Chris Pasquale

Chris Pasquale questioned the confidence in achieving a 1:1 handpiece to procedure ratio in 2026, given that handpiece sales historically exceeded procedure volumes by over 10,000 units over the past three years, and asked for details on the gross margin impact of a field action in Q4, including its nature and whether the impact is contained.

Answer

President and CEO Larry Wood explained that historically, handpiece sales were 108%-115% of procedure volume, but they are now modeling 1:1 for 2026, even with new system placements requiring initial inventory. He cited 8-9 weeks of data under the new business practice showing handpiece sales and procedures aligning, giving confidence in the 1:1 ratio. He noted that if the historical 110% ratio were used, it would add $20M-$22M in revenue, largely offset by price increases. Regarding the field action, Mr. Wood clarified it was a one-time, non-recurring event with no patient safety issues, related to handpiece-system compatibility, resolved by a field upgrade. EVP and CFO Kevin Waters quantified the impact as approximately $1.5 million, representing 240 basis points of gross margin pressure, and confirmed it was contained to Q4 and will not impact future periods.

Chris Pasquale questioned the confidence in a one-to-one handpiece sales to procedure volume ratio for 2026, given that sales historically exceeded procedures by over 10,000 units over the past three years, and asked for details on the gross margin impact of a field action in Q4.

Answer

Larry Wood, Chief Executive Officer, stated that while historical handpiece sales were 108%-115% of procedure volume, the new 1:1 modeling for 2026 accounts for new system placements requiring inventory and is supported by recent weeks of aligned sales and procedures. He noted this change significantly impacted guidance but was offset by price increases. Mr. Wood clarified the field action was a one-time, non-recurring event related to handpiece-system compatibility, with no patient safety issues, resolved by a field upgrade. Kevin Waters, Chief Financial Officer, quantified the impact as approximately $1.5 million, or 240 basis points of pressure, contained to Q4.

Chris Pasquale from Nephron Research LLC asked for details on the surgeon utilization curve and the key drivers behind the continued strength in international revenue.

Answer

EVP & CFO Kevin Waters explained that the utilization ramp is consistent, taking 3-4 quarters for a surgeon to reach the average. He noted a new focus on launching accounts with multiple surgeons to improve efficiency. For international sales, he confirmed the UK remains the primary driver of upside, with Japan and Korea showing promising early traction and representing a combined 70% of international revenue with the UK.

Chris Pasquale asked about the lower-than-expected performance in heart and lung segments in Q4, inquiring if trials or other dynamics caused the deceleration.

Answer

Waleed Hassanein, President and CEO, noted lung is a 'rounding error' and most centers awaited FDA approval for de novo. For heart, he mentioned similar impacts, wrapping up other trials, and some centers doing organic activities. He believes these dynamics are transient and will be addressed by ENHANCE and De Novo trials.

Chris Pasquale asked about the lower-than-expected performance in heart and lung segments in Q4, inquiring if trial disruptions or other dynamics played a role.

Answer

President and CEO Waleed Hassanein noted that lung volume is a 'rounding error' and centers were awaiting FDA approval for de novo. For heart, he mentioned similar impacts from trials wrapping up in H2 2025, believing these dynamics are transient and will be addressed by ENHANCE and De Novo program initiations.

Chris Pasquale inquired about any substantive changes to the OCS Lung IDE trial design and sought commentary on the relatively flat U.S. heart transplant market.

Answer

CEO Waleed Hassanein confirmed the OCS Lung trial's clinical design is unchanged, with final FDA questions focused on preclinical data. He attributed the flat heart market to normal fluctuations and DCD non-progression rates, expressing confidence that the upcoming next-gen OCS Heart trial will be a significant growth catalyst.

Chris Pasquale inquired about the expected cadence of gross margin throughout 2026, specifically whether Q2 would be the low point with subsequent improvement, and the magnitude of the high and low points for the year. He also asked about the clinical evidence strategy for new indications like breast and prostate, questioning if randomized trials or single-site registry studies would be required.

