Oct 30, 2018
Executives
Jack Nielsen - Vice President of Investor Relations and Corporate Communications Scott Ward - Chairman, President and Chief Executive Officer Jeffrey Points - Chief Financial Officer Rhonda Robb - Chief Operating Officer Ryan Egeland - Vice President of Medical Affairs
Analysts
Mathew Blackman - Stifel Danielle Antalffy - Leerink Partners Bob Hopkins - Bank of America David Jackson - Needham & Company Jayson Bedford - Raymond James Margaret Kaczor - William Blair
Operator
Good afternoon. My name is Kristine, and I'll be your conference operator today.
At this time, I would like to welcome everyone to the Cardiovascular Systems' Fiscal 2019 First Quarter Earnings Conference Call. [Operator Instructions] Thank you.
Jack Nielsen, Vice President, Investor Relations and Corporate Communications, you may begin the conference.
Jack Nielsen
Thank you, Kristine. Good afternoon, and welcome to our fiscal 2019 first quarter conference call.
With me today are: Scott Ward; CSI Chairman, President and Chief Executive Officer; Rhonda Robb, Chief Operating Officer; Jeff Points, Chief Financial Officer; and Dr. Ryan Egeland, Vice President of Medical Affairs.
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 will now turn the call over to Scott Ward.
Scott Ward
Thank you, Jack. Good afternoon, everyone, and thank you for joining us today.
I'm very pleased to report that CSI delivered a strong first quarter. Year-over-year growth of 13% is the strongest we have experienced in the past six quarters and is consistent with our fiscal year 2019 annual guidance.
We're driving market leading performance with Orbital Atherectomy and we are executing on many of the key initiatives that will accelerate our growth over the next several years. Our first quarter reflects continued success in our core Atherectomy franchises, incremental growth from international sales of Orbital Atherectomy devices and new revenue contributions from our emerging product pipeline.
Our domestic revenue grew 11% in Q1, consistent with our expectations. Peripheral grew in the upper single digits and coronary grew approximately 20%.
We completed the full market launches of OrbusNeich coronary balloons and ZILIENT guidewires in August and we're encouraged by the early response from the market. The 1.0 millimeter Sapphire II coronary balloon is the smallest approved angioplasty balloon in the US and we are experiencing strong demand for this product and the other OrbusNeich balloons as well as our ZILIENT guidewires.
In fact, the Sapphire II represented about 33% of our first quarter angioplasty balloon sales. Finally, our recently announced international distribution agreement with OrbusNeich is progressing well.
We're making solid progress on our efforts to introduce Orbital Atherectomy worldwide. In September, we announced the first peripheral Orbital Atherectomy procedure outside the United States and in the coming weeks we anticipate announcing the first peripheral Atherectomy procedures performed in Europe, as well as the first international coronary Atherectomy procedures performed in collaboration with OrbusNeich.
In summary, we began fiscal 2019 with a solid performance and we enter Q2 with momentum and confidence. CSI delivered double digit revenue growth supported by continued strength in peripheral and coronary Artherectomy and supplemented with revenue from international markets and new products.
In addition, we continue to make strong progress on the execution of key operating objectives in manufacturing, product development and clinical research. Rhonda will address some of these achievements in a few moments.
I'll now ask Jeff Points, to discuss our Q1 financial results. Jeff?
Jeffrey Points
Thank you, Scott and good afternoon everyone. I'll now discuss our first quarter financial results in more detail.
First quarter revenue of 56.3 million represented a 13% increase compared to last year. In total, we sold over 18,000 devices during the quarter generating 90% of revenues.
Worldwide coronary revenue increased over 30% to 15 million. Worldwide coronary revenue includes revenue from our OUS distribution partners and the full market launch of OrbusNeich coronary balloons.
In the US, ordinary unit sold increased nearly 19%, partially offset by a low single digit ASP decline. Worldwide peripheral revenue increased 8% to 41.2 million.
Worldwide peripheral revenue includes revenue from an initial stocking order with OrbusNeich and the full market launch of ZILIENT peripheral guidewires. US revenues in our hospital side of service grew8%, while office space lab revenue increased 7%.
We continue to secure attractive long-term contracts that include volume based discounts particularly in the office space lab setting. Compared to previous quarters, our domestic peripheral business experienced a mid single digit ASP decline.
As we've demonstrated the last several quarters, we continue to maintain strong gross margins even as we offer more competitive pricing to select high volume accounts. International revenues for the quarter totaled 1.3 million, as we continue to expand our launch in Japan and also completed a stocking order with OrbusNeich.
