Q3 2019 Earnings Call
And gentlemen, thank you for standing by and welcome to the Silk Road Medical's Twinkie, Nike Inc. third quarter earnings call.
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Lynn Lewis and Investor Relations you may begin.
Thank you. Thank you all for participating in today's call. Joining me are Erika Rogers, Chief Executive Officer, and look if you can't and Chief Financial Officer earlier today for grid Medical released financial results for the quarter ended September 32019, a copy of the press releases are available on the company's website before I begin I'd like to remind you that management.
These statements. During this call include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 any statements contained in this call it relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation as a rating try examination of operating trends or future financial expectations, which includes expectation for hiring physician training personnel organization and reimbursement market opportunity guidance for revenue gross margin in operating expenses in 2019 are based upon our current estimates embrace assumption.
These statements involve material risks uncertainties that could cause actual results or event to materially differ from those anticipated or implied forward looking statements. Accordingly, you should not place undue reliance on these statements.
With a description of the risks and uncertainties associated with our business. Please refer to the risk factor section of our Form 10-Q .
Filing with the Securities Exchange Commission on August 13, 2019 in connection with their most recent quarterly report, Wisconsin Conference call contains time sensitive information is accurate only as of the live broadcast today October 29, 2019, Suckered medical disclaims any intention or obligation except as required by law.
They are by any financial projections or forward looking statements, whether because of new information future events or otherwise and with that I'll turn the call over to Erica.
Thanks Lynn good afternoon, everyone and thank you for joining us for Silk Road Medicals third quarter earnings call. Joining me is Lubys Buchanan, our chief Financial Officer.
Revenue for the third quarter was $17 million, 77% year over year.
Our team continues to deliver strong consistent revenue growth driven by our relentless focus on outcomes.
Our patient first culture and investment in clinical evidence education and innovation are beginning to change physician behavior as we drive toward our long term goal of becoming the standard of care in the treatment of carotid artery disease in patients at risk of stroke.
We are raising our revenue expectations for 29 team to a range of $60 million to $63 million.
Which represents growth is 79% <unk>, 82% over 2018 revenue.
Gross and momentum continues to be driven by our focus on or 29 team priority one building the clinical evidence based and true commercial execution.
Let's take those in reverse order and start when commercial execution.
Our overarching goal with physician to first build awareness and interest in T. car based on the strength of our clinical evidence.
And then from their move them through our physician training program support them during their initial procedures, a learning curve and work toward deeper adoption through recurring procedures.
At this stage and for the foreseeable future our primary market opportunity is driving the conversion from carotid endarterectomy to T car in high surgical risk patients and we are laser focused on that effort.
That effort starts with our flagship test drive physician training courses as a reminder, test in four key car education and simulation training.
These courses are held at a centralized treating facility in the Midwest and our led by a highly regarded faculty of key opinion leaders, who are experience he car practitioners, allowing for valuable incredible peer to peer interaction.
We believe these professional education initiatives are a key factor in driving successful outcomes from the first patient.
Each physicians learning curve and enable physicians to establish the confidence to more broadly integrate t. car in their own practices.
Our goal at the outset is to identify physicians, who will invest for time and energy to build a t. car program.
Typically means they are willing to take a day out of their busy practices to attend the course.
I have already champions the Silk road products after hospital value analysis Committee.
And have identified three to four patients they think could be suitable candidates for their first procedures.
The content of the core and aren't doing clinical support are designed to ensure that physicians have positive outcomes in their own hand early on.
We know that their personal experiences with their first few procedures will impact their adoption curve I.
Ideally positioned to perform their first 10 procedure swiftly post training. So they can capture muscle memory and preserve the knowledge the green in the course in their own practices.
Our experience to date shows that after about 10 to 15 successful procedures.
This is half the confidence and comfort to accelerate the adoption of T. car.
Conducted on a regular basis, our test drive courses have been oversubscribed since inception.
We have our first inaugural test drive at the end of 2016, and which we trained 12 positions across 10 states in hospital.
In just two short years that initial group of trainees grew their adoption of T. car from zero.
Over half of their carotid procedure volume by the end of 2018.
These pioneers are critical in converting their personal positive experiences with T. car to other physicians in their hospital regions and on the National stage.
