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The Spectranetics Corporation (NASDAQ:SPNC)

Q1 2017 Earnings Conference Call

April 27, 2017 16:30 PM ET

Executives

Michaella Gallina – Director of Investor Relations

Scott William Drake – President and Chief Executive Officer

Stacy Powell McMahan – Chief Financial Officer

Shahriar Matin – Chief Operating Officer

Analysts

Chris Pasquale – Guggenheim

Matt Blackman – Stifel

Jason Mills – Canaccord Genuity

Ethan Potasnick – Needham & Company

Suraj Kalia – Northland Securities

Jayson Bedford – Raymond James

Glenn Novarro – RBC Capital Markets

Mike Weinstein – JPMorgan

Matt Miksic – UBS

Operator

Welcome to the Spectranetics First Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen only mode. Following managements prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference call is being recorded today, April 27, 2017.

I would now like to turn the conference over to Michaella Gallina, Director of Investor Relations for Spectranetics. Please go ahead.

Michaella Gallina

Good afternoon, everyone, and thank you for participating in today’s call. Joining me from Spectranetics is President and Chief Executive Officer, Scott Drake; and Chief Financial Officer, Stacy McMahan. Earlier today, Spectranetics released financial results for the quarter ended March 31, 2017, which can be found on the Investor Relations portion of our website.

Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. For a list and description of those risks and uncertainties, please see the company’s filings with the Securities and Exchange Commission. Spectranetics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, April 27, 2017.

I will now turn the call over to Scott.

Scott William Drake

Thanks, Michaella. Good afternoon, everyone, and thank you for joining us today. On our call, I will provide revenue highlights from the first quarter, share context on our performance and progress on key initiatives. Stacy will review our financial results. And then we’ll open the line for questions.

The following revenue commentary reflects constant currency. The first quarter was a solid start to the year. Our Vascular Intervention and Lead Management businesses both delivered double-digit growth. We are focused on commercial execution and the opportunities that lie ahead.

In the first quarter, total company revenue increased 11%. Geographically, U.S. revenue increased 10%, and international grew 16%. Our vascular business grew 11% over prior year. Growth was led by U.S. peripheral atherectomy and our Turbo-Power franchise. Coronary atherectomy was also a growth driver and we’re well-positioned in the expanding complex disease segment. Internationally, AngioSculpt and Stellarex were again our primary contributors of growth.

In Lead Management, revenue increased 12% over prior year. Growth was largely driven by mechanical tools and complemented by the ongoing adoption of our Bridge to Surgery device. As a reminder, we will anniversary the Bridge launch next quarter.

I am encouraged by the momentum in our business and pipeline. In Vascular Intervention, we are in the midst of expanding our clinical data compendium, launching new products internationally and domestically, and preparing for Stellarex approval in the U.S. Our Stellarex ISR study is underway and we’re making progress towards the approval of our below-the-knee IDE.

As we have shared, we’re exploring additional markets and indications for our drug-coated balloon platform. In Europe, we expanded activities associated with the commercialization of AngioSculptX, and commenced our Stellarex below-the-knee launch. AngioSculptX combines 2 therapies into 1 device, offering the plaque modification attributes of our proven AngioSculpt platform with the added benefit of Drug Delivery.

European physicians have shared encouraging feedback on the device, especially in challenging patients. Early clinician feedback on Stellarex below the knee is positive. Customers have highlighted its superior deliverability and cross ability. Further, they have expressed that performance, coupled with our coating stability and lower drug dosage, provide a compelling solution in the challenging anatomy associated with below the knee disease.

In the U.S., we launched our Turbo-Power 6-French product during the quarter. 6-French is an important size for expanding access and utilization to a larger customer base. Regarding our Stellarex PMA submission, progress is on track. We continue to expect approval in the second half of 2017. We believe our expanded commercial organization is prepared for the most important launch in the history of our company.

On the international front, we see opportunities for growth in emerging markets, especially BRIC nations. In fact, our first commercial peripheral atherectomy cases were performed in China during the quarter.

In Lead Management, we are pleased with the growth in mechanical tools and the adoption of Bridge. We launched TightRail Sub-C late in the quarter, providing physicians a solution for calcified lesions in the subclavian area. While early, the product is performing well and customer feedback is positive.