Gross profit margin remained very strong at 81.2%. Compared to the prior year, manufacturing efficiencies and product cost reductions more than offset the impact of lower domestic ASP's.
However, increased international revenues and the full market launch of coronary balloons and peripheral guidewires, led to a minor decline in overall gross margin. Operating expenses of 48.7 million increased 6.4 million or about 15%.
R&D expenses associated with plants, new product development and enrollment in the ECLIPSE clinical trial increased 18%. As we indicated at our Analyst meeting in July, we plan to continue to significantly invest in product and clinical initiatives, broaden our product offering, expand the use of Orbital Atherectomy and drive long-term value.
SG&A increased about 15%. Higher Q1 SG&A expenses were anticipated an increase due to several factors.
Q1 expenses reflect the forecast of our 85 clinical specialists, only about half of which were on board in the first quarter of last year. The timing of certain items such TCT Conference which was held in September this year and initial investments for our international expansion.
For the remainder of fiscal 2019, we plan to grow revenue at a faster rate and SG&A. First quarter net loss was 2.9 million or a loss of $0.09 per share.
Adjusted EBITDA remained positive at 1 million. With a cash balance of 113 million, no long-term debt and a line of credit in place for borrowings up to 40 million, we continue to maintain financial flexibility.
I'll now discuss our annual guidance and provide some color on our fiscal second quarter. First quarter financial results were in line with our expectations.
So today we're reiterating the fiscal year guidance we introduced in July. Specifically, we forecast the following for fiscal year 2019, revenues in the range of 240 million to 250 million, representing growth of 11% to 15%; gross profit of about 80%.
Net loss equal to 1% to 2% of revenues and positive adjusted EBITDA. For our second quarter, we anticipate a year-over-year revenue growth rate similar to what we experienced in Q1.
I'll also note that SG&A expenses are expected to decline as a percent of revenue in Q2. As I mentioned previously, we anticipate revenue growth to outpace SG&A growth for the remainder of fiscal 2019.
Also keep in mind that due to the seasonality in our business cycle, profitability is typically in first quarter and tends to improve throughout the year. We would anticipate a similar progression in the current fiscal year.
That completes my prepared remarks. I'll be happy to answer questions during Q&A.
Rhonda will now provide commentary on our commercial and clinical developments. Rhonda?
Rhonda Robb
Thank you, Jeff. I would reflect to echo Scott and Jeff's comments regarding our revenue growth in Q1.
It is so exciting and motivating for our entire CSI team to demonstrate that we're achieving our key milestones and that our strategy is producing early success. This afternoon I'll share some additional details on our progress in peripheral and coronary franchises.
And in peripheral we enjoy continued growth. During the quarter we recorded over 1 million in sales of our new Diamondback 360 extended length, otherwise known as our radial device.
This is a terrific example of our commitment to innovation in our core Atherectomy business. As you recall, this product allows the physicians the ability to treat above the knee lesions using a radial access point to access the vascular through the wrist.
When using Diamondback, physicians now may use tibial, pistol, radial or traditional for moral access routes for treating peripheral lesions. As you might assume accessing the vascular through the blood vessels in the wrist requires a very small devise and due to Diamondback's low five pinch profile and unique orbital mechanism of action, we have a significant competitive advantage here.
Longer- term we remain optimistic about the value proposition to enable greater efficiencies and patient workflows given the ability ambulate and discharge patients faster and potentially reduce length of stay. The introduction of new radial support products from CSI and others is expected to help with the adoption of this product.
In coronary for example, radial access is now used in 40% of PSI's in the United States. So we are optimistic that peripheral procedures could reach this level of adoption as additional support products become widely available.
To that end we plan to launch our radial length exchange catheter in December. Today the longest exchange catheters are about 150 centimeters, our 200 centimeter ViperCath XC [ph] will enable easier wire exchanges and should provide access for more radial cases.
Also in peripheral, I'm pleased to share that we submitted our 510(k) application to the FDA for the exchangeable peripheral platform. This new platform is designed to serve up to 50% of peripheral patients that suffer from multi-vessel disease throughout their legs.
This important innovation is unique and that it facilitates the utilization of multiple crowns during a single case where today an operator would need to pull an entirely new device to treat a second lesion in a different part of the anatomy. The exchangeable platform will enable both patients and economic benefits enabling potentially more patients to be effectively treated in a single setting as well as a more cost effective solution for the practice.
