Shockwave Medical (SWAV) Q2 2023 Earnings Call Transcript

Shockwave Medical (SWAV 0.31%)
Q2 2023 Earnings Call
Aug 07, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Shockwave's second quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. We will be facilitating a question-and-answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host, Debbie Kaster, vice president of investor relations at Shockwave, for a few introductory comments.

Debbie Kaster -- Vice President, Investor Relations

Thank you all for participating in today's call. Joining me today from Shockwave Medical are Doug Godshall, president and chief executive officer; Isaac Zacharias, president and chief commercial officer; and Dan Puckett, chief financial officer. Earlier today, Shockwave released financial results for the quarter ended June 30, 2023. A copy of the press release is available on Shockwave's website.

Before we begin, I would like to remind you that management will make statements during this call that includes 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, other than the statements of historical fact, 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, reimbursement proposals, future product development and approvals, and the integration of Neovasc and its technology into our business are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events, such as the COVID-19 pandemic, that could cause actual results are events to material to materially differ from those anticipated or implied by these forward-looking statements 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 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 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, August 7, 2023.

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 second quarter of 2023. Our businesses continue to experience solid growth across the board in the U.S. and internationally in both peripheral and coronary franchises.

Second quarter revenues of 180.2 million represented a 49% increase from the second quarter of 2022. We're pleased with the continued acceptance and penetration of our products and are particularly encouraged by the traction we have seen with our two newly released products, the L6 peripheral product in the U.S. and the C2+ coronary product internationally. In both cases, the enhanced capabilities of these new designs have resonated with customers and are a testament to the ability of our organization to understand customer needs and work together efficiently to design and launch products that successfully address those needs.

This past quarter, we closed our acquisition of Neovasc. And we quickly got to work integrating the Reducer product and team into Shockwave. The lean resource profile and creative financing structure of Neovasc made for a complex integration process, and it was a heavy workload for our team. But they did a stellar job on our first such project together and proved they were up to the task.

Over the last few months, we have begun to infuse additional resources into the Reducer program, which we are confident will help up-regulate performance and execution. Much of the future value of Reducer hinges on clinical data generation, particularly the COSIRA II study. We have overhauled the approach to clinical operations and are adding resources to the existing team. This should lead to a tightly executed study as they become accustomed to at Shockwave.

Our principal focus right now will be to activate more sites since having more shots on goal is a critical component of enrollment. As a reminder, COSIRA II is a sham-controlled double-blind randomized IDE trial to evaluate the Reducer system for safety and effectiveness in patients with refractory angina due to obstructive coronary disease that is not amenable to conventional revascularization. The study will include approximately 380 patients and up to 50 centers. The primary endpoint is change in exercise tolerance testing time.

Now that we have begun to get our arms around the clinical and regulatory program, we are projecting U.S. approval in 2027. Taken with the subject of the Reducer for the moment, the energy we saw around this product at EuroPCR was rather remarkable as evidenced by a standing room only symposium and multiple very well-attended training sessions. The strong global interest in Reducer has us even more enthusiastic about this acquisition and further increases our confidence that Reducer is well positioned to address a significant unmet need and has great potential to become a meaningful contributor to our business once COSIRA II data is available.

EuroPCR was a fantastic conference for us across the board. Many of our customers referred to it as the Shockwave congress. We had our official international launch of C2+ and, at the same time, we celebrated the five-year anniversary of our initial commercial launch of coronary IVL at PCR 2018. The IVL presentations at PCR consistently highlighted the outcomes achieved with the IVL in real-world environments, including data presented from Eli Lilly and replica registries from France and Spain, respectively.

That together included almost 1,000 patients and strongly reinforced the safety and efficacy of coronary IVL. It is remarkable that in just five years, we have transitioned from IVL being a relative unknown to becoming a standard of care. The fall will include several strong conferences for Shockwave, and we are particularly looking forward to TCT in October in San Francisco, where we have many events including several symposia, more real-world evidence, and one of our favorite events, the TopShock competition, which will focus on best practices with IVL in eccentric  and nodular calcium. We had roughly 100 submissions from our global customers this year.

And of course, we are looking forward to the U.S. launch of C2+ at TCT and to our investor innovation day on October 23rd. Our IVL clinical work continues to ramp up after a quieter 2022. And last quarter, we were pleased to announce the first enrollment in our groundbreaking EMPOWER study, which is the first-of-its-kind all-female study assessing the performance of IVL in a population that is almost always underrepresented in cardiovascular research.