As we've described in the past we have the ability to increase or decrease the number of test drive courses and customize our programs were specific physician groups to meet our near and long term business objective.
As an example of this based on the success of test drive in a desire to dispose T. car to the next generation of decision.
We developed a specific version of the program for fellow.
Designed to meet trainees needs as the first enterprise.
We hosted our first Fellows program last year with approximately 50 fellows and attended and our second just this past quarter with over 80 Fellows and then substantial weightless.
So how does represent the future of clinical practice and we strongly believe that for five providing educational and training tools specifically for them. We can establish t. car as a primary modality early in their careers.
I'd love to hear a quick story about Dr. Laurel Hastings vascular surgeon from Baton Rouge.
Dr. Hastings attended our first fellow scores in 2018.
On completing her fellowship she joined a practice with an already established and vibrant T. car program I was able to hit the ground running adopting t. car as her primary moved dallied for treating patients with carotid artery disease.
Dr. Hastings has performed over 30% Leisure Centre training course, and returned to our Fellows program and 29 team as a faculty member to talk to new Fellows about her success with T. car.
This is an important example of the power of treating physicians early in their career to make sure key car has the opportunity to become as or more habitual then see yet.
Although many of those will be establishing their own she car practices rather than joining in existing program.
Dr. Hastings is representative of the next generation of forward thinking physician, who will drive T. car a top adoption over the next many here.
With all that said we are always mindful that we are challenging the standard of care and changing physician behavior.
And this takes time.
Variants and relentless effort.
He is a formidable competitor it has been around since the 19 fifties as well entrenched in today's standard of care.
Turning to some metrics on our business there were approximately 2250 T. car procedures performed this quarter, both by new and experienced physicians in new and established hospital accounts and in new and establish sales territories.
With just shy of 6000 procedures through the third quarter, we are firmly on track to deliver in excess of 8000 procedures in 29 team.
We remain confident that our commercial expansion plan and physician training cadence will enable us to achieve our procedure and revenue goals for the year.
As always we're balancing our efforts between training, new physicians and driving adoption curve with our more tenured physician.
And now shifting to our second key 2019 priority.
We are firmly rooted in the belief that physician awareness confident and adoption are driven by T. car clinical evidence.
Since our inaugural test drive course in 2016, the safety effectiveness and clinical advantages of T. car has been demonstrated in multiple clinical trial post market studies and registries that have evaluated outcomes in more than 6500 patients.
As we discussed on the second quarter call updated results from the T. car surveillance project or TSP as well as the final results from our Rooster to post marketing studies were presented at the society vascular surgery vascular annual meeting in June .
With data from T.S.P., showing that T car has lower on a composite in hospital group death, and myocardial infarction compared to see EA and roadster true demonstrating sub 1% 30 days stroke risk positions have taken notice.
And our increasingly inquiring about T. car.
The remarkable consistency and reproducibility of these data coupled with the procedure short learning curve and ease of use.
Has further elevated awareness and interest among the physician community.
Last month I attended the Western vascular Society annual meeting in now.
As the largest vascular surgery scientific meeting on the West Coast. This event attract many physicians from a mix of teaching and community hospital.
A large number of attendees were seeing the updated results from TSP as well as final results from roaster too for the first time.
After the data presentation, there was a groundswell of interest in registering for test drive courses and learning more about T. car.
As our expanding clinical evidence is presented across national regional and local meetings and ultimately published in peer reviewed journals. We weren't able we are able to continue to drive awareness of the benefits of T. car promising new physicians to get trained on T. car and tenured physicians to convert more.
Some of their overall procedure volumes to T car.
Building off the T. card data on over 5000 patients presented from the T. Carson village project. This past June we expect a larger body of evidence to be presented at the upcoming be symposium, taking place from November 19th to November 20, Threerd in New York City, along with several other podium.
Even stations regarding T. car.
With our intense focus on building best in class clinical evidence based commercial execution keycorp is finding its place prominently in the carotid treatment continue on.
While we are still in the very early stages, along the path towards standard of care, we look forward to continuing this journey.
With that I will now turn the call over to Lucas Buchanan, Our Chief Financial Officer, and then we'll return with closing comment.
