Michael Matson

Michael Matson sought clarification on why the organic revenue guidance mentioned an unfavorable foreign exchange impact and asked about the proceeds from the Spine business divestiture.

Answer

CFO Preston Wells clarified that the unfavorable foreign exchange impact is expected to affect the EPS line, not the constant currency organic sales growth figure. He also stated that the company did not disclose the sale price for the Spine business, noting proceeds will be received over time through milestones and used for general corporate purposes like debt repayment or M&A.

Michael Matson questioned how the Mako Spine enabling technology would operate post-divestiture and whether the revenue opportunity remains intact. He also asked about Stryker's manufacturing exposure to Mexico and Canada amid discussions of potential tariffs.

Answer

CEO Kevin Lobo explained the Mako Spine revenue opportunity is largely unchanged, as the model will be similar for the customer, but Stryker will no longer invest in implant innovation. CFO Glenn Boehnlein noted that Stryker has only one assembly plant in Mexico out of 40 worldwide and is monitoring the tariff situation.

Michael Matson asked if Stryker's large Mako installed base creates an advantage for the upcoming spine and shoulder launches and also inquired about the sustainability of the positive pricing trends.

Answer

CEO Kevin Lobo confirmed that the trusted Mako brand and large installed base provide a 'massive advantage' for new applications, whether through system upgrades or new purchases. CFO Glenn Boehnlein described the company's focus on pricing as now 'systemic' across the business, driving the recent positive results, but deferred specific guidance for 2025 to the next call.

Michael Matson of Needham & Company inquired about third-quarter revenue seasonality and sought clarification on the drivers of the updated revenue and EPS guidance, specifically the impact of foreign currency exchange rates.

Answer

CFO Micah Young explained that the company expects normal seasonality, with revenue stepping down in Q3 before a seasonally strong Q4. He confirmed the $5 million revenue guidance increase is due to favorable currency rates, as the company is maintaining its 8-11% constant currency growth forecast and passing the FX benefit through to the reported numbers.

Michael Matson from Needham & Company questioned the rationale for prioritizing share repurchases over debt repayment with the Sound United sale proceeds and asked for details on the hemodynamic monitoring market opportunity and Masimo's differentiation strategy.

Answer

CFO Micah Young stated that while share repurchases are the priority, the final decision on use of proceeds will depend on economic factors like interest rates and share price. CEO Katie Szyman clarified that Masimo's hemodynamic strategy, built on the LiDCO acquisition, targets mid-to-low acuity patients by integrating the technology into mainline monitors for a 2026 launch, differentiating through ease of use and synergy with its core pulse oximetry platform.

Michael Matson asked for an update on the hospital automation business and whether the Apple litigation would remain with the core Masimo business after the consumer unit separation.

Answer

CFO Micah Young confirmed hospital automation remains a key focus and a strong growth area, exceeding its 20%+ growth target. CEO Catherine Szyman added that it is a critical investment for the future of healthcare. Regarding the litigation, Micah Young affirmed that the pursuit of the case against Apple will remain with the core Masimo healthcare business.

Michael Matson asked about the completion status of the Malaysian sensor production transfer and its expected margin benefit in 2025. He also sought to clarify if the 200 basis points of 2025 operating margin improvement is inclusive of normal operational leverage and asked if the potential consumer business divestiture would be accretive to EPS.

Answer

CFO Micah Young confirmed that the majority of high-volume sensor manufacturing will be in Malaysia by year-end, providing margin momentum for 2025. He stated the 200 bps of operating margin improvement is inclusive of all factors, including gross margin gains and cost initiatives. Regarding the consumer separation, Young advised analysts to model the healthcare business on a standalone basis, as the consumer segment would likely be treated as a discontinued operation, and did not directly comment on accretion/dilution.

Michael Matson questioned why the fiscal 2026 free cash flow guidance is lower than the record fiscal 2025 results and asked for an update on the company's M&A outlook given its significantly reduced leverage ratio.

Answer

SVP and CFO Michael Tokich explained the lower free cash flow forecast is primarily due to a planned $40 million ETO legal settlement payment and less substantial inventory reductions compared to the prior year. President and CEO Daniel Carestio added that STERIS has the financial and intellectual capacity for M&A and will act if the right opportunity emerges.

Michael Matson asked if customers in hospital and life science markets are delaying spending due to concerns about potential policy changes from a new administration. He also requested an update on ambulatory surgery centers (ASCs) as a growth driver.