Our BTK study is enrolling at a healthy pace, and we anticipate the last patient will be enrolled by the middle of 2024. We have a full pipeline of other studies in the very near future, which we will discuss at our innovation day. Overall, our investment in IVL clinical studies will be roughly 50% higher in the second half of this year than it was at the same period last year. Regarding U.S.

reimbursement, we continue to make great progress and are very encouraged by how we see CMS transitioning coronary IVL from temporary innovation programs, like the NTAP, to more permanent reimbursement structures, such as those programs that concluded. As you may recall, the duration of the NTAP program for coronary IVL is two years and is set to expire on September 30th at the end of CMS' fiscal year. Consistent with their procedures, CMS analyzed the relevant data collected on coronary IVL under the NTAP program in order to determine how to best structure and pay for coronary IVL going forward. In April, CMS proposed creating three new MS-DRGs for coronary IVL as being the most appropriate long-term structure coming out of NTAP.

We were extremely pleased to see that the final inpatient rule issued last week confirmed the creation of the three new DRGs for coronary IVL. This is a watershed event because this is the first time CMS has created new DRGs in the field of PCI in over 20 years. We think this is good for the field of interventional cardiology and for patients suffering from complex calcified coronary artery disease. The new DRGs capture the use of coronary IVL whether it's with or without a stent.

The vast majority of coronary IVL cases involve a stent implantation, so I'd like to focus on those DRGs which will pay, on average, $20,785 or -- to $28,987, if major complications or comorbidities are present. For comparison, the other PCI DRGs involving stent implantation without IVL will pay $12,767 and $20,187, respectively. So, in summary, effective October 1, 2023, payments for coronary IVL and the new DRG structure will be approximately $8,000 more than the non-IVL PCI procedures, and $4,000 more than was paid by the NTAP program. We believe this will help alleviate economic pressures on hospitals and enable physicians to make the best clinical decisions for their patients.

On the hospital outpatient front, the transitional pass-through program will continue through June 30, 2024. And while CMS has not given any early signs of how they plan the transition from temporary to permanent, we remain very optimistic about our prospects of landing in the highest APC. As we have seen in the hospital inpatient side, with the conclusion of the coronary IVL NTAP, CMS follows the process, and we remain confident in what we are seeing from the data. To date, additional remuneration for physicians, be it professional fees or RVUs, have not been available for any of our therapies.

We are excited to report that this will change as of January 1, 2024, when a new Category I CPT add-on code will go into effect. We will not know the amount that physicians will receive starting in 2024 until the final calendar year 2024 physician fee schedule is released in November. We're pleased with CMS' 2024 draft schedule issued last month, which proposed up to 30% additional remuneration for physicians when coronary IVL is performed. Turning now to operations, we continue to make significant investments to support and sustain our growth.

We are accelerating our investment in Costa Rica, where we have a strong leadership team in place and have hired over 50 employees, many of whom are spending significant time in Santa Clara for training to ensure that the new site starts operating at a high level from day one. Based on our global momentum and pipeline, we believe we will need even more capacity in the future than our combined Santa Clara and Costa Rica facilities will be able to provide, so we have exercised an option for a second phase in Costa Rica earlier than we initially planned, which will nearly triple our clean room space there by 2025. Our strategy of using Costa Rica as our primary production location and Santa Clara as our innovation center is coming to fruition as we had hoped. Our intention is to develop new designs and therapies in Santa Clara, pilot them to optimize processes, and then transfer most of them to Costa Rica in order to make room for the next wave of innovations.

Next year, we're anticipating having seven products in pilot production, which is a considerable step-up and would once again leave us out of space. So, we have also exercised an option on a fourth building in Santa Clara, which we'll occupy toward the middle of next year. We are fortunate that we have the bandwidth and financial wherewithal to expand our commercial footprint, continue ramping R&D and clinical activities, forward to invest in a high-quality, margin-expanding production facility, and layer in a very promising future growth stimulus in Reducer. These investments should bear fruit for years to come.

We now anticipate top-line revenue in the range of $725 million to $730 million for the full year of 2023, representing growth of 48% to 49% from 2022. This number includes less than 5 million of Reducer sales for the full year of 2023. With that, I will turn the call over to Isaac to provide more detail on the commercial front. Isaac?

Isaac Zacharias -- Chief Commercial Officer

Thank you, Doug. I am pleased with the team's efforts and results in Q2. Our U.S. peripheral business grew 13% sequentially from Q1 and 65% compared to the prior year, driven by increased usage across all sizes of catheters and strength from our newly launched L6 catheter.

We were pleased to be able to showcase the L6 at several conferences, including multiple live cases in the quarter, which generated a lot of energy and enthusiasm. Customers love the device and the power profile of L6 and see it as the ideal treatment for iliacs and large common femoral arteries. Our customers believe L6 provides improved angiographic results due to larger sizes and power profile. During the quarter, we launched L6 in more than half of our peripheral accounts, and we are seeing solid reorder patterns.

