it right off the top of your head?

Dan Puckett -- Chief Financial Officer

U.S. coronary?

Doug Godshall -- President and Chief Executive Officer

It's $51.3 million?

Dan Puckett -- Chief Financial Officer

It's $57.9 million.

Doug Godshall -- President and Chief Executive Officer

$57.9 million, yeah. I just want to make sure I didn't give the wrong number.

Bill Plovanic -- Canaccord Genuity -- Analyst

Oh, $57.9 million?

Doug Godshall -- President and Chief Executive Officer

Yes.

Bill Plovanic -- Canaccord Genuity -- Analyst

OK. That makes a little more sense. OK. Just checking.

OK. So a couple of questions here. First, congratulations on another solid quarter, especially given January was tough. I was wondering just a couple of things is, in Isaac's commentary, there was comment regarding the target accounts you're in three quarters.

Can you remind us of the number of target accounts that you have? And as you continue to expand kind of, I think, how should we think about that going forward? And then as we think about the guidance, it was a pretty big jump in guidance. Kind of just directionally, if you have any color on that. Thanks.

Isaac Zacharias -- Chief Commercial Officer

Doug, why don't you take the guidance?

Doug Godshall -- President and Chief Executive Officer

Yeah. So as we sort of look at the run rate of the business and continued acceleration of both well, really, our three drivers of U.S. coronary, U.S. peripheral and then broadly the international business, taking into account that, to your point, the January, into early February is a little softish.

And what we -- and as we don't anticipate really ongoing -- any ongoing COVID downdrafts, it's -- we see all three contributing very nicely to growth over the course of the year. And so having a jumping off point of close to $94 million, which was obviously meaningfully ahead of where we and the Street initially thought we were going to be for the quarter struck us at that 235 -- or $435 million, $455 million was the right range given the trajectory of the business.

Isaac Zacharias -- Chief Commercial Officer

Yeah. And then on the account side, we have probably 1,100 or so target accounts. And on top of that, there's a number of accounts that we've launched that are kind of satellite hospitals to a target account. So you open up a big account, and then they want to us to launch into their three or four hospitals that they use -- that are partners in the area.

So that's a -- I think the key for us, Bill, is we're getting great reorders from our launched customers, and we've still got a chunk -- a decent chunk of accounts that we plan on launching throughout this year to drive kind of new customer growth.

Doug Godshall -- President and Chief Executive Officer

Yeah. And we anticipate we'll be in virtually every cath lab over time, so north of 1,500 total. It's just sort of where do you draw the line for who's a target versus who is sort of opportunistic and that's sort of an account-sized cutoff.

Bill Plovanic -- Canaccord Genuity -- Analyst

Gotcha. And then the one thing I didn't hear anything on, then I'll jump into queue, is just C2+ in Europe. I know you're going through the MDR pathway. Any update on that? And thanks for taking my questions.

Doug Godshall -- President and Chief Executive Officer

I would say the MDR process needs an update because it's torture for any company that's going through it. But we think we're nearing the tail end and anticipate we'll be first with a limited launch and then a broader launch, rolling that in Europe in the back half of this year. We've not determined what our timing is going to be for a U.S. launch.

We want to get some experience in Europe before we launch into the U.S. approval process.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thank you.

Doug Godshall -- President and Chief Executive Officer

Yup.

Operator

And thank you. And our next question comes from Adam Maeder from Piper Sandler. Your line is now open.

Adam Maeder -- Piper Sandler -- Analyst

Hi. Good afternoon. Thanks for taking the questions, and congrats on a great quarter to start the year. Wanted to dig in a little bit more on the peripheral business.

Isaac, did I hear correctly, sequential growth, 10% quarter-over-quarter? Just wanted to clarify that remark. And then just any finer point that you can put on BTK versus ATK? Thanks.

Isaac Zacharias -- Chief Commercial Officer

Yeah. So the 10% was a U.S. sequential growth quarter-on-quarter for all peripherals. And color on ATK, BTK, we see a -- it's generally been pretty well proportioned since we've gotten out of the gates with the S4 product line, which is the product that is mostly used below the knee.

