Teleflex Incorporated (TFX) CEO Liam Kelly on Q2 2019 Results - Earnings Call Transcript

About: Teleflex Incorporated (TFX)
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Earning Call Audio

Teleflex Incorporated (NYSE:TFX) Q2 2019 Earnings Conference Call August 1, 2019 8:00 AM ET

Company Participants

Jake Elguicze - Treasurer and Vice President of Investor Relations

Liam Kelly - President and Chief Executive Officer

Thomas Powell - Executive Vice President and Chief Financial Officer

Conference Call Participants

David Lewis - Morgan Stanley

Larry Keusch - Raymond James

Richard with - Leerink

Shagun Singh - Wells Fargo

Anthony Petrone - Jefferies

Kevin Farshchi - Piper Jaffray

Kristen Stewart - Barclays

Matthew Mishan - KeyBanc

Mike Matson - Needham & Company

Brian Weinstein - William Blair


Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Teleflex Incorporated Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode to prevent background noise. [Operator Instructions]

Now it's my pleasure to turn the call to Jake Elguicze, Treasurer and Vice President of Investor Relations.

Jake Elguicze

Good morning everyone and welcome to the Teleflex Incorporated Second Quarter 2019 Earnings Conference Call. The press release and slides to accompany this call are available on our website at As a reminder, this call will be available on our website and a replay will be available by dialing 855-859-2056 or for international calls 404-537-3406, passcode 8346258. Participating on today's call are Liam Kelly, President and Chief Executive Officer; and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we'll open up the call to Q&A.

Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in our slides. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today as well as our filings with the SEC, including our Form 10-K, which can be accessed on our website.

With that said, I'd like to now turn the call over to Liam.

Liam Kelly

Thank you, Jake, and good morning everyone. It's a pleasure to speak with you again. The second quarter of 2019 was very positive for Teleflex as we accelerated the momentum in our global business, delivering 7% revenue growth on an as reported basis and 9.6% on a constant currency basis. When normalizing for the impact of one less shipping day, second quarter constant currency revenue growth was 10.8%.

Like the first quarter of the year, during quarter two, the strength in our top-line line performance was once again broad-based driven by improvements across nearly every global product category. This included 42.7% growth in Interventional Urology, 12% percent growth in Vascular Access, 9% growth in Surgical, and 8.8% growth in Interventional Access. But from a geographic perspective, we achieved particularly strong growth within the Americas and Asia where constant currency revenue growth was 13.1% and 10% respectively.

Turning to some other key metrics; we reported adjusted gross margin of 57.7%, adjusted operating margin of 25.2%, and adjusted earnings per share of $2.66, which represents an increase of 7.7% over the second quarter of 2018. Our adjusted earnings per share performance in quarter two was slightly better than we expected in our last earnings call despite a greater than expected headwind from FX. If we were to normalize for the year-over-year currency headwind, our adjusted earnings per share would have grown 13.8% during quarter two.

In summary, we are incredibly pleased with our better than expected revenue performance in the second quarter and first half of the year. This has been added to increase our full year 2019 guidance for constant currency revenue growth from a range of between 6% and 7% to a range of between 7.5% and 8%.

Additionally, based on strong UroLift performance during the first half of the year, we are increasing our full year UroLift revenue growth guidance from a growth rate of approximately 30% to a growth rate of approximately 35%. We are pleased that our increased 2019 revenue growth expectations are being driven by a combination of both, UroLift and non-UroLift product; and if you were to break down the components of our full year constant currency revenue guidance raise on a dollar basis, approximately one-third of the raise is driven by UroLift while approximately two-thirds is driven by the remainder of our products.

Moving away from revenue; today we are also reaffirming our full year 2019 adjusted gross margin guidance, but we are slightly lowering our full year adjusted operating margin guidance largely due to increased headwinds from FX and decisions we made to make certain growth and infrastructure investment. Yet, due to a combination of strong revenue performance coupled with reduced expectations for interest expense, we can offset significantly worse impact from FX and we are reaffirming our adjusted earnings per share guidance range of $10.90 to $11.10. We are pleased with our expectation to grow full year 2019 adjusted earnings by 10% to 12% while funding investment behind key revenue growth opportunities and offsetting headwinds from foreign exchange and tariffs.

With that as an overview, let's now at quarter two revenue in more detail. I will begin with a review of our reportable segment revenue and unless otherwise noted, the growth rates I would refer to are on a constant currency basis. The Americas delivered revenues of $373.8 million, which is an increase of 13.1%. This was driven by our Interventional Urology and Vascular Access product category.

Moving to EMEA; in reported revenues of $147.1 million, which represents an increase of 1.9%, during the quarter the growth was led by our Interventional Access and Vascular Access products. However, the performance of this region was slightly lower than what we anticipated a few months ago due to the timing of certain orders. As we look forward, we expect EMEA performance to improve in the second half of the year as compared to the performance during the second quarter.

Turning to Asia; revenues totaled $75.2 million, which is an increase of 10% as compared to the prior year period. From a product standpoint, growth was strongest within our surgical and Vascular Access categories, while from a geographic perspective, our business in China grew 15% and we also saw strength in Korea and Southeast Asia.