We're also encouraged that approximately two-thirds of the L6 sales were in the 9-, 10-, and 12-millimeter sizes. These are cases that would likely have not been IVL cases with the 8-millimeter M5+. We plan to get the vast majority of our remaining peripheral customers launched on L6 in Q3. U.S.

coronary revenue grew 9% sequentially from Q1 and 37% compared to the prior year, driven primarily by increased penetration in our existing accounts as we continue to see healthy same-store sales growth. Nearly all of our revenue in Q2 came from accounts that were open in prior quarters. While new account growth has slowed, units per account are increasing, and we are seeing solid growth in high-volume accounts. We are on plan to grow the U.S.

sales force to over 110 territories by the end of this year, and we'll have about two clinical specialists per territory. With the growing sales team, we are looking forward to the launch of C2+ in Q4, coupled with the tailwind of the improved inpatient reimbursement starting in October and the additional physician fee for coronary IVL starting in January. On the international side, we posted record revenue that was up 20% from last quarter and was over 70% higher than the year-ago quarter. The headliner of the quarter was Germany, where the increased reimbursement that took effect in January drove a doubling of coronary IVL revenue from a year ago.

We expanded from six to 10 territories in Germany during Q2 of 2023 and expect to add more salespeople in the second half of the year to support increased demand. In Japan, the team posted great results in Q2. The revenue in Q2 more than doubled from Q1, and the momentum is increasing in the current Q3. We are encouraged by the physician response and are exceeding our expectations for penetration in the launched accounts.

We expect that Japan will become a significant contributor to our global revenue in the coming years. We were pleased to see peripheral sales account for nearly 20% of our international sales in Q2. We've been adding headcount and focus to our peripheral efforts outside the U.S. and have expanded peripheral marketing programs and our KOL network in Europe.

It is nice to see the hard work of the team pay off and bolster our non-U.S. peripheral business. We also transitioned from distributor to direct sales in Canada, Spain, and Portugal during the second quarter. Our distributors in those countries were good partners, but as we have typically seen, our direct teams can drive increased penetration due to their ability to focus exclusively on Shockwave products.

While these changes cause some small disruptions in revenue and an increase in operating expense, we have seen that the investment quickly generates higher penetration and gross margin, more than offsetting the increased costs. We will transition to a direct sales model in Italy in Q4 of this year. On the Reducer side, we've made good progress to rationalize the distribution network with the intent to focus resources on countries and centers that can both afford the product and build a solid practice treating underserved refractory engine of patients. While the revenue contribution of Reducer will be relatively small this year, we are more optimistic than ever that we can build a sustained business.

That said, we will do so methodically and are not in a hurry to generate revenue. We prefer at this point to continue building clinical evidence and partnering with centers of excellence in those countries to learn how to establish patient care pathways and achieve excellent outcomes for those patients. 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 second quarter ended June 30, 2023 was 180.2 million, a 49% increase from 120.7 million in the second quarter of 2022. U.S.

revenue was 144.9 million in the second quarter of 2023, an increase of 45% from 100.1 million in the second quarter of 2022. Coronary products contributed 99 million to U.S. revenue in the second quarter of 2023, an increase of 37% from 72.1 million in the second quarter of 2022. U.S.

revenue from our peripheral products was 45.7 million in the second quarter of 2023, an increase of 65% from 27.7 million in the second quarter of 2022. U.S. generator revenue is $0.2 million in the second quarter of 2023. The growth in U.S.

revenue during the quarter reflects increased utilization of existing accounts, new account adoption of IVL, and continued sales force expansion. International revenue is 35.2 million in the second quarter of 2023, representing a 70% increase from 20.7 million in the second quarter of 2022. Coronary products contributed 26.7 million to international revenue in the second quarter of 2023, an increase of 70% from 15.7 million in the second quarter of 2022. International revenue from our peripheral products was 6.6 million in the second quarter of 2023, an increase of 57% from 4.2 million in the second quarter of 2022.

Revenue from our Reducer product, which we acquired through the Neovasc acquisition that closed in April of this year, contributed 1.2 million to international revenue in the second quarter of 2023. Generators contributed 0.7 million to international revenue in the second quarter of 2023. The increase in international revenue over the prior-year period reflects continued geographic expansion, including China and Japan, the increased productivity of our direct selling teams in Europe, and the strength of coronary sales in Germany. Looking at product lines, our peripheral products, Shockwave M5, Shockwave M5+, Shockwave S4, and Shockwave L6, accounted for 52.3 million of total revenue in the second quarter of 2023 compared to 31.9 million in the second quarter of 2022, a 64% increase.

