Good afternoon. My name is Tushan and I will be your conference operator today. At this time, I would like to welcome everyone to the Penumbra’s First Quarter 2017 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would like to introduce Mr. Dan Wilson, Director and Head of Business Development, for Penumbra. Mr. Wilson, you may begin your conference.

Thank you, Tushan, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the first quarter 2017. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance, and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties including those referenced in our 10-Q for the quarter ended March 31, 2017, which will be filed with the SEC on May 09, 2017 as well as those described in our 10-Q for the year ended December 31, 2016 filed with the SEC on February 28, 2017. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC including the 10-Q and 10-K previously mentioned for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Penumbra disclaims any duty to update or revise our forward-looking statements, as a result of new information, future events, developments or otherwise. We anticipate that prepared comments on today’s call will run about 14 minutes. Thank you very much. And with that, I would like to turn over the call to Adam Elsesser, Penumbra's Chairman and CEO.

Thank you, Dan. Good afternoon. I would like to welcome you to Penumbra's first quarter 2017 conference call. I am joined today by members of our senior management team. I will begin today’s call with a few business updates from the first quarter, and then I will then turn the call over to Sri to cover the detailed financials. Our total revenues for the first quarter of 2017 were $73.2 million compared to $57.9 million for the first quarter of 2016, an increase of 26.4% as reported and 27% in constant currency. We had an operating loss in the quarter of $2.0 million compared to $1.9 million in operating income for the same period last year. We continue to see strong momentum throughout our product portfolio. We were particularly pleased with our results in the quarter. As you may recall, we had an unusually strong fourth quarter and our results today represent a slight sequential increase over Q4. Our strong product portfolio together with the amazing effort from our U.S. and international commercial teams continue to distinguish Penumbra and drive our success. Today, I would like to start by highlighting several positive events that are recently taking place that only add further support to our market development efforts and longer term mission across both our neuro and peripheral vascular franchises. I will then finish by highlighting three products that we are introducing in existing areas that further broaden our portfolio. In early March during the Society of Interventional Radiology Meeting in Washington DC, the results from ATTRACT trial were presented. As a reminder, this was an NIH funded trial to study the use of adjunctive pharmacomechanical catheter-directed thrombolysis in patients with acute proximal DVT. We estimate that 600,000 Americans each year are affected by deep vein thrombosis, and we believe…

Thank you, Adam. For the first quarter ended March 31, 2017, our total revenues were $73.2 million, an increase of 26.4% reported compared to the first quarter of 2016 or 27% in constant currency. Our geographic mix of sales in the quarter were 66.2% U.S. and 33.8% international. Neuro and peripheral vascular represented 68.6% and 31.4% of sales respectively. We saw strong performance in the quarter following an unusually strong fourth quarter 2016. Revenue from our neuro business grew to $50.2 million in the first quarter of 2017 from $41.3 million in the same period a year ago, an increase of 21.7% reported or 22.3% in constant currency. Our neuro growth was primarily driven by sales of our ACE68 reperfusion catheter, which is part of our Penumbra System for ischemic stroke. We saw strong growth contribution from access as well as our embolization product families. Within embolization, we observe the sequential decline that we had discussed last quarter related to our SMART Coil launch in Japan. Looking ahead in neuro, next quarter, our year-over-year comparisons include the launch of ACE68 and the competitive recall tailwinds in both embolization and access. In the back half of the year, we expect growth in neuro embolization to be consistent with this quarter after excluding the impact of our SMART Coil launch activities in Japan. Revenue from our peripheral vascular business grew to $23 million in the first quarter 2017 from $16.6 million in the same period a year ago, an increase of 38% reported or 38.7% in constant currency. Our growth in peripheral was driven by our Indigo family in peripheral thrombectomy. Similar to last year, we saw strong follow through in Indigo coming out of the SIR meeting in March which resulted in higher Indigo growth than what we had seen in…

Thank you, Sri. As we head into the middle of 2017, we are continuing to make investments in our team and capabilities to set us up the extraordinary opportunities that we believe are in front of us. We have the possibility of increasing the impact of our products dramatically over the next four to five years. The work to do this is not easy and is not guaranteed, however I want to let you know that the entire team at Penumbra are engineers, our production team, our quality team, our clinical and regulatory teams and our commercial team remains singularly focused on continuing to positively impact patients and their families. I am very proud to be part of an organization that has responded with such passion and energy to this meaningful challenge. Thank for your attention and we will now open up the call for questions.

[Operator Instructions] You do have a question coming from the line of Mike Weinstein with JPMorgan. Your line is open.

