Oct 25, 2017
Executives
Jack Nielsen - Senior Director of Investor Relations Scott Ward - Chairman, President and Chief Executive Officer Larry Betterley - Chief Financial Officer
Analysts
Danielle Antalffy - Leerink Partners John Gillings - JMP Securities Mike Matson - Needham & Company Jason Bedford - Raymond James Bob Hopkins - Bank of America Brooks O'Neil - Lake Street Capital
Operator
Good afternoon. My name is Kristen, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Cardiovascular Systems Incorporated Fiscal Year 2018 First Quarter Earnings 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]. I would now like to turn the call over to your host Mr.
Jack Nielsen, Senior Director of Investor Relations. Please go ahead sir.
Jack Nielsen
Thank you, Kristen. Good afternoon.
And welcome to our fiscal 2018 first quarter conference call. With me on today's call are Scott Ward, CSI Chairman, President and CEO and Larry Betterley, Chief Financial Officer.
During this call, we will make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, and include statements regarding CSI's future financial and operating results or other statements that are not historical facts.
Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise.
We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.
I'll now turn the call over to Scott Ward.
Scott Ward
Thank you, Jack. Good afternoon, everyone and thank you for joining us today.
During today's call we will discuss our first quarter performance and provide details on our commitment to drive future revenue growth. First quarter revenues of 49.7 million were flat with the same period one year ago.
Revenue was negatively affected by the hurricanes in the saline infusion pump recall. In addition, these temporary challenges cause turbulence in our business that disproportionately affected our coronary franchise.
We previously noted that the timing, severity and location of hurricanes Harvey and Irma would result in a temporary but substantial disruption to normal business activity in Florida and Houston and to a lesser extent in several other areas along the Gulf and Atlantic course. The affected markets represent nearly 20% of our business.
As many of you know carefab procedure volumes are low in July and August and then rebound in September, so our sales are typically back and loaded in the first quarter. With only a few weeks remaining in the quarter there was not sufficient time to recover the lost carefab time and the cancelled procedures that occurred during the period surrounding the hurricanes.
In total, we lost over 300 selling days in Q1. Consequently, the timing of the hurricanes in late August and early September resulted in a significant impact on our quarterly revenues.
Today the types of service in the affected areas are largely back up and running and we anticipate a return to normal procedure volumes as the second quarter progress. As we stated during our fourth quarter conference call, the saline infusion pump recall continued to impact our sales in Q1.
The recall temporarily disrupted our new account pipeline, caused a temporary slowdown coronary case volumes and diverted valuable selling time, as our sales reps were focused on inventory management and paper work associated with the return of the effective pumps. I'm pleased to report that the recall is now closed and all field activities related to managing the recall are now complete.
Finally, our experience over the past two quarters has revealed that we're not gaining sufficient leverage from our dual franchise sales approach in certain circumstances. As a result, we're adjusting the allocation of sales resources to assure a dedicated focus on coronary accounts and increase coverage for both coronary and peripheral cases.
I'll discuss these and other developments after Larry provides details on our Q1 results. Larry?
Larry Betterley
Thank you, Scott and good afternoon everyone. First quarter revenue of 49.7 million was consistent with last year.
We sold approximately 15,250 devices during the quarter, generating 92% of revenues. Both peripheral and coronary revenues were flat with the prior year quarter at 38.2 million and 11.5 million respectively.
Below-the-knee product mix was also consistent at about 60% of peripheral revenue. Reorder revenues were over 98% of total revenue.
Gross profit margin was 81.5% in the quarter compared to 81% last year, driven by unit cost reductions. Operating expenses of $42.4 million were also the same as last year.
Operating expenses were lower than guidance primarily due to lower incentive compensation as a result of lower financial performance. First quarter net loss of 2 million or $0.06 per share was slightly better than the guidance range and consistent with last year.
Adjusted EBITDA remained positive at 2.4 million. At quarter end, our cash balance was strong at 105 million.