And lastly, our OEM business reported revenues of $56.4 million which represents an increase of 8.5%. Growth here was led by strength in our suture and catheter product offering. On a full year basis, we continue to expect this business to grow in the upper single-digit range. However, due to a difficult comparable, as well as the timing of certain orders we expect growth within this segment to be relatively flat as compared to the prior year period during the third quarter.

Now let me move to a discussion of our revenues by global product category. Like my comments regarding our reportable segments, my comments regarding our global product category growth will also be on a constant currency basis unless otherwise noted. Starting with Vascular Access; second quarter revenues increased 12% to $153.6 million. This was driven by strong growth and CVCs, PICCs and EZ-IO. Additionally, we saw an increase in distributor orders during quarter two that positively impacted results. This was essentially the reverse of the distributor destocking that negatively impacted our quarter one Vascular results.

Moving to Interventional Access; second quarter revenue was $104.8 million, which is an increase of approximately 8.8%. The strength of this business during quarter two was broad-based with growth in complex catheters, biologics on-control and intra-aortic balloon products. And while not a meaningful driver of Q2 growth, let me provide you with a brief update on MANTA, our large bore closure products.

The first three months of MANTA's limited market release have gone very well as the product has received strong positive feedback from key both leading positions as we continue to conduct price discovery in the market. We have made good progress on our strategy to generate positive clinical outcomes at key institutions, and we remain on-track with our strategy of generating additional positive physician and patient experiences as we move through the remainder of 2019. We continue to believe that MANTA will contribute to our top line in a more meaningful way in 2020.

Turning to Anesthesia; second quarter revenue was $85.7 million, which is a decrease of 0.9%. The decrease here is primarily driven by softness in airway and pain management products. Turning to a brief update on RePlas which going forward will be referred to by it's new commercial name EasyPlas. As a reminder, we are on a fast-track approval process with the FDA and our most recent public comments regarding this product indicated that we expected to complete our BLA submission by the third quarter of 2019.

In the course of our frequent communications with the FDA, which have been highly collaborative, we recently received additional questions from the FDA. Although we previously anticipated many of these, there were others that will require additional analysis and testing, which would take more time to complete; therefore we no longer expect to complete the BLA submission by the third quarter of this year.

While this is unfortunate, we view this as a temporary setback. The fact that the BLA submission will take additional time to complete is in part due to the unique nature of the product as a biologic product like this has never been approved by the FDA before. It is important to understand there was no revenue assumed in our 2019 financial guidance related to this product, and less than $10 million in revenue by 2021 in the long-range plan estimate we shared at our Investor Day last year.

As we move forward to continue to work with the FDA, we will continue to provide updates as part of our quarterly earnings call as and when we receive further information on the BLA submission and he associated regulatory timing of EasyPlas. Shifting to our Surgical business; revenue increased 9% to $95.6 million driven by sales of ligation clips and surgical instruments. While this business fundamentally performed very well in quarter two, many of you will recall that it was also against an easy year-over-year comparison.

Moving to Interventional Urology, revenue increased 42.7% to $67.9 million, our sales force continues to make excellent progress driving physician adoption of the UroLift system, and we expect to train a total of 450 new urologists during 2019. From a patient demand perspective, our direct-to-consumer program is performing well, and it is driving new patients toward talking to their urologists about whether they are a good candidate for UroLift as a solution to their BPH.

Transitioning to UL2; we continue to expect to begin the rollout of UL2 in the latter half of this year with a full conversion of the UL's physician base from UL1 to UL2 expected in 2021. We are also continuing to actively see the market for the launch of UroLift in Japan, and we remain on-track for a limited market release in mid-to-late 2020 with revenues ramping more meaningfully in Japan during 2021. Given the outperformance of UroLift in the first half of the year, we are raising our annual 2019 Interventional Urology revenue growth from approximately 30% to approximately 35%.

And finally, since OEM was covered in our segment review, let me summarize second quarter revenue for the businesses within our other category which consists of our respiratory and urology care products. Revenues were up 0.3% in the constant currency basis, totaling $88.4 million; this was driven by an increase in sales of our bladder management products, offset by declines in sales of our respiratory products. That completes my comments on quarter two revenue performance. Next, I would like to briefly discuss some important clinical and reimbursement update on UroLift.

First, we are pleased to announce that Anthem, one of the nation's leading health insurance providers has revised their surgical and minimally invasive BPH medical policy to revise coverage for UroLift. With the announcement of Anthem coverage, UroLift has now achieved coverage by all the national and regional commercial plans, and all independent licensees of the Blue Cross Blue Shield Association, as well at 100% Medicare coverage.

Given that Anthem with the last large commercial payer to change their coverage policy on UroLift to positive, our reimbursement teams' focus is now on supporting this strong coverage with robust clinical and real world data, and that with any new commercial payer coverage decision Anthem will take time to work through the commercial channel. Therefore, we do not expect any material upside to our 2019 UroLift guidance due to this coverage decision. Let me move briefly to a clinical data update.