Our coronary products, Shockwave C2 and Shockwave C2+, accounted for 125.8 million of total revenue in the second quarter of 2023 compared to 87.8 million in the second quarter of 2022, representing a 43% increase. Revenue from our Reducer product accounted for 1.2 million of total revenue in the second quarter of 2023. The sales of generators contributed 0.9 million in revenue in the second quarter of 2023. Gross profit for the second quarter of 2023 was 155.7 million compared to 104 million in the second quarter of 2022.

Gross margin was 86.4% for the second quarter of 2023, which was slightly above the gross margin of 86.1% for the second quarter of 2022. Total operating expenses for the second quarter of 2023 were 123.3 million, a 66% increase from 74.4 million in the second quarter of 2022. Sales and marketing expenses for the second quarter of 2023 were 56.7 million compared to 40.5 million in the second quarter of 2022. The increase is primarily driven by sales force expansion.

R&D expenses for the second quarter of 2023 were 36.8 million compared to 20.8 million in the second quarter of 2022. The increase is primarily driven by headcount growth, higher clinical-related expenses, and facility expansion to support R&D. General and administrative expenses for the second quarter of 2023 were 29.7 million compared to 13.2 million in the second quarter of 2022. The increase was primarily driven by higher headcount to support the growth of the business and legal and other acquisition-related expenses associated with the acquisition of Neovasc.

We do not expect that the full year operating expense from Neovasc will exceed our prior full year forecast of approximately 32 million despite the higher-than-expected upfront nonrecurring spend in Q2 of 2023. We expect to continue to make significant investment to support and sustain our growth and anticipate full year 2023 operating margin in the range of 20% to 22%. Excluding Neovasc, our operating margin range is expected to be 24% to 26%. Net income for the second quarter of 2023 was 28.9 million compared to net income of 25.6 million in second quarter 2022.

Basic net income per share for the period was $0.79. Diluted net income per share for the period was $0.76. We ended the second quarter of 2023 with 258.6 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, and thank you all for joining us today. We had a great quarter at Shockwave as we continued to execute and grow our existing businesses, while at the same time, paving an exciting path for our future. For that, I will open the call to questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Bill Plovanic with Canaccord Genuity. Please proceed with your question.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thanks for taking my questions. Doug, I was wondering if you could help us understand just -- you gave us some general timelines, but maybe some processing key dates as we look at the ops reimbursement and kind of, you know, how that kind of next thing to look out for there. And then, just any other color on the investor day at TCT, kind of major themes or topics you may cover.

Thanks.

Doug Godshall -- President and Chief Executive Officer

Sure. Thanks, Bill. And I'll tag team with Rob Fletcher, who's also on the call, and who I think you guys are all familiar with now. So, OPPS, there will be a final rule out this fall.

We are not anticipating that IVL will -- there will be any change or mention of IVL in the final rule. We think it's more likely that we'll see something in the proposed rule next summer so that we'd go from transitional pass-through sunsetting at the end of June. And then, early in July, we'd see how we would map to what we believe will be APC 5194 starting January of 2025. And, Rob, I don't know if you want to add color on that.

Rob Fletcher -- Senior Vice President, Marketing and Market Access

Well said, Doug. The next thing from CMS, Bill, that we'll see is, as Doug stated, is on November 1st when the final of OPPS for calendar year 2024 is issued -- on approximately November 1st.

Doug Godshall -- President and Chief Executive Officer

And then for investor day, we will see obviously the spectrum of our pipeline, peripheral, coronary, structural heart, and the Reducer. So, we should see several new products that we've not talked about previously, and looking forward to folks' participation. We're excited about our pipeline, our customers are incredibly excited about our pipeline. And hopefully, our investors are, too, once they get a glimpse of it.

It -- we'll truncate it to things that we think are appropriate to share at this time. We have some very interesting things under the cupboard, but no need to preview things for our competition that we wouldn't be launching until sort of after 2026. So, we're still going to keep it to a reasonably near-term pipeline, other than things that have already been disclosed previously, such as our structural heart platform.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great, thanks. Then, on guidance, just what are you contemplating in the high end, in the low end of that range that you're giving? And then, just, I don't know how -- if Dan wants to say how many one-time costs kind of we saw in that quarter that won't be reproduced kind of in Q2 and Q3 in operating. And thanks for taking my questions. And we'll see you this week at our conference.

Doug Godshall -- President and Chief Executive Officer

So, Dan, we can go back and forth. As we look to the back end of this year, obviously, you've got -- as we have expanded our footprint and our, you know, over 1,500 cath labs in the U.S. and obviously lots of cath labs internationally, we'll -- we feel seasonality in the summer in the northern hemisphere as other companies do. And as Isaac elucidated, we are continuing to add accounts, but not at the same clip as we did a couple years ago, obviously.

So, we'll -- we see the year progressing with substantial growth in the back half, but weighted more in the fourth quarter. And, Dan, I don't know if you want to add to that.