Cash declined 3.2 million during the quarter primarily from payments of incentive compensation earned and accrued in the prior fiscal year. I'll now discuss our financial outlook.
With the hurricanes and recall behind us, we expect revenues to increase significantly in our second fiscal quarter over the first quarter of this year and regain growth over prior periods. Full recovery however, will take some time and is not expected to occur until the second half of the year.
For the second quarter of fiscal 2018, we anticipate revenues in the range of 52.5 million to 54 million, representing year-over-year growth of 5% to 8%. Gross margin of about 81%, operating expenses of 44.5 million, other expense of about 225,000 and net loss in the range of 1.9 million to 1million, this equates to a loss per share $0.06 to $0.03, based on approximately 33.1 million average shares outstanding.
Also, adjusted EBITDA is expected to remain positive in the second quarter. For the full year, we still expect revenue in the range of 226 million to 233 million, which is consistent with our prior annual guidance.
I'll now turn the call back to Scott for additional commentary. Scott.
Scott Ward
Thank you, Larry. Despite our slow start in Q1, we remained committed to our annual guidance.
In August, I shared with you our plans to drive revenue growth in 2018 by increasing our sales productivity, enhancing our market development programs, introducing product line extensions in orbital atherectomy, launching our coronary franchise and continuing to set the standard for medical evidence to support use of orbital atherectomy in the treatment of coronary and peripheral artery disease. As you know, the majority of the CSI sales force supports both coronary and peripheral customers.
We refer to this as our dual franchise sales model and this approach has been proven to be effective principally because most of our customers perform both coronary and peripheral orbital atherectomy procedures. However, we have determined that full sustainable adoption of our coronary technology often requires more time and resources than our peripheral products.
Case coverage, clinical acumen, and customer support is important in our business and it has been difficult for some of our dual-franchise sales reps to balance the competing demands of their coronary and peripheral accounts. To assure a dedicated focus on coronary accounts and to accelerate the adoption of our technology we have reallocated 20 sales representatives to focus exclusively on coronary in select high-volume markets.
We are not adding new quota-carrying sales representatives. Our total number of quota-carrying representatives remains targeted at 200.
In addition, we have expanded the field sales professionals by 45, primarily by adding clinical specialists to provide case coverage. This expansion improves our case-coverage capacity by over 20% and will help support our sales representatives with both coronary and peripheral accounts.
In addition to providing increased case coverage in coronary, many of these clinical specialists will provide coverage in the rapidly-growing office-based lab market. With over 700 locations today, office-based labs are forecasted to perform nearly 50% of peripheral atherectomy procedures by the year 2020.
Consequently, we are dedicating more focus resources to this market segment and we expect to capitalize us on this opportunity going forward. CSI is the market leader in both peripheral and coronary atherectomy because we have the best interventional solution for the treatment of calcific disease, and we have the strongest medical evidence in the market.
We are focused on amputation prevention for patients with peripheral artery disease and specifically with critical limb ishcemia. In August, we added to our growing medical evidence with compelling 1-year data from our LIBERTY-360 Study.
As you recall, LIBERTY 360 is designed to evaluate the acute- and long-term clinical and economic outcomes of peripheral vascular interventions in patients with peripheral artery disease. This is a large and clinically relevant trial with over 1200 patients enrolled at 51 sites in the United States.
Dr. Mustapha of Metro Health Hospital in Michigan presented the one year outcomes at the Amp Conference.
HIs presentation highlighted the impressive results achieved using orbital atherectomy in patients with critical limb ischemia where amputation prevention should be the primary treatment goal. After one year of followup, over 91% of Rutherford Class 6 patients were free from amputation and major adverse events.
These results illustrate that peripheral vascular intervention using orbital atherectomy can improve the quality of care and lead to amputation-free survival for critical limb ischemia patients. Further the LIBERTY 360 one-year results support new AHAACC treatment guidelines recommending that an evaluation for revascularization option should be performed by an interdisciplinary team before amputation in patients with critical limb ischemia.