A meaningful part of our strategy to make UroLift the standard-of-care to treat BPH is to create an industry-leading high-quality set of published clinical evidence. On our last earnings call, we announced our 1,413 patient's real-world study, and that results were consistent with those seen in previous clinical studies of the UroLift system, even with a more diverse patient population. In July, the study was published in the Journal of Endourology, its publication serves the tool for our sales team to use when calling on both, new and existing physicians.

In closing, I would like to reiterate how pleased we are with our second quarter and first half of the year performance. Revenue growth has been incredibly strong, driven by a broad spectrum of products and geographies which led us to increase our revenue guidance for the full year. We have been working to build a product portfolio capable of accelerating revenue growth and gross margin expansion and feel we are on-track to achieve that goal.

When you take a step back and look at the midpoint of our increased full year 2019 constant currency revenue growth guidance range, approximately 2.8% of our expected growth is driven by UroLift and nearly 5% is being driven by the remainder of our products. In fact, the midpoint of our increased constant currency revenue growth guidance range indicates that we expect to grow approximately 7% during the second half of 2019, and this is against more difficult comparison. The ability for us to accomplish this gives us additional confidence in our ability to consistently grow between 6% and 7% over a multi-year period.

In addition to continued revenue growth in the second half of the year, we also expect to generate a material improvement in our adjusted gross and operating margins which will translate into meaningful earnings and free cash flow generation. And as such, we are reaffirming our full year adjusted earnings per share guidance range.

That completes my prepared remarks. I would now like to turn the call over to Tom for a more detailed review on our second quarter financial results and full year 2019 financial guidance. Tom?

Thomas Powell

Thanks, Liam and good morning, everyone. Given the previous discussion of the Company's revenue performance I'll begin at the gross profit line. For the quarter, adjusted gross profit was $376.6 million versus $348.3 million in the prior year quarter, or an increase of approximately 8.1%.

Adjusted gross margin increased 60 basis points to 57.7%, the expansion in adjusted gross margin primarily reflects increased sales volumes, benefits from cost improvement programs, and a favorable sales mix of higher margin products. Partially offsetting these gains were negative impact from foreign exchange, incremental tariffs, higher logistics and distribution costs and inflation.

Adjusted operating profit was $164.7 million as compared to 158.8 million in the prior year. Adjusted operating margin in the second quarter of 2019 was 25.2% which is a decrease of 80 basis points over the prior year period. As the improvement in gross margin was offset by the negative impact from foreign exchange, additional selling expenses related to the revenue upside and select investments designed to upgrade our quality systems, strength and protection of our IP portfolio enhanced customer experiences while interacting with Teleflex.

On a currency neutral basis, adjusted operating margin would have been approximately flat to a year ago period. Continuing down the income statement; net interest expense decreased to $20.3 million from $26.5 million in the prior year quarter. The decrease primarily reflects the impact of our cross-currency swap agreements.

Moving to taxes; for the second quarter our adjusted tax rate was 13.4% versus 12.7% in the prior year period. The increase in our adjusted tax rate is primarily due to the mix of earnings in higher tax jurisdictions, as well as a reduced amount of windfall benefit from stock-based compensation.

Adjusted earnings per share was $2.66 or an increase of 7.7% as compared to the prior year. We are encouraged by the strength of our earnings performance as this result includes a foreign currency headwind of $0.15. So on a currency neutral basis, adjusted earnings per share increased by approximately 13.8% in the second quarter.

In addition to the FX headwind, second quarter earnings also included incremental year-over-year tariff expense which reduced earnings by approximately $0.03, as well as a headwind from the divestiture of our catheter reprocessing business which contributed $0.01 in the prior year quarter.

Turning now to select balance sheet and cash flow highlights. During the first six months of 2019, cash flow from operations totaled $157.3 million compared to $181.6 million in the prior year period. The decrease in cash flow is primarily attributable to contingent consideration payments. Finally, during the second quarter we further reduced our outstanding debt by approximately $28 million and our net leverage stood at approximately 2.63 times. This completes my comments on our second quarter results.

Now I'll move to 2019 guidance updates. Given our performance for the first six months of the year and our expectation for the remainder of the year, we are increasing our full year constant currency revenue growth guidance from a range of between 6% and 7% to a revised range of between 7.5% and 8%. We are also increasing our as-reported revenue growth guidance from a range of between 5% and 6% to a revised range of between 6% and 6.5%. Our current expectation is that currency is 150 basis point headwind to revenue.

Continuing down the P&L we are reaffirming our previously provided GAAP and adjusted gross margin guidance ranges. However, we are lowering our GAAP and adjusted operating margin guidance ranges. Our updated adjusted operating margin guidance range is reduced by 50 basis points from a range of between 26.5% to 27% to a revised range of between 26% and 26.5%. Similar to the second quarter discussion, reduction in full year adjusted operating margin expectations can be attributed to a couple of items.

First, a less favorable FX environment versus our previous expectation. We project that 2019 operating margin will be adversely impacted by an additional 25 basis points versus our previous expectation. Second, additional selling expense associated with the revenue outperformance in UroLift and other areas of the business. And then third, proactive investments designed to both protect and enhance future growth prospects, investments include upgrades to our quality systems, strength and protection of our IP portfolio, enhanced customer experiences while interacting with Teleflex.