Good afternoon guys. First off, congratulations on another strong quarter. Maybe start with the peripheral thrombectomy business, so you commented that your Indigo business actually accelerated this quarter and I’m pleasantly surprised and I’m picking in heart because of the [indiscernible] scientific this quarter in which their business decelerated and we were left wondering whether there were some negative fallout from ATTRACT that was impacting their business. So can you just spend a minute on what you’re seeing with that business and your thoughts post to ATTRACT in going forward?

Sure. Thanks, Mike. As we said in the prepared remarks, we saw this last year as well. The SIR meeting happened though in the second quarter last year, this time it was in the first quarter and we have seen now for the second year in a row a relatively notable increase coming out of that meeting. I think you have done an awful lot of physicians hearing about and learning about the success that we are having with Indigo. So I think that is the primary thing that we can attribute it to. I do think as I’ve said around ATTRACT that, ATTRACT has not been negative even though the primary endpoint was not met. It I think highlighted one very important point and that is it is part of the transition or the paradigm shift that we’ve talked about from using drugs and ancillary tools with those drugs to a different approach which we’re obviously describing as immediate colt removal. And that transition is underway and I think the ATTRACT trial sort of highlighted that and has been helpful to us. I think the main thing that we can attribute to is just post SIR interest that comes out of that. I want to sort of just briefly I said in my prepared remarks too, we really have a notable success story on the arterial side and I think that’s become more well- known. And then as we move on to the venous side, physicians are starting who have really practiced and gotten the hang of it and understand it, we’ve gotten some great success on the venous side as well.

And if I look at this quarter geographically, it looks like the incremental upside is relative to our expectations was in particular outside the U.S. And you commented that the similar stocking you got in Japan in the fourth quarter faded this quarter but you still had this really strong underlying performance internationally. Could you just maybe call it out a little bit for us and where that’s occurring and why?

Hey, Mike, it’s Sri. Yes, I think you are on the mark there and we’ve had very strong international growth. The last number of quarters, we saw particularly the last couple of quarters pick up and it wasn’t just one quarter, we had a couple of quarters of launch activities in Japan related to our SMART Coil which we’ve spent a lot of time talking about. So that did help international but even as that’s trailed off and we’re transitioning slowly to ongoing usage, we still had very strong international and rest of the world growth.

Any other investments that you are making in terms of distribution into any geography that we should be aware of?

So we are constantly looking at that, Mike. I think you know that we have a distributor relationship in Japan. We are direct in many parts of Europe as you think about the markets that we’re involved in. They are global markets, so we are constantly looking at that and also looking at the right way to approach those markets, necessarily doing it as quickly as we can but thinking about the best economic solution as well.

And Adam, last item maybe you could touch on is just a capital raise this quarter and obviously you’ve got this cash in your balance sheet can you just talk a little about your thoughts on how you might choose to put that to work and what’s your business development thought process is?

Sure. Mike, I think it’s an important question. I don’t and we went out of our way to stress this during the capital raise. The capital raise doesn’t fundamentally change how we think about projects we work on, whether it’s internal projects or external opportunities I think we have always looked at them with the same of fundamental criteria. Does it matter? Can we at Penumbra do it? And does it have the economics work i.e. I mean not just on the price or the development cost internally but how do we sell it, is it a channel that we can do. And nothing has changed from that fundamental view with the capital raise. It is with that same discipline that we have always looked at things and we will continue to do that.

Okay, perfect. I’ll let some others jump in. Thank you guys.

Thank you, Mike.

Thanks, Mike.

And your next question comes from the line of Bob Hopkins with Bank of America. Your line is open.

Great, thanks and good afternoon.

Hi, Bob.

Hi, just wanted to ask my first question about the 2017 guidance relative to the new products that you are talking about in this call. Do the original guidance that you guys gave include an assumption for 3D, the way efficient coil and CAT-D or not? I just want to get a sense for that and maybe the introduction of those products the reason why you are emphasizing the high end of the guidance?

Yes, Bob, it’s a very good question and we wanted to just touch on a couple of components of the guidance because we talked about a few things in this call today. One, as it relates to our business, we did touch on a few announcements that only give us greater enthusiasm for the long term prospects across narrow and peripheral. Two, to your question, we did talk about three new products, many of those you’ve known about, many of those we’ve spoken about how we see their impact in particularly with 3D and Adam can touch on this more, it’s got more of a strategic relevance for our franchise that we’ve been talking about since the 3D trial without last year. And the third component just to help with the more specific fine tuning, we have been trying to be in front of a lot of the items that happened in 2016 that we didn’t see necessarily as being repeatable in 2017. In Q2, there are few of those which I touched on competitive recalls in neuro, the SIR meeting which is one quarter removed from this year between last year and then as we get to the back half of the year, the SMART Coil launch and we estimate that there is roughly $4 million to $5 million of stocking to help with this analysis so that you can reconcile the guidance commentary that we are talking about today. So hopefully that’s helpful, Bob.