Answer

President and CEO Daniel Carestio reported seeing no spending delays, highlighting a strong orders quarter in both Healthcare and Life Sciences. He confirmed that STERIS continues to view ASCs as a key growth area and is investing in specific products and sales channels for that market. SVP and CFO Michael Tokich added that Healthcare order growth was strong at 14% year-over-year.

Michael Matson from Needham & Company, LLC questioned the persistent margin pressure from labor and energy costs despite cooling inflation. He also asked for the current size of the bioprocessing business within AST and how the company is maintaining its EPS guidance with a flatter margin outlook.

Answer

CFO Michael Tokich explained that labor cost pressures are a lagging indicator, while energy costs are volatile and have a delayed pass-through effect. CEO Daniel Carestio sized the bioprocessing business at 6-8% of AST revenue. Tokich clarified that the EPS guidance is maintained due to a favorable impact from lower-than-expected full-year interest expense.

Sought clarification on the composition of U.S. centers in the clinical trial, the training required for new sites, and whether the current Europe-heavy site mix reflects higher demand there.

Answer

The clinical trial will involve a mix of current and new U.S. centers, totaling 'much more than 3'. New sites require minimal training (about 1.5 weeks) due to the simplicity of the PCR workflow. The initial stronger pull from Europe was partly because the company intentionally reserved some top U.S. sites for the FDA trial, so more U.S. sites are expected to be announced soon.

Michael Matson inquired about the strategic rationale for opening a new manufacturing facility in Mirandola, Italy, and asked for an update on potential changes to federal transplant policy.

Answer

Executive Waleed Hassanein described Mirandola, Italy, as a global hub for perfusion technology with a unique talent pool essential for OCS disposables. He cited the move as a strategic step for vertical integration and ensuring business continuity as the company scales. On federal policy, he stated that while nothing is imminent, TransMedics is actively engaged with policymakers on the topic.

Michael Matson of Needham & Company asked about customer pushback on the company's pricing and how it could be addressed. He also questioned if aircraft maintenance could be scheduled more effectively to reduce quarterly financial volatility.

Answer

CEO Waleed Hassanein defended the pricing strategy, stating the value delivered to transplant centers far exceeds the cost, a fact supported by strong adoption rates. He explained that while scheduled aircraft maintenance is managed throughout the year, unexpected "Airplane on Ground" (AOG) events are unpredictable and are the primary source of variability, which the company mitigates by having a robust fleet and internal maintenance teams.

Michael Matson of Needham & Company, LLC inquired about the new OCS versions planned for 2025, asking for details on the technology and timing. He also asked about the capacity of the current 18-plane fleet and how much revenue growth it could support.

Answer

CEO Waleed Hassanein reiterated that next-gen technologies for lung and heart are designed to enable perfusion up to 24 hours and facilitate morning transplants. He clarified that while they own 18 planes, the average number available in Q3 was only about 10. The company plans to grow the fleet to 20-22 and then pause to 'sweat these assets' and drive efficiency.

Michael Matson of Needham & Company asked about the company's long-term organic growth potential beyond fiscal 2026, questioning if it would settle at the lower end of the mid-to-high single-digit target. He also inquired about the status of the Vivasure Medical acquisition option and whether the company's appetite for the deal had changed.

Answer

CEO Christopher Simon stated that the company expects to replicate its recent 10% organic CAGR and will issue a new Long-Range Plan in December. He affirmed that the long-term M&A appetite remains, focused on the Hospital sector, but the near-term priority is organic growth. He confirmed the Vivasure option is on track, calling it a later fiscal '26 opportunity that fits well with their strategy at the intersection of Closure and Structural Heart.

Michael Matson asked about the future of innovation and pricing power in the plasma business beyond the current upgrade cycle. He also requested an update on the international launch and performance of VASCADE.

Answer

CEO Christopher Simon stated that Haemonetics is 'far from done' with plasma innovation, outlining future opportunities in yield enhancements, procedure speed, and leveraging donor management software. On VASCADE's international progress, he noted Japan is a strong contributor, while Europe has been slower but remains a key focus for future growth.

Michael Matson asked about the requirements and timing for the VASCADE MVP XL label expansion, the outlook for currency headwinds in the second half, and sought confirmation of the $100 million revenue contribution from CSL.