Answer

Lindsey Hartley (CFO) explained that gross margin pressure is expected in Q2 and the second half of 2026 as the new biologic Avance product, which carries a heavier cost, begins to be sold. She anticipates improvement in gross margin starting in 2027. Michael Dale (CEO) stated that clinical evidence would involve both randomized and adequate/well-controlled studies. Mixed and motor nerve indications will require randomized clinical trials, while breast is unlikely to be randomized due to ethical concerns but will pursue adequate control studies. Prostate study details will be determined later in 2026 after reviewing clinical signals from initial sites.

Chris Pasquale asked for clarity on the expected cadence of gross margin throughout 2026, specifically if Q2 would be the low point and the anticipated magnitudes of high and low points for the year. He also inquired about AxoGen's plans for clinical evidence generation in breast and prostate indications, including whether randomized trials or registry-style studies would be required.

Answer

CFO Lindsey Hartley explained that gross margin pressure would build from Q2 into the second half of 2026 as the new, higher-cost biologic Avance product is sold alongside tissue products, with improvements expected in 2027. CEO Michael Dale stated that clinical evidence would involve both randomized and 'adequate and well-controlled' studies. He noted that mixed and motor nerve indications would require randomized trials, while breast, due to ethical considerations, would likely involve adequate control studies rather than randomized ones, both initiating this year. For prostate, the study design will be determined later in 2026 after reviewing clinical signals from initial sites.

Chris Pasquale from Nephron Research LLC asked about the primary drivers behind the strong Q2 revenue growth, which showed acceleration against a tougher comparison, and questioned the implied deceleration in the full-year guidance for the second half.

Answer

President and CEO Michael Dale attributed the robust growth to solid execution of their strategic plan, particularly the focus on high-potential accounts and the core value proposition of the Avance Nerve Graft. He highlighted that the extremities business was growing faster than internal plans. Regarding the conservative back-half guidance, Dale explained it was a prudent measure to account for potential logistical changes related to the BLA approval, which could affect how the company manages product supply for unscheduled procedures.

Chris Pasquale questioned the protracted nature of the international transition to direct operations, noting it was initially perceived as a 2025 headwind but now impacts 2026 and potentially beyond, and asked when the transition is expected to be completed.

Answer

CEO John Sheridan explained that the transition is a significant undertaking, staged over a two-year period (2026-2027) to manage risk, involving hiring sales forces, coordinating distributor separations, and implementing back-end infrastructure. He confirmed they are now live in the U.K., Switzerland, and Austria, using this experience as a playbook for future expansions. The majority of the planned direct transitions are expected to be completed by the end of 2027, with a long-term hybrid model envisioned.

Chris Pasquale asked about the protracted nature of Tandem's international transition to direct operations, which was initially expected to be a 2025 headwind but now impacts 2026 and potentially beyond, inquiring about the reasons for the extended process and the anticipated completion timeline.

Answer

President and CEO John Sheridan explained that the transition involves major tasks including hiring sales forces, separating from distributors, and building back-end infrastructure in new markets. He noted that completing these for three countries in 2025 was a significant accomplishment, and staging the transition over a two-year period (2026 and 2027 for additional countries) is a strategic approach to mitigate risk. He anticipates the majority of the transition will be complete by the end of 2027, with a long-term hybrid model combining direct business and distributor partnerships.

Chris Pasquale asked about the timeline for Hugo to significantly impact the surgical business and requested qualitative comments on the system's pipeline.

Answer

Chairman and CEO Geoff Martha expressed excitement about Hugo's FDA approval and initial U.S. cases, noting positive leading indicators like smooth case rates, global procedure growth, and utilization. He expects a step-up in Q4 installations, but acknowledged that the surgical business is large, so Hugo's impact on the overall segment's reported numbers might not be immediately visible, though it is growing fast underneath the covers.

Chris Pasquale, a Partner at Nephron, asked about the expected timeline for Medtronic's Hugo robot to significantly impact the surgical business's financial performance, given that Symplicity and Altaviva are anticipated to kick in sooner. He also requested qualitative comments on the current system pipeline for Hugo.

Answer

Chairman and CEO Geoff Martha expressed excitement about Hugo's FDA approval and initial U.S. cases, noting strong positive feedback on performance and future opportunities. He highlighted positive leading indicators such as smooth case rates, global procedure growth, utilization, and a meaningful step-up in installations. While Hugo is growing fast, he acknowledged that it might take time to significantly move the large $6 billion surgical business, but Medtronic is pleased with its current trajectory and orders.