As you know, we launched Bridge last year with the goal of improving both actual and perceived safety of lead extraction procedures. Prior to the introduction of Bridge, many physicians showed reluctance to perform extractions due to fear of an SVC tear and the risk of patient mortality. Bridge has created a new dialogue with our customers.

Notably, reluctant extractors are sharing their increased confidence in doing cases. Feedback for moderate-to-high volume customers continues to be positive, and we look forward to showcasing Bridge and lead extraction at HRS next month.

Internationally, we’re introducing Bridge into key European countries, and are in the early stages of launching Lead Management into emerging markets. Overall, we remain cautiously optimistic about the global growth prospects in Lead Management.

In summary, we are pleased with double-digit revenue growth in both businesses. Product launches across business lines and geographic regions are tracking nicely. Our expanded commercial footprint is maturing, and clinical data enhances our competitive position.

I will now turn the call over to Stacy to discuss our financial results.

Stacy Powell McMahan

Thank you, Scott, and good afternoon, everyone. I will begin by referring you to the press release issued this afternoon for details. Consolidated first quarter revenue was $69.7 million, up 11% both as reported and in constant currency. By geographic reporting segment, our U.S. revenue growth was 10%, and international revenue growth was 14% as reported, and 16% on a constant-currency basis.

By line of business, Vascular Intervention revenue was up 11% in both reported and constant currency. Lead Management revenue was up 11% as reported and 12% in constant currency. Laser service and other revenue increased 8% as reported and 9% on a constant-currency basis.

In Vascular Intervention, peripheral and coronary atherectomy were the primary growth drivers. In Lead Management, growth was driven by mechanical tools and Bridge. In the U.S., growth was primarily driven by an increase in disposables revenue. Internationally, growth was again driven by AngioSculpt and Stellarex.

Regarding laser placements, we placed 43 lasers globally during the first quarter versus 53 last quarter and 44 a year ago. 14 of these placements were redeployed within the field, driving greater productivity from our installed base.

Moving down to P&L. Gross margin for the quarter was 74.1%, the 40-basis point decline from last year was driven primarily by sales mix and somewhat offset by favorable production efficiencies.

Selling, general and administrative expenses increased 11% versus prior year and represented 66% of sales. The increase was primarily due to our global-commercial footprint expansion.

R&D spending increased 9% year-over-year and represented 26% of our sales. The increase was primarily driven by cost associated with our FDA warning letter remediation and quality system improvement efforts, partially offset by a reduction in development cost due to the approval of AngioSculptX in the third quarter of 2016.

A total operating loss of $14.9 million in the quarter compares to a $13.9 million operating loss in the same quarter a year ago.

Net loss for the quarter was $18.5 million or $0.43 per share versus a $17.3 million net loss or $0.40 per share in the prior year’s quarter. Cash on hand as of March 31, 2017, was $43.9 million. Cash used in operations during the first quarter was $14.1 million.

As a reminder, Q1 is our heaviest cash use this quarter. Of the $14 million, about $12 million was annual performance-based cash compensation, and the underlying operating cash burn was around $2 million. Lastly, our full year guidance remains unchanged.

I will now turn the call back to Scott for closing remarks.

Scott William Drake

Thanks, Stacy. In summary, I’m pleased with the broad base strength of our first quarter results. We have much to look forward to within our existing portfolio and pipeline as we build out capabilities to capitalize on near and long-term opportunities.

Shahriar Matin, our Chief Operating Officer, is also joining us for Q&A. Operator please open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We’ll be taking our first question from the line of Chris Pasquale from Guggenheim.

Chris Pasquale

Scott, on Stellarex, can you just give us a little bit more color on where you stand with the agency at this point? Are there still outstanding questions about the filing that you need to respond to or you’re just waiting now to hear back from them?

Scott William Drake

We’re well down the path, I would say, Chris, in terms of the finalizing answering questions with the FDA. We’re not completely through with that. But I think the second half of ’17 the commentary stands at this point. But I think it’s very well derisked as we are here today.