Answer

CEO Christopher Simon confirmed that the company is gathering clinical evidence for the label expansion and is in supportive dialogue with the FDA, though timing is not yet determined. He expects currency to remain a headwind at current rates. He also affirmed the updated $100 million CSL revenue forecast for the year, up from the initial $85 million minimum, noting that about 70% of this was already realized in the first half.

Michael Matson questioned whether the strong B2B growth was driven by market share gains or overall category expansion and inquired about the macroeconomic impact on the DTC business, particularly on sales close rates.

Answer

CEO Kevin Smith stated that B2B growth is a mix of acquiring new customers and a broader market shift from oxygen tanks to portable oxygen concentrators (POCs), supported by strong unit growth. Regarding the DTC channel, Smith highlighted that key per-rep metrics like unit volume and revenue have improved year-over-year due to the 'patient-first' initiative, suggesting the primary headwind is the reduced sales team size rather than macro pressures.

Michael Matson of Needham & Company sought clarification on the timeline for stabilizing the Direct-to-Consumer (DTC) sales force headcount. He also probed for details on the FDA regulatory status of Simeox and inquired about the market reception and channel strategy for the new Rove 4 POC.

Answer

CEO Kevin Smith projected that the Direct-to-Consumer (DTC) rep headcount would stabilize by mid-2025. Regarding Simeox, Smith confirmed positive FDA discussions but did not confirm a filing, stating an update would come upon clearance. CFO Mike Bourque highlighted the rising earn-out accrual in SEC filings as a sign of progress. Smith also explained the new Rove 4 POC is primarily a 2025 growth driver for the U.S. DTC channel, allowing Inogen to capture patients earlier in their disease progression.

Michael Matson asked for an update on the U.S. sales force, inquiring if the team is still around 40 reps and what the plans are for expansion. He also requested feedback on the U.S. market reception and performance of the Flora tissue expander.

Answer

CEO Peter Caldini confirmed the sales force is at 40 reps and that the company plans to add more reps in key markets throughout the year, with further evaluation for 2026. Regarding Flora, he stated it is performing well and building a foundation for the future reconstruction indication, though the immediate priority remains the Motiva augmentation launch.

Michael Matson asked for an estimate of the company's post-SNIA leverage ratio and resulting capital allocation flexibility, and also confirmed that the tariff impact guidance is based only on currently applicable tariffs.

Answer

CFO Alex Shvartsburg described the company's leverage ratio as 'extremely healthy' following the debt repayment and accounting for the SNIA liability. He outlined capital allocation priorities as investing in the core businesses, funding the OSA growth opportunity, and pursuing disciplined M&A, noting they have additional borrowing capacity. He also confirmed the tariff impact estimate is based on the current environment and will be reassessed as the situation evolves.

Michael Matson asked about the Essenz heart-lung machine, clarifying if the 40% sales penetration was a global figure and what the peak penetration could be. He also inquired about the epilepsy business, asking for the percentage of patients on Medicare and the potential for a spillover reimbursement effect on private payers.

Answer

CEO Vladimir Makatsaria confirmed the 40% Essenz penetration is global and the goal is to reach 100% over a three-year cycle, using a single platform with varied options. President of Stephanie Bolton, Stephanie Bolton, stated that Medicare patients represent about 40% of new patient implants and that a spillover effect on private payer reimbursement is a possibility.

Michael Matson of Needham & Company asked CEO Tony Zook about his comments on M&A and whether to expect an increase in activity. He also questioned if the annual guidance, which was maintained despite increased non-clinical headwinds, suggests that results might land at the lower end of the range.

Answer

CEO Anthony Zook confirmed that NeoGenomics will continue to seek value-generating, accretive tuck-in and licensing opportunities that leverage its strength in community oncology, without being transformational. CFO Jeff Sherman responded that the provided guidance range is reasonable and achievable, noting that the company's forecasting accuracy has improved and that recent performance has often been above the top end of guidance.

Michael Matson inquired about any revenue impact from the recent hurricanes and asked about the market opportunity for the new PanTracer and AML Express tests.

Answer

An executive stated the hurricane impact was minimal in Q3 but caused some temporary slowness in Q4 that they expect to recover. CCO Warren Stone described the PanTracer liquid biopsy market as a very large and underpenetrated opportunity. CEO Chris Smith clarified that AML Express targets the smaller, hospital-based inpatient market where NeoGenomics is already a leader.