Moving now to interest expense; on our last earnings call we pointed to the investment community to the low end of our $87 million to $90 million range. However, to date LIBOR rates have trended favorable versus expectation and we have now included a 25 basis point reduction for 2019. As a result, we are lowering our full year interest expense guidance to a range of between $82 million and $83 million.

Turning to taxes; we are reaffirming our previously provided range of between 14% and 14.8% although, we now expect that will be at the very low end of that range. Over share count perspective, we now expect full year weighted average shares to be closer to 47.1 million as compared to our prior expectation of 47.2 million. And that takes me to our GAAP and adjusted earnings per share ranges; on a GAAP basis, we are increasing our full year guidance from a range of between $6.72 to $6.84 to a new range of between $6.82 and $6.94.

On an adjusted basis we are reaffirming our previously provided guidance range which calls for earnings of between $10.90 and $11.10. Implicit in this adjusted EPS guidance range is our current FX assumption of a 35% full year headwind versus our previous expectation of $0.20. So given the strength of the revenue outperformance, we were able to maintain earnings guidance despite a $0.15 increase in the headwind from FOREIGN EXCHANGE.

In closing, we are very pleased with the top line growth achieved in the first half, the acceleration growth was broad-based across our portfolio of products, we believe the investments made to-date are paying dividends and those planned for the balance of 2019 will serve to further strengthen our business platform and provides a framework for continued topline acceleration.

While foreign exchange has somewhat tempered earnings growth, the underlying constant currency operating performance has been strong. Adjusting for currency; first half adjusted EPS grew by 13% and further adjusting toward the China tariff, first half adjusted EPS grew by 14.7%, so a very solid start to 2019.

And that concludes my prepared remarks. I'd like to now turn the call back to the operator for Q&A.

Question-and-Answer Session


[Operator Instructions] And our first question is from David Lewis with Morgan Stanley.

David Lewis

Liam, there's a lot of things to focus on here, obviously, NeoTract. But I wanted to focus more on what we used to call the core business. Two specific businesses, Liam, Surgical and Vascular took big steps forward this quarter. And I wonder if you can just sort of talk about the momentum you're seeing in those businesses and outlook for the back half the year? And then I had a follow-up for Tom.

Liam Kelly

Thanks, David. And we're very pleased with the quarter. What we saw in vascular was really in the first quarter, as I outlined in our calls. We saw something stopping by distributors. And then in the second quarter, we saw that restocking as we had anticipated. So if you look at a nonday's adjusted Vascular Access growth through the first half of the year, Vascular Access grew by 7.2% to the first half the year.

Now we expect Vascular as we said to be in the mid-single range, maybe not quite in the 7.2% range in the back half of the runs into a topper comp in the back half of the year. If you recall back to last year, actually Vascular in Q3 grew by about 7% and in Q4 grew by about 6%. So they're bottomed up against slightly tougher comps. But notwithstanding that the growth in Vascular is really, really positive for us. And it's coming from areas that we wanted to come from, PICC as we continue to take share and EZ-IO Vidacare had really strong second quarter.

Second question on surgical, surgical had a really good second quarter growing at 9%. They have a, again it's a cost comparison, David. They had a weaker comp comparison to last year. If you recall the last year, they declined by about 3%. So that helps them but notwithstanding that, now that we've anniversary, the exit of that trocar business, we're seeing the Surgical business really perform very well and very much in line with expectations. And on a full year basis again, we expect the Surgical business to be in that mid-single growth rate for us.

David Lewis

And then Tom, FX headwinds for sort of well understood into the quarter and we previous much. But can you just walk us through the implied guidance in the back half of the year, basically with the new updated guidance down 50 bps, we need to see kind of 3.5 points of margin expansion into the back half of the year. Can you sort of walk us through what gives you the visibility and confidence that you can deliver that number. Thanks so much.

Thomas Powell

Okay. Well, certainly a fair question. And, to your point, FX was understood. We did have a larger-than-expected FX impact in the second quarter do some balance sheet evaluation. But let me just talk about full year. So in the first quarter of the year, the second quarter, we saw an increase in operating margins about 150 basis points. And as we move towards the back half of the year, we anticipate further sequential operating margin expansion, approximately 60% of our anticipated opening margin expansion in the second half is expected to be driven by higher gross margins. And 40% of the operating margin expansion is expected to deliver better operating expense leverage down the OpEx lines.

The gross margin expansion from the first to the second half is expected to be generated by a combination of many factors and cost improvements, further benefits from various restructuring programs, as well as benefits from product and geographic mix. And while we expect to see a modest increase in the total operating expense dollars, the second half of the year, compared to the first half, we also anticipate an increase in second half revenue that results in improved leverage of our overhead cost structure. I think at the midpoint, we're about $70 million more revenue in the second half, and then tried some good leverage.

This coupled with the fact that we incurred certain operating expenses in the first half of year. And we don't expect to reoccur in the back half of the year, such as trade shows investments made to enhance customer experience as well as some costs to strengthen our key portfolio do lead to reduce operating expenses in the back half. Traditionally, we've seen much better profitability in the second half verses first half given some of the upfront stream that goes on in the first quarter.

So we recognized, there's some work to be done on the op margin, but we understand the drivers that need to take place, and the organization is focused to deliver on that.