And so as we see growth, the proportion of growth between -- if you look at the total peripheral number in the U.S., the proportion of above the knee to below the knee has been relatively stable over the last four to six quarters. And it was last quarter as well.

Doug Godshall -- President and Chief Executive Officer

Yeah, and it will be interesting to see -- the added shaft length of the M5+ will actually enable that device to be used -- when you go sort of up and over, that you'll be able to use it in below-the-knee cases. So the smaller size of the M5+ we anticipate will be used in the sort of proximal vessels below the knee. Because it has a longer treatment zone and a faster treatment time. So we anticipate and are going to be watching to see if it's -- if we see some sort of complementary M5+, S4 below-the-knee strategies.

Adam Maeder -- Piper Sandler -- Analyst

Got it. That's helpful color, guys. And if I can sneak in, actually, two more, one follow-up on peripheral. I just want to ask about the ATK reimbursement change that went into effect.

You're at parity to atherectomy Jan 1, 2022. It sounds like that's having a nice impact. Isaac, I think you talked about removing economic barriers. But just wanted to, I guess, hear a little bit more about kind of the observations in the field that you're seeing from customers.

Is that changing customer behavior? And then I had one follow-up. Thanks.

Isaac Zacharias -- Chief Commercial Officer

Sure. Yeah. I think it's -- we've talked about this in the past as it relates to TPT and the NTAP on the coronary side. The customers -- customer behavior takes a little while to change because it's -- you need to both kind of get the administration, who cares about the revenue that the hospital has associated with procedures aligned with generally the cath lab manager.

And they tend to focus on the expense of procedures, not necessarily the revenue. So our team is just kind of an ongoing education with the physicians, cath lab managers and the administration on what this change means in terms of revenue. And as those conversations happen and then generally, you go into a hospital and the rep that had been in there a couple of weeks ago talking to them about it, it won't have sunk in yet. It won't have sunk in yet until one of those constituents that, oh, there is actually a payment change for the Shockwave procedure this year.

So I think my observation is, this is going to be an ongoing educational effort by the team, by our field reimbursement team and the field team themselves with those constituents. And over time, we'll continue to see the alignment between the revenue side of the hospital and the cost side of the hospital saying, OK, we no longer need to really try to put a break on the physicians for using Shockwave. They can use this now whenever they think it's appropriate. But I think it's going to be a build.

Adam Maeder -- Piper Sandler -- Analyst

OK. That's helpful. And just for the last one. And thanks again for taking the questions here.

Not sure if it's for Doug or Dan, but I know the focus is on driving top line growth, Q1 results, strong healthy guidance raise. Gross margin has continued to improve. Opex spend has been well controlled. So the question is just around kind of future leverage and models going forward.

How do we think about that? Just any color there would be much appreciated. Thanks again.

Doug Godshall -- President and Chief Executive Officer

Yeah, we can probably tag team on this. Fortunately, our thesis going into the coronary launch was that we would have one of the more leverageable field teams, given that we believe we'd be able to sell both coronary and peripheral through the same channel. And that it would actually be complementary versus the experience many companies have had where they can't effectively call on both peripheral and coronary customers. I think so far, so good, a year into the launch, that we're encouraged that our team is operating at an extremely high level in terms of providing a high level of service to both peripheral and coronary customers, many of whom are overlapping on the cardiology side, obviously.

And we don't think that's going to be going backwards. We think that will only get better, frankly, over time, as we complete the launch into our target accounts of coronary and then work on a penetration model for both coronary and peripheral. We'll be building out some of the supporting infrastructure. So we're -- our IT team is getting strong and getting stronger.

Our finance team is strong and getting stronger. So some of the areas that you -- they aren't as obvious to the outside world. We're sort of -- which are critical backbone to the company to support this -- convert the sales efforts. Those might not be quite as leveraged right now.

But as sales ramp through this year, you'll see sort of top line far outpacing some of that G&A expansion. And Dan, if I probably said everything you were going to say, sorry.

Dan Puckett -- Chief Financial Officer

Yeah. No, I think it's a good summary. Like Doug said, I mean, we expect more leverage out of the business toward the back half of the year for sure. And sales and marketing and G&A and R&D, we're going to continue to invest, no doubt, and we're investing in infrastructure as well.