We are also gaining traction in our ECLIPSE coronary clinical trial. We began enrolling patients in this trial in March.
Today, we have 35 sites activated and about 80 patients enrolled. We are planning to enroll approximately 100 sites and 2000 patients in this trial, and we anticipate having the majority of these sites activated by the end of this fiscal year.
Flexing our sales model and expanding our medical evidence are both consistent, yet critical features of our long-term growth plan; however, the company we are building will also benefit from broader value streams that maintain our focus on the patients and customers that we already serve. Our sales professionals are present in cases everyday where our orbital atherectomy is used to treat complex coronary and peripheral lesions.
Leveraging OEM and distribution agreements, we intend to add a line of support products that are typically used during our peripheral and coronary procedures including wires, guide catheters and possibly balloon-angioplasty catheters. Four or five of these devices are typically used during our procedures, so this presents a meaningful opportunity to increase our revenue per procedure.
As a reminder, just a few years ago, we sold high-quality guidewires alongside our orbital atherectomy systems, and we were generating nearly 2 million dollars of revenue per quarter when our distribution agreement for these wires expired in June of 2015. Accordingly, we believe the addition of these support products could have a favorable impact on our revenue per procedure over the course of the next two years.
We will also broaden our business by launching internally developed products and expanding into new geographies outside the United States. For example, we plan to commercialize our radio product or peripheral lesions in calendar 2018.
In August, we announced FDA clearance for orbital atherectomy and treatment of peripheral artery disease as the only atherectomy device available to treat peripheral lesions using radial access. We believe this provides CSI with a very significant competitive advantage.
In addition, we plan to launch our coronary franchise in Japan in the second half of fiscal 2018. Japan is the second largest market for coronary interventions and an attractive market for our first commercial venture outside the US.
We will provide more details regarding our opportunity in Japan after we receive reimbursement approval; so, in summary, we have taken action to address the revenue shortfall we experienced in Q1 and we have developed specific plans to accelerate our growth throughout the remainder of the year. Our intent is to build a company with broader value streams while maintaining our focus on the patients and customers that we currently serve every day.
Our greatest asset is our people, and we are well positioned to leverage the capabilities and capacity of this organization to introduce new products and improve the quality of care for patients with coronary and peripheral vascular disease. We look to the future with confidence and a clear focus on our mission to save limbs and to save lives every day.
We certainly appreciate your continued support and interest in CSI, and we will now take your questions. Kristen, please repeat the instructions if you would, thanks.
Operator
Certainly. [Operator Instructions] And our first question comes from the line of Danielle Antalffy from Leerink Partners.
Your line is open.
Danielle Antalffy
Hey, good afternoon, guys. Thanks so much for taking the question and congrats on pulling out a solid quarter and reiterating guidance despite the hurricane impact.
Just a quick question on sales-force sort of reorganization, can you give a little bit more color cover Scott, on what you think will do for sales-force productivity, and If there is a ramp that needs to happen here that we should be thinking about as we are thinking about the model.
Scott Ward
I think, actually, as you think about your model, I would just maintain the same assumptions building around that 200 quota-carrying sales representatives in delivering about the same productivity for now that we are seeing. I think what we are really doing by focusing on coronary is to really drive sustainable adoption in these key accounts.
It gives us 20 sales representatives now that we can focus on these really large coronary accounts where we can drive growth over time. Really, the key thing here is to get back to a stable growth trajectory in coronary.
I think what you would see, Danielle, when our business experiences some form of turbulence because our coronary case coverage because coronary sales requires case coverage. We oftentimes see that the turbulence in our business has a disproportionate effect on coronary, so by creating this more focused group of sales reps that will focus solely on coronary, we think that we can have a more stable growth trajectory and we can sustain that business more effectively over time.
We have been doing this for a little while. As I have said on a number of occasions, we have we have allowed our local management teams to focus their resources on accounts as they see fit locally, you know, so they can allocate resources where they think they can drive growth the best; so our sample size is small, but we have seen success where we have targeted our dedicated coronary sales reps, and as a result, I think, over time, this will drive our growth and improve our productivity, but I do not think that will see any immediate impact, you know, that you should build into your models right now.