Michael Matson asked about the decision timeline and financing plan for the potential Endospan acquisition, given the company's leverage. He also inquired about the possibility of an HDE for NEXUS and whether On-X growth was constrained by supply issues.

Answer

Executive James Mackin confirmed the option to acquire Endospan triggers upon FDA approval, expected in H2 2026, after which they have 90 days to decide. He also stated Endospan is not pursuing an HDE. Mackin affirmed that On-X growth was constrained by supply in Q1 and could have been higher. CFO Lance Berry addressed financing, stating the upfront cost would be $135M and the company is confident it can fund the deal without issue, given expected EBITDA growth and improving cash flow.

Michael Matson from Needham & Company asked for the earliest timeline for a decision on acquiring Endospan and the rationale for converting debt to shares instead of refinancing.

Answer

CEO James Mackin stated that the decision on Endospan would follow its potential PMA approval in H2 2026, likely placing the decision in Q1 2027. CFO Lance Berry and CEO Mackin explained the debt conversion is a strategic move to deleverage the balance sheet, which is favored by shareholders and better positions the company for future acquisitions like Endospan.

Michael Matson sought clarification on the AMDS PMA submission timeline, asked about the revenue potential and ramp-up for BioGlue in China, and inquired about the financial impact of the PerClot manufacturing agreement.

Answer

CEO James Mackin clarified that the first of several AMDS PMA modules has been filed, with the final clinical module expected in Q2 2025, keeping the product on track for a Q4 2025 approval. He confirmed the BioGlue opportunity in China is significant but will be a gradual ramp-up over several years starting in the second half of 2025. An executive explained that the PerClot agreement represents a minor headwind of slightly less than one percentage point of revenue and has minimal impact on EBITDA.

Michael Matson inquired about the company's antimicrobial technologies, specifically the FDA pathway for its iodine-coated implants in the U.S. and its openness to acquiring external technologies in this area.

Answer

President and CEO Ivan Tornos described the iodine-treated hip, launching first in Japan, as a 'transformational' platform with a defined regulatory pathway for the U.S. He emphasized that the company's strategy to combat infection is broad, encompassing not only coated implants but also technologies that expedite surgery and external investments in anti-infection companies.

Michael Matson of Needham & Company asked about the impact of China's volume-based purchasing (VBP) on Zimmer Biomet's business.

Answer

CEO Ivan Tornos stated that China represents only 2-3% of global sales and that the company has a full understanding of the VBP impact. He expressed confidence that they have the right investment level and do not foresee any changes to their revenue contribution outlook from China over the next 3-5 years.

Michael Matson of Needham & Co. questioned the company's pricing strategy, asking why they are not passing through tariff costs to customers. He also inquired about the launch timing for the new wellness platform and whether it might be delayed due to market conditions.

Answer

CEO Moshe Mizrahy stated that raising prices in a weak, price-sensitive market with high financing costs would be commercially unwise and would hurt sales volume. Regarding the new wellness platform, CFO Yair Malca indicated a launch is planned for 'later this year,' but the exact timing is not yet decided. Moshe Mizrahy added that they will release more details after the completion of clinical studies.

Michael Matson asked if the 2025 EPS guidance accounts for the new share repurchase plan. He also sought to clarify whether the 2024 revenue decline was driven more by supply chain challenges or by lower demand, and inquired about a potential replacement cycle for the installed base.

Answer

CFO Yair Malca confirmed that the EPS guidance does not factor in future share repurchases. CEO Moshe Mizrahy clarified that the revenue decline was due to market slowdown and high interest rates, not supply chain issues, noting they caught up on early-year production delays. Regarding the installed base, he stated that while systems are not old, they see doctors buying new-generation platforms as second machines. Yair Malca added that upgrade promotions are planned for 2025.

Michael Matson of Needham & Company asked for updates on the Manta and Standard Bariatrics products and sought to clarify if the annualized impact of the new tariffs would be more than double the stated $55 million.

Answer

CEO Liam Kelly confirmed that Manta and Standard Bariatrics are performing as expected, with the latter being seasonally lighter in Q1. CFO John Deren cautioned against annualizing the $55 million tariff figure, stating it is too early to project given the dynamic policy environment and ongoing mitigation efforts.

Michael Matson asked why the acquired Biotronik business has a gross margin only similar to Teleflex's corporate average, and whether a new U.S. pivotal trial would be required for the Free cell device.