Thank you. Our next question comes from Larry Keusch with Raymond James.

Larry Keusch

Good morning, everyone. I guess, Liam, I'm left with just some broad thoughts on M&A and clearly you're leveraging 2.6 times leverage gives you a position to driving transact deals. I'm really just very curious as to kind of how you're seeing the environment out there, asset valuations? Can you actually drive returns given the current valuation environment out there?

Liam Kelly

Yes, Larry, you're absolutely correct in your assessment, we're at 2.6 times leverage. We have the capacity to do scale transaction should we find this. I think Teleflex is in a pretty unique position, Larry, insofar as we have capacity but no urgency. If we find the right asset, we, for sure, will be in a position to pull the trigger and get the deal done. And obviously, we're very financially disciplined and always have been, and we will be in the future.

We will only do transactions that will give benefit to our shareholders. The environment is a little frothy out there, you're correct. But in fairness, Larry it's always been frothy with the good-quality assets. It's gotten a little frothy with a poor quality assets have been my observation but they're never the assets that Teleflex have been interested in any way. So have capacity but no urgency, Larry as how I position that. But we never, ever, ever stop looking, and we are active in the marketplace.

Larry Keusch

Okay, that's perfect. And then I just want to pivot over to your lift in Japan specifically, obviously, that's as you look at the multiyear, multi-geography growth engine with that product that going to be an important market for you. I guess sort of two questions embedded here; Number one, you know, your comments were that, you expect to get this thing going midyear to the latter half of 2020. Just want to get a sense that it is best, flipping a little bit along that lines, could you sort of help us just think about as you have discussions with urologists over there, are there any dynamics in that market that would make be differently than the U.S.? I am just trying to gauge how quickly this market may start to gain traction?

Liam Kelly

Yes, Larry. So first of all, there is no change to us and we always thought it will be in the latter half of 2020 that we would get the reimbursement through those and that we would start generating revenue by 2021. So, nothing changed in our thinking with regard to Japan. In the same way we classify the U.S. as $1 billion market. The Japanese market is $2 billion market. So you are correct in your statement that's a significant opportunity.

Now I'd remind investment made in our regional team, we have not anticipated any revenue for Japan in 2021 which is the last year of LRP. So, we see this as a potential for upside. Regarding the dynamics of the market, Larry, we don't see a significant different in the dynamics of the market between Japan and U.S. at this stage. We do see a very collateral relationship with the Japanese Urology Association and the U.S. Urology Association.

And we have met with many Japanese urologists at the American Urology Association Meeting every year and we continue to build relationships with those urologists. And also, I would also remind you now to forget, the urologist know us very well in Japan from using the kit. So we already have a relationship with them in the same ways we had in the United States. This is an area and a call point that tell us like knows very well and its a call point that we would really be interested in growing further.

Back to your original question on M&A, we'll something in the MANTA's space that will be an interest for us.

Larry Keusch

Okay. Terrific. Thanks Liam.

Liam Kelly



Thank you. Our next question comes from Richard with SVB Leerink.

Richard with

Hi, thanks for taking the questions. One bigger picture, one on growth and then one on your U.S., Liam, just starting on the investments that you're making, you're pulling forward a little bit of the investment spend in the first half. So, I'm just curious if you could remind us where that be the incremental spend is going and what's the timelines are for the payoff there and within the contact of entering that your trending top line meaningfully higher, double-digit territory at selling days, I guess as we can get this one part a long range plan and the kind of pull forward spend, should we be thinking of you guys mat be a little bit towards a high single-digit at the upper end of your long range 6% to 7% over the part of your plan. Is that a fair assumption with kind of spending and what the payoff timeline like be there?

Liam Kelly

So, first of all, I'd say, we are currently happy with the first six months of our LRP and it is first six months of our LRP. So clearly, the strategy is working. You know, our five to drive are older ones that are delivering through the first half of the year: Interventional Urology, greater than 42%, Interventional Access, almost 13%; APAC greater than10% through the first half, Vascular greater than 7% where PICCs and EZ-IO house and of course OEM greater than 10%.

Obviously, we have updated our guidance today to constant currency 7.5% to 8% for this year and the first year of our LRP which is incredibly encouraging, and it doesn’t show a ratio point that the full forward of investment is working and clearly the strategy that we deployed is working for Teleflex.

With regards to when you see the returns obviously the increase revenue carries an additional expense with commissions and things like that, which they don’t reoccur in the following year, the revenue is with you forever, so therefore that through jump up point and the base for the commissions and for the following year, so we would anticipate that we would have a good solid position in order to be able to deliver our 60% to 61% and our 30% to 31% as we outlined in our LRP. So couldn’t be happier but the start of the NRP and really things of the revenue growth is a key driver and the strategy is working.

Richard with

And just on Europe, I think you said 1400 plant training in 2019. Can you just describe the Doctors and the characteristics of the types of doctors that you are training now versus six months ago and what you are seeing in potentially size of moving more to the mass adoption or passed early adaptor phase, if anything? Thank you.