Thank you Erica the sustainable growth that are commercial model was built to deliver continued as planned in Q3.
We have a defined universe of target physicians and hospitals that we are building or official commercial coverage model towards with a goal of increasing adoption of t. car to deliver reliable durable revenue growth overtime.
Now turning to our Q3 performance revenue for the three months ended September 32019 was $17.0 million, they 77% increase from $9.6 million in the same period of the prior year.
Growth was driven by the growing adoption of T. car across an expanded base of hospital accounts trained physicians and active sales territories.
Gross margin for the third quarter of 29 team was 76% as compared to 70% in the corresponding prior year period.
Gross margin improvement was driven primarily by leveraging manufacturing overhead costs across higher revenue.
Also contributing to higher gross margin for the realization of manufacturing efficiencies in the timing of certain manufacturing engineering projects.
Total operating expenses for the third quarter of 2019 were $20.3 million to 77% increase from $11.4 million in the third quarter of 2080.
R&D expenses for the third quarter of 29, Keane were $3.2 million compared to 2.4 million in the third quarter of 2018.
The increase was driven primarily driven by an increase in personnel related expenses as we continue to support product development and clinical study programs.
Sales general and administrative expenses for the third quarter of 2019 were $17.1 million compared to 9.0 million in the third quarter of 2018.
The increase was primarily attributable to expenses related to growth in our commercial team and marketing efforts as well as cost related to being a public company.
Net loss for the period was $8.0 million or a loss of 26 cents per share as compared to a net loss of $9.0 million for a loss of $8.49 per share for the same period for the prior year.
We ended the third quarter of 2019 with $112.3 million of cash cash equivalents.
Turning to our capital structure, we completed a follow on offering for 4.2 million shares in the quarter comprised entirely of secondary shares from certain selling shareholders.
Which allowed us to to diversify our stock holder base.
Turning to our outlook for 2019, and as Eric mentioned, we are raising or 2019 revenue guidance range to $62 million to $63 million representing growth of 79% to 82% over 2018 revenue of $34.6 million.
At this point I would like to turn the call back to Erika for closing comments.
Thank you Lucas.
In summary, we are pleased with our third quarter performance and our continued ability to deliver towards our guidance.
Before closing I would like to thank our cross functional commercial teams for their unwavering dedication.
First and commitment to drive adoption and penetration of T. car, while always being mindful of our focus on successful patient outcomes every patient every day.
This team includes employees involved in education and training customer success.
Sales operations analytics, and the sales and marketing organization.
To go up against the inertia CEA every day and change physician behavior across a well entrenched standard of care challenging and takes a large collective effort and unified front.
This team's hard work is instrumental in our growing momentum and success and I am grateful to be working alongside them every day.
With that we will now open it up to question.
Operator.
Thank you ladies and gentlemen, if we have a question at this time. Please press the star and then the number was on your thoughts on telephone.
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Please be advised the between any session is limited to one question and one follow up question.
Just first question comes from the line of Robbie Marcus from JP Morgan Your line is open.
Thanks, a lot and congrats on a really great quarter here.
Thanks, Lucas, maybe maybe I can start off you had a really good procedure number here, hoping you could give us a little more color into where this is coming from is it you know new docs are doing more is it existing docs ramping up.
Hi, just any color you can add to where you're seeing the biggest a increases and traction here with procedures.
Right. Thanks, Robbie Yeah, we're pleased with the case volume for the quarter for sure and I think it's fair to say as we've said in quarters past, which is the business is primarily driven in any given quarter or by the kind of existing treating physician base you know we've talked about.
Oh the period of time it takes for any newly trained physician to kind of come up their adoption curve and so it's fair to assume that a lot of those cases are done by the existing trains physician that said you know with a strong quarter or the way it looked year certainly there's contribution from the new training physician.
And as well.
Great. It's there any color you could add ons in terms of what new store or for existing store sales were in the quarter.
Well Robbie it depends on how you define it as a store as it is a physician or hospital town and how long they've been open we service all those trends.
Whether they've been open a quarter or for a year and we continue to have strong same store sales growth and just tying that back to your.
Your first question if it takes a new physician nine to 12 months to get to their first turn faces.
Where we see an adoption inflection that that kind of my definition means no along with our business driven by physicians trained.