Answer

CEO Liam Kelly explained the margin profile is influenced by significant R&D investments in the pipeline, including for Free cell. He confirmed there is potential to improve margins over time by accelerating growth in the higher-priced U.S. market. Kelly also affirmed that a new clinical trial would indeed be necessary to commercialize Free cell in the United States.

Michael Matson asked about the current trends in bariatric surgery procedure volumes and how that market environment is affecting the Titan surgical stapler.

Answer

Liam Kelly, Chairman, President and CEO, acknowledged that while the rate of decline in bariatric procedures has slowed, the market is still in decline. However, he emphasized that Titan's strong double-digit growth is driven by market penetration, not overall market trends. He cited compelling clinical data showing Titan enables faster procedures and quicker patient discharge, which are key drivers for hospital adoption regardless of the macro environment.

Michael Matson of Needham & Company asked about CONMED's long-term top-line growth potential after supply chain issues are resolved, questioning if the key platforms are now seen as double-digit growers. He also asked if supply chain constraints are the primary factor holding growth at the lower end of its potential range. His follow-up question was about where the FX benefit to EPS would appear on the P&L.

Answer

CEO Patrick Beyer estimated the company's long-term growth potential is in the 4% to 9% range, driven by double-digit growth from its four key platforms. He confirmed that resolving supply chain issues is key to achieving the higher end of that range (7-9%). CFO Todd Garner added that the favorable foreign exchange impact on EPS is spread throughout the P&L, benefiting both gross margin and operating expenses.

An analyst on behalf of Michael Matson asked for more detail on the Orthopedics supply chain, including which specific product categories are still affected and the status of qualifying new suppliers.

Answer

COO Pat Beyer stated that improvements have been made across all orthopedic categories rather than being isolated to one, following a two-pronged approach of increasing internal manufacturing and improving the external vendor supply chain. CEO Curt Hartman added that while work remains, the U.S. Orthopedic business grew 7.4% in the quarter, indicating progress.

Michael Matson inquired about AtriCure's strategy for its U.S. MIS business amid PFA headwinds and asked for more details on the role of the EPi-Ease product.

Answer

CEO Michael H. Carrel explained the strategy is to maintain strong relationships with electrophysiologists to position the CONVERGE therapy for when PFA procedures fail, rather than pulling back. He described EPi-Ease as a strategic, low-revenue product used to facilitate epicardial access and maintain relevance and dialogue with the EP community.

Michael Matson from Needham & Company asked about the regulatory pathway for the new PFA technology and details on the design and market expansion potential of the new BoxX-NoAF clinical trial.

Answer

CEO Michael H. Carrel stated that the PFA technology will likely require a PMA trial and will be integrated into both open and MIS products. He described the BoxX-NoAF trial as a study in non-Afib cardiac surgery patients using both ablation and the AtriClip to reduce post-operative Afib, representing a significant market expansion.

Michael Matson asked about management's expectations for the sternotomy market in 2025 following the launch of the cryoSPHERE MAX probe. He also inquired about the outlook for achieving consistent positive cash flow in 2025.

Answer

CEO Michael H. Carrel responded that while the cryoSPHERE MAX is well-suited for sternotomy procedures due to its faster freeze time, the company is not yet providing specific revenue guidance for that market, preferring to let adoption grow organically. CFO Angela Wirick projected that AtriCure is likely to be cash flow positive on a full-year basis in 2025, while cautioning that the first quarter typically involves a heavy cash burn due to structural payment cycles.

Michael Matson asked if the tariff impact implies the China business is now operating near breakeven, inquired about the reimbursement timeline for WRAPSODY's TPT status, and asked about the device's inpatient versus outpatient procedure mix.

Answer

EVP and CFO Raul Parra declined to comment on regional profitability but reiterated the gross tariff impact figures. Chairman and CEO Fred Lampropoulos stated they anticipate final decisions on both NTAP and TPT reimbursement for WRAPSODY by June 2025. Management did not disclose the specific procedure mix but expressed overall confidence in the program.

Michael Matson of Needham & Company asked why the company's projected 20 basis point currency headwind was lower than peers and inquired about the international performance of Wrapsody, including whether U.S. trial data has been beneficial.

