Summary of Penumbra Conference Call Company Overview - **Company**: Penumbra - **Industry**: Medical Technology (Med Tech) Key Points Q3 Performance - Q3 performance in the MO (Mechanical Operations) and access business was exceptionally strong, leading to a reassessment of growth durability by investors [3][4][5] - The sales force was expanded to focus on the growing embolization product line, adding over 50 experienced personnel from related fields [4][5] Product Innovations - The Ruby XL coil was launched, which fills larger spaces faster and has received positive feedback from physicians due to its innovative design [5][6] - The embolization franchise is expected to grow at a pace comparable to the overall business, marking a significant development for Penumbra [14] Market Opportunities - The MMA (Meningeal Artery) embolization procedure is emerging as a significant growth area, with a potential market opportunity estimated at $1 billion [12][14] - The company is seeing growth in the neuro side, particularly in treating cerebral aneurysms, which was previously underutilized [11][12] Clinical Data and Reception - Positive feedback has been received regarding the STORM-PE study, which demonstrated that mechanical thrombectomy with CAVT is superior to anticoagulation [20][21] - The study showed significant safety and efficacy, with procedure times averaging 25 minutes, which is considered groundbreaking in the field [22][52] Changes in Treatment Protocols - The study's results are prompting hospitals to update their treatment protocols, moving away from waiting for clinical deterioration before intervention [34][36] - The RV/LV (Right Ventricle/Left Ventricle) ratio is a critical diagnostic measure influencing treatment decisions, and improvements in this ratio were noted in the study [25][26] Future Outlook - The company is optimistic about the upcoming years, expecting continued growth driven by new products and market acceptance [19][60] - The Thunderbolt product is under FDA review, and while there are thorough questions from the FDA, the company remains confident in its efficacy [55][59] Sales and Market Penetration - The penetration rates for mechanical thrombectomy are currently low, but the new data is expected to change this by encouraging earlier intervention [33][34] - The company is focused on educating referring physicians and updating hospital protocols to facilitate this change [32][45] Product Development - The upcoming 3.0 product version is expected to be faster and result in less blood loss compared to previous versions, enhancing its appeal in clinical settings [49][50] Conclusion - Penumbra is positioned for significant growth with innovative products, strong clinical data, and a proactive approach to changing treatment protocols in the medical technology industry [62]

Group 1 - Canaccord analyst William Plovanic raised the price target on Penumbra (PEN) to $355 from $350 while maintaining a Buy rating on the shares [1] - The firm reported a strong Q3 performance driven by its US Embo/Access segment, which benefited from the Ruby XL launch [1] - A dedicated and focused salesforce was created in the first half of 2025, contributing to the positive results [1]

Core Insights - Penumbra, Inc. (NYSE:PEN) is recognized as one of the top medical device stocks to invest in, with Needham upgrading its rating from Hold to Buy and setting a price target of $326, driven by expected revenue growth in 2026 [1][2] Revenue Growth Factors - The anticipated revenue growth is attributed to four key factors: the launch of the Ruby XL, findings from the STORM-PE trial, the upcoming Thunderbolt product launch, and reduced headwinds in China [1] - The Thunderbolt product is projected to nearly double Penumbra's revenue per stroke procedure, which is expected to enhance growth in neuro thrombectomy and improve gross margins [2] Company Overview - Penumbra, Inc. is a California-based leader in thrombectomy and vascular intervention technologies, offering products such as the Indigo and Lightning series, along with neuro and vascular embolization solutions [3]

Core Viewpoint - Needham upgraded Penumbra Inc. from Hold to Buy with a price target of $326.00, anticipating significant revenue growth in 2026 driven by key product launches and clinical trial results [1] Group 1: Revenue Growth Drivers - The upcoming Thunderbolt product launch is expected to nearly double Penumbra's revenue per stroke procedure, enhancing growth in neurothrombectomy and improving gross margins [2] - Positive results from the STORM-PE clinical trial are anticipated to support revenue growth [1] - Easing regulatory headwinds in China is expected to facilitate market expansion [1] - The rollout of Ruby XL is also projected to contribute to revenue acceleration [1] Group 2: Financial Projections - Analysts expect improving operating leverage to positively impact consensus earnings estimates for 2026 [2] - A combination of higher sales forecasts and multiple expansion is predicted to support continued appreciation in Penumbra's share price [2]

