Q4 2019 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Siloed Medicos 2019 fourth quarter earnings call. At this time also do you think about they then you can only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should acquiring that's during the conference. Please press Star then zero on your touch.
Stone telephone as a reminder, this conference call may be recorded I would now like to turn the conference over to your host meeting two weeks Investor Relations Ma'am. Please go ahead.
Thank you and thank you all for participating in today's call. Joining me are Erika Rogers, Chief Executive Officer, because Buchanan's Chief Financial Officer earlier today. So first medical released financial results for the quarter in full year ended December 31st 2019, a copy of the press release is available on the company's website.
Before we begin I'd like to remind you the management will make statements. During this call may 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 that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation is relating to our examination of operating trends in our future financial expectation, which includes expectation for hiring physician training broken organization and reimbursement market opportunity label expansion clinical studies pipeline development and guidance for procedures revenue gross margin operating expense.
Doesn't 2020 are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statement. Accordingly, you should not place undue reliance on these statements for list and description of the risks and uncertainties associated with her business.
Please refer to the risk factor section of our form 10-Q filing with the Securities Exchange Commission on November 13th 2019 in connection with her most recent quarterly report.
The conference call contains time sensitive information is accurate only as of the life broadcast today February 26, 2020, so grammatical disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, mainly because of new information future events or otherwise and I'll turn the call over to Erica.
Thanks Lynn good afternoon, everyone and thank you for joining us for Silk Road Medicals fourth quarter and full year 2019 earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer.
2019 was marked by consistent and compelling patient outcomes that drove continued t. car adoption and robust revenue growth. Our full year revenue was $63.4 million up over 80% year over year with fourth quarter results of $18.6 million and growth of 62.
Percent I'm exceptionally proud of our teams many accomplishments throughout 2019 as we made substantial progress towards the two key priorities. We sat in the beginning of the year building the clinical evidence based and U.S. commercial execution.
In June we announced the final results of our roadster to post market study as well as updated results from over 10000 patients in the T. car surveillance project, which compared T car favorably to the standard of care carotid endarterectomy or CEA in December the journal of the American Medical Association or Jama publication.
Large studies showing significant benefits of T. car over transfemoral carotid artery stunting or cat.
These compelling data sets contributed towards our goal of becoming the standard of care and provided a tailwind to our second key priority of U.S. commercial execution.
In 2019, we expanded our sales territories from 25 at the beginning of year to 33 at year end. This team in turn expanded or hospital account base from approximately 400 to approximately 640 accounts.
And we trained over 650, new physicians to reach approximately 1440 total physicians trained.
In the fourth quarter, our growing physician base performed approximately 2450 procedures, which enabled us to end the year with over 8400, T. car procedures, having been performed and cross the 16000 cumulative procedure mark by year end.
Before turning to some thoughts on milestones and goals for 2020, I would like to share one key car patient treatment journey.
Dr. Wayne Wilson is retired vascular surgeon from Roanoke, Virginia last year, he unexpectedly experienced its asia or difficulties speaking it resolves spontaneously, but after further evaluation. He was diagnosed with right carotid artery disease after having received to see a.
On his left side a few years earlier.
Dr. Adams from the growing in clinic in Roanoke recommended the T. car procedure for his rightside due to his age end to end atomic features that increased the risk of surgical complications.
In addition, he had several co morbidities, including coronary artery disease heart failure and diabetes, such that general anesthesia would be risky.
Wayne It was a self described old school vascular surgeon and he'd been the chief of surgery at the University of Virginia Medical Center and he was hearing about key car for the first time and was initially a bit reluctant to have their procedure.
Dr. Adams walk them through the benefits of T. car and Wayne agreed after careful consideration.
After a successful T. car procedure under local anesthesia Wayne was back to his normal everyday activities quickly.
This was particularly poignant given Wayne history of performing CEA and his own experience as a patient receiving <unk> in the past.
Dr. Wilson his wife, and his daughter, all express profound depreciation for the faster recovery time and improvement in his quality of life following key car.