Danielle Antalffy
Okay, great, and then also as far as hurricane impact, I mean, it sounds like - can you give any color on exactly what the impact was in the quarter and what you're assuming from making up procedures in - reiterated guidance - what I am trying to gather if it was not for the hurricanes would you guys actually be raising guidance today.
Scott Ward
No, I think actually if you look at the results and even, you know, considering my comments ,I think that the shortfall that you saw was really about - was probably about half. The hurricane probably contributed to about half of that shortfall.
The other half was really due to the lingering impacts of the recall, and then the, you know, kind of the disproportionate effect that we saw in our coronary business. So I guess that probably addresses your question, and the recall did continue to have an impact on us in Q1, and we forecasted that one when we presented in August, but I think, you know, the area we have room for improvement here is really to stabilize our coronary business and get that back on a predictable growth trajectory.
Danielle Antalffy
Okay, and did that contribute to the lower number of coronary new accounts added this quarter is it part of it too or are you talking about existing accounts?
Scott Ward
Oh, well, I think it is really both. The lower coronary accounts were also impacted a bit by the disruption caused by the recall, but I think once again, you know, any time we get this disruption, it is easier for our sales representatives to go back to peripheral and do well there because selling coronary takes more time, it's more difficult, and it requires more case coverage.
So, once again, it leads us back to really just the importance of this focused coronary sales organization.
Danielle Antalffy
Perfect. Thank you so much guys.
Scott Ward
Alright, thanks, Danielle. Operator [Operator Instructions] Our next question comes from line of John Gillings from JMP Securities.
Your line is open.
John Gillings
Hey guys, can you hear me okay.
Scott Ward
Yes, John.
John Gillings
I want to start also asking a little bit of guidance. May be can you talk this through a little bit of the forecasting process that you went through looking at the back after the year, and how you got comfortable, you know, that you could sort of make up for, you know , the first half and maintain guidance - I mean, it is great to see it maintained.
I just want to know that how you got to where you are comfortable doing that.
Scott Ward
I think key to that, John, will be taking the new sales model that we have - the 285 professionals, getting them back to the average productivity of the - that we had basically in fiscal '17, so it is going to take a quarter to get them more up to speed, but that is going to be key to driving the numbers in the back half of the year.
John Gillings
Okay, that is helpful, and then I just wanted to dig a little bit deeper into the LIBERTY 360 data you talked about, specifically the Rutherford 6 patients tending to have more than 91% free from amputation after a year. It is pretty extraordinary and so I guess what I am wondering is, now that we have that information out there and more people are becoming aware, you know, who has the patient before they would go to amputation and do they know how, you know, to give them to the right person and are these interdisciplinary teams going to reliably look at these patients each time.
May be, just can you walk us through that and how quickly those patients could receive this kind of treatment.
Scott Ward
So, first of all, that is a very astute question, because that really is the key. There are two aspects to the - we now need to take this data and these results and get out to the physicians who are currently - who diagnosed these patients, and that is often times the primary care physician, the podiatrist, the endocrinologist physicians who are typically seeing patients with diabetes and other disorders that are, typically found to be associated with peripheral artery disease.
As we continue to educate that group of diagnosing physicians, we will continue to improve their willingness to refer these patient for angiographic examination prior to sending them on for an amputation. Not all Rutherford 6 patients are created equal; I mean, there are some patients that have very severe lesions where, you know, they may be very much at risk of developing an infection or sepsis, and as a result, an amputation still may be the most appropriate treatment for that patient, but what we find in these results is that for patients who have large wounds who are Rutherford 6, if we can treat them with orbital atherectomy and peripheral vascular intervention, we can indeed save them from an amputation and serious adverse events, and sustaining that type of an outcome for greater than 90% of the patients over 12 months is really a remarkable outcome and our effort now is going to be focused on training and educating the referring physicians, these diagnosing physicians, but also working with the physicians that are currently performing these peripheral vascular interventions, so that they know that when these patients do come into their practice that performing an angiogram and treating them aggressively has been demonstrated to have good outcomes, so that is really the focus and it will take us some time to continue to get this word out and to continue to provide, you know, this education, but we are very optimistic about these results and really pleased with the results of this trial.