Liam Kelly

Yes, so, just to clarify Rich, what we said was we would train over 450 docs in this year in 2019, as the second quarter we had said that we had trained over so far of the 12,000 that are available. And what we had seen is that urologist in any spectrum can become a champion. So, this is very encouraging because I think end of the first quarter we frame one six of the doc and we were generating global revenues over $60 million. And I think that moving from the early adaptors to the path follow, we have all those been and continued to be cautious under ramp as you are getting that approved because it is more of a clinical scenario through the path followed.

Now, I will say that what is incredibly encouraging to me and the management is the real world data that we have to support that fast follower adoption and the real world data has compared the LIFT study. There are some real key points here, IPSS scores in real-world after 24 months is a 9 point reduction compared to the LIFT. Quality of life still in the 40% as compared to the LIFT, catheter rates, 99.5% of patients were catheter free at the completion of the study versus 32% in the list which is a significant improvement. And of course retention rate 87% of main that were catheter free with the UroLift and this I think Rich what point that is a path and allowed us to bring in this daily adopter but none of the technologies and fail real world data is comparable to the clinical study they have probably to bring the product to market.


Thank you. And our next question comes from Shagun Singh with Wells Fargo.

Shagun Singh

Liam, I wanted to touch on core growth, you've delivered pretty strong results in the first half despite the one less selling days. But historically, the core, the range for the core growth has been pretty wide. So, how should we think about growth in your core portfolio relative to about, I guess, about 5%, or so that you deliver in the first half? And then I have a follow-up.

Liam Kelly

Thank you. That was the point I was trying to make it in my prepared remarks. If you look at our full year increase guidance range, first of all, two-thirds of the growth is coming from ex-UroLift, I can put it that way. And then if you look at our complete growth for the years, we take the midpoint of our growth, which will be around 7.8%, 2.8% of that growth is coming from UroLift and 5% is coming from all other.

And I know there has been a question for Teleflex around the core growth or growth outside UroLift, is it sustainable? And we've always said that this is one of the misunderstood things about Teleflex. We always internally were incredibly confident. So that business had the capacity to perform at the level that we are now seeing, and we believe that it is sustainable.

And I would add, that's what gives me that belief is that we continue to see our end customer tracing notch up, and it did the same again in the second order. So the end customer demand is there. We had a slight destocking in Q1, restocking in Q2. But if you look at the half year base result also in that 5% range with UroLift adding to a little bit over 3%. So I think that it's very encouraging for Teleflex, because it's so broad based and our entire portfolio is performing well.

Shagun Singh

And then I just wanted to get an update on pricing. It looks like Teleflex is in price discovery mode for a few key products. For MANTA, it appears that price may be settling in at about $800 to $1,000 range. Even though objects have suggested that price is the biggest value to adoption. And you've seen some pushback from Value Analysis Committees at hospitals for Percuvance. So, can you just give us your take on what is the pricing environment look like currently? And just comment on your ability to achieve the desired level of pricing? Thank you for taking question.

Liam Kelly

So, regarding the MANTA pricing that would not come through in pricing as of yet, because there's a new product. That's total sale of that will be seen for us as a new product, but regarding your comments on general pricing. Teleflex has always been a pretty unique med tech company and so far as said we have an internal discipline around pricing and that was no different in this quarter.

So in this quarter positive pricing in around the 40 or 50 basis points range, which gets us to a year-to-date pricing positive about 30 basis points, so we continue to see this as a strength in the Teleflex portfolio and also in the discipline within our commercial organizations to continue to be able to pay pricing in certain geographies and within certain product categories on an ongoing basis.


And our next question comes from Raj Denhoy with Jefferies.

Anthony Petrone

This is Anthony for Raj actually. Two questions congrats again on the quarter and all the progress here so far. The first one will be on UroLift and the second actually on interventional access. So just non-UroLift, can you give us a sense as a lot of drivers here right now in the U.S.? And so AUA last quarter, there was some clinical data, obviously, you mentioned, Liam favorable reimbursement events in the quarter, but also a competitor had some reimbursement sort of shift against them. So, when you look at all of those drivers, how, is there any one that's kind of leading the charge here? And then on Interventional Access, actually to dig in specifically to the intra-aortic balloon pump business, there seems to be a lot of moving parts in that market right now. So Datascope recently had a recall, and then Abiomed on the Impella side has seen some headwinds in their business. So any color on the balloon pump business would be helpful. Thanks.

Liam Kelly

Yes. So, we were aware of a competitor recall their stock of the balloon pump. We were that they had a recall on their product. Now, in many instances, for capital equipment, we wouldn't expect to see a massive benefit in that. I will say, though, that are intra-aortic balloon pump business continues to have a very solid second quarter off a very solid first quarter. And we were very pleased with the growth in that and we have a new pump on the market.

And regardless of what's happening with a competitor regarding a recall or anything, which wouldn't have really flown through the second quarter, we continue to take share with that new pump on a global basis. And the good thing about the balloon business was it was pretty broad-based. There was solid growth in the Americas. There was solid growth within EMEA and also within Asia. So we feel good on the balloon pumps and a very solid performance.

Regarding your question on the UroLift, I've always said it, Anthony, clinical data, patient outcomes will win seven days a week and twice on Sundays. So -- and that will continue. And we just have better clinical data. The reimbursement issue with regard to the competitor, that hasn't flushed through yet either. That's just a guidance, or a, and a, their expectation for the reimbursement. That won't come to be, to fruition until the third or fourth quarter on there.