But we still see some upside on leverage this year. And we're very satisfied with the direction we're going.

Adam Maeder -- Piper Sandler -- Analyst

Great. Thanks so much.

Doug Godshall -- President and Chief Executive Officer

Yeah. Thanks, Adam.

Operator

Thank you. And our next question comes from Larry Biegelsen with Wells Fargo. Your line is now open.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Good afternoon. Thanks for taking the question, and congrats on a nice quarter, guys. OK. Just maybe to follow up on Adam's question, because profitability has become a little bit more of an important topic recently.

So basically, Dan, it sounds like the message is you're going to be above 16% operating margin for 2022, given that you were at 16% this quarter, and you expect more leverage in the second half. And that mid-30s, Doug, operating margin goal that you've talked about, when do you think you can get there? Maybe just talk a little bit more beyond 2022. And I had just a couple of follow-ups.

Dan Puckett -- Chief Financial Officer

I agree with the first part, Larry. We've always said probably longer range at full scale, upper 20s, lower 30s. I mean we want to continue to invest in the business, but we see a path to kind of best-in-class, for sure.

Doug Godshall -- President and Chief Executive Officer

We aspire to, aspire to that. Not to commit to a specific number. But yes, I mean, it's -- we're -- we feel very fortunate that we're able to kind of walk and chew gum of improving profitability and sustaining high growth rate, which I know is a tricky balance. But so far, we haven't had to make trade-offs on the growth side in order to drive profitability.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

OK. Yes. Clearly, you guys are in a unique position. So Doug, back to the top line, Japan reimbursement, is it possible that you get it by -- how much visibility do you have on that? And from a timing standpoint, could you get it by October, where you would get revenue this year? And why the slower growth in the U.S.

given the IVUS use, the higher awareness and reimbursement? It's just going to be reimbursed from day one. And I did want to ask about China after that.

Isaac Zacharias -- Chief Commercial Officer

Sure. So I guess going the -- we expect Japan to have reimbursement put in place by the end of September. So that's the current expectation. It's a fairly steady process.

So there's not a lot of guess work associated with it. So our understanding is end of September, we should get that. We don't yet know what that reimbursement amount will be. And regarding the launch and, I think, the relative speed of the launch compared to the U.S., you're exactly right on the tailwinds.

There's really a high degree of imaging, which helps identify the calcium -- for intravascular imaging, to help identify the calcium. It's nice to have reimbursement out of the gate. But just in terms of account coverage, Larry, with the sales team, we do not have nearly the team on the ground that we had in the U.S. And we were in hundreds, and hundreds, and hundreds of PCI accounts already with our peripheral business in the U.S.

So just -- it's really just solely the ability to go in and turn on accounts. And then the speed with which we'll do that in Japan is going to be limited by the personnel and the lack of existing business.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

OK. That's helpful, Isaac. And lastly, just on China, I don't think I heard any update on this call. On the last call, I think you said you expect approval by the end of this year.

So any update there, please? Thanks for taking the questions.

Isaac Zacharias -- Chief Commercial Officer

I think we said midyear for -- or maybe --

Doug Godshall -- President and Chief Executive Officer

No, we said this year.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

So it just sounds like -- just sorry to follow up. It sounds like you do have a little bit of revenue in for Japan and China in 2022 in the guidance.

Isaac Zacharias -- Chief Commercial Officer

There's a little bit, yeah, but it's not much at all. I think we want to be conservative on that front until we get out there.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Got it. Thanks, guys.

Operator

Thank you. And our next question comes from Danielle Antalffy from SVB Securities. Your line is now open.

Danielle Antalffy -- SVB Securities -- Analyst

Hey, good afternoon, everyone. Thanks so much for taking the question. Congrats on a really good quarter and a good start to the year. I guess just to follow up on the U.S.

and coronary and just -- you're in three quarters of accounts already. Just curious to see how the different accounts are ramping. And I guess maybe a good way to sort of characterize it, if you could, even qualitatively some of your sort of best account. What are you seeing there from a penetration perspective or how the market for vessel prep has grown in those accounts versus some of your less penetrated accounts? And then when you look at the less penetrated accounts, what are you doing to get -- whether it's more users at those accounts or just the users that are using to use it more? What are you doing to get that going? Thanks so much.