John Gillings
Okay, and then just one last one for me, just kind of a big picture market development question. In some of my diligence, I have spoken to physicians that use DCBs as well as orbital atherectomy, and some of the feedback that I have had is that using a DCB in a severely calcified lesion is, not only probably not going to be effective but potentially fairly risky, as, you know, the balloon, will just kind of seek the path of least resistance and you end up - you know not treating the calcium very well and putting too much pressure on the less diseased parts of the vessel.
I just want to get kind of an update from you, does that line up with what you guys are hearing and what you are seeing and maybe just give us an updated view on how you see orbital atherectomy alongside the ongoing DCB market.
Scott Ward
Yeah, it's a good question. Drug-coated balloons are typically used or really only approved for use today in lesions that are above the knee, and you know, I guess where we see really severely calcified lesions there the physicians that we interact with are generally using orbital atherectomy to prepare the vessel, to remove the calcium, and to break up the medial calcium that is there to fracture that calcium if you will, and by doing so, that is thought to improve the distribution of the drug and may indeed enhance the effectiveness of a drug-coated balloon.
I think the reference to make to safety, probably the physicians in that case are probably referring to the use of a balloon in a severely calcified lesion and potentially causing a dissection of the vessel. That is a fairly rare complication, but it does occur, and certainly, by treating the calcium there and preparing that vessel, you can, not only improve drug distribution, but you can also dramatically reduce the incidence of dissections, so that generally is the case; I mean, what we're seeing out there pretty common now is the combined use of orbital atherectomy with drug-coated balloons, I think, you know the companies that are selling drug-coated balloons are really doing good job at driving patients to for intervention, driving them to cath labs, and their market development programs frankly are tailwind for us because the more of these patients that come into the cath labs, the more calcium that is there and the more we can treat, so .
. .
we are encouraged by the fact that these technologies are typically used in combination with one another.
John Gillings
Alright, that is really helpful. Thanks a lot guys.
Operator
[Operator Instructions] Our next question comes from the line of Mike Matson from Needham & Company. Your line is open.
Mike Matson
Good afternoon. Thanks for taking my questions.
I guess I am just curious about how you're compensating on these new reps that you have added. I understand they are not quote carrying, but you know, is that going to add some cost, and what would you expect the impact on your margins to be from that.
Scott Ward
So we are reallocating sales reps, so we are not adding new sales reps. We are reallocating 20 quota-carrying sales reps, so the dedicated coronary reps will be quota carrying and their compensation plan will be the same as our dual-franchise reps except that they will focus solely on coronary.
So, really we do not anticipate any other - any distinct - implication tend to - the clinical specialist - compensation with the clinical specialist is roughly half, little less than what a quota-carrying rep would be, so that does add some costs as built into our guidance for Q2.
Mike Matson
Okay.
Scott Ward
If you look into the back after the year, the quarterly OpEx is probably going to be 46 million plus for the third and fourth quarters.
Mike Matson
Okay. Alright, and then I am kind of intrigued by the comments around the support products, so one, is this going to be dilutive to your gross margins; two, where are these going to come from.
Is it going to be something that you partner or distribute from another company or is it going to be something you develop internally, and then finally, what sort of the timing do you expect in terms when you would start selling the guidewires and catheters and things like that.
Scott Ward
So, yeah, the revenue that we generate from the sale of these products is likely to be dilutive to our gross margins, but I suppose they will depend on how successful you are in reducing our cost of goods sold for our products. The way that we will be bringing these products on is mainly through OEM agreements and distribution agreements.