Chris Pasquale

Okay. And then, spend another minute on Lead Management because that was probably the biggest surprise this quarter and it’s actually been a couple of quarters now where we’ve seen that accelerating. Can you break down at all, what you think has really changed there? How much of it has been Bridge itself contributing extra revenue per case versus maybe increased caseload because Bridge is there as a safety net or is mechanical tools a bigger piece of it? What do you think has really driven that acceleration?

Scott William Drake

Yes. We are very pleased with the step up in LM growth in the first quarter. It’s split pretty evenly between the growth in mechanical tools and the Bridge device itself, Chris. What I would say in terms of further color, we’re seeing volume increases in low and moderate volume accounts that is being offset a little bit by high-volume accounts coming down a bit. There’s a slight net uptick in terms of procedures being done, but a little bit of trade-off there. And this next comment is anecdotal, what we’re hearing is increased comfort and confidence with those lower volume customers in doing cases that generally they may have referred to higher volume accounts. So that was precisely what we were attempting to do with the device. Now the question is whether or not we can really open up the market given the effectiveness of it. So that remains to be seen. And we’ll just reiterate again, let us prove instead of project sustainability of real nice growth in LM.

Operator

Our next question comes from the line of Rick Weiss from Stifel.

Matt Blackman

It’s actually Matt Blackman in for Rick. Stacy, maybe starting with you. Could you help us with the calendar? This is a pretty clunky year if holiday is shifting from quarter-to-quarter. So as we think about this just reported first quarter and the remainder of the year, anything to sort of call out in terms of selling day differences?

Stacy Powell McMahan

Yes, Matt. There really is, compared to last year, is the third quarter where we have 1 fewer selling day, otherwise we’re even.

Matt Blackman

Okay. That’s very helpful, thanks. And then Scott, shifting to the BTK opportunity, I realized in Europe in and of itself, BTK is probably not a huge dollar opportunity. But I can’t help but think that given the fact that you’re now the sort of 1 of 2 on labeled devices for BTK versus 1 of 12 for SFA that this opportunity may have a positive halo effect for your European business more broadly. Is that a fair way to think about this?

Scott William Drake

I think so, Matt. I mean, customers are pretty optimistic about what Stellarex means for below the knee disease. And I think they may have incrementally more confidence in Stellarex than some of the other offerings that are currently in the market or on the market in Europe. I think it will also help us above the knee as we’re able to bring a total leg solution there. But I wouldn’t get overly optimistic in terms of modeling. It’ll take us a little while to have the effect that we hope to have. But I think it will help drive incremental growth in Europe moving forward.

Matt Blackman

Okay. And then just, if I can sneak in one last quick one on the Turbo-Power launch. Where are we in that rollout? I suspect this could be a longer-tailed opportunity, more than simply just 4 quarters and then you anniversary it. Could you maybe, just if only directionally, kind of give us a sense on where we are in that rollout?

Scott William Drake

Yes. I think you’re exactly right. I mean, the feedback from customers is such that it’s being very helpful competitively in the marketplace. And we’re being told that it’s very useful and performing well in morphology that historically has really been seated to other companies. So we’re pleased with the way that’s going. And I do think there is a tale to ongoing adoption as it relates to the Turbo-Power family of products. So I would agree with your assessment there. And we’re pleased with where we’re at. The 7-French product has been in the market now Matt, for about a year. 6-French, we’re just kind of getting underway with here more recently. So we will have some benefit in the coming quarters. But I again would agree with you that this is a longer-term opportunity than just anniversary-ing after a year’s launch.

Operator

Our next question comes from the line of Michael Weinstein from JPMorgan. We’ll take our next question from the line of Jason Mills from Canaccord Genuity.

Jason Mills

Scott, starting with Stellarex. You’ve confirmed on previous calls to many questions that you’re prepared for this launch and you mentioned it again today. I was wondering if you could characterize based on – I’m sure a ton of market research you’ve done internally, I mean, what the drug-moving blue market in the United States has done over the last couple of quarters from your perspective, what kind of market do you think they’re going to be entering here in the second half of the year? And I know that you’ve heard – well we’ve heard, we’ve probably seen what we’ve seen with respect to Medtronic’s propensity to try to use their breadth to maintain or gain share. Perhaps give us a sense on how you think you can successfully compete against that sort of a marketing strategy?