Just to be clear though, was the original $312 million to $317 million for the year, did that including the assumption that these launches and announcements will happen or no, is this incremental?

Bob, this is Adam. We obviously knew about these products when we gave our guidance.

Okay. And then I just want to ask about 3D because obviously the stent retriever market opportunity broadly is I don’t know at least $300 million to $400 million by my math, so it’s a big business, it’s a very profitable business. You are now launching into that business and you’re saying obviously you can be focused on slumber of it. Maybe Adam you could just put 3D in perspective for us, of the stent retriever market that exist today, what portion of that do you think is slumber type cases and why wouldn’t 3D potentially be competitive in that entire $300 million to $400 million market?

I think it’s a great question, Bob, and I want to without going through our detailed launch strategy and plan which I think you would appreciate we are not going to do on the call, I will tell you that it is very important philosophically to understand how we see the world. We obviously want the best and most efficient and fastest cases done possibly, and we believe that aspiration is the leading edge of that is critical. And so we are not going to change that view, I think I made that clear for quite a while and within that fits this tool. We think it’s a great tool, obviously we are very proud of its performance, it did extremely well in the trial and the data says that but we are always going to lead with aspiration as the first and this will fit underneath that as an adjunct tool. So for slumber users, it could be a very helpful tool. For adapt users, who use stent retrievers in a much more limited way, it could be a good tool but it is not in our mind the same as somebody who is using stent retrievers alone, that’s not the point of this product.

Just curious is 3D now launched and selling in the marketplace today? Where are you in the launch?

We have not yet ship the product.

Okay. All right. I’ll get back in queue. Thanks very much.

And your next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open.

Hey, guys. Thanks for taking the question. Let me start with the guidance, something you touched upon and the quarter as well. So, Sri, and this was the first time you’re relatively flat sequentially but you talked about some one-time things are relatively strong Q4. Could you just remind us again what those were and why we should necessarily look at this flat sequentially? And then on the guidance, typically maybe a little bit more color on the cadence. Typically Q2 is up the last two years, it’s been up about 10% sequentially. Why would this year be different? And I have a couple of follow-ups. Thanks.

Sure. Larry, on the sequential Q1, Q4 as you recall is just under – sorry, Q4, our last quarter was just under 9% sequentially up and we talked about some of the dynamics there particularly with the strong December in Japan, SMART Coil launch that we had also talked about on top of that. So, we also talked about if you recall on the last call our sort of expectations that Q1 would sequentially be down sort of following that quarter. So, we are happy with where we ended up relative to those comments. Related to your comments on how we typically see Q2, last Q2 we were up a little over 12%, but again I mentioned in our commentary and it’s important that we make sure we put the right context around this. We had just launched our ACE68 in the U.S., we had had competitive recalls that we benefited from and we were just coming off the SIR meeting, which last year was in our second quarter. So that was one of our stronger Q2s. I think the guidance that’s implied today still implies that we have a pretty healthy sequential uptick each of the remaining quarters of this year. So I hope that’s helpful.

That’s very helpful. And then I wanted to turn to DAWN, Adam, I mean, it seems like a pretty important trial for the field. So, what are your thoughts just kind of on the implication for the market? We assume currently about 50% of large-vessel occlusion patients are treatable right now in our model, how do you think DAWN changes that? Thanks for taking the questions guys.

Yeah, thank you, Larry, for that question. First of all, obviously, DAWN was run by Stryker, so I can’t comment on the specific data until it’s presented and ultimately published. From what they’ve announced and what we know is that it seems that it will show that treating outside the treatment window for this subset of patients shows a benefit. So that obviously is additional data that is positive for the movement here. And we will, I think, help in the larger issue that we’ve talked about a lot over the last couple of years and that’s the effort to get patients from where they’ve had the stroke through the ambulance and [indiscernible] is to the right hospital and that – they will just be helpful to have additional data and motivation to do that. It’s hard to know – and I don’t think there is any real definitive data that we’ve seen that shows how many of those patients are currently being treated versus this really dramatically open up the number of patients that can be treated eventually. We just don’t know that. We certainly know that many – very, very busy centers, not just in the U.S. but around the world do use imaging techniques to treat many of those patients even outside the window already and at the same time obviously inevitably that could open up some number of those patients that aren’t yet being treated. We just can’t quantify that with any kind of certainty right now.