So we do anticipate adding wires and guide catheters to our product line during the course of this fiscal year, probably later in the second half of this fiscal year, and you know, we may be adding balloons as well during that time. The balloons are likely to come from a distribution agreement, while the wires and guide catheters are more likely to be from OEM supply agreements.
Mike Matson
Okay. Thanks.
And then, finally just on the ECLIPSE trial, I don't know, you might have said this. I apologize to do it, but just can you give us an update on where the normal stands and you know, is there going to be any presentations of the trial design or anything like that at the upcoming TCT meeting.
Scott Ward
Our current enrollment we have enrolled about 35 sites at this time, and we have about 80 patients enrolled, so the enrollment is going well. I mean, what I am watching very closely right now is just site activations because we are still within about six months of the start of the trial.
We are going to put 100 sites on in total and we anticipate having the 100 sites activated by really the end of this fiscal year, and that is kind of the leading indicator that really will drive patient enrollment. Remember too that the early patients enrolled in the study received many of them will be enrolled into the OCT arm of the trial, and as a result, patient enrollment can be a bit slower at the start of the study because of the patient involvement in that subgroup.
Mike Matson
Alright, thanks a lot.
Operator
[Operator Instructions] And our next quest question comes in line of Jason Bedford from Raymond James. Your line is open.
Jason Bedford
Hi, good afternoon, and thanks for the questions. Just a few, I guess there is obviously a lot of noise and disruption in the quarter.
Scott, are you comfortable that there has been no change to the competitive landscape, your competitive positioning with an account.
Scott Ward
Yeah, good question. I am comfortable with that.
I think that the noise that you are seeing there is really due to some unfortunate events and then the way that those have impacted our coronary franchise. At this time, we really do think that the competitive landscape is fairly stable.
We do not see really new entrants or substantial changes occurring. The acquisition of Spectranetics by Phillips, you know, closed in about the middle of this quarter, so we really did not see much of an impact from that during that timeframe and we have not seen much there, but there really is not any significant change in competitive dynamics that I can reference for you.
Jason Bedford
Okay, that's fair, and just I apologize if this is known or understood, but just getting back to the size of the sales team, 200 quota carrying reps plus 85 clinical specialists, is that the right way to think of the footprint of the team.
Larry Betterley
Yeah, the model is 200 quota carrying and 85, primarily clinical specialists. There is a few associates in there for bench strength, but primarily clinical specialists, some associate sales reps, but they are mainly clinical specialists here.
Jason Bedford
And just to understand, how many have you added, I think there were at least talks about adding 45; are those people already have been added or were they added recently.
Larry Betterley
Yeah, they were added during Q1, so they are on board now and basically in territory.
Jason Bedford
Okay, and just in terms of getting back to an earlier question, the implied acceleration in the second half of your fiscal year - it is largely due to bigger footprint continued sales-force productivity, there is no kind of a pulling forward or adding more from Japan or radial or anything like that.
Scott Ward
There is not much from radial, but there certainly would be some from Japan. We do anticipate learning more about the reimbursement approval in Japan, probably in really calendar year 2018, and then we are still anticipating launching our product in Japan in the second half of this fiscal year, so there is some uplift there.
It probably will be happening later in the fiscal year, so most of the growth will be coming from our Japan launch, I think we will see next fiscal year as that begins to ramp up.
Jason Bedford
Then, may be last for me, getting back to the LIBERTY 360 data; in terms of the impact, do you expect it to have more of an impact on adding new accounts or is this more of a driver of increased utilization at existing account?
Scott Ward
I think it is really a driver of increased utilization. I think that combined the LIBERTY 360 results combined with the guidelines, the new AHA/ACC guidelines those two things combined provide a pretty compelling case or diagnosing physicians to be referring their patients on or an angiogram and for peripheral vascular intervention before they send them on for any other form of treatment or an amputation.
These outcomes are very compelling and really it is a called action for these diagnosing physicians.
Jason Bedford
That's great. Thank you.
Operator
[Operator Instructions] and our next question comes from Bob Hopkins from Bank of America. Your line is open.