Scott William Drake

Yes, happy to touch on those items, Jason. I would say the market, overall, is unfolding very much in line with our commentary now over the past couple of years. I think the U.S. market in 2017 is on track to be roughly a $300 million market. And we know how share currently is split between really the 3 companies that are in the space, 2 brands. So I would say that’s really unfolding how we anticipate it. And I think in terms of how we’ll be going to market versus others, I would begin with the fact that we’ve got enormous respect for the companies that we compete with. I think we do go to market in a slightly different way, much more clinically focused versus breadth and bundling and contracting based. And I wouldn’t say one is inherently better than the other. But we’ve been very clear for the past 6 years that we intend to have meaningful clinical solutions with level 1 data. And that’s how we go to market. So it is a different approach. I think it’s relatively appreciated by our customers. But obviously, our competitors are doing well also.

Jason Mills

Got it. And sticking with Stellarex, what are your below-the-knee discussions with FDA? I think you filed that, correct me if I’m wrong, with the FDA in Q4, so I presume that you’re not too far away from hearing back if you haven’t already? And perhaps, could be in a position this time, next quarter, on this call to talk about it. Is that the right timeline to think about? And you’ve talked in the past about it being unique. I think everyone on this call is really eager to hear what unique means. Any color on that?

Scott William Drake

Yes, happy to, Jason. You’re exactly right. We submitted in Q4. We have addressed the study design with the FDA. And I think we’re in alignment as it relates to the study design. We’re still working with the agency on the preclinical questions. They very much want to understand what’s going on below the knee. They’re keenly aware of what’s happened with other products in the market and outcomes of clinical studies that have not been successful. So I think they’re being prudent in their approach. And the thing that I would be comfortable sharing is that we are going to be addressing more complex patients which are really the kind of patients that our customers see with critical limb ischemia patients. So that’s what you can anticipate from us. And as it relates to kind of first patient enrolled, I would just say broadly, at this point, second half of ’17, and hopefully we’ll be able to give you a little more color, Jason, next quarter.

Operator

Our next question comes from the line of Matt Miksic from UBS. We will go to the next person in the queue. This one’s from the line of Ethan Potasnick from Needham & Company.

Ethan Potasnick

This is Ethan Potasnick phoning in for Mike Matson. So I’m just curious, do you guys plan to add sales reps after the launch of Stellarex? And I guess, how will you guys ensure that reps don’t lose focus on laser atherectomy and other products once Stellarex is launched?

Scott William Drake

Yes, Ethan, I would just characterize where we’re at currently with the sales force expansion. We’ve shared previously that our goal is to get to somewhere in the 150 to 175 quota-carrying reps. We have hired our last kind of tranche or bolus of reps, and now we’re just kind of hiring in normal course. And that will continue on really through the calendar year, so that will go beyond the initial launch of Stellarex. We’re marching more toward effectivity and optimization versus trying to race the clock. So the expansion will continue beyond the initial launch of the product we anticipate. I think the team has done an incredibly thoughtful job in terms of preparing for the launch and contemplating how we can continue to grow the base business while we put the appropriate focus on Stellarex. And there’s a lot of tools that we have in our armamentarium including compensation and training, and different ways that we intend to go to market when we have Stellarex in the bag. I don’t want to go into detail here for competitive reasons, but rest assured it is something that we’ve thought very deeply about.

Ethan Potasnick

Okay. And sorry if this is repetitive, but have you guys seen any faster growth with Stellarex outside the U.S.? I guess with the presentation of the U.S. pivotal data?

Scott William Drake

Yes. You know, we don’t break out specifically the growth rate of Stellarex in Europe. What I would share with you is that our international vascular growth has been driven now for many quarters by both Stellarex and our AngioSculpt platform that continued here in Q1. And the team is doing a very nice job of continuing to convert accounts over there. So I would just characterize it as being a very nice growth driver for us and now we bring to it the addition of Stellarex below the knee. And we’re, obviously, in a pretty good position in France as well. So I think there’s some nice incremental drivers in front of us in Europe there with our drug-coated balloon platform. It’d be remiss if I didn’t mention AngioSculptX as well, very nice addition to our family of drug-coated products.