Dan Puckett -- Chief Financial Officer

Sure. It was about 6 million non-recurring for Neovasc, and that was mainly changing controlled severance.

Doug Godshall -- President and Chief Executive Officer

All right. Thanks, Bill.

Operator

Our next question is from Travis Steed with Bank of America. Please proceed with your question.

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

Hey, I just wanted to follow up on the margin question. The 6 million nonrecurring, is that in G&A? Because I was going to ask about the 10 million step-up in G&A. And then, the op margin got into the year, I just want to be clear. It looks like it was at 22% to 23% at the beginning of the year, and now you're guiding to 20% to 22%.

You've got Neovasc in there. I just want to see what else changed in the full year op margin guide versus three months ago and how to think about margin expansion, you know, kind of beyond that in '24, if we should be closer to a couple of hundred basis points of margin expansion or not, if you can continue to expand margins. Thanks for the question.

Dan Puckett -- Chief Financial Officer

Sure. So, most of that, 6 million on recurring was in G&A. We're still expecting about 32 million in opex for Reducer. As I noted earlier, it was most -- we had a bigger chunk than expected in Q2.

So, we looked at the combined margin, you know, it's at 18%. If we would look just at the base business, the operating margin is 25.6%. So, a slight improvement over Q1, even with our kind of pickup and investment that Doug alluded to. As far as this year, we did give -- in the past, we had given like 26%, 27% without Neovasc, so we've knocked that down to 24% to 26%.

We're feeling very good about some R&D programs. So, the decrease is really kind of driven by probably a little more spin in R&D programs, a little more spin in clinical. We're accelerating some Costa Rica activities to get that plant up and running, which will help our margin down the road. And that's hitting R&D right now.

And then, we also increased the footprint. So, you know, we've always said we're going to spend what we need to spend to grow the business near and long term. So, that's where you get a little bit of, you know, 100, 200 basis points of potential hit to the margin from what we said three months ago. But I think it's smart money.

Longer term, we expect -- you know, like I said, this is a big investment year; '25, '26, we'll be back up. You know, we'll absorb and get some scale and be back to where we've kind of always guided, which was the upper 20s.

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

Great. And, Doug, on the six-month gap scenario, just curious if your customers are talking about that yet or it's too early in your willingness to kind of help customers through that and how you think about the impact on kind of the overall revenue, if any at all. Thanks a lot.

Doug Godshall -- President and Chief Executive Officer

Yeah, no, customers are just now becoming aware of the inpatient reimbursement. Well, barely aware of the reimbursement because it's not even coming into fruition here for a few months. So, that will be the next order of business, is making sure they're aware of that. Then comes physician fees, which will be finalized in the fall and then go into effect in January.

The outpatient transition from NTAP to permanent is so far in the future that's not really getting any air time. And at this juncture, we're -- as we've said before, we think the -- assuming the transition is from that July to till January, we're not really anticipating an impact on our business. You've got the other two very favorable outcomes on the reimbursement side between physicians and outpatient -- physician fee and outpatient/inpatient. And there's so much momentum -- clinical momentum behind our device.

We're not anticipating a change in utilization rates.

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

Great, thanks a lot.

Operator

Our next question is from Adam Maeder with Piper Sandler. Please proceed with your question.

Adam Maeder -- Piper Sandler -- Analyst

Hi. Good afternoon. Thank you for taking the questions. I wanted to start with one on the top-line guidance.

You know, healthy guidance raised here, I think 17.5 million at the midpoint. You beat Q2, you know, by 6 million in change. So, maybe just talk about kind of what's giving the confidence to raise by the larger amount. Are you able to kind of bridge us with specific components in that guidance increase? And, you know, what's being contemplated for Reducer in that updated number? Thank you, and I had a follow-up.

Doug Godshall -- President and Chief Executive Officer

Yeah, maybe I'll let Isaac just chime in a little bit on sort of what he's seeing in the market that gives us confidence. On Reducer, as we said on our last call, in aggregate, it's going to be less than 5 million for the year. We did 1.2 the last quarter. We're very focused on understanding the model, how you impact referrals for these patients.

And we're focusing on a small handful of countries as we transition from the former Neovasc team, many of whom will stay with us on the commercial side, and others we'll be adding to in some countries. But the focus is not on taking that 1.2 and making it 2. The focus is how do we take that commercial experience so that we are poised once we have COSIRA II data, which we think will be helpful -- well, necessary for U.S. approval, but incredibly helpful for driving global adoption.

We want to really understand the model well, which is what we're working on now. And then, Isaac, maybe a bit of what you're seeing in the field.