Doug Godshall -- President and Chief Executive Officer

Yeah, we can -- Isaac and I can tag team on this. On a macro level, we are not close to -- if 30% of patients have calcium and some people like to use 20% as a sort of realizable number for IVL use, 20% PCI procedures, we aren't scratching the surface of full penetration hardly anywhere. The highest penetration is probably at some small -- a handful of small centers that don't have atherectomy, and so this is the only tool they have for calcium treatment. But at our larger centers, we're not in the double-digit sort of penetration of PCI volume.

So we're -- we have meaningful upside across the board. And I can say the same thing about peripheral, but certainly focused on coronary. And Isaac, I don't know if you want to tag team on the service --

Isaac Zacharias -- Chief Commercial Officer

Yeah. So I think that what -- the way we're thinking about it, Danielle, this year is we just annualized the launch. So we still have accounts that have only been open a quarter or two quarters. And like I said, there's more accounts to go.

I think this is a year of the team just kind of doing the usual blocking and tackling. And while we gather data on what the distribution -- another way to look at it is what's the distribution of penetration across our accounts? And as we get more data on that and track it, we'll work to understand why do some accounts have higher penetration than others. And once we really understand that, at the customer level, then we'll develop tactics, specific tactics to go after bringing the kind of the lower penetration accounts closer toward the higher penetration accounts. But right now, I think it's -- we're doing the same stuff we've done throughout the launch, which has only been a year, and that is going in, making sure they know how to use the product, getting more people to use it, who haven't been using it.

And then as we've kind of shifted toward the M5+ launch, which is an important launch, spending time on the peripheral side of the house and making sure that's getting the attention it needs.

Danielle Antalffy -- SVB Securities -- Analyst

Got it. Thank you for that. And then just one quick follow-up on the guidance. And you're increasing the guide by $30 million at the midpoint.

I know you guys don't give quarterly guidance, but you beat consensus by $7 million. Annualizing that gets you close to that $30 million. But I guess just what -- if you could talk a little bit qualitatively about what is looking better within the business? Is it coronary? Is it peripheral? Is it all of it? Is it U.S.? Is it Japan? Maybe just help us understand where in the guidance you're seeing better trends versus where we were in mid-February.

Doug Godshall -- President and Chief Executive Officer

Well, Asia broadly, China, Japan is not different. So that's not affecting our guide. We anticipated launching Japan next year. We're still anticipating launching Japan next year.

China, as Isaac indicated is a small -- we have a sort of small, plugged number in. For this year, we think we'll sell some. So it's really driven by the same three drivers that we had anticipated from -- as we started the year, which was international, but more so U.S. peripheral U.S.

coronary. And the M5+, like you always hoped that your limited launch is broad enough and that you're rigorous enough to be able to interpret what you see in a limited launch and extrapolate it to a full launch and so far so good. It isn't just the early folks who really, really liked the M5+. It seems to be everybody really, really liked M5+ and sees it as a sort of meaningful new product, not just an upgrade of an old product.

It's really resonating very well. The team has done did a great job in developing it and now launching it so far. And then coronary just continues to sort of outpace adoption expectations. It's -- I'm sure you've heard it in your physician calls, Danielle, like the -- a full year into launch for people still to be referring to it as a game changer.

I actually had the pleasure going with my dad to get a stent last week and the doc there said, oh, Shockwave, my God, that thing is a game changer. So on a personal level, glad my dad didn't need Shockwave because he didn't have calcified arteries, but it's nice that the consistency with which folks respond so positively to the device.

Isaac Zacharias -- Chief Commercial Officer

And just maybe to tack on -- when we did the guidance in February for the year, we were maybe two weeks of positive trend out of January. And January was bad, especially in the U.S. So I didn't think -- we didn't have enough of a quarter under our belt yet to feel great about the year.

Danielle Antalffy -- SVB Securities -- Analyst

OK. Fair point. And so I hope you guys are doing well. Thanks, guys.

