I have initiated a new position in NARI last week representing 6% of my portfolio. The company is a medical device manufacturer focused on patients suffering from venous diseases. Thier main products are two minimally-invasive, single-use, novel catheter-based mechanical thrombectomy (removal of blood clots) devices. ClotTriever product is FDA-cleared for the treatment of deep vein thrombosis, or DVT; FlowTriever is the first thrombectomy system FDA-cleared for the treatment of pulmonary embolism (PE). FlowTriever System was the first mechanical thrombectomy device to be awarded an FDA indication for treatment of Pulmonary Embolism.
The company IPO'd on May 27th with a ticker NARI raising $179 million before investment banking commissions and fees. The proceeds from the IPO will be mainly used for research and development and clinical trials.
Historically, development efforts for mechanical thrombectomy devices have focused on arterial devices, which are then repurposed for use in the venous system. Given the significant differences between the arterial and venous systems and the clot that forms in each system, these devices have difficulty removing venous clot, which is often adhered to the vessel wall and is older, firmer and substantially larger than arterial clot.
Venous thrombosis (VTE) causes 296,000 deaths per year in US, with approx. 1 million patients diagnosed with the disease each year. Out of those 242,000 DVT and 200,000 PE patients could potentially benefit from Inari Medical's products. Most of these patients are currently treated with coagulants, which are chemical drugs that cause blood thinning. The most common adverse effect of these is increased bleeding.
Pulmonary embolism is a blockage in one of the pulmonary arteries in lungs. It is primarily caused by blood clots that travel to the lungs from deep veins in the legs or, rarely, from veins in other parts of the body (DVT).
Mechanical thrombectomy (a catherer is inserted into the body) is also used on patients suffering from VTE but it has its drawbacks such as a limited ability to remove large clots or clots from vessel wall, as well as the need to undergo multiple procedures.
In addition, VTE patients are also treated with thrombolytic drugs, which have demonstrated an ability to prevent new clots from forming. However, the disadvantage is that older clots often remain in the body and this treatment can be quite expensive and time consuming.
Inari has treated more than 8,500 patients since their commercial launch in the third quarter of 2018. The company estimates their addressable market to be approx. $3.6 billion per year. In addition, there are 465,000 cases of DVT and 295,000 cases of PE in the European Union each year.
The company is currently evaluating long-term effects of their products in studies with 500 enrolled patients.
Advantages of Inari's products:
- designed specifically to treat larger blood clots
- they can replace the need to use thrombolytic drugs
- better safety profile than alternatives according to their studies and actual procedures performed on more than 8,500 patients
- short and mostly single session visits to the hospital, which decreases overall healthcare expenditures
Covid impact
The company was negatively affected by COVID-19, due to stay at home orders in Q1 and Q2, which negatively affected the number of venous procedures in hospitals. During mid-April the number of procedures was down 40% from peaks, but recovered in later months.
There is also an increasing incidence of VTE in COVID-19 patients, as high as 26% in according to the National Center for Biotechnology Information. This might have provided a short-term tailwind for the company, although they didn't cite it specifically in their earnings releases or conference calls.
Financials (USDm)
The company IPO'd on May 27th with a ticker NARI raising $179 million before investment banking commissions and fees. The proceeds from the IPO will be mainly used for research and development and clinical trials.
Historically, development efforts for mechanical thrombectomy devices have focused on arterial devices, which are then repurposed for use in the venous system. Given the significant differences between the arterial and venous systems and the clot that forms in each system, these devices have difficulty removing venous clot, which is often adhered to the vessel wall and is older, firmer and substantially larger than arterial clot.
Venous thrombosis (VTE) causes 296,000 deaths per year in US, with approx. 1 million patients diagnosed with the disease each year. Out of those 242,000 DVT and 200,000 PE patients could potentially benefit from Inari Medical's products. Most of these patients are currently treated with coagulants, which are chemical drugs that cause blood thinning. The most common adverse effect of these is increased bleeding.
Pulmonary embolism is a blockage in one of the pulmonary arteries in lungs. It is primarily caused by blood clots that travel to the lungs from deep veins in the legs or, rarely, from veins in other parts of the body (DVT).
Mechanical thrombectomy (a catherer is inserted into the body) is also used on patients suffering from VTE but it has its drawbacks such as a limited ability to remove large clots or clots from vessel wall, as well as the need to undergo multiple procedures.
In addition, VTE patients are also treated with thrombolytic drugs, which have demonstrated an ability to prevent new clots from forming. However, the disadvantage is that older clots often remain in the body and this treatment can be quite expensive and time consuming.