Isaac Zacharias -- Chief Commercial Officer

Yeah, sure. I think if you look at what we see for revenue in the second half and the increased guidance, we're -- Q3 will be seasonal as it is for everybody. We'll still be able to grow through that, but probably modest growth, you know, quarter on quarter in Q3 versus Q2, particularly with the international business really being much more seasonal in Q3. And then, as we go into Q4, we'll have -- Japan, we expect obviously quarter-on-quarter growth throughout the year, but you're getting a bigger contribution from Japan in Q4.

And we're pleased with what we saw in Japan in Q2 compared to what our expectations were. We'll have the U.S. coronary business in particular with a new product launch of C2+ in the fourth quarter, and that'll be coupled with the story for our customers on the inpatient reimbursement that's taken effect in October. And then, generally, you know, with the international businesses, we've seen some really strong performance this year.

We'll have a nice tailwind in Germany that's going to continue to build. We'll have direct selling organizations now in Spain and Canada, which will be nice contributors incrementally as they go. And then, we'll have Italy go in direct and Q4. So, we think there's a nice momentum going into the second half, and that kind of builds on itself as we come out of the seasonal Q3 with the growth drivers mentioned in Q4.

Doug Godshall -- President and Chief Executive Officer

And it's -- and we're -- and we also think -- you know, through additional stimuli in the U.S. in the fourth quarter with the C2+ launch and then inpatient reimbursement. So, we're -- and I think we're -- we continue to see building momentum and benefit from the physician education investments we've done this year, which is quite substantial relative to prior years and the work we've done to continue building out our sales and clinical specialist team. So, that continues to bear fruit.

It bore fruit last quarter, it will bear fruit through the end of this year.

Adam Maeder -- Piper Sandler -- Analyst

Very helpful color, thank you for that. I guess just one quick clarification. So, in the previous guidance range, were you assuming, you know, roughly 5 million for Reducer? I guess I want to understand that. Or is that added into the updated guidance this go-round? And then, I had a follow-up.

Doug Godshall -- President and Chief Executive Officer

Yeah, we -- so beginning of the year, obviously, no Reducer because we didn't have it. But as we looked in our last commentary, Reducer was incorporated into our expectations. Not everybody's model on the street incorporated Neovasc into either the spend or the revenue, so there's a little bit of a mixed bag on the street. But we did include it.

Adam Maeder -- Piper Sandler -- Analyst

OK. Perfect. Thank you for that. And then, for the follow-up, Doug, both you and Isaac touched on it in your last response, but C2+, just was hoping to get a little bit more color in terms of the U.S.

launch, in terms of pricing strategy, how quickly will that roll out. And I guess, how much of a potential growth lever is this for that business? Thanks for taking the question.

Doug Godshall -- President and Chief Executive Officer

Yeah, go ahead, Isaac.

Isaac Zacharias -- Chief Commercial Officer

Sure. Yeah, good question. So, in the U.S., we will bring C2+ with price parity on C2. So, same price point.

The launch strategy is really coupling the message of the improvements that you can get with C2+ compared to C2. And then, really, you know, we feel very good about those based on what we've seen with the launch in the international markets. Couple that message with an in-service and the reimbursement message for inpatient, the inpatient change in October 1st. So, we'll launch kind of typical.

We've got more territories than we have in the past. So, I expect this launch will go more quickly than prior launches. The product C2+ compared to C2, it's reasonably simple to explain. You can basically get 50% more power, more pulses.

By the way, you're now getting this incremental reimbursement that did not exist before on the inpatient side of your business. And we'll kind of do a -- you know, we're still contemplating the specific tactics, but I expect the launch to go reasonably quickly and kind of roll it up, you know, in the next, probably at two quarters. So, kind of be through most of the launch by the end of Q1 of '24. And part of the reason for that is we need to -- as we launch two products a year, we need the teams kind of clearing a launch in roughly six months so they can get ready for the next launch.

Adam Maeder -- Piper Sandler -- Analyst

Thanks.

Operator

Our next question is from Michael Polark with Wolfe Research. Please proceed with your question.

Mike Polark -- Wolfe Research -- Analyst

I will continue this thread on C2+, maybe ask a very specific question. From the Europe launch, thus far, the analogy there, what have you seen in same-store sales impact from C2+? How much more productive does it make these accounts? Would you hazard a number or framework?

Dan Puckett -- Chief Financial Officer

That's a good question. I don't have a good number for you, Mike, right at this moment. I think -- we do think there's an incremental uptick. It's a little hard to divorce that from just the base momentum.

If we -- you know, if you didn't put C2+ and we were still growing same-store sales at a pretty good clip, at least, to the extent, we can see the same-store sales in our direct selling markets. But we do think there's, you know, from an anecdotal perspective, when do you pull IVL versus something else or take your shot without using IVL, and I think C2+ with the additional pulses addresses some of those anecdotal question marks that customers have about when to use IVL. And that's longer, more diffused lesions where they want to be able to treat the whole lesion with one catheter. We think C2+ is a benefit for that.