Isaac Zacharias -- Chief Commercial Officer

Yeah. Yeah. He's crushing it. Thanks.

Operator

And thank you. And our next question comes from Travis Steed from Bank of America. Your line is now open.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Congrats on a great quarter. Doug, most of mine have been asked. So I'd just love to get your views on kind of like the update on the pipeline progress potential for an R&D day at some point this year.

And I'll ask my second question now, as well as since it's getting late. And just any update on the competitive environment as you see it. Thank you.

Doug Godshall -- President and Chief Executive Officer

Yeah. Those two are actually intertwined, Travis, thanks. We were tentatively looking at doing a full Investor Day toward the middle of this year, but with the sort of competitive noise or sort of future -- sort of distant future competitive noise, we've decided that we're going to be a little bit more judicious about how much we share about our next product development. I mean folks have talked about C2+ a little on this call.

That will be a late -- or second half '22 international product, 2023 U.S. product. The L6 has also been talked about a bit. That's our larger peripheral catheter sort of larger than the -- what M5+ is able to achieve in terms of diameter.

And beyond that, we are -- we have a sort of multiple products a year product launch plan well into sort of the next three, four, five years. But what we don't want to do is provide a road map to folks who are looking to try to figure out what's working for us and make it easy for them to try to just copy us. We're spending a lot of money on R&D. Obviously, we continue to expand our team.

We -- I think in our last call we talked about being north of 100 R&D folks by the end of this year. The hiring plan is going well. And while we are -- we feel fortunate that we're able to both invest heavily and drive profitability. We still, even though today's tape doesn't suggest that growth is very popular, we still think growth is long term, going to be what rewards our customers because it's going to mean we've brought them better solutions and it will reward our shareholders.

So we're going to continue focusing on growth and try to maintain that profitability. So right now, we're -- we'll meter out products when they're more visible, closer to market and not provide a multiyear product road map.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

All right. Great. Thanks, Doug. Congrats again on a great quarter.

Doug Godshall -- President and Chief Executive Officer

Thanks, Travis.

Operator

Thank you. And our next question comes from Cecilia Furlong from Morgan Stanley. Your line is now open.

Cecilia Furlong -- Morgan Stanley -- Analyst

Good afternoon, and thank you for taking the questions. Doug, I wanted to continue just on R&D specifically and really what you're contemplating through the back half of '22 versus Q1 levels, either from a hiring, clinical or pipeline product focus. And really how we should think about R&D investment focus beyond '22 as well?

Doug Godshall -- President and Chief Executive Officer

The ramp will slow because we'll continue adding heads but not at this sort of aggressive pace. We'll start -- we got the BTK trial up now, but 2023, we'll start -- because we're in a bit of a lull on big trials, but we'll have our BTK trial running into 2023. And we'll, in all likelihood, to have a coronary trial that will spool up into '23. So you'll have a bit more clinical expense.

And then as some of our more advanced new product development activities start to hit the clinic, then we'll start shifting into also augmenting with pre-approval studies. And that will be probably plural into '23, '24 pre-approval studies. Some will be feasibility and some will be sort of pivotal pre-approval studies. In terms of the, sort of what people think of as R&D, sort of people designing and building new products, that spend is not likely to change as if you do a run rate after Q4.

Because we'll just keep churning through -- we'll keep churning through sort of one -- the team will finish one project, and they'll roll on to the next project. And so that will be a modest increase in spend after Q4.

Cecilia Furlong -- Morgan Stanley -- Analyst

OK. And if I could follow up just quickly on Japan about how you're thinking right now from a time line perspective around bringing your peripheral product into the region. And thank you.

Isaac Zacharias -- Chief Commercial Officer

Sure. Hi, Cecilia. We are working right now with team -- our team in Japan is working with our consultants and starting to have conversations with regulators on what the appropriate trial is and -- to get a product -- our peripheral products approved in Japan. So I don't have time lines yet, but they started turning the crank on that early this year.

So hopefully, we'll have more clarity on that as we exit the year.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great. Thank you for taking the questions.

Isaac Zacharias -- Chief Commercial Officer

Yup.

Operator

And thank you. And our next question comes from Michael Polark with Wolfe Research. Your line is now open.