So that couldn't have an impact. In all honesty, what's driving our product is it's better for the patients, it is reimbursed well, but it's better for the patient to get better patient outcomes. We have a world of clinical data. We have excellent coverage. We have every life in the U.S. practically covered now, as per my prepared remarks. And I think we're well on the way so have it be the retreatment for BPH. And I think that it, we are working and we are focused on making UroLift the treatment for BPH. And as we move in from the early adopters to fast followers and we couldn't be happier with the performance of the product.


Thank you. Our next question comes from Matt O'Brien with Piper Jaffray.

Kevin Farshchi

This is Kevin Farshchi on for Matt. Congrats on another great quarter. Two quick ones from me on MANTA, it sounds like the first three months of market release has been successful. Curious, one, what is some of the specific feedback that you've been hearing? And then secondly, you reiterated no material revenue in '19. Can you parse out some of what's holding back commercializing the products a bit faster? I'm thinking about the tailwinds we see in the TAVR market specifically. And then you mentioned it gets more meaningful in 2020. Can you quantify that what contributions might look like to your growth rates? Thanks so much.

Liam Kelly

Thanks Kevin, thank you very much. So as I prepared, as I mentioned in my prepared remarks, we did begin the U.S. limited market in recent quarter two, and of course we're getting very positive feedback. So, that was feedback that didn't align with the clinical study we just published, which is showing a real short time that you would state which is important for the doc for a getting down to 23 seconds as compared to 6 to 10 minutes and also seeing the reduction in major complications.

On the cash market side that we worked on, we have had a very, very high re-order rate from those -- side, which is proving to us that the product is sticky. We aren't getting us the back without too much complication to be honest simply because the product is such clinical evidence behind this and the intervention is the need for the product. The reason that we going to see significant uptick in revenue in that business unit from this product is because we have a divestiture going on and it's a fair time within that business unit where we divested the business. And regarding your question about time through 2020, if you don't mind we'll hold that and until we do give 2020 guidance and we'll exclude some specific in that guidance what we give.

Kevin Farshchi

Terrific. Very helpful. Thank you.


Thank you. And our next question comes from Kristen Stewart with Barclays.

Kristen Stewart

Hey. Thanks. My first question is just kind of around the growth guidance for the second half of the year especially considering I think you've an extra selling in 4Q. I guess what would be some of the things that you would expect to be contributing to a deceleration in the going to rate again considering 4Q should have a little bit of benefit from the selling day comp? And then I have a follow up.

Thomas Powell

Yes. Thanks, Kristen. Really there are number of aspects and a number of news moving first of all, the first half of the year we had easier comp comparison. And again in second half, I think we grew by 5.6% and 7.7% in the Q3 and Q4 last year, which is a tougher comp. But what I think first of it, very, very encouraging that we put out our guidance that hasn't growing approximately 7% range even with those tough comps. So, this is a portfolio that we have been trying to build to have a portfolio product that sustain the distributor movement that we saw in quarter one, but also we are reading confident in growing at that 6% to 7% even in tougher comp environment that we would have fact next year.

So, that's the encouraging think from our standpoint. Also, as we said, OEM and Internventional access came out as a blast really quick in quarter one and we didn't anticipate maintaining that level of growth. So, therefore we would anticipate that they would be a little bit lighter in the back half. And on the positive side of the ledger I guess, we will see that, perhaps anesthesia and EMEA might do a little bit better in the back half and obviously we have taken up our guidance for U.S. compared to 35% and that's business continues to do incredibly well. If we can continue to invest behind that which we have been doing and been working perhaps that is an area that might help them to gain as we go through the year and into next year.

Kristen Stewart

Thanks. I was wondering if you can just provide a little bit more detail on what you have said about strengthening IP portfolio and what that exactly means. I'm not sure if you are facing any sort of IP litigation or anything in that regard may be just wash out that commentary a little bit more. Thank you.

Liam Kelly

What we seen in the market place, is more a company that would perhaps be we would believe in bringing on some of our IP and obviously we will protect and as our investors will expect us to do we will protect our valid right to self product that we invented another real copycat in preferred market. So, we have also spent some significant dollars on the other side of the ledger, reinforcing our IP. We have a number of new products in the pipe that are in our mine pretty exciting and we're trying to get broader coverage from IT profession within the landscape so that in the future this product we run them to our pipeline will be significant generators of brand new growth within the future. So that’s the true aspect of that.

Kristen Stewart

Is there anything on the IP side related to UroLift?

Liam Kelly

I don’t want to go into specifics. And please Kristen don’t go to our whole product portfolio, but that is one that we are defending. It is one that we fire though and protect for future.


Thank you. And our next question is from Matthew Mishan with KeyBanc.

Matthew Mishan

Thank you for taking the questions and nice lead up to my question, which is Medtronic lease of products in the quarter that looks similar to guide lines is this something you consider to be a competitor product and some to maybe something close to your patents?

Liam Kelly

So I guess you talking about the telescope.