Bop Hopkins
Thanks and good afternoon. Thanks for taking the question.
Just a couple of quick things one, just to clarify something, I think you said in this fiscal quarter, you did 15,250 procedures. Is that right?
I just - in the year-ago period, you did 14,700 and that is obviously a lot more growth since flat, so I'm wondering what the discrepancy is?
Larry Betterley
Yeah, the dollars were flat, Bob. You are correct.
We did see about a 3% growth in units year over year, so the obstruct [ph] for that is ASP
Bob Hopkins
Okay, and then, sorry on this back half question, is there any revenue in there from your new OEM agreements that you are talking about on the catheters and your guide side, is that part what gives the uplift because you know it just seems like the things you are talking about the uplift in the back half were kind of known previously, so just it seems like you are - in order to get to the full-year guidance, you got to have even better growth in the back half than you originally anticipated, and yet I am not really sure what's new about the back half, so just curious as to why you didn't be a little more conservative may be in the back-half guide.
Scott Ward
Well, what's really in the year –I mean we are one quarter in, and we do have confidence in our sales organization and our ability to grow. I think the changes we made in coronary and the additions we are driving into case coverage is new, Bob.
I think you know the increased case coverage that we have out there will improve our productivity, in particular in our large coronary accounts and also in these office-based labs, so that is new, that is different. Yeah, there is a small amount of revenue in the second half related to radial; there is a small amount related to these through our OEM strategy and I would say there is a small amount related to Japan as well.
So that is that is really where we anticipate the uplift come from.
Bob Hopkins
Okay, and then in the second fiscal quarter, by my math here anticipating growing about 6% or so. Is there residual impact from the storms or is that more a function, you know, some of the stuff on the coronary side taking a little bit longer to, you know, sort to resolve and get headed in the right direction.
Larry Betterley
I think it - there is still a residual amount related to the storms; we were seeing a restoration of some of the office-based labs and some of the ambulatory sites in certain parts of the country, but right now, some of the others are really still focused on inpatient care and the normal cadence of referral to some these office-based labs really has not come back fully online yet in some places, but that is relatively a small impact. I would say more what we seeing is it will take a short amount of time for us to ramp up our new focus in coronary here, and remember too as we do that, you know, in these 20 territories, let us say where we now have focused coronary reps.
We basically are enabling our peripheral reps to get back to focus on peripheral, so while they still will be dual-franchise reps and they will still cover some coronary accounts, they are going to have more time now to focus back on their core business, so adding these coronary reps as the synergistic benefits of providing greater capacity in peripherals well.
Bob Hopkins
And then I guess a quick little thing just on the topics. You kind of - you had this specific coronary sales force previously and then you kind of gone back and forth but have made a couple of adjustments to the model, so I guess just sort of theoretically what is different now than the last time you had sort of a dedicated coronary group and then I just want to ask also on the net number.
I am just curious if there are any accounts that dropped off.
Scott Ward
Yeah, it is a little bit hard for me to comment on how this is different because that predates me, but I wouldn't - what I think is really important today is the treatment of complex coronary lesions has really become the kind of the medical need of our time, and so, there are many institutions now that are focusing on the treatment of these patients, which previously may have been referred to surgery or had just gone to hospice, and now we find these patients are either surgical turndowns, or you know, interventional cardiologists are more aggressively treating them, and in some cases they may be using hemodynamic support; you know, they are treating bifurcated lesions, they are treating left main lesions; they are treating patients with severely calcified lesions and so these patients historically have been excluded from most past clinical trials, the patients who oftentimes frankly, have not been treated that well and so now we have institutions that are really focusing on their care. And I think over the course of the past couple of years as I have been in this role and observing this, I have really seen a change in the environment where we are seeing very large institutions that are dedicating large portions of their practice to the care of these difficult to treat patients, and we really are now trying to take what right now is frankly a small installment of just 20 sales reps focusing them in territories where we know we have these large coronary accounts that are dedicated to the treatment of complex lesions.