All right, guys. Thanks for taking the questions.

Thanks, Larry.

Thanks, Larry.

And your next question comes from the line of Jason Mills with Canaccord Genuity. Your line is open.

Hi, Adam. Hi, Sri. Congrats on another good quarter. Can you hear me okay?

Yeah, we can. How are you Jason?

Super. Adam, just to follow up on some of the commentary on ischemic stroke, it strikes me I don’t think I’ve ever asked you this question, but what do you think the top one or two things that can be done either by you or the industry to augment the care pathway ischemic – for patients how suffer an ischemic stroke and ultimately could be patients for mechanical thrombectomy, we all know the stats right, in terms of how many strokes, how many of them are ischemic and how many of them we assume can be treated large vessel that are salvageable patients once they get to the hospital, but what can be done in your mind to the care pathway to move us off of call it maybe 10% penetration of a problem that kills people?

I think it’s – I’m glad you asked that question. It’s really the fundamental question that we have been attacking. I would break it up to three categories. The first is the local work. Most of that is driven and this is really hospital by hospital and county by county where it usually starts by somebody within that system, whether it’s a physician who does the treatment, a neurologist who has cared for these patients over the years and wants to make sure they are treated now, stroke coordinators, attenders, somebody driving this at local level where they start doing outreach with EMS providers and they try to breakdown the rules and have agreements within hospitals around patient travel to make that the patients are being brought to the right place at the right time. And we have done whatever we can, whenever we are asked on the local level to help do that and that has been really the unsung heroes of this entire movement for the last two years on a local level. As you know and I think I’ve shared in the past, there is a pretty comprehensive political effort underway to go after certain states and have state legislation passed that directs patient flow to be sent to centers that are neurointerventional-ready centers and obviously as a company we are actively and financially supporting that and in any other way we can that effort. We think that is really a critical compound of this. And then, finally, the third category is really at the federal level and looking at reimbursement pathways and we’ve help put together a cross-functional group of physicians in three different societies working together with a team in DC to look at are there ways that one could look at reimbursement to encourage the patient flow in the right way and it’s a pretty creative effort. That will obviously take a little longer and the other ones we think might bear fruit a little sooner.

That’s helpful color, Adam, thank you. And then I wanted to follow-up on Bob’s question about 3D and you are – I think I understand your philosophy with respect to the stroke market, clearly direct aspiration first, something that you have benefitted from and plan to continue to move forward with. I’m wondering this 3D, while you may see it as a tool, asking Bob’s question different way, do you think it will accelerate or augment the speed with which direct aspiration generally is taking share from either [indiscernible] and/or stent retriever alone?

Yeah, I think that will be an interesting question. I don’t know if we know the answer to that. I do think – look, the most fundamental question or the way I would answer that is we designed the 3D device specifically to be used with aspiration – direct aspiration at the side of the clot. And I think that has shown the results. So I think from that standpoint, it will be a very helpful tool. Our goal, as I have said, for many years now is to continue to refine the products and the procedures to be as fast as possible. Because we all know that the faster you can remove the clot, the better the patients ultimately do. And so that’s from our vantage point I think there is enough data that does show that starting with direct aspiration first is faster and there is some data that shows its even statistically faster than other cases. So that has to stay our foremost view of the world, but there are certain patients that are tricky and hard and having a device that’s specifically designed to be worked well with direct aspiration could be helpful to the field.

That’s helpful. Just two quick follow-ups, probably not so quick, but nonetheless two and then I will get back in the queue. Really, the first question I asked was ischemic stroke, same question as it relates to peripheral thrombectomy and specifically what do you think are from the top couple of things, [indiscernible] augment the care pathways there and I’m just interested in your comments really about the arterial versus venous traction that you have and perhaps if you could comment on the kind of addressable markets looking one versus the other? And then lastly, Sri, on gross margins, good to see you now on the – officially in the high-60s, I’m wondering do you expect sequentially to improve from here? I know you’ve done a lot of work in augmenting your campus and your manufacturing capacity and I’m sure there is more investment to come, but I’m wondering if the majority of that’s behind you and you are going to reap some of the leverage benefits? Thanks, guys.

Why don’t, Sri, answer the gross margin question first and I will circle back on the peripheral question?

Yeah, we will go in reverse, Jason. So on the gross margins, we did touch on just pretty basically it was product and geographic and I think some of the Japan related commentary helps discuss and describe that. On the other end, we just talked about three new products. So I think our hope is we are going to see a continual progression. I don’t think our expectation is we are going to see it all come right away here in the next few quarters. So, we are happy it’s moving in the right direction, but we think it’s going to take some time.