Mike Polark -- Wolfe Research -- Analyst

Hey, good afternoon. Thank you. Just in Japan, as we peer out to '23 and '24, trying to make sure I have the inputs in the ballpark, 250,000 PCIs. We know our calcification rates are probably similar in high IVUS adoption there.

What's the ASP for coronary in Japan, give or take relative to the U.S.? Can you frame that up so we can kind of consider Japan in '23 and '24 better?

Isaac Zacharias -- Chief Commercial Officer

Yeah. So we're still negotiating with the MHLW on the reimbursement. It's an ongoing process. It could be in a reasonably wide range of where it might land.

So I prefer not to comment now. But once we have the reimbursement decision, that will drive ASP roughly. ASP will be close to the reimbursed amount.

Doug Godshall -- President and Chief Executive Officer

I just wanted to say the -- Japan uses atherectomy at a slightly higher rate than the U.S., which is at 2x the rate of Europe. So it will be interesting to see is that in part because they do use imaging, so they see more. And you've got a decent chunk of hospitals who don't have atherectomies because they don't have surgical backup. So it's -- and yet, they do use IVUS.

So it strikes us as a really interesting alignment of clinical practice and our product capabilities. So we're excited about Japan, obviously.

Mike Polark -- Wolfe Research -- Analyst

If I can ask one more, just on the -- a fine point on coronary center activation in the U.S. I'm trying to track that quarter-to-quarter here. As your ramp toward close to full market penetration in the U.S., is it fair to say that new accounts activated in the first quarter, given the lingering Omicron challenges, were de minimis? And that the focus for the rest of the year will be bringing on board that one quarter of accounts that you haven't opened yet? Basically, I had you at the end of the fourth quarter, give or take, at 1,100 accounts. And I'm just curious what the first quarter kind of ended at and then -- so I can build the rest of the year in a reasonable way.

Thank you so much.

Doug Godshall -- President and Chief Executive Officer

Yeah. Isaac's grabbing the -- some rough feedback. But I'd say to answer part of your question of what's the focus, I mean, we are -- as the launch has progressed, we've already migrated toward a stronger blend of better penetration of existing accounts with the addition of new accounts. Obviously, if you've got a territory where you're in 50% of your target accounts, you might spend a little more time trying to pick up new accounts.

If you're in a territory that is where you've been there from day one and you're at 90% in your territory, you're going to be already shifted very heavily toward getting more physicians at each center using the device and getting more utilization among the physicians who do use the device already. And --

Isaac Zacharias -- Chief Commercial Officer

And we added -- so we -- it was a slower quarter for adding new accounts for coronary, mostly because there's fewer accounts to add. So you've kind of seen, we were giving statistics last year, you saw the number of accounts per territory had in the quarter going down progressively. That's still going down. But we did a pretty good job of bringing on new accounts even with the January, to Omicron.

So we're pleased with kind of the account growth we had in the quarter.

Doug Godshall -- President and Chief Executive Officer

Yeah. It's getting harder to -- we used to do an accounts per territory, per quarter, and we keep adding more territories. So it's getting harder at -- it's like where do you draw the line at the beginning of the quarter, a number of account territories end of the quarter, number of accounts. And so that was one of the reasons we shifted to the -- shifted to the percent of targets metric versus the accounts per territory per quarter metric.

Mike Polark -- Wolfe Research -- Analyst

Thank you so much.

Operator

And thank you. And I'm showing no further questions. I would now like to turn the call back over to Doug Godshall for closing remarks.

Doug Godshall -- President and Chief Executive Officer

Thanks very much, and thanks, everybody, for joining us today. We appreciate the interest and attention, and certainly look forward to catching up with you over the coming weeks. Have a good rest of your evening, and take care.

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

Bill Plovanic -- Canaccord Genuity -- Analyst

Adam Maeder -- Piper Sandler -- Analyst

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Danielle Antalffy -- SVB Securities -- Analyst

Travis Steed -- Bank of America Merrill Lynch -- Analyst

Cecilia Furlong -- Morgan Stanley -- Analyst

Mike Polark -- Wolfe Research -- Analyst

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