And you know we are really trying to leverage those changes in the environment to accelerate our growth. I think the opportunity is there, and I think it will continue to grow over time.
It is not a good explanation of the past versus the future, but I think it gives you some perspective on why I think, you know, this will be successful.
Bob Hopkins
Larry, do you want to comment on the CAD number.
Larry Betterley
Yeah, Bob, you are probably tracking life to-date accounts on coronary, that would be about 700 life to-date accounts and we do lose some over time, don't lose but some become more remote users or limited users, so I would say the more active accounts is closer to 600.
Bob Hopkins
Okay. Super, thanks guys.
Operator
[Operator Instructions] And our next question comes from line of Brooks O'Neil from Lake Street Capital. Your line is open.
Brooks O'Neil
Hello. so I was listening as carefully as I could about all the things you are going to do to drive growth, and I think you have a nice list of activities that you are focused on.
Would you be willing to comment at all about the profile of the business you hope to create as you go forward in terms of such things that investors like to know, sort of what you hope the revenue growth rate might be as we move out of fiscal 2018 and the fiscal 2019, the profitability metrics -
Scott Ward
I think what we can say is, you know, we have worked really hard over the course of the past couple of years to stabilize this business and get it back on track and I think where we stand today we have got a good strong company. We are in a good stable position.
We have got a really important core technology that physicians use to treat a very well-defined unmet medical need. Our sales reps we have 200 sales reps and now roughly 85 support personnel out there that are routinely attending cases and who are present are standing shoulder to shoulder with these physicians in caring for these patients, and we now are in control of our own destiny.
We are now in a place where we can continue to really develop and provide products and other innovative solutions that can help treat those patients and support our customers in the care of that specific patient. We are in the process - obviously we are heavy investors in research and development and we are were in the process of developing our sense of vision and direction around this, and I think in time we will be in better position to give you a more specific information on exactly how, you know, this might drive our growth or expand our business going forward.
But, for right now, we have talked about really just trying to increase our revenue per procedure; we are starting out relatively simple with the addition of these OEM products and distribution products and that is mainly because these are things we can do and we can do quickly and we can execute on and there are opportunities immediately available to us. Over time, we will continue to expand and broaden products based on our organic development and that will be focused on what we like to call our patients - patients we are already supporting customers and caring for these patients.
Brooks O'Neil
Can you just give us a little more insight in the Japan - you made some basic comments there, but sort of what is going on over there now and what you would expect as we get through the end of year into early 2018.
Scott Ward
Yeah, I would love to be able to do that. I don't have much more that we can give you an update on.
The MHLW process is a process for marching other companies who have been seeking approval in Japan. This is a process that has a lot of uncertainty in it, and you work with them, you actually submit your dossier, they take their time they need to review it, and then you hear back.
I know it sounds terribly basic, but it is just what we had, and I cannot give much more color than that. We are on hold.
In the meantime, you know, we are working with our key customers there; we are working with Medicaid - our distributor there; we are continuing to get prepared for the launch; we are doing everything we can to be prepared when the reimbursement approval comes through; and that's all about we can do right now until we learn more from MHLW.
Brooks O'Neil
Cool. I get that.
And then are you going to talk at all about international markets beyond Japan, any thoughts about where you might head next?
Scott Ward
No. We are going to stay focused on Japan for right now and make sure that we get that done right and that we can leverage our opportunity, and then we will eventually have a good international infrastructure that will be built based upon distribution in Japan, and from there, we will expand, but we are not ready to comment on what our next targets will be at this point.
Brooks O'Neil
Okay, thank you very much.
Scott Ward
Thank you. Operator [Operator Instructions] And we have no further questions at this time.
I would like to return the call back over to Scott Ward for final comments.
Scott Ward
Okay. Very Good.
Thank you, and thanks every one for your continued interest in CSI. We would look forward to updating you on our progress in January, and this will conclude our conference call.
Operator
Thank for your participation. This does conclude today's conference call.
You may now disconnect.