Thank you.

Okay. And then on the question of peripheral thrombectomy and sort of the work, it’s very, very different from what I just described in stroke where most of that work is specifically sort of system work around how to get patients to the right place. In peripheral thrombectomy those patients are really already in the hospital and/or available to be treated. So the work is really very different. It’s around the constant effort to move from using tPA and tPA with some form of an assist device that are out there now. Two, something very different, which is really immediate clot removal rather than moving a clot around or dissolving it over a long period of time. We are really encouraging the idea that you can just take the clot out and again even it might not all be that successful as Mr. Nox’s case where he went home the same day, but it’s certainly less of a procedure and a big deal. That’s the goal. And you just have to do that sort of experience by experience, obviously, overtime data will continue to support that effort. We’ve shown that data and presented it several times on the arterial side, which is probably partly why we are able to have that level of success earlier on, but we will continue to add to that set as we move to the venous side.

Thanks, Adam. Thanks, Sri.

Sure. Thanks, Jason.

Thank you.

[Operator Instructions] You do have another question coming from the line of Joanne Wuensch with BMO. Your line is open.

Good evening. Can you hear me okay?

Yes, hi, Joanne.

Hi, wonderful. I have two questions. In the post-ATTRACT presentation days, have you seen any change or interest or conversation as it related to peripheral thrombectomy? And is there anything associated with the trial that need you rethink a trial of your own or efforts of your to just sort of better document the use of peripheral thrombectomy?

So, first of all, the answer is, the data that comes from ATTRACT, I think we have seen some data, there is others that will be published later and I alluded that gives us a couple of key takeaways. I’m going to ask Daniel Davis to sort of comment specifically on the few subsets of cases and patients, but I do think that there is some bit real key takeaways from that trial.

Hi, Joanne, this is Daniel Davis. And, yeah, the specific subset data which more will forthcoming in the publication of ATTRACT and so I think we are going to get to hear about this going forward for some time and there will be more purls. About the response from physician is that they have been very involved in treating this disease for many years is that the data is largely confirmatory for what they know for iliofemoral disease and that’s been very helpful and we see that in some of the practices that were well established as they – what’s available of the subset data and we expect that data will be forthcoming and there will be more discussion around that going forward.

Thank you. And my second question has to do with inter-quarter, there was some movement regarding off-label usage of cen catheter – catheters for aspiration. Can you comment on that and if you saw any impact on your business? And I will signoff then thank you.

Yeah, thank you, Joanne. Look, I can’t really comment on what the FDA has done, obviously, we are aware of the letter that they issued. We have always gone through processes, everyone knows that our products are fully cleared and I really think it’d be inappropriate for me to comment further. We haven’t really seen a change in our business. I think most people understood that and we haven’t seen a change – a dramatic change one way or the other.

Thank you very much.

Thank you.

And you next question comes from the line of Bob Hopkins with Bank of America. Your line is open.

Sorry. Just wanted to sneak in one more quick one or a couple of more quick ones. Just to clarify, when do plan on launching 3D and then also, Adam, I was wondering if you could talk a little bit more about CAT-D and wave, like, is there a way to kind of quantify or to find the incremental market opportunity for CAT-D and for wave and then again on 3D, just any timelines would be helpful?

Yeah, well, let’s – so I appreciate timelines. We will likely launch 3D this quarter, but I’m not going to go through any specific timeframe. Obviously, new products have to go through the VAC committees and processes, so there is always a fairly significant timeframe in which one introduces those products into the marketplace, so it’s not immediate. As for CAT-D, I don’t think CAT-D will bring particular incremental patients, it was as I alluded to in my comments really designed to specifically address comments around sort of the length of the products and making sure the procedures were easier to do and a little less awkward with length of products or the hanging outside during a procedure and it’s been well received. And again, those are the kinds of things we need to keep doing as we enter brand new areas that bring with it all kinds of nuances and changes and be responsive, so that the customers find it, their procedures are easier and more efficient and it promotes the paradigm shift that I’ve talked about. On the wave side, I think we are really kind of pretty proud of that coil. Finishing coils are really important. Aneurysms are many well treated or not well treated based on the finishing coil’s performance. I don’t think it changes our outlook of the market per se. We certainly understood the size of that market and our place in it, but the actual performance of this coil was – has been really fun to watch and have the reaction that we’ve had.

Great. Thank you very much.

Yeah, thank you, Bob.

And I see no further questions over the phone at this time. I will turn the call back over to Dan Wilson for closing remarks.

Thank you, Tushan. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our second quarter call.

And this concludes today’s conference call. You may now disconnect.