Matthew Mishan


Liam Kelly

Yes, we're aware. That is we've seen in similar markets and in due to course we'll aggressive with the response, Matt.

Matthew Mishan

Okay fair enough and on RePlas. I guess expedited approvals sounds better to congress and it does to the FDA. But what do you think the time frame looks like now on the BLI submission and then also can you comment on the timing of the potential build out of manufacturing infrastructure ahead of this submission as well.

Liam Kelly

Let me deal with the manufacturer infrastructure and the math for. The manufacturing infrastructure is already built. We have an up lay in our productivity to address the demand from the total military demand and a portion, a significant portion of the build in demand. I will see in the easy plan and I mentioned this in my prepaid remarks. The collaboration with FDA has been very constructive. The issue here is that for the FDA, and the military are incredibly excited about it because they see this product can have a positive impact on humanity and we're all marching in the same direction but we are in on charter water here. A product like this is never been approved before.

We have some additional testing to do math and we will get further update, it would be I think not we're going to give an expected timeline, we're going to run some test between over the next couple of quarters and once we have that test results back I think then I will give you a much clearer view as to when we expect to do this BLA submission. I would say that the FDA are working hand and glove with us and with the military to get this through. We've already agree to protocol for pediatrics, pediatrics were never requirement for fresh-frozen plasma, so we've got that milestone done and many other milestones as we work with them. And we will get further updates on the subsequent calls, Matt, as we go through this testing analysis that we need to do.


And our next question comes from Mike Matson with Needham & Company.

Mike Matson

Just a couple of product related question. So can you just remind us, why the transition to UroLift is going to take as long as it is?

Liam Kelly

One of the main reasons is because we don't want to disrupt the growth. And we want to be thoughtful about the role of the UroLift 2 within the United States. So we want to make sure that we do it in a thoughtful way so that our sales talent can continue to service existing accounts, bring on new accounts, and then transition new and existing accounts to UroLift 2. I think, it would be almost foolhardy to go to aggressively after disruptive growth. Don't forget, we are, last year we did $200 million and $6 billion market in the United States. And the last thing we want to do is to disrupt that growth. It is one of our five to drive and it's our most important one of the five to drive. So we're going to keep a very close eye on them.

Mike Matson

And then just Percuvance, I didn't hear that, you call that out as one of the things that sort of the surgery business. So just curious where things stand with that? Thanks.

Liam Kelly

Thanks Mike. We're still on limited market release, and we will be on, as we said previously, on limited market release through the end of the year. I'm going to get further updates on Percuvance, as we get into guidance for 2020, when we should then come either from an extended limited market release or a full market release. But everything is going according to plan, Mike is what I can say with Percuvance.


And our last question is from Brian Weinstein with William Blair.

Brian Weinstein

So outside of UroLift. I'm curious how much of the growth in the first half is from actual gains versus segment market conditions? In other words, what do you see, it's kind of market growth in your key segments right now? And where do you think you're specifically taking the most share?

Liam Kelly

So, I would say, if I went through the various business segments. If I went to Vascular Access, let me started at the top of the house Vascular Access. Through the first half of the year, as I said, we grew over 7%, for sure that market is growing into 2% range. So clearly, we're taking share, the areas we're taking shares is for sure within the PICC part of our portfolio where we have an antithrombogenic and antimicrobial PICC. And also we continue to develop the market with the EZ-IO, which also takes care.

Interventional Access to that half year. As I said earlier almost 13% and that's clearly a share again, also, that market will be growing in that 4% or 5%. Surgical is again above market, so you have to be taking share Interventional Urology were creating new category. So we're moving patients that will be taking pharma into another area. OEM is again an area is growing above market where we're taking share. Anesthesia is probably the one where it's not taking share. It's growing, maybe modestly below the market in the first half of the year. But again, they've been through some destocking and that's the one area where we didn't seem to restock is a little bit of modest restocking sitting in Anastasia that may come back.

Brian Weinstein

And then on the DTC stock with UroLift. Can you start to quantify the benefits that you're seeing there or give us any metrics and how that is rolling out? And how you intend to expand that program to help drive UroLift going forward? Thank you.

Liam Kelly

Thank you for details on how we're expanding it. So last year, we did 6, this year we will do 12. If it's continue to drive accelerated growth. Brian, we might even add a few more the back end of the year. So through the first quarter, we initiated 7 of the 12. So it's clearly working. We get great response. And we're very encouraged by it. We do see, if we compare the DTC market to the controlling market of a similar size.

We do see a significant uptake in customers going and patients who now know what the condition they have is called. So many patients that are just getting up 8 to 9 times a night driving their wife and their spouse crazy and now they see the advertising campaigns, they listen to it, we hit them on Facebook, and they now can put a name so what has been called in their condition and they go to their urologists and they have a conversation. And then urologist will defined what the best path for that patient. So, working very well and we're very excited by it, Brian, I think it's the headline.


And this concludes our Q&A session for today. I would like to turn the call back to Jake Elguicze with his final remarks.

Jake Elguicze

Thanks operator and thanks to everyone for joining us on the call today. This concludes the Teleflex Incorporated second quarter 2019 earnings conference.


Thank you, ladies and gentlemen, for participating in today's program. You may now disconnect. Have a wonderful day.