And that's what our customers are telling us as we've launched internationally. And then, also, for nodular and eccentric calcium. And we've done a lot of good work on the publication -- you know, clinical trial and publication standpoint on that this year, educating on how IVL works in those really difficult nodular or eccentric coronary lesions. And we think the additional pulses help that story and help the results in those lesions even more.

So, I think, you know, kind of two -- both of those aspects are where our customers are telling us they're getting better results and they feel more comfortable pulling IVL with the 120 pulse catheter than the 80 pulse catheter.

Mike Polark -- Wolfe Research -- Analyst

For the follow-up question on Reducer and maybe my note on this was sufficiently squishy such that that's the answer, but I had a wide range for potential U.S. approval 2025, 2026, 2027. I heard on the prepared remark, Doug, 2027 now is the target. So, kind of, you know, to the extent that was a range in your mind as well before, why the back end of the range? What have you learned that kind of wants you to position a little more runway there before it could come to market?

Doug Godshall -- President and Chief Executive Officer

Yeah, when Neovasc had been publicly saying 2025. And when we inherited it -- we inherited the trial, that had really slowed down to a crawl at best, which we are now switching from crawl to walk and then probably run next year. And so, we weren't sure when we bought it how quickly we'd be able to stimulate enrollment, so we were cautious about sort of being -- leaning into heavily on when we -- how long we expected the trial to take to enroll. Now that we understand it, it's a fascinating, sophisticated, complex trial in terms of enrollment.

And so, we think we're going to have a significant impact, but there's sort of only so much we can do with -- from where we stand today. And so, we thought it better to make sure everybody understands that it's going to take a bit of time to enroll, and we didn't want to have models still sort of landing in 2025 approval because we don't think that's at all likely and hard to even imagine how we could get enrollment done fast enough to get a 2025 approval. There are -- on the back end, there are things that might offer some upside on approval timelines like do you or do you not have a panel, but we think it's safest to just assume in 2027 approval at this juncture.

Mike Polark -- Wolfe Research -- Analyst

Thank you so much.

Operator

Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Good afternoon. Thanks for taking the question. A couple quick ones from me, Doug. The investor day at TCT, is there a plan to give any kind of long-term financial guidance or anything directional?

Doug Godshall -- President and Chief Executive Officer

We will let you know when we get there, Larry. We're calling it an innovation day. We want to focus on technology, but we appreciate that a lot of these investor days that folks are looking for a bit of a view into the future. So, we'll be thoughtful about what we share for sort of future financial outlook.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

That's helpful. And I was also surprised by the Reducer 2027 dates. I want to just understand what that assumes, Doug. So, you know, Gregg Stone said they had 42 patients enrolled last year at TCT.

They hoped to complete by the end of '23 enrollment. It's an adaptive design. So, what are you assuming? You know, is the first interim analysis at 380 and you can roll up to 760? Just help us understand kind of what you're assuming to get to that 2027 U.S. approval.

Thanks.

Doug Godshall -- President and Chief Executive Officer

Yes. So, you've got to get -- one of the ways that the trial had been characterized in the past was focusing on enrollment. What really matters is randomization. So, they didn't have 40-some odd randomized, and that's what we -- we need 380 randomized.

And so, where we stand today with sort of less than half of the sites -- well, frankly fewer than 20 had been initiated, had been activated when we bought the company out of the 50 that we'll eventually get to. So, we're now adding sites -- activating sites at a better clip. And yet, enrollment, you got to get the site activated for the randomizations to happen, etc. So, we're anticipating that the final randomized patient will be sometime in 2025, probably back half 2025 based on what we're seeing in the trajectory so far, which then you got to follow the patients, submit, etc., which is how we kind of realistically landed in 2027.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Got it.

Rob Fletcher -- Senior Vice President, Marketing and Market Access

Yeah, I'd just add on to that, Larry. Where we've landed is not -- frankly, is about right where we thought we would land as we looked at this and peeled it back after the acquisition. You know, we sort of have a what we thought were overly rosy and optimistic expectations from previous management on that trial enrollment. We were hopeful that they were right.

But as we've integrated and spent the last three, four months getting our arms around it and putting new plans in place, it's landing about where we thought it would. So, that's sort of the bid ask, I think, is what did previous management think and was that realistic compared to what we think now.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

OK, thank you.

Operator

Our next question is from Imron Zafar with Deutsche Bank. Please proceed with your question.

Imron Zafar -- Deutsche Bank -- Analyst

Hey, good afternoon. Thank you very much for taking my question. I wanted to focus on the international business first. Sounds like the launches in all the big three o-U.S.

markets, China, Japan, and Germany, are all going -- playing well. I'm just wondering if you can talk about the relative growth contribution from those three geographies in the back half and especially in 2024.