We're planning to commercialize this product in late fiscal 2019. In coronary we achieved strong domestic Atherectomy due to continued recognition in the field on the value of vessel preparation for complete revascularization from CSI product innovation and from continued improved sales execution.
We continue to find that our dedicated coronary reps and clinical specialists are succeeding by focusing on high volume coronary centers of excellence. We pride ourselves on the clinical expertise of every CSI employee in the field by leveraging our dedicated coronary reps and specialists were leveraging this competitive advantage to our benefit.
We remain uniquely qualified to provide procedural support to physicians treating high risk coronary patients. On the product front we continue to gain market share due to the increased adoption of the Diamondback 360 with the new GlideAssist feature.
GlideAssist provides a slower speed of 5,000 revolutions per minute, making a significant difference in maneuvering around tortuous and angulated anatomy and improved lesion access in complex PCI patients. The result is smoother tracking with the ability to remove and reposition the crown of the device and the feedback we're receiving from our physicians is uniformly positive and we look to further build on our leadership position in coronary Atherectomy with this important product innovation.
Turning now to our investments in medical evidence, our ECLIPSE study with a targeted enrollment of 2,000 patients is designed to evaluate vessel preparation with the Diamondback 360, compared to conventional balloon angioplasty technique, progress can implantation for the treatment of severely classified coronary artery lesions. We currently have over 550 patients enrolled and remain on track to complete enrollment in the study on schedule in 2020.
On the peripheral side, Dr. Jihad Mustapha showed two-year outcomes of our LIBERTY 360 study at the 2018 Amputation Prevention Symposium in August.
Patient study continued to show High Freedom from Major Amputation in all Rutherford classifications at two years. In addition, primary amputation may not be necessary for the most complex Rutherford 6 patients as evidenced at two years by High Freedom from Major Amputation, improvement in quality of life and improvement in overall Rutherford classification.
He also noted that a sub analysis of LIBERTY 360 patients treated specifically with CSI Orbital Artherectomy did even better with the higher freedom for major amputation across all Rutherford classes including a freedom for major amputation of 88.5% in the most complex patients. Now, until now physicians have had limited evidence regarding the broader use of endovascular devices for peripheral artery disease and data from our LIBERTY 360 really does provide compelling evidence that peripheral interventions have a positive impact on patients suffering from mild to severe peripheral arterial disease and even in critical limb ischemia.
The moving epidemic of peripheral arterial disease is attracting more and more attention and we believe that a broad collision of policy makers, patient advocacy groups, medical societies and industry initiatives will further the progress to build awareness over the benefits of revascularization to help prevent unnecessary amputations. So it's encouraging to see that the CLI global society recently published a manuscript in the journal of the American Heart Association illustrating both the clinical and economic benefit, revascularization of peripheral of peripheral arterial disease patients versus amputation.
The manuscript reviewed over 72,000 Medicare patients and found that revascularization for strategies led to better outcomes versus the amputation first approach. Compared to revascularization primary major amputation resulted in shorter survival, higher risk of subsequent major amputation and higher healthcare cost.
Overall, the study conclusions underscore our belief that revascularization first approaches for CLI patients lead to better clinical and economic outcomes. And in September, which was peripheral arterial disease awareness month, Congressman Payne from New Jersey and Congressman Paulsen from Minnesota sponsored a briefing on Capitol Hill with the cardiovascular collision or CVC with the objective of raising awareness regarding the economic and human toll of peripheral vascular disease.
We are collaborating with CVC to advance to the next step. Establishing an intergovernmental working group on PAD and ultimately proposing legislation to minimize unnecessary amputations.
We are very optimistic that the momentum from these collisions will ultimately translate into increased awareness in treatment for peripheral arterial disease patients with critical limb ischemia. Turning to international, as Jeff and Scott indicated, we made significant progress in Q1 on our international expansion.
As you recall, we launched in Japan last February and we continue to train physicians and gain market share in Japan. The training of physicians and the enrollment of new centers in Japan requires physician peer to peer training and will result in a geometric rate of adoption over time.
In mid-July we announced an exclusive international distribution agreement with OrbusNeich that enables us access now to over 60 countries outside the United States and Japan. In September we announced our first international peripheral case in Hong Kong, only two months after signing the agreement.
OrbusNeich shares are passion, customer-focused and pace to expand a therapy to patients with peripheral and coronary artery disease. Internally, we continue to develop a scalable medical education infrastructure for our international expansion.
Our plan is to replicate the high-quality physician training that we provide to U.S. physicians through our future international partners.