Upgrades - Seaport Research upgraded Constellation Energy (CEG) to Buy from Neutral with a price target of $407, anticipating more datacenter power deal announcements and positive earnings revisions for thermal IPPs before year-end [2] - Wolfe Research upgraded Otis Worldwide (OTIS) to Outperform from Peer Perform with a price target of $109, noting that downside risk to Q4 outlook is widely anticipated but offsetting positive developments could drive more bullish positioning [3] - JPMorgan upgraded Ionis Pharmaceuticals (IONS) to Overweight from Neutral with a price target of $80, up from $49, citing multiple launches that position the company on a path to breakeven [4] - Needham upgraded Penumbra (PEN) to Buy from Hold with a price target of $326, expecting significant growth acceleration in 2026 due to upcoming product launches and easing headwinds in China [4] - Deutsche Bank upgraded Northrop Grumman (NOC) to Buy from Hold with a price target of $700, up from $575, forecasting strong free cash flow post-2028 as key programs become cash profitable [5] Downgrades - HSBC downgraded Intel (INTC) to Reduce from Hold with a price target of $24, up from $21.25, indicating that while short-term deal announcements may drive stock higher, sustainable turnaround relies on fab execution [6] - JPMorgan downgraded FedEx (FDX) to Neutral from Overweight with a price target of $274, down from $284, based on recent channel checks suggesting a lower multiple for FedEx's freight segment [6] - Oppenheimer downgraded Edwards Lifesciences (EW) to Perform from Outperform with no price target, indicating a structural nature to the downgrade despite potential TAVR upside in Q3 [6] - BofA downgraded Freshpet (FRPT) to Neutral from Buy with a price target of $60, down from $81, citing deteriorating growth in the pet food category due to slowed pet adoptions and reduced consumer spending [6] - Oppenheimer downgraded Incyte (INCY) to Perform from Outperform with a price target of $82, up from $81, due to high expectations for several products and new management [6]

Financial Data and Key Metrics Changes - The company raised its 2025 revenue growth guidance, implying low teens revenue growth in the second half of the year, which indicates a deceleration from mid-teens growth in the first half of the year [9][11] - The underlying guidance of 13 to 14% is more like 17 to 18% when considering a $40 million headwind from China [11] Business Line Data and Key Metrics Changes - The embolization franchise has seen low teens growth, with the introduction of the Ruby XL coil expected to enhance market presence [59][61] - The stroke business has been gaining share and growing above the market, with the new Red 72 Send-It silver label product receiving positive feedback from physicians [40][44] Market Data and Key Metrics Changes - The U.S. pulmonary embolism (PE) market has 157,000 annual patients, with only 11% currently receiving mechanical thrombectomy, indicating significant growth potential if the Storm PE trial results are positive [20][22] - The company is positioned to capture a larger share of the embolization market, particularly with the introduction of new products and a dedicated sales force [61][64] Company Strategy and Development Direction - The company is focused on continued innovation and expanding its commercial footprint to capitalize on the large CAVT opportunity and embolization market [3][4] - Management emphasizes the importance of clinical data and market access initiatives to penetrate new areas and enhance profitability [4][68] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about the next five years, highlighting the importance of innovation and the potential for significant growth in both embolization and stroke markets [3][4][67] - The company is on track to achieve a gross margin of at least 70% by 2026, driven by efficiencies and new facility developments [71] Other Important Information - The Storm PE trial is a pivotal study that could shift treatment paradigms in the PE space, with results expected to be presented at TCT and VIVA [13][15] - The company is not currently facing the $40 million headwind from China next year, which could positively impact growth [65] Q&A Session Summary Question: Why is there a deceleration in revenue growth guidance for the second half of the year? - Management indicated that the updated guidance reflects a cautious approach and does not want to get ahead of itself [9][10] Question: What is the expected impact of the Storm PE trial results? - Positive results could lead to increased referrals for mechanical thrombectomy and a shift in treatment protocols among hospital systems [22][37] Question: How is the company addressing the challenges in the stroke market? - The strategy focuses on quick access to clots and the introduction of innovative products to enhance treatment efficacy [40][42] Question: What are the expectations for the embolization business moving forward? - The introduction of the Ruby XL coil and a dedicated sales force are expected to drive growth in the embolization market [59][61] Question: What is the outlook for gross margin and profitability? - Management is confident in achieving a gross margin of at least 70% by 2026, supported by operational efficiencies and new product introductions [71][72]