Chris Pasquale asked about Inspire Medical Systems' expectations for commercial payers regarding the transition from CPT code 64568 to 64582 with the -52 modifier. He also inquired about the intentional reduction in territory count (down 40 year-over-year), the rationale behind it, and an update on the number of centers served per representative and the expansion of the installed base in 2025.

Answer

Tim Herbert (Chairman and CEO) explained that while commercial payers currently allow 64568, they are expected to transition to 64582 with the -52 modifier over time, necessitating work on global contracts. He confirmed the territory count reduction was intentional, aimed at optimizing strategic territories and increasing field clinical reps for case management, while territory managers focus on referrals and capacity. He estimated generally 5 centers per territory.

Chris Pasquale asked about Inspire's expectations for commercial payers, specifically if they would continue to allow billing under CPT code 64568 or transition to 64582 with the -52 modifier. He also inquired about the intentional reduction of 40 U.S. territories, the number of centers reps are serving, the rep-to-center ratio, and the expansion of the installed base in 2025.

Answer

Tim Herbert, Chairman and CEO, explained that commercial payers currently allow 64568 per their policies, and prior authorizations include the specific CPT code, leading to a lesser initial impact. However, he expects them to eventually transition to 64582 with the -52 modifier, requiring work on global contracts. Herbert confirmed the territory reduction was intentional, aimed at strategic alignment for improved utilization, with increased field clinical reps to support case management and training. He noted that, generally, there are about 5 centers per territory.

Chris Pasquale from Nephron Research LLC questioned why the company's guidance follows typical seasonality given the unique headwinds peaking in Q3. He also asked about potential pushback from physicians regarding lower Medicare payment rates under the new CPT code.

Answer

CEO Tim Herbert acknowledged the Q3 guidance is softer than historical trends but maintained that the Q4 ramp-up remains consistent with past seasonality. On reimbursement, he addressed physician concerns by explaining that the reduced OR time with Inspire V should make the effective reimbursement-per-minute comparable. He also highlighted that the proposed 2026 Medicare rate increase significantly closes the payment gap between the old and new codes.

Chris Pasquale noted that S.E.T. organic growth stepped down despite strong performances in CMFT and Upper Extremities. He asked about the performance of other S.E.T. segments in the quarter and the expected performance of the business once Paragon becomes part of the organic growth calculation.

Answer

Ivan Tornos, Chairman, President, and CEO of Zimmer Biomet, stated that S.E.T. delivered mid-single-digit growth for the year, with CMFT and shoulders performing well, and foot and ankle (Paragon) showing double-digit growth. He identified trauma and restorative therapies (HA injections in the U.S.) as two 'problem children' that were headwinds in 2025. For 2026, the company plans to invest in four key growth drivers (shoulder, CMFT, ASC, robotics), adding reps and implementing new processes to address the challenges in trauma and restorative therapies.

Chris Pasquale inquired about the performance of other SET segments beyond CMFT and Upper Extremities, given that overall SET organic growth stepped down, and how the company views the business once Paragon becomes part of the organic growth calculation.

Answer

Ivan Tornos, Chairman, President, and CEO, stated SET delivered mid-single-digit growth for the year. He identified trauma and restorative therapies (HA injections in the U.S.) as headwinds in 2025. For 2026, the company will invest in key growth drivers, expand sales force, and implement new processes to address the underperforming segments.

Chris Pasquale from Nephron Research LLC questioned the confidence in the Monogram commercialization timeline, given the perceived regulatory hurdles for autonomous robotics, and asked how the deal would be EPS-neutral before generating revenue.

Answer

Chairman, President & CEO Ivan Tornos expressed high confidence, noting a 2.5-3 year diligence process, engagement with third-party experts, and a robust clinical trial plan. To achieve EPS neutrality, he explained the company is reallocating OpEx from non-core areas and leveraging existing R&D and operational platforms from the ROSA business.

Chris Pasquale noted that U.S. PFA penetration is already at 70% for AF cases, which is higher than expected and suggests the latter innings of that mix shift. He asked what remains to be penetrated with PFA, particularly in other procedure categories like SVT or VT, and what product or data is necessary to move into those segments.