Answer

Executive Raul Parra attributed the lower FX impact to two factors: a consistent, rolling hedging program and a higher mix of U.S. revenue, which is now closer to 55% of total sales. Executive Fred Lampropoulos added that their hedging strategy is disciplined and not speculative. Regarding international Wrapsody sales, Lampropoulos stated that performance is strong, the European sales team is encouraged, and the product continues to receive positive market feedback.

Michael Matson of Needham & Company questioned whether Merit's sales force possesses the right skill set to effectively sell higher-value, physician-preference therapeutic products like WRAPSODY and the Cook lead management portfolio. He also attempted to get a U.S. Total Addressable Market (TAM) estimate for WRAPSODY's specific indications.

Answer

Executive Joseph Wright expressed confidence in the sales team, noting that while it's a change in selling, the company can attract and retain top talent. He highlighted that the renal therapies group is already training for WRAPSODY. Executive Fred Lampropoulos declined to provide a TAM estimate, stating it would be provided in the post-approval virtual meeting.

Michael Matson of Needham & Company asked about the number of covered lives under the Highmark policy and the potential impact of a positive MolDx decision on the sales team, cash burn, and revenue recognition timing.

Answer

CEO Dr. Lishan Aklog described the Highmark of New York policy as a modest-sized plan whose primary value is as a "precedent setter" for other commercial payers. CFO Dennis McGrath explained that with a positive Medicare policy, revenue would be recognized when reports are issued, not upon cash collection. He added that due to the high margin, the increased volume from Medicare should not significantly increase the cash burn rate.

Michael Matson asked how Lucid's go-to-market strategy would change if and when it receives Medicare coverage, and whether the data package being submitted to MolDx is considered sufficient for private insurers as well.

Answer

CEO Dr. Lishan Aklog explained that Medicare coverage would allow Lucid to more effectively target the 40%+ of the at-risk population covered by Medicare. He stressed that Medicare coverage is a critical "gateway" to finalizing coverage with commercial payers. Dr. Aklog affirmed his confidence that the current data package is sufficient for both Medicare and private insurers.

Michael Matson from Needham & Company questioned the company's contingency plans if the MolDX Medicare decision is delayed and asked for details on how the concierge medicine program markets EsoGuard to patients.

Answer

CEO Dr. Lishan Aklog stated that the most important mitigating factor against delays is the company's recently strengthened balance sheet, which provides a cash runway well into 2026. He also highlighted the parallel revenue-generating efforts with concierge and employer channels as a buffer. Regarding the concierge program, Dr. Aklog explained they are actively developing patient-facing marketing materials and processes, similar to models used by other companies, to help contracted practices effectively offer and explain the test to their patient base.

Michael Matson asked for the synergy impact in Q4 and whether any dissynergies are assumed in 2025. He also requested a quarter-by-quarter breakdown of selling day differences for the year.

Answer

CEO Matthew Trerotola clarified that the net dissynergy impact on the Recon business was about 1% in Q4. He expects this to be neutralized in Q1 2025 and turn into a net positive synergy for the rest of the year. He also confirmed the selling day impact is primarily a trade between Q1 (2-3 extra days) and Q4.

Michael Matson asked if the international Lima integration was lagging the U.S. and posed a risk for dissynergies in 2025. He also inquired about the company's plans for the cementless knee market.

Answer

CEO Matthew Trerotola clarified that the international integration is not lagging but is more complex due to hybrid direct/indirect markets. He noted they are ~90% through the process and do not see meaningful risk carrying into next year. He also confirmed that the company already has cementless knee offerings and is seeing healthy growth.

Michael Matson from Needham & Company asked if the double-digit device growth was representative of new patient growth or if it included benefits from pricing, mix, or an increase in device replacements (rePAP).

Answer

Executive Michael Farrell acknowledged that while the base market growth is mid-single-digits, ResMed aims to outperform this through various initiatives. He confirmed that the rePAP opportunity for devices older than five years is a factor the company actively pursues, alongside new patient demand generation. He emphasized that the strong growth is a result of a multi-faceted approach including demand generation, curation, and conversion for both new and existing patients.

Michael Matson asked if the fabric technology on the new AirTouch N30i mask could be applied to other products and if it would command a price premium.

Answer

CEO Michael Farrell confirmed the technology is a platform that can "absolutely" be applied to other masks over time. He stated it will have a price premium due to higher manufacturing costs, which is justified by the expected ROI from improved patient adherence, better fit rates, and lower overall healthcare system costs.