Operator

Our next question comes from the line of Suraj Kalia from Northland Securities.

Suraj Kalia

So Scott, forgive me, I’ve been just hopping in between a few calls, if some of this has been mentioned, my apologies. Scott, when you look at the current DCB market, what does your internal analysis indicate? By that, I mean if I look at 3 buckets primarily, DCBs plus laser, DCBs without any atherectomy device or standalone, and DCBs with some atherectomy device, how does that look to you? And the reason I ask is when Stellarex gets launched, I know the focus is on rep productivity and compensation. I’m more interested in how you all see this Venn diagram and how you could capitalize of it? Any color here would be great.

Scott William Drake

Yes. I’d be happy to take a shot at that, Suraj. I think the place to begin is the overall aim in the marketplace that is very clear, and that is to achieve stent-like results without leaving an implant behind. And I think there are kind of – to the point of your question, emerging algorithms in physician’s minds and admittedly, it varies from 1 physician to the other around what kind of vessel preparation, whether it’s atherectomy or scoring balloon, would be used or if they would be prone to use DCB on a standalone basis. It’s probably not as granular as you would like, but I anticipate that we will see, and in fact, I do see in labs when I spend time with customers that in some instances, they’re using just a bare balloon for predilatation, followed by a drug-coated balloon.

It seems to me that there’s an increasing propensity to use vessel preparation in some form. I’ve seen laser used in many, many cases prior to DCB. And I’ve also seen our scoring balloon used as well. And I think as our customers think more deeply about the indications of use and the complexity of disease, and the desire for better patency numbers and longer durability of positive outcomes, as you know, we’ve been projecting for a long period of time that vessel preparation will grow in concert with drug-coated balloons. It appears that, that may be true. Certainly, it is in Europe, and I project that it will be in the U.S. market as well.

Suraj Kalia

Fair enough. And finally, Scott, I’ll hop back in queue. I know not much has been said about AngioScore contribution, and you’ve sort of shied away over the last few quarters. Any color you all can give us how you’re normalizing? How does – how much of a drag does AngioScore currently on the overall business?

Scott William Drake

Happy to address that one, Suraj. It’s improved. The growth rate of our AngioScore franchise has improved over the past several quarters. This quarter, if I’m not mistaken, we were in kind of high-single-digits growth overall with Sculpt and the trends that we’ve talked about previously hold true. Europe growing faster than the U.S., coronary growing faster than peripheral, but we see an improvement there in terms of that category. But you’re exactly right; it is growing slower than our overall vascular business.

Operator

Our next question comes from the line of Jayson Bedford from Raymond James.

Jayson Bedford

Just Scott, on that last point, I may have missed this, but AngioSculpt, you said grew high single digits in the quarter?

Scott William Drake

That’s right.

Jayson Bedford

Okay, that seems like a noticeable pickup. In terms of your peripheral atherectomy business, has the growth profile been impacted at all by the on-label use of DCBs for ISR?

Scott William Drake

Yes, it’s really interesting, Jason. It’s still not obvious to us. I know we’re so many quarters in, the net effect on our atherectomy franchise still feels like roughly a net 0 as it relates to the impact of DCBs. As I’ve said before and forgive the repetition here, there are clearly cases where it’s being where laser atherectomy is being used in concert with DCB. And there’s clearly cases where DCBs are being used on a standalone basis. But it still feels as though the net effect is roughly 0. We would anticipate over time and with data that I think will be forthcoming that chances are that it will be complimentary but we have not seen that as yet.

Jayson Bedford

Okay. Fair enough. And just the comment on Turbo-Power helping growth, I wasn’t sure if that was a comment specifically related to the 6-French launch? Or was that just the family of Turbo-Power products?

Scott William Drake

Yes, the family of Turbo-Power is really helping drive our peripheral atherectomy growth, and that peripheral atherectomy was indeed one of our growth drivers in the overall VI business.

Jayson Bedford

Got it and then just maybe lastly for me, you mentioned France. Are you selling Stellarex in France right now? Is that contributing?