2018 were prior and so we're we're constantly focusing on.
Any news auction that effort for for the long term plans of our business has been more and more driven as time goes fivefive why the tenure.
Yes.
Great and then last question from me.
I had a great showing it to be Am conference in June roadster, two data ways really impressive be great to hear any commentary on in terms of what you're seeing in physician attitude trends impacting the market that that data set and conferences had.
Thanks, a lot.
Yeah, you're right. We did have a strong showing in June as the vascular annual meeting and as we said in the last quarter. You know it takes time for that information to really disseminate broadly and that's done by our team one physician at a time.
Our our area managers talking about the data with their customers, but it also happens now at these regional meetings and local meetings. An example of that of course is that that for Western vascular Society meeting story that I told in the prepared remarks.
And it was interesting to see how many physicians were seeing the data for the first time and that meeting was a couple of months Aster Van is just gives you a sense of how long it takes for the information to disseminate.
That said.
We continue to talk about it at the field level and we also believe that once the data or published in peer reviewed journal they'll have a greater impact and that you know that is typically.
A year or so within the year of the.
Of the public presentation.
Great. Thanks appreciate the color.
Thanks Robbie.
Your next question comes from the line Rick Weiss from Stifel. Your line is open.
Hey, guys. This is going on for Rick Thanks for taking my question.
I said one on gross margin.
Gross margin in the quarter came in.
Well that better than we had expected and understand that there has.
Benefit from maybe higher volume and you referred to some tightening of.
The manufacturing engineering initiatives the last quarter, you had mentioned.
As expected gross margin to be flat in the second half due to some of these manufacturing engineering initiatives and.
I'm just wondering if you get any give any updated color.
Some of those investments and if there's an impact this quarter and how that might impact next quarter. If that we can expect the larger impact from those.
Sure Dillon. Thanks for the question happy to provide some color. So just to add a high level. We continue to feel confident with my comments on the on them on the Q2 call that the.
Back half of the year gross margin will be relatively flat to the first half.
And just to put some more color around that you know the Q2 gross margin was 75.2 and in Q3 was 75.5, so a modest uptick.
I'm going to state the obvious.
17 million in revenue, a 100 basis points is $170000. So it doesn't take much to swing gross margins in either direction as we speak about the timing of payments and the timing of some of these manufacturing engineering projects, but but again at a high level.
Same guidance, we provided on the prior call.
Okay. Thanks, and then just one follow up in kind of following up on Robbie's question about.
Procedure numbers, if you could provide any color on.
Whereas some of these procedures are coming from in terms of.
Is it all converting seat the credit endarterectomy procedures right now are you taking some of the traditional stenting procedures or.
Are you seeing any market expansion.
Yeah, well drilling in terms of the conversion. It is a mix of both I mean, we're highly focused on converting slaughtered endarterectomy to keep our and the reason that we're highly focused on that is the vast majority of procedures performed in the United States in 2018 work a lot of endarterectomy that said.
The the Transfemoral Kaz business continues to be a kind of low hanging fruit opportunity for us.
Lastly, live surgeons that have historically done the procedure duty so somewhat reluctantly knowing that the stroke risk is higher.
And we work we're kind of.
Got a little bit of a tailwind in the fact that the most recent data that compared transfemoral attached.
50 car in a propensity match patient population of in hospital outcomes.
He car really showed a significant advantage and composite endpoint of stroke in death in stroke death, and am I would also important things like the time of fluoroscopy and the amount of contrast volume.
So the data are even stronger and more compelling when you compare keith or to transform little cash. So yeah, we do focus on converting that business as well and then lastly on your market expansion question. You know anecdotally, we continue to hear stories about patients who were treated with Ti.
Our who otherwise couldn't be treated at all but right now as I said in the prepared remarks.
Right now and really for the foreseeable future. Our focus is on converting business from carotid endarterectomy, primarily in high surgical risk patients, which represents two thirds of the market opportunity.
Got it cool thanks, guys.
Thank you.
I'm showing no further questions at this time I wouldn't like like to turn to call over to Enrico Rogers thinking it.
Thank you so very much for joining our Q3 earnings call.
Goodbye.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating and haven't wonderful day, you may all disconnect.