Essentially, we will export our training expertise to physicians worldwide. We can do this in the same way we have succeeded domestically, leveraging exceptionally qualified proctors to share their expertise with their peers.
By the end of Q2, we expect to have approximately 40 international physicians trained on the use of orbital Atherectomy. Supporting these international expansion plans, in September we received positive news from our European Notified Body that would renew our CE marks certification for peripheral orbital Atherectomy for another three years.
We expect commercial peripheral cases imminently. Next up we will pursue CE Mark for our coronary product line and look to approval in the back half of this fiscal year.
That concludes my remarks, and before we open up the call for your questions, Scott, will now provide his closing thoughts.
Scott Ward
Thank you, Rhonda. Well, as many of you know, on July 31, we hosted our first Analyst Day, and during this meeting, we introduced our strategies to build on our strengths and broaden our value streams with growth drivers from new products, new markets and new geographies.
We highlighted our investments in research and development provided an overview in our new product pipeline and we outlined our international expansion plans. Following the Analyst meeting, we have been actively sharing our strategic vision with many of our key stakeholders.
Since August 1, we have met with over 100 of our key physicians, and we are pleased that our focus on complete revascularization for complex coronary and peripheral artery disease is really resonating with our customers. We felt that it was vital for our customers to understand the level of commitment we have to their practices and to the patients that they serve.
And we want them to know how they can partner with us over the next several years to improve patient outcomes. Most importantly, our physicians were impressed by our commitment to invest approximately $250 million over the next five years, as we strive to develop 20 new products for the treatment of complex cardiovascular disease.
Our level of commitment extends to our continued focus on quality, medical education, providing superior clinical support in the Cath Lab and an investment in robust medical evidence supporting the safety efficacy and economic benefits of orbital Atherectomy. We have come away from these initial meetings both humbled and energized by the enthusiasm our physicians have for our plans and we look forward to building and expanding our physician relationships, as we execute our strategy and reach more patients.
As I hope you can tell, we are very proud of the meaningful progress we are achieving across our company. Financially we begin the year on plan and well positioned to achieve our annual guidance.
We have a strong management team and it is capable of running a much larger company. With the addition of OrbusNeich, we are rapidly executing on our plans to expand our business to new geographic markets.
Our new product launches are progressing well, including radio access peripheral Atherectomy, the introduction of GlideAssist to enhance coronary Atherectomy, the full commercial launch our coronary angioplasty balloon and our ZILIENT peripheral guidewires. In addition, our R&D teams are working to fill out our product pipeline with exciting new solutions for the treatment of complex study of vascular disease.
Our clinical programs are ahead of schedule and our sales team is delivering solid growth built up on a strong foundation of exceptional procedure support and clinical expertise. And perhaps most importantly, our entire organization has remained focused on our mission, to save limbs and save lives every day with purpose and great success.
The CSI team is motivated and determined to begin this next chapter as we begin to transform this company from a single product, single geography company to being a multiproduct, multinational company, focused on the most compelling unmet medical needs in interventional cardiology. Thank you for your continued support and your interest in CSI.
We will now take your questions, so for operator Kristine, if you would please repeat the instructions. Thank you.
Operator
Thank you. [Operator Instructions] Your first question comes from the line of Mathew Blackman from Stifel.
Your line is open.
Mathew Blackman
Good afternoon, every one. Thanks for taking the question.
If I could start just thinking about the Q2 revenue growth guidance, I think you said roughly 13% from what you posted here in the first quarter, that doesn't imply a sequential uptake in growth, if you adjust for a year-over-year comparison. So can you just remind us of the potential drivers of the imply growth ramp, I assume its increasing contribution from distributor products in the international, but is there anything else you would highlight?
Scott Ward
So, it is actually a continued strength from our core business, we do anticipate seeing continued growth in both coronary and peripheral. We will also continue to have incremental revenue coming in now from our international launches as well as the launch of our new products are wires and balloons in the United Sates.
So Mat, it really - our growth in Q2 is really going to continue to come from those primary drivers making it probably not that unlike what we saw in Q1.
Jeffery Points
Yeah. And just to add to that Mat, what the guidance I've provided in July, peripheral, you can plan on kind of that high single-digit growth and the domestic peripheral, on the domestic coronary side, mid-teens is kind of what we plan on and then we did guide to 7 million to 8 million for international and OEM products, so all that still on track was what we guided to back in July.
Mathew Blackman
Okay, great. I appreciate that Jeff.