Inari has treated more than 8,500 patients since their commercial launch in the third quarter of 2018. The company estimates their addressable market to be approx. $3.6 billion per year. In addition, there are 465,000 cases of DVT and 295,000 cases of PE in the European Union each year.
The company is currently evaluating long-term effects of their products in studies with 500 enrolled patients.
Advantages of Inari's products:
- designed specifically to treat larger blood clots
- they can replace the need to use thrombolytic drugs
- better safety profile than alternatives according to their studies and actual procedures performed on more than 8,500 patients
- short and mostly single session visits to the hospital, which decreases overall healthcare expenditures
Covid impact
The company was negatively affected by COVID-19, due to stay at home orders in Q1 and Q2, which negatively affected the number of venous procedures in hospitals. During mid-April the number of procedures was down 40% from peaks, but recovered in later months.
There is also an increasing incidence of VTE in COVID-19 patients, as high as 26% in according to the National Center for Biotechnology Information. This might have provided a short-term tailwind for the company, although they didn't cite it specifically in their earnings releases or conference calls.
Financials (USDm)
Inari Medical recorded $51m in revenue in 2019, and $110.9m TTM in 2020, despite hospital closures. In their latest quarter, revenue increased 172% to $38.7m, with operating income up more than 10-fold. They have paid down their debt and have $168m in cash on their balance sheet. The company is solidly profitable with a TTM gross margin of 90% and ability to significantly expand their revenue.
The company employs its own salesforce and targets primarily interventional cardiologists, interventional radiologists and vascular surgeons. Their front-line sales employees attend up 80% of procedures performed, which allows them to gather valuable feedback from patients and surgeons. The products are sold to hospitals and reimbursed through various third-party payors. As of the date of their IPO, the company sold to 600 out of 1,500 US hospitals with a catherization laboratory.
Risks
Management
The company is run by CEO Bill Hoffman, a veteran manager who has spent decades at various medical device companies. He was previously the CEO at Visualase Inc., which was sold to Medtronic for $105m in 2014. Largest shareholders are U.S. Venture Partners (17%) and Coöperatieve Gilde Healthcare (17%) and Versant Venture Capital (13%). CEO Bill Hoffman owns approx. 3.5% of shares.
Sources:
https://en.wikipedia.org/wiki/Anticoagulant#:~:text=Anticoagulants%2C%20commonly%20known%20as%20blood,blood%2C%20prolonging%20the%20clotting%20time.
https://ir.inarimedical.com/static-files/82618a0a-0122-4e86-9309-3b1b21380cd9
https://en.wikipedia.org/wiki/Pulmonary_embolism
https://www.hematology.org/covid-19/covid-19-and-vte-anticoagulation
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7420982/
https://www.medscape.com/answers/1267714-124044/what-is-the-annual-international-incidence-of-venous-thromboembolism-vte
https://ir.inarimedical.com/news-releases/news-release-details/inari-medical-reports-third-quarter-2020-financial-results
The company employs its own salesforce and targets primarily interventional cardiologists, interventional radiologists and vascular surgeons. Their front-line sales employees attend up 80% of procedures performed, which allows them to gather valuable feedback from patients and surgeons. The products are sold to hospitals and reimbursed through various third-party payors. As of the date of their IPO, the company sold to 600 out of 1,500 US hospitals with a catherization laboratory.
Risks
- Despite hospital closures, COVID-19 might have positively impacted their revenue as many covid patients are hospitalized with blood clots or pulmonary embolism
- Competitors like Penumbra or Medtronic might come up with similar or better solutions
- Valuation is very steep at 30x 2020 forward sales, any slowdown in their growth rate could be severly punished by the market
Management
The company is run by CEO Bill Hoffman, a veteran manager who has spent decades at various medical device companies. He was previously the CEO at Visualase Inc., which was sold to Medtronic for $105m in 2014. Largest shareholders are U.S. Venture Partners (17%) and Coöperatieve Gilde Healthcare (17%) and Versant Venture Capital (13%). CEO Bill Hoffman owns approx. 3.5% of shares.
Sources:
https://en.wikipedia.org/wiki/Anticoagulant#:~:text=Anticoagulants%2C%20commonly%20known%20as%20blood,blood%2C%20prolonging%20the%20clotting%20time.
https://ir.inarimedical.com/static-files/82618a0a-0122-4e86-9309-3b1b21380cd9
https://en.wikipedia.org/wiki/Pulmonary_embolism
https://www.hematology.org/covid-19/covid-19-and-vte-anticoagulation
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7420982/
https://www.medscape.com/answers/1267714-124044/what-is-the-annual-international-incidence-of-venous-thromboembolism-vte
https://ir.inarimedical.com/news-releases/news-release-details/inari-medical-reports-third-quarter-2020-financial-results
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