Answer

CMO Kenneth Stein acknowledged that while 70% of AFib cases are penetrated, 30% still remain, along with the ongoing tailwind of new technology adoption. For other arrhythmias, he identified atrial tachycardias (though potentially diminishing with Farapulse efficacy for de novo AF ablation) and ventricular tachycardia as prime use cases for PFA. He mentioned ongoing studies for Farapulse technology in the ventricles and the potential of Farapoint and Faraflex catheters to excel in these areas.

Chris Pasquale asked about the implications of U.S. PFA penetration already reaching 70% for AF cases, suggesting the latter innings of that mix shift, and what remains to be penetrated in other procedure categories like SVT or VT, along with the necessary product or data requirements for these segments.

Answer

CMO Kenneth Stein clarified that even at 70% AFib penetration, there's still 30% left and a tailwind of new technology adoption. He identified atrial tachycardias (atypical atrial flutter) and ventricular tachycardia (VT) as prime use cases for PFA expansion. He mentioned ongoing studies for using Farapulse technology in ventricles and highlighted that Farapoint and the developing Faraflex catheters are expected to excel in these areas.

Chris Pasquale asked about the Agent drug-coated balloon (DCB) launch, its potential as a billion-dollar product, and the growth trajectory in the interim period before stent data readouts. He also questioned if there's enough room in in-stent restenosis (ISR) to sustain momentum with upcoming competition and if physicians are already using the product off-label for de novo lesions.

Answer

Chief Medical Officer Dr. Ken Stein confirmed ample room for continued Agent growth even before the STANCE trial completes enrollment and reads out, noting the benefit of NTAP and improved reimbursement. He highlighted the opportunity to at least double the indicated population by expanding beyond ISR into areas like small vessel bifurcation disease and other de novo lesions. Dr. Stein mentioned upcoming Agent data at TCT from the post-approval study, which will provide real-world insights, and emphasized the fundamental advantages of paclitaxel in DCBs, expressing confidence in Agent's position as a long-term growth driver.

Chris Pasquale from Nephron Research inquired about the AGENT drug-coated balloon's launch success and its potential to become a billion-dollar product. He asked about the sustainability of growth in the interim period before STANCE trial readout, particularly within the in-stent restenosis (ISR) indication and in anticipation of new competition, and whether physicians are already using the product off-label for de novo lesions.

Answer

Chief Medical Officer Dr. Ken Stein confirmed ample room for continued AGENT growth even before the STANCE trial readout, citing the new TPT and improved reimbursement. He highlighted the opportunity to at least double the indicated population by expanding beyond ISR into small vessel bifurcation disease and other de novo lesions. Dr. Stein mentioned upcoming AGENT post-approval study data at TCT, which will provide insights into real-world usage and outcomes. He expressed confidence in AGENT's position, noting fundamental advantages of paclitaxel in drug-coated balloons, and reiterated its role as a long-term growth driver.

Chris Pasquale asked about the MedSurg pricing benefit, noting it was the smallest since 2022, and whether there was anything unusual about the quarter or if it's expected to rebound in 2026. He also inquired about the Inari clinical pipeline, specifically if the Peerless 2 trial is still wrapping up this year and when data should be expected.

Answer

CFO Preston Wells attributed the smaller MedSurg pricing benefit to one specific international deal but expects a steady cadence of price from that business in 2026. VP of Finance and Head of Investor Relations Jason Beach clarified that Peerless 2 trial results are expected closer to the middle of next year (2027).

Chris Pasquale asked about the MedSurg pricing benefit in Q4 2025 being the smallest since 2022, inquiring if there was a specific reason for this and if it's expected to rebound in 2026. He also sought an update on Inari's clinical pipeline, specifically the PEERLESS II trial, and when to expect its data.

Answer

Preston Wells, CFO, Stryker, attributed the MedSurg pricing to one particular international deal but expected a steady cadence of positive pricing from the business in 2026. Jason Beach, VP of Finance and Head of Investor Relations, Stryker, clarified that the PEERLESS II trial results for Inari are now expected closer to mid-2027.

Chris Pasquale of Nephron Research LLC asked if Stryker sees a limit to its 'one size fits all' Mako strategy compared to competitors' portfolio approaches. He also questioned the sustainability of double-digit trauma growth as comps for the Pangaea launch get tougher.