Scott William Drake

It is not yet, that will be in the not-too-distant future. Shar, I could be wrong there. You may want to correct me, if we are, Jayson, I can tell you it’s not moving the needle. Shar, do we have first sales in France as yet, Shar?

Shahriar Matin

Yes, we do have sales in France, but to your point, it’s pretty marginal because reimbursement is a challenge, so if there’s a way to bundle, we can get it. But private hospitals don’t get reimbursement and some public hospitals will have a small budget for it. Once reimbursement is in place, we expect that market to pick up similar to a perimental stents where it’s the largest market in Europe for perimental stents.

Operator

Our next question comes from the line of Glenn Novarro from RBC Capital Markets.

Glenn Novarro

Scott just wanted a clarification on the sales force expansion. You said 150 to 175 reps, that’s the goal. Are you there now or do you anticipate getting there with these additional hires? And then can you just remind us how your numbers would compare to like a Medtronic and a Bard?

Scott William Drake

Yes, happy to, Glenn. We’re not quite there yet. We anticipate that we’ll get there by the end of the calendar year. But again, we’re more interested in quality than speed as it relates to that, and trying very carefully not to disrupt the business as we do an inherently disruptive thing. And thus far, the team has managed it, I would say, very well. And as it relates to competitive sales forces within this space, I think we’re at a bit of an advantage relative to Bard. I think we’re a bit larger. I think we’re getting to relative parity, relative to Medtronic. We are smaller than Boston Scientific, that’s our best intel, Glenn, and hope that’s helpful.

Glenn Novarro

Yes, that is. And then I think most of us are assuming the drug-coated balloon gets approved at some point in the third quarter, and the fourth quarter will be your first full quarter on the market. So Scott, I’m wondering if you can help frame or provide some color as to how you see that first quarter ramping up? Is it a measured launch? Do you have to put a lot of contracts in place? Any color for that first quarter because it’s always a critical quarter for any new product story.

Scott William Drake

Yes, happy to and an incredibly challenging question to answer with precision as you can appreciate. I would start big picture, Glenn, and tell you that we’ve got a good deal of confidence in the share position that we will ultimately get to with Stellarex, given the data that we have and given the commercial footprint that we have in the marketplace. And our research indicates that we will ultimately take a very attractive position in the DCB market. Trying to predict that ramp with accuracy, I think would be a mistake for us. And as a result of that, I think we’re just going to be muted in terms of setting expectations on that front.

To the part of your question regarding market access, that will vary from account to account. There will be accounts that we have to go through, contracting processes, there will be other accounts where we’ll be able to sell trunk stock on the first day of our launch. So it will be across the board, but market access will be one of the primary efforts that we have out of the gates. And that will mitigate the steepness of that curve but we’re contemplating that in terms of what the launch plans look like.

Operator

Our next question comes from the line of Mike Weinstein from JPMorgan.

Mike Weinstein

I just wanted to come back to a couple of items, so maybe if I could go first with the last question there from Glenn. We’re assuming that depending on – the timing was going to dictate, kind of that pace of that ramp because if you actually did an approval sooner rather than later, you’re still going to have to go through hospital committees to get approvals. Do you have any sense or percentage of accounts in which you’ll have to do that? You seem to indicate there will be accounts where you won’t, but I’ve been assuming that you would.

Scott William Drake

I think that’s right, Mike. I still think even accounts with value analysis committees. I would anticipate that we’ll be able to do some kind of trials in those accounts to get the product in physician’s hands. But I think in the vast majority of cases, we’ll have to get through a value analysis committee. And I think you’ve written very smartly about the fact that those in the summertime, tend not to happen quite as frequently. I think on average, value analysis committees meet bimonthly or so. But I think that will be one of the hurdles, certainly that we’ve got to get through.

Mike Weinstein

And our work on the market has – had been kind of suggested that there is a spread in the pricing between the 2 products that are out there today. I just want to get your own perception of what that spread looks like.

Scott William Drake

Yes, our data suggest that it’s within about $100 box of one another. I’d be curious to know if you see it differently than that. And we’re contemplating what may happen as we enter the market, if anybody chooses to pull the price lever or not, I don’t think anybody will do that significantly, Mike, as the market is expanding very attractively, price pressure tends not to happen until the market reaches some kind of maturity point. And I think that is a little way off.