And then just sort of following on that, acknowledging it's still early days, but can you provide any metrics, qualitative or quantitative, that can help us frame how adoption of the distributor balloon in guidewire products you're tracking so far?
Jeffery Points
Yeah, we did about 0.5 million in the second quarter that was up from - I'm sorry, in the first quarter that was up from fourth quarter what we did about 350,000. With just launching that I guess international sales meeting back in August, we're a little uncertain how that will continue to ramp but it has gone well in the first couple of months here.
So we're off to a great start.
Scott Ward
Yeah, Mat, qualitatively, I would add to that that we launched these products, there are - there is kind of two categories where we will success. The first is just daily day use of the product in our procedures where we have opportunity to introduce, let's say, our guidewires and our balloons.
The second is, as we go back and we begin working through contracting with both - some of our larger providers as well as some of these very large institutions that can take a little bit of time, but we are seeing good progress there and is progressing about on plan. So we're seeing good adoption of these products across the country.
And right now we feel pretty good about it. The 1.0 millimeter balloon are Sapphire II balloon has really achieved pretty strong adoption.
I mean, it is the smallest balloon in the market place and a lot of physicians have really appreciated that they can use that balloon coronaries to almost to use it like a CTO device itself. So the crossability of that device, the ability of physicians to access really difficult reasons, using that small balloon has really been great.
I would as well that that having access to that device has also probably opened up some cases for orbital atherectomy that we might not have seen in the past. So, we're feeling pretty good about how this launch is progressing, we are feeling good about the synergy with the rest of our pipeline and I think the support of our sales channel now on the marketplace.
Mathew Blackman
All right, thanks, guys. I appreciate it.
Operator
Your next question comes from the line of Danielle Antalffy from Leerink Partners. Your line is open.
Scott Ward
[indiscernible] Hi, Danielle.
Danielle Antalffy
Good. Hi, guys, thanks so much for taking the question.
Just to follow-up on Matt's question there - so taking any - broader look at the rest of the year. I mean you guys are facing increasingly difficult comps as we move through the year and I was just wondering if you could highlight, I'm sorry to make you rehash some of this, but what are the drivers that are going to essentially have to drive, if you are comp adjusting, drive pretty significant growth acceleration as we move through the year, maybe remind us sort of when new product launches are hitting or is there something we need to consider as we look back at the latter half of last year that makes it a more difficult comp for whatever reason?
Can you maybe walk us through the math here a little bit? That would be helpful?
Rhonda Robb
Yeah, Danielle, thanks for the question. I can take it.
Several factors are going to continue to drive growth and we are going to continue to see strong sales management and execution and leveraging. Our clinical specialists, they are showing anticipated return.
We are continuing to leverage training and education investments that are building physician user competence and interest in orbital atherectomy. ECLIPSE is continuing to enroll and building interest in very large academic medical centers and international will continue to contribute as well as we continue to launch throughout Asia and in particular in the near-term in Western Europe.
So we are looking forward to those things. We are going to continue to launch additional overseas niche products in particular.
A new micro catheter is expected over the course of the next several months. And as I said in my comments, the ViperWire flex, as well as the exchangeable peripheral platforms will be coming as well.
So it's really a multi-factorial program. It is going to continue to support that growth, but those are just a few of the things that I would highlight there.
Danielle Antalffy
Okay. And all of those things are - should drive growth acceleration.
So like if I think about the clinical specialists, they are going to continue to ramp as we move through the year international and new products from Orbus?
Rhonda Robb
Yes, absolutely, got it. Okay.
One, oh, sorry, go ahead.
Scott Ward
Yeah. So, Danielle, maybe just a - sorry, just to kind of address that maybe just a little bit more quantitatively and quickly is as we've talked about before as we look at this year, we expect to add from our international sales, as well as our new products something on the order of $7 million to $8 million of new revenue and then we continue to expect coronary growth in the mid teen level and our peripheral business to grow in those high single digits.
Danielle Antalffy
Got it.
Scott Ward
So I think when you talk about the math, I mean that I think is the - that's how the addition, that's how the math works I guess.
Danielle Antalffy
Yeah. Got it, okay.
And then one quick follow-up on the peripheral side of things and Rhonda you touched on LIBERTY 360 and I thought the data that we saw in August was really compelling. I mean are we at a point yet where some of this LIBERTY 360 data could be guideline changing?
Rhonda Rob
Yeah. I think we've already seen it have an impact on guidelines and what you saw in the 2016 ACCAHA guidelines was really kind of the first call for multidisciplinary assessment of amputations before they occur.