Financial Data and Key Metrics Changes - The company raised its 2025 revenue growth guidance, implying low teens revenue growth in the second half of the year, which indicates a deceleration from mid-teens growth in the first half of the year [9][11] - The underlying guidance of 13 to 14% is more like 17 to 18% when considering the impact of a $40 million headwind from China [11] Business Line Data and Key Metrics Changes - The embolization franchise is expected to ramp up, with the introduction of the Ruby XL coil targeting a previously untapped 20% of the overall embolization market [61][63] - The stroke business has seen a positive response to the new Red 72 Send-It silver label product, which has gained market share in Q2 [40][44] Market Data and Key Metrics Changes - The company noted that the U.S. has approximately 157,000 annual PE patients, with only 11% currently receiving mechanical thrombectomy, indicating significant growth potential if the Storm PE trial results are positive [21][22] - The stroke market has been described as experiencing regular ebbs and flows, with the company gaining share and growing above the market despite recent fluctuations [44][46] Company Strategy and Development Direction - The company is focused on continued innovation and expanding its commercial footprint to capitalize on large market opportunities in CAVT and embolization [3][4] - The management emphasized the importance of clinical data and market access initiatives to penetrate new areas and enhance profitability [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the next five years, highlighting the importance of new product launches and clinical data in driving growth [3][4] - The company is confident about its position to help more patients in the coming years, driven by innovation and data [69] Other Important Information - The company is on track to achieve a gross margin of at least 70% by 2026, with ongoing efforts to improve profitability through efficiencies and new facilities [73] Q&A Session Summary Question: Why is the second half growth expected to slow? - Management indicated that the updated guidance reflects a cautious approach and does not want to get ahead of itself [9][10] Question: What is the significance of the Storm PE trial? - The Storm PE trial aims to compare mechanical thrombectomy versus anticoagulation, which could shift treatment paradigms if results are positive [12][14] Question: How does the company view the embolization opportunity? - The company sees significant potential in the embolization market, especially with the introduction of the Ruby XL coil [61][63] Question: What is the outlook for the stroke market? - Management noted that the stroke market has regular ebbs and flows, but the company has been gaining share and expects continued growth [44][46] Question: What are the expectations for next year? - Management is optimistic about next year, citing the absence of the China headwind and the potential impact of new innovations [67][69]

Financial Data and Key Metrics Changes - The company raised its 2025 revenue growth guidance, implying low teens revenue growth in the second half of the year, which indicates a deceleration from mid-teens growth in the first half of the year [9][11] - The underlying guidance of 13 to 14% is more like 17 to 18% when considering a $40 million headwind from China [11] Business Line Data and Key Metrics Changes - The embolization franchise has seen low teens growth, with the introduction of the Ruby XL coil expected to enhance market presence [61] - The stroke business has been gaining share and growing above the market, with the new Red 72 Send-It silver label product receiving positive feedback [40][44] Market Data and Key Metrics Changes - The U.S. pulmonary embolism (PE) market has 157,000 annual patients, with only 11% currently receiving mechanical thrombectomy, indicating significant growth potential if the Storm PE trial results are positive [21][22] - The company is positioned to capture a larger share of the embolization market, particularly with the new XL product line targeting larger vessels [61] Company Strategy and Development Direction - The