Doug Godshall -- President and Chief Executive Officer

We anticipate all that -- go ahead.

Dan Puckett -- Chief Financial Officer

Yeah, I mean, we -- and probably what Doug's going to say, we anticipate they're all going to continue to be healthy growth. If -- you know, from a dollar growth perspective, I haven't really scrubbed down 2024 yet. But if just based on what -- and we're two quarters in, in Japan, so that's pretty early. And we are two quarters in to the improved reimbursement situation in Germany, which is already having a substantial effect on revenue growth compared to the last four years that we've had in Germany.

So, I would expect that as we go through this year and into next year, you're going to see kind of largest dollar growth coming out of Japan. And then, Germany and China, it's a little early to tell yet for Germany, but Germany is looking strong right now.

Imron Zafar -- Deutsche Bank -- Analyst

OK, and then on this topic of relative growth rates, it looks like the Street is looking for pretty similar growth in 2024 for coronary and peripheral sort of mid 20s. Is that consistent with your thinking for next year?

Doug Godshall -- President and Chief Executive Officer

We've not -- we certainly expect next year to be a very strong growth year, but we've not characterized what we think top line is going to be. So, I think I'll shy away from that until we have a chance to put a number out there.

Imron Zafar -- Deutsche Bank -- Analyst

Fair enough. Thank you very much.

Operator

Our next question is from Mike Matson with Needham and Company. Please proceed with your question.

Mike Matson -- Needham and Company -- Analyst

Yeah, thanks. Just a couple on the peripheral business. So, just wondering if you could maybe compare kind of what you're seeing in terms of adoption trends, customer objections, etc., in peripheral versus what you've seen in coronary. And then, just the international peripheral business economy, I know it's small, but maybe just talk about where you're seeing some traction there, I guess, what countries.

Doug Godshall -- President and Chief Executive Officer

Yeah, so Isaac and I will tag team this one, too. The peripheral market and the coronary market are obviously dramatically different. The sort of sales model in peripheral across the industry, not just Shockwave, is a little bit more labor-intensive. And we think one of the real benefits that we're seeing from the expansion of our clinical specialist team is that we are better aware with all the both -- support our coronary business, but more importantly, support the sort of the case coverage that is expected and from which sales benefit in the peripheral lab.

There is certainly -- I think we do benefit from the peripheral-coronary synergy in our bag because we have one team in territory that can sell to the cardiologist who does -- who both practices peripheral and coronary interventions. And a very high percentage of our customers do both, which is why very high -- one of the reasons is a very high percentage of our hospitals use both coronary and peripheral. But we also will have a larger portfolio, as we already do, on peripheral with L6, M5+, S4. And a couple of our next product launches are also going to be in peripheral.

So, we'll have a more complex and more sophisticated bag because you're covering a much broader spectrum of vessels versus -- in coronary, we have C2, and then we'll have C2+. In the future, we'll have two or three coronary products that we'll be selling simultaneously. But for now, it's a little bit more sort of targeted with the C2 version, depending on where you're selling. And, Isaac, I don't know if you want to jump in on the international aspect.

Isaac Zacharias -- Chief Commercial Officer

Sure, yeah, the international peripheral, as you mentioned, it's a small number. But it's -- we've started -- as we've gone and had more focus in some of the large European countries with the direct sales force, that sales force and some marketing horsepower that we put behind it has really done a nice job of really introducing the peripheral product to many customers because the distributors -- it was a lot of work and relatively -- a lot of effort for relatively small juice for the distributors to focus on peripheral internationally. But as our team has gotten on it, we're getting -- it's just a nice incremental growth driver, and we're seeing good patterns of vascular surgery -- primarily vascular surgery adoption in the European countries.

Mike Matson -- Needham and Company -- Analyst

OK, got it. Thank you.

Operator

We've reached the end of the question-and-answer session. I'd now like to turn the call back over to Doug Godshall for closing comments.

Doug Godshall -- President and Chief Executive Officer

Thanks, everybody, for your time and attention and continued interest in Shockwave. We're obviously incredibly enthusiastic about the next six months and multiple years ahead of us. Thanks for your time, everybody.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Debbie Kaster -- Vice President, Investor Relations

Doug Godshall -- President and Chief Executive Officer

Isaac Zacharias -- Chief Commercial Officer

Dan Puckett -- Chief Financial Officer

Bill Plovanic -- Canaccord Genuity -- Analyst

Rob Fletcher -- Senior Vice President, Marketing and Market Access

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

Adam Maeder -- Piper Sandler -- Analyst

Mike Polark -- Wolfe Research -- Analyst

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Imron Zafar -- Deutsche Bank -- Analyst

Mike Matson -- Needham and Company -- Analyst

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