So I think we've seen some early signs of that. Sky published updated guidelines recently as well that I think were more favorable and then as I said in my comments, the paper coming from the amputation prevention summits as well as the paper that was just published in the American Arts journal, both also support and then we are going to be having economic data from Liberty 360 coming in about the Q3 timeframe as well.
So there is a lot of building evidence around this and we would expect that the guidelines would continue to follow through in terms of stronger recommendation for revascularization strategies.
Danielle Antalffy
Got it, thanks, guys.
Scott Ward
Yeah. Thanks, Danielle.
Operator
Your next question comes from the line of Bob Hopkins from Bank of America. Your line is open.
Bob Hopkins
Great, thanks. Can you hear me okay?
Scott Ward
Yeah. Hi, Bob.
Bob Hopkins
Great, good afternoon, so a couple of quick things, first just to be clear on the guidance for the second quarter, I know you gave a growth rate, but the consensus estimate I think it's about $59.6 million or $59.7 million which is a little over 13% growth. So should I read your comments about growth guidance in Q2 to say that you are basically comfortable to work incentives as today?
Scott Ward
Yeah. We've given guidance for the year, Bob, of 11% to 15%.
We just finished that 13.3% growth in the comment that I made was that we expect second quarter growth to be very similar to that. So I think you are right on track.
Bob Hopkins
Okay. And then also just want to make sure you guys have a lot going on.
Of all the things you talked about at the Analyst Day in terms of new products and launches and timelines and relationships and all that, is everything on track or are there any of those timelines that are different from what you talked about in July?
Scott Ward
Right now I think everything is on track and I thank heavens for that. It's only been a few months.
So things are going pretty well right now, Bob. I think we feel pretty good about it.
Bob Hopkins
And then the last question is a little bit bigger picture. But obviously sometimes you are going to have a new drug-coated balloon entering or the first so ever drug-coated balloon entering below the knee market with Becton, Dickinson advancing the program.
The last time we had drug-coated balloon entering the SFA was a little bit disruptive at least temporarily. So, Scott, can you maybe comment on how you see the below the knee launch from back then potentially impacting your core peripheral business both short term and long terms especially in light of what we saw with the last launch when it was in the SFA?
Scott Ward
Yeah. I think it's a good question, Bob, and you are right.
I think anytime a new product comes into the market like that, we do see some disruption because of trialing. We don't really anticipate that to occur below the knee because there is such a high prevalence of severely calcified lesions below the knee.
The vast majority of these patients unfortunately have fairly severely calcified lesions. So most of our business as you know, we are very strong below the knee and that's largely because physicians use our product as an atherectomy device to mentally prepare those vessels, but also just to restore the lumen in the outflow.
So we anticipate that that will continue. I believe actually that this time around we might see a bit of a tailwind coming from the launch of drug-coated balloons in the segment mainly because one of the things we did see above the knee was a lot more patients being referred for intervention principally because podiatrists and other primary care physicians were encouraged by the fact that there may be nothing left behind that indeed their patients could be treated with a drug-coated balloon or atherectomy plus the drug-coated balloon and we would now receive the stand.
And as a result, we saw probably a little bit of an uptick in the total number of patients coming to cath labs. If that same thing happens and we see more below the knee patients being driven to cath labs we're certainly going to get our share of those patients that have severely calcified lesions.
So it remains to be seen and we are still kind of uncertain of the timing and we haven't seen the data yet. So it's a little bit hard to comment on the specifics, but we'll probably know more at our next call and be able to give you a little bit more specifics on it at that time.
Bob Hopkins
How about with the Aluvia launching into the marketplace, is that something that could help or maybe be a short-term headwind to the business because that's obviously now at least initially in the marketplace?
Scott Ward
I mean I think once again Aluvia is another drug-coated stamp there. It isn't a new category like a drug-coated balloon below the knee would be.
So I think that that's relevant in the DES segment for peripheral but I don't think it really changes parameters much for us. I think that the patients that are candidates for a drug-eluting stamp probably receive a drug-eluting stamp today and I'm not sure that the presence of Aluvia would significantly change practice.
Aluvia may gain share but I don't think it's going to change practice and that we are going to see more patients receive the strength than what we had in the past.
Bob Hopkins
Okay. Thanks very much.
Scott Ward
All right, thanks, Bob.
Operator
Your next question comes from the line of Mike Matson from Needham & Company. Your line is open.