company is focused on continued innovation and expanding its commercial footprint to capitalize on the CAVT and embolization opportunities [3][4] - There is a strategic emphasis on profitability and efficiency, with a goal to exit 2026 with at least a 70% gross margin [73] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the next five years, highlighting the importance of clinical data and market access initiatives to penetrate new areas [4][70] - The company is confident about its position moving into next year and beyond, driven by new innovations and data [69] Other Important Information - The Storm PE trial is a pivotal study that could significantly influence the treatment paradigm for PE if results are positive, with primary endpoints to be presented at TCT [13][14] - The company is actively working on a new facility in Costa Rica, which is expected to contribute to margin expansion [73] Q&A Session Summary Question: Why is there a deceleration in growth guidance for the second half of the year? - Management indicated that the updated guidance reflects a cautious approach and does not want to get ahead of itself [9][10] Question: What is the expected impact of the Storm PE trial? - Positive results could lead to increased referrals for mechanical thrombectomy and a shift in treatment protocols [22][24] Question: How is the company addressing the stroke market? - The strategy focuses on quick access to clots and the introduction of innovative products like modulated aspiration to improve treatment outcomes [40][41] Question: What are the expectations for the embolization business? - The introduction of the Ruby XL coil is expected to drive growth, with a new sales team in place to support this initiative [61][63] Question: What is the outlook for next year? - Management is optimistic about growth potential, especially with the absence of the China headwind and the introduction of new products [67][69]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $339.5 million, reflecting a year-over-year growth of 13.4% on a reported basis and 12.7% on a constant currency basis [7][19] - Gross margin was reported at 66%, an increase from 54.4% in Q2 2024, excluding a one-time inventory write-off of $33.4 million [22][24] - Operating income was $40.8 million, representing 12% of revenue, compared to an operating loss of $1.6 million in the same quarter last year [24][25] - Adjusted EBITDA was $61.4 million, or 18.1% of total revenue, compared to $13 million, or 4.3%, in Q2 2024 [25] Business Line Data and Key Metrics Changes - U.S. Thrombectomy revenue increased by 22.6% year-over-year to $188.5 million, driven by strong adoption of the CAVT portfolio [9][19] - Global thrombectomy business revenue grew to $230.3 million, a 13.1% increase reported and 12.6% in constant currency [21] - Revenue from the Embolization and Access business was $109.2 million, an increase of 13.9% reported and 12.8% in constant currency [22] Market Data and Key Metrics Changes - The U.S. region reported growth of 19.5%, primarily driven by the thrombectomy franchise [20] - International regions saw a decrease of 3.2% reported and 5.8% in constant currency, mainly due to a decline in China revenue [20] - Excluding China, international thrombectomy revenue grew by 14.4% compared to the same period last year [21] Company Strategy and Development Direction - The company is focused on continuous innovation and expanding the total number of patients treated globally with its technologies [7][8] - A separate peripheral embolization sales force has been established to enhance focus on thrombectomy and embolization, with over 50 new sales representatives added [12] - The company aims to achieve a gross margin profile of over 70% by 2026, with operating margin expansion expected to outpace gross margin expansion [10][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about easing headwinds in China, anticipating a return to growth in international regions [20] - The company is committed to running high-quality clinical studies to support its product offerings and market access initiatives [14] - Management highlighted the importance of the STORM PE trial, which could fundamentally shift patient treatment for pulmonary embolism [13][31] Other Important Information - The company ended Q2 2025 with cash, cash equivalents, and marketable securities of $424.6 million and no debt, an increase of $45.7 million sequentially [25] - The company is increasing its revenue guidance for 2025 to a range of $1.355 billion to $1.37 billion, representing 13% to 15% year-over-year growth [26] Q&A Session Summary Question: Importance of STORM PE study - Management emphasized that STORM PE is the first randomized study comparing anticoagulation and mechanical thrombectomy, which is significant for the field [31][33] Question: Update on Thunderbolt FDA