Answer

Chair & CEO Kevin Lobo stated that Stryker has a 'winning solution' with Mako and will continue its strategy of adding new applications to the single platform, without commenting on future pipeline developments. He expressed confidence in sustaining high growth in Trauma & Extremities, citing the ongoing, multi-faceted Pangaea launch, its upcoming European debut, and strong performance in upper extremities and total ankle.

Carol, on behalf of Chris Pasquale, asked about long-term steps to mitigate tariff exposure, such as manufacturing footprint changes, and inquired about the potential impact of recent FDA layoffs on product approvals.

Answer

CFO Preston Wells stated that no major changes to the manufacturing footprint are planned, as such moves are complex and lengthy, though the company is leveraging dual sourcing where possible. CEO Kevin Lobo assured that the FDA layoffs were largely and quickly reversed for industry-funded positions, and he does not anticipate any major slowdowns in product approvals.

Chris Pasquale from Nephron Research asked about the growth trajectory for MiSight into fiscal 2026, questioning if new launches could drive an acceleration or if growth would moderate due to a larger revenue base. He also requested a more specific outlook for CapEx next year and its growth relative to sales going forward.

Answer

President and CEO Al White suggested that MiSight's growth in 2026 would likely be more similar to this year's rate rather than an acceleration, given the larger base. CFO Brian Andrews stated that CapEx will decrease in both absolute dollars and as a percentage of revenue next year. He explained that while investment will continue, the peak spending cycle is over, allowing CapEx to normalize and help drive free cash flow higher, similar to historical levels.

Chris Pasquale questioned if the slowdown in contact lens market growth was simply pricing trends returning to historical norms and asked about future pricing power. He also inquired about the company's ability to mitigate potential tariff impacts by shifting manufacturing.

Answer

President & CEO Albert White asserted that market pricing remains solid and likely higher than pre-COVID levels due to inflation, attributing the current softness more to channel inventory adjustments. CFO Brian Andrews stated that Cooper has multiple levers to mitigate tariffs, including price increases and supply chain adjustments, but is taking a "wait and see" approach pending more clarity.

Chris Pasquale of Nephron Research asked about the sustainable long-term revenue growth rate for STAAR's EVO ICL platform and questioned why Alcon's tariff headwind forecast increased while other companies saw theirs decrease.

Answer

CEO David Endicott expressed confidence in solid global growth for EVO, citing low penetration and Alcon's ability to accelerate adoption. CFO Tim Stonesifer explained the increased tariff forecast was due to rates coming in higher than expected, with mitigation currently relying heavily on favorable currency exchange rates while the company evaluates supply chain adjustments.

Chris Pasquale of Nephron Research asked for quantification of China's contribution to the strong international embolization results and for an updated full-year outlook for the Embolization & Access business.

Answer

CEO Adam Elsesser clarified that China does not order Penumbra's coil products, so the recent order had no impact on the embolization (Ambo) business results. He attributed the broader international strength to a multi-year rebuilding effort and new product introductions, expressing confidence in the segment's trajectory without providing a specific guidance update.

Chris Pasquale from Nephron Research LLC asked about the practical reimbursement landscape for asymptomatic TAVR cases, questioning how local MACs are handling claims in the U.S. and what the reimbursement pathway looks like in Europe following the new indication.

Answer

Larry Wood, Corporate VP of TAVR, explained that while he is unaware of coverage issues for trial patients, some U.S. hospital systems are waiting for a formal NCD update, creating a 'slow burn' adoption. In Europe, he noted that the recent CE mark approval is the first step, and the company must now begin the country-by-country process of securing reimbursement, which will take time.

Chris Pasquale of Nephron Research LLC asked about the practical reimbursement landscape for asymptomatic TAVR cases with local MACs ahead of an NCD update. He also inquired about the process and timeline for securing broad reimbursement access in Europe following the recent CE Mark approval.

Answer

Corporate VP Larry Wood explained that while he is not aware of reimbursement issues for cases submitted to local MACs, some large hospital systems are waiting for a formal NCD update, creating a 'slow burn' adoption. For Europe, he noted the CE Mark approval was the critical first step, and the process of engaging with individual country reimbursement bodies has just begun.