David Jackson
Hi. Good afternoon.
This is David Jackson on for Mike. Thanks for taking our questions.
Just looking at gross margin, it was higher than we were modeling and I hear your comments around manufacturing efficiencies and kind of more production costs, but I guess just some guidance kind of in place that quite increase in gross margin. What kind of factors should we be thinking about I guess through the remainder of the year?
Scott Ward
As I stated in the guidance, we do expect margins of about 80% for the year. I also mentioned that we do have mid-single digit price erosion in our peripheral market largely because of the contracting process that we've gone through in the OBL space.
So I think you will continue to see mid-single digit price erosion in the peripheral market that's some we plan on and we forecast, so I think you will see some impact on that as we move throughout the year, but I do think margins will remain very effective or very attractive throughout the rest of the year and we maintain a focus on continuing to reduce costs at a faster rate than we see ASP erosion. So I think you will see the margins stay fairly consistent.
It might come down slightly throughout the year, but 80% for the year is the reason.
David Jackson
Okay.
Scott Ward
As we've - yean, as we've just guided, as we've talked about before, just a reminder that as we think about our cost of goods sold or as you do, looking at our labor burden and materials, our COGS is dominated by burden and so more than half of our cost of goods sold is related to burden and as a result we continue to drive volumes. We continue to benefit from that directly in terms of margin.
Now our teams are also very focused on reducing material costs and doing a great job at that. But we are in a rather unique position to see continued improvement in COGS as we drive volume.
David Jackson
Okay. That's helpful.
And then I - just for the extensive length radial device, are you getting some sort of price premium for that and I guess how is that being received by the market?
Scott Ward
We are getting a small price premium for that. It's been very well accepted in the marketplace and like Rhonda talked about it, it's been a great success so far.
David Jackson
Great, thank you very much.
Operator
Your next question comes from the line of Jayson Bedford from Raymond James. Your line is open.
Jayson Bedford
Good afternoon. Thanks for taking the questions.
Just a couple quick ones, is there any way you can quantify the size of the stocking order to OrbusNiche and also I'm just kind of curious as to the revenue contribution from Japan?
Scott Ward
No, we wouldn't be providing information on the stocking order to OrbusNiche in terms of Japan. Jeff?
Jeffrey Points
We've talked about $1.3 million in international revenue, Jayson. About $250,000 of that was deferred revenue related to Japan.
Like we said, we did do a stocking order to OrbusNiche to get started for the year, but $7 million to $8 million is still reasonable for the OEM products and international and we are - that's still a good estimate to go on. We are still on track for that.
Jayson Bedford
Okay. Just of that $7 million to $8 million basically you recognized 1.8 of it this quarter.
Is that fair if I just add the -
Jeffrey Points
Yeah, 1.8 or 1.9 of course with international revenue may not be completely linear. It could be a little bit lumpy throughout the quarters, but we are off to a good start with that.
Jayson Bedford
Okay. And just international you mentioned the case in Korea, the upcoming cases in Europe, wondering if you could just comment on the reimbursement environment in those geographies?
Scott Ward
Yeah, sure, I think to really address our strategy as we look at these markets outside the United States is we are really focusing on taking market share. So we are going to existing institutions that are already using atherectomy for the treatment of their coronary peripheral disease patients and we are really targeting those and so we are addressing markets where reimbursement is not an issue and we are addressing patient populations and accounts that have already addressed reimbursement and we are basically where we can sustain good pricing.
The pricing is different and there is obviously different reimbursement schemes and methods around the world, but really by focusing on existing accounts and those that I've already adapted to technology, we can rapidly get into all those markets and drive growth.
Jayson Bedford
Okay. Just a couple of others, in terms of the account added, can I assume that it was kind of similar in trend to the last couple of quarters?
Was there any material deviation either up or down in the number of new accounts added?
Jeffrey Points
Yeah normally Jayson historically you've seen between 30 and 40 accounts with both franchises. This quarter was a little bit different, on the coronary side we had 26 and on the peripheral side we had 53.
Keep in mind we consider a new account, we count a new account when they cross over and do six cases. So some of this could be dependent on timing as well if somebody had four or five cases, but we did have a little bit of a switch in how many new accounts we had.
Keep in mind that reorder revenue in total remained at about 99%, so we're going deep into our existing accounts as well as opening new accounts as well. So hopefully that provides some more color for you.
Jayson Bedford
Yeah and it's very helpful, thanks. And then just lastly the bump in SG&A effect, you explained it well, did you add any to the sales team or do you anticipate any kind of material adds in fiscal '19?