Mike Weinstein

And just to – after a question from – I don’t think I heard who asked, but are you expecting anything, any type of legal response from any competitors when you get to your approval?

Scott William Drake

We are not.

Mike Weinstein

Okay, I assumed that was the case, but I don’t think I ever heard it asked, so I wanted to double check.

Operator

We’ll be taking our next question from the line of Matt Miksic from UBS.

Matt Miksic

So I wanted to follow up on a couple of things that have been asked, but maybe a little bit more detail. One was on Bridge and on the results you’ve seen there, which sounds very encouraging. If you could just remind us, we hear often that clinicians like to have the Bridge on hand. And I wanted to get a sense of I guess how – if it’s driving growth, is it driving growth in the core laser sheets business, and that’s where the revenue is coming from or to what degree is it driving growth from utilization of actually Bridge opening it up and using it? I’d love to get a sense of that and then I have a couple of other quick follow-ups.

Scott William Drake

Yes. Matt, what I would say, in Q4, the growth that we drove was really on both mechanical tools and the sale of the Bridge product itself. What we see that is new, and I would be very muted and careful with this, is that we are seeing procedural volume increasing in low and moderate volume accounts. That, to some degree, is being offset by volumes coming down slightly in high-volume accounts, so a slight net positive there. And the goal with the device, obviously, is to save lives but also to help us open up the market for the benefit of shareholders and patients. And there is a light signal that we may be beginning. I would underline beginning, to do that. I don’t want to get carried away with that. I think we’ve got a lot more to prove. But we were hearing just what you are, that physicians really want to have the product in the room. And to varying degrees, they all have their thoughts on when they want to have Bridge actually deployed for cases prophylactically. But the response from customers is incredibly positive as it relates to the product.

Matt Miksic

That’s great. That’s very helpful. Then a follow up on the vascular business, and I think what you’ve been getting a lot of questions on is sort of the pace of the prospective launch post-approval of Stellarex. And understanding that, that – we’ve heard all your answers there, I’d love to get a sense of to what degree should we be thinking that the core business maybe takes a half a step to the side while everyone is busy training or to the extent participating or – in these committees or detailing this new exciting product. How should we think about the core business? And if it’s okay, I just have 1 other quick follow-up.

Scott William Drake

Sure. I would say the overall – the core business has been performing pretty well. You see us the last several quarters with the little variation here or there growing roughly at twice the market rate. The team being able to do that while we’re in the midst of sales force expansion and without yet Stellarex approved, I would say is solid performance. We have seen when others have launched their product, maybe a little slowdown in their base business growth. We’ve tried to learn from them and contemplate how we can mitigate that risk, but you’re absolutely right to point out that, that risk exists. And we’re trying to be very thoughtful in terms of how we contemplate that in our guidance and we’ll continue to attempt to do that as we go forward.

Matt Miksic

Okay and then the last, just on Charing Cross. I mean, any significant [indiscernible].

Scott William Drake

Matt, you’re breaking up a little bit there. But I think your question is around Charing Cross. Shar is actually in London at the conference. Shar, any color in terms of interesting things that you saw at the show that would be interesting for the audience here?

Shahriar Matin

I think the biggest takeaway as far as drug-coated balloons that we kept hearing from thought leaders on the podium was there is a no class effect, especially with the data that we’ve released, our two randomized studies and Medtronics’ additional data that’s coming out and just some analyses and what-not. Really, a lot of thought leaders are making it clear that there is no drug-coated balloon class effect, and each drug-coated balloon stands on its own so I think that’s been my biggest takeaway at the meeting.

Operator

[Operator Instructions] Looks like we have no other questioners in the queue at this time, I’d like to turn the call back over to Scott for closing comments.

Scott William Drake

Excellent, thank you very much. Thanks everybody for joining us today on the call. I look forward to talking again in another 90 days. Have a good evening.

Operator

Ladies and gentlemen, thank you, again for your participation in today’s conference call. This now concludes the program, and you may disconnect at this time. Everyone, have a great day.

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