review - Management stated that the FDA review process is thorough and as expected, and reiterated excitement about the Thunderbolt product [37][38] Question: Impact of Salesforce split on margins - Management clarified that the investment in the commercial team does not impact gross margin but may cause month-to-month variability in product mix [52] Question: Anticipated slowdown in specific divisions - Management noted that while the stroke market has shown softer growth, the company continues to gain market share [70] Question: Update on international markets, particularly China - Management indicated that while there were headwinds in China, recent orders have been filled, and the company is optimistic about future growth [79] Question: Market share in pulmonary embolism and DVT - Management believes they have gained significant market share in DVT, estimating over 50%, and have made substantial progress in the PE market [110]

Financial Data and Key Metrics Changes - Total revenue for the second quarter of 2025 was $339,500,000, representing a year-over-year growth of 13.4% on a reported basis and 12.7% on a constant currency basis [6][19] - Gross margin for the second quarter was 66%, up from 54.4% in the same quarter of 2024, which included a one-time $33,400,000 inventory write-off [22][23] - Operating income was $40,800,000, or 12% of revenue, compared to an operating loss of $1,600,000 for the same period last year [25][26] - Adjusted EBITDA was $61,400,000, or 18.1% of total revenue, compared to $13,000,000, or 4.3%, in the second quarter of the previous year [26] Business Line Data and Key Metrics Changes - U.S. Thrombectomy revenue increased by 22.6% year-over-year to $188,500,000, driven by a 42% growth in the USVTE franchise [8][19] - Global thrombectomy business revenue grew to $230,300,000, an increase of 13.1% reported and 12.6% in constant currency [21] - Revenue from the Embolization and Access business was $109,200,000, an increase of 13.9% reported and 12.8% in constant currency, primarily driven by U.S. Embolization sales [22] Market Data and Key Metrics Changes - The U.S. region reported growth of 19.5%, driven by the strong performance of the thrombectomy franchise [20] - International regions saw a decrease of 3.2% reported and 5.8% in constant currency, primarily due to a decline in China revenue [20] - Excluding the impact of the China region, international thrombectomy revenue grew by 14.4% compared to the same period last year [21] Company Strategy and Development Direction - The company is focused on continuous innovation and expanding the total number of patients treated globally with its technologies [6][7] - A separate peripheral embolization sales force has been established to enhance focus on thrombectomy and embolization, with over 50 new sales representatives added [11] - The company aims to achieve a gross margin profile of over 70% by 2026, with operating margin expansion expected to outpace gross margin expansion [9][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about easing headwinds in China, anticipating a return to growth across all international regions [20] - The company is committed to running high-quality clinical studies to support its product offerings and market access initiatives [12][17] - Management highlighted the importance of the STORM PE trial, which is expected to provide significant evidence for the treatment of pulmonary embolism [12][34] Other Important Information - The company ended the second quarter with cash, cash equivalents, and marketable securities of $424,600,000 and no debt, reflecting strong operating profitability [26] - Due to outperformance in the second quarter, the company increased its revenue guidance for 2025 to a range of $1,355,000,000 to $1,370,000,000, representing 13% to 15% year-over-year growth [27] Q&A Session Summary Question: Importance of STORM PE study - Management emphasized that STORM PE is the first randomized study comparing anticoagulation and mechanical thrombectomy, which is significant for the field [32][34] Question: Update on Thunderbolt FDA review - Management stated that the FDA review process is thorough and ongoing, and they remain excited about the product's potential impact [38][39] Question: Impact of Salesforce split on margins - Management clarified that the investment in the commercial team does not impact gross margins but is expected to support long-term margin goals [52][54] Question: Anticipated slowdown in U.S. thrombectomy business - Management acknowledged a potential deceleration in the stroke market but remains optimistic about continued growth in the thrombectomy business [48][72] Question: International market performance and China - Management noted that international markets are beginning to show signs of recovery, particularly with the launch of new products [80][82]