Michael Matson of Needham & Company sought clarification on the financial reporting of the Otsuka JV, the role of ICU's sales force post-transaction, and the competitive dynamics in the infusion pump market.

Answer

Executive Brian Bonnell explained that ICU Medical will deconsolidate the JV's results and will not report its revenue on their top line, instead recognizing its share of the JV's net earnings. Executive Vivek Jain confirmed the customer experience will be seamless, with ICU's sales force continuing to sell the full portfolio. Regarding the pump market, Jain noted that while incumbency is a major factor, the market is large enough for ICU to achieve meaningful growth.

The analyst asked about the expected impact of 2024's new product launches on 2025 performance and questioned the strategy for reducing the company's high inventory levels to a more normal standard.

Answer

The executive confirmed that the numerous 2024 product launches are expected to be a significant growth driver in 2025, given a typical 6-12 month ramp-up period. The CFO addressed inventory, stating they are laser-focused on reducing it through smarter deployment and efficiency, expecting continuous improvement over time while noting their trauma-focused business requires more inventory than other orthopedic segments.

Questioned the nature of the market 'choppiness,' the mechanics and financial impact of the inventory burn-down plan, and the rationale for combining the CFO and operations roles given past operational issues.

Answer

The company stated the 'choppiness' was more week-to-week rather than specific to elective procedures, with growth balanced across segments. The inventory plan involves selling more and ordering less to burn down high-cost stock, with a baseline gross margin of 75% already reflecting this. Management defended the new CFO's dual role, citing his diverse experience and emphasizing that improving operations is a company-wide priority.

Asked about the size of the bunion market, whether new products will drive market share gains or market expansion, and the company's outlook on M&A.

Answer

The US bunion market is around 450,000 procedures annually. Their new products are expected to be complementary and drive market share gains within this growing segment. While open to M&A for technology that aligns with their mission, they have no immediate plans.

Michael Matson of Needham & Company inquired about the drivers behind the strong pricing performance in 2024 and its sustainability. He also asked for the expected launch timeline and revenue ramp for the MRD test.

Answer

CFO Rebecca Chambers attributed strong pricing to the effectiveness of the managed care and billing teams securing new contracts, particularly a large commercial payer for Decipher, and successfully resolving prior period collections. CEO Marc Stapley reiterated the MRD test launch for muscle-invasive bladder cancer is planned for the first half of 2026, which will serve as a proof of concept for the broader MRD platform.

Michael Matson asked about the reasons for the domestic decline in the NovaSure business and its long-term outlook. He also questioned whether the newly acquired Gynasonix system would cannibalize the existing MyoSure product, given both treat fibroids.

Answer

Chief Operating Officer Essex Mitchell explained that the overall market for global endometrial ablation is slowly declining due to alternatives like IUDs, though Hologic is maintaining share and growing NovaSure internationally. He clarified that Gynasonix will not cannibalize MyoSure, as its Sonata system treats different types and sizes of fibroids, filling a gap between the Accesa and MyoSure systems.

Michael Matson asked if the data from the THUNDER trial could be expected in the first half of next year. He also inquired about the pricing strategy for the upcoming Thunderbolt device and whether it would command a premium similar to other CAVT products.

Answer

CEO Adam Elsesser stated that the company has not set a specific timeline for the THUNDER data presentation, as the immediate focus is on completing the trial follow-up. He confirmed that Thunderbolt will likely be priced at a premium, but the exact amount will be determined within the context of the neurovascular reimbursement structure and may not be a dollar-for-dollar match to premiums in other vascular beds.

Inquired about the Pounce LP device, specifically its market size, the prevalence of below-the-knee clots, and the competitive landscape for treating them.

Answer

The executive team explained that the below-the-knee market size is hard to quantify because current technologies are limited, often forcing a reversion to surgery or lytics. They believe the potential market is much larger. Pounce LP is uniquely designed for small, friable vessels (down to 2mm) where other technologies like suction struggle. Initial physician feedback from the limited market evaluation has been very positive.

Asked for a qualitative comparison of the growth drivers between the Pounce and Sublime products. He also inquired about the potential growth impact of the new Preside coating technology.

Answer

Pounce is currently a bigger growth driver than Sublime, partly due to a conscious decision to focus the sales team on the higher-priced Pounce product after the sales force was reduced. The new Preside coating is a significant technological advancement, but its revenue impact will be long-term as customers need to go through their own development and regulatory cycles before royalties are generated.