Scott Ward
Yeah, we're still at 200 direct sales people, 85 clinical specialists, the biggest part of the increase quarter-over-quarter was the clinical specialists we added at this time last year, but we've - that number has remained consistent.
Jayson Bedford
Alright, thank you.
Operator
Our last question comes from the line of Margaret Kaczor from William Blair. Your line is open.
Margaret Kaczor
Hi, good afternoon guys. Thanks for taking the questions.
So the first one for me is just a follow up on some of the commentary on the elbow and peripheral and I think I heard in there 7% growth, so maybe can you compare that to what you've seen over the last few quarters because it seems like it's accelerating and maybe stabilized. And then can you just give a context of what are that revenues to units?
Scott Ward
The OBL growth has been consistent in terms of its percentage of our overall peripheral business, so we've seen that continue to be really quite consistent and the strategies that we've deployed in terms of our clinical support, our contracting and frankly providing radial access have proven to be very successful and so we're seeing actually quite consistent performance in the OGL's at this point Margaret.
Margaret Kaczor
Okay and then since you mentioned the real access products right there, can you give us any kind of metrics how that new access products help trap maybe for peripheral accounts, but I don't know if that's relative to the value proposition as that may add to those accounts or even kind of more specifics of how it helps to fix it?
Scott Ward
Yeah, so that's really a great question because it does help us go deeper into peripheral accounts, both in OBL's and in hospital settings. And because we have a very unique mode of action and our device has such a low profile, really the only device that can reach the above the lesions and where we can perform Artherectomy through the radial access.
So what that really does is it changes the patient flow in lot of these Cath labs because it's much safer and because patients can ambulate more quickly. A lot of times both OBL's and hospitals find that they could be more efficient and it allows them perhaps to do or to treat more patients every day and to do so in a safer and an effective manner.
So it does certainly - it is a very important form of competitive advantage for us and it does help us to go deeper. I think we're also seeing is that as coronary accounts and these being large institutions that had heavily adopted the radial approach for coronary indications are rapid adaptors now of using the radial approach for their peripheral procedures.
So it is - it's a real competitive advantage for us. I think we have a limitation here and that we don't - the support devices have not yet fully come through and we are somewhat dependent on others in the market place and other companies to be supplying sheets and the longer wires and even the longer balloons that can support peripheral procedures from the radial side of access.
As those support products - as more of those support products become available, I think we'll continue to see increased adoption of the radial route of access across the peripheral market. I should point out as well that we're not standing still on that and as we talked about in - at the end of July, we too are going to start developing and launching some of these support products that can facilitate that radial side of access.
Margaret Kaczor
Okay, maybe just kind of a last question to wrap up. If you look at some of the other new products you guys have focused on and referenced, is it right or wrong to maybe think about it from a quarterly run rate perspective how much it can be contribute individually and how should we think about the progression of the last year to the year it's been pretty expensive [ph]?
Thanks.
Scott Ward
Margaret, we - I couldn't quite understand the very beginning of the question is, your question related to radial access?
Margaret Kaczor
No, so just all of the other products that you guys have referenced, so the micro catheter, micro wires et cetera as those kind of layer on over the next several quarters.
Scott Ward
Yeah, and I think as Rhonda addressed in her commentary, we certainly do expect that as those products rollout into the field that we'll see a growth related to those and I think a good example of that is the GlideAssist feature which was rolled out into our coronary segment. We saw some rather quick adoption of that actually in Q3 and Q4 and we now we see GlideAssist really as an innovative feature that's driving our growth in coronary.
So as we rollout ViperWire, I think ViperWire will be another example of an improvement in the coronary space as well that will continue to make our device easier to use and it will enhance the ability to access some of these more difficult lesions, but I think what all of these improvements do is they help us to go deeper in our existing accounts. So these are really for physicians who've already been trained and educated by now providing them with these product enhancements.
They can immediately see that this helps them access lesions more effectively and it allows them to do procedures faster. So yeah, I think as each of these come out we're going to continue to see a synergy and we'll continue to see Orbital Artherectomy adoption increase.
Hope that addresses your question.
Margaret Kaczor
Thank you.
Operator
There are no further questions.
Scott Ward
Alright, well it's very good. Okay, thank you Kristine and with that we will conclude today's call.
So thank you everyone for your continued interest in CSI and as always we look forward to updating you on our progress next quarter. Thank you.
Operator
This concludes today's conference call. You may now disconnect.