When story demonstrates the power of key car specifically, how this minimally invasive approach can safely and effectively treat carotid artery disease and reduce the risk of a potentially devastating stroke wow, reducing the risk of older complication and allowing patients to quickly recover and return to spending time.
With the people they love the most.
And so road medical we never rest when it comes to building positive experiences with GE car, one patient and one physician out of time.
Looking ahead to 2020, we continue to be focused on U.S. commercial execution and driving deeper penetration in our train physician base underpinned by our now much larger clinical evidence base.
Our expectations are for full year 2020 revenues to be in the range of $92 million to $95 million.
As we continue to work towards becoming the global leader in the treatment of carotid artery disease, we've outlined three strategic priorities for 2020.
Number one U.S. commercial execution.
Number two outlining our regulatory and reimbursement pathway with the goal of obtaining label expansion in coverage for the standard surgical risk patient population and finally number three further development of our R&D pipeline.
Starting with U.S. commercial execution, our biggest and most important priority for 2020.
As we've discussed in the past we are measuring our success an operational performance through several key metrics and initiatives, both near and long term in nature.
As always the pace in which we execute commercial team expansion, new account activation and physician training. The key levers of our business will always be dictated by our focus on patient outcomes and operational excellence.
This focus is working well and we will put us on the path desktop towards our long term goal of becoming the standard of care.
We expect growth will continue to come from increased T. car adoption in the U.S. by our growing trained physician base supported by our expanded commercial organization.
Over the last couple of years, we have been methodically hiring and training a world class field team as we've carefully rolled out t. car.
It is our people and programs combined with our technology that has led to our physician success in driving positive patient outcomes, which with T. car, which in turn fuels our commercial success.
2020 commercial execution execution is still all about driving adoption of key car to generate initial and repeat orders of our products in the hospitals, where she car is performed we are continuing to train new physicians in both new and established a hospital accounts and we continue to.
Provides significant support early in their learning curve, which we believe is critical to sustained and growing adoption of key car in the long term.
However, our primary focus this year is to continue moving already trained physicians up the adoption curve, thereby capturing a larger share of patients who would otherwise received CEA or cash.
Many of our train physicians are still early in their key car experience and others have adopted to significant level, but still have lots of upside potential.
Our business continues to be one physician at a time one patient at a time each and every day.
On the heels of our data presentations and publications throughout 2019, we saw meaningful increase in physician interest for our test drive training courses.
We responded to this demand and increased the number inside of courses in the second half of 2019.
Our philosophy is should choose to train physicians at a pace, where we can sustain positive experiences and successful patient outcomes early in the adoption curve, which we feel engendered the confidence required for sustained an increasing adoption over the long term.
As a result, we trained and certified over 650 physicians for the year that figure includes fellows and the official certification of a small cohort of physicians initially train in periods before 29 team.
And 2020, we plan to train approximately 450, new physicians, which would bring our total train physician base to approximately 1900 by the end of the year.
We continue to believe that we can effectively cover the bulk of the hospitals and physicians that drive a majority of carotid procedures with between 40 to 50 territories and approximately a one to two ratio of area managers to therapy development, especially.
Throughout 2020, we expect to selectively add highly qualified personnel to our commercial organization, we plan to exit the year with roughly 45 territory and we have set a goal for our efficient commercial team and train physician base to yield in excess of 13000 procedures.
For the year.
Moving to our second key priority broadening the indication for the Henri said to standard surgical risk patients and expanding reimbursement.
As a quick reminder, the current indication for use of the Henri stand is in patients who are considered at high risk for adverse events from CEA or high surgical risk and this is also the population of patients eligible for reimbursement in the T. car surveillance project.
We estimate that the high surgical risk population represents approximately two thirds of the patients currently treated with the remaining deemed standard risk.
We have shown a clear ability to achieve successful patient outcomes and drive adoption in the sicker older patients represented in the higher surgical risk population.
Which we believe bodes well for the future of key car in standard surgical risk patients.
Through our continued collaboration with a key constituents Sta CMS and the society of vascular surgery.
We expect to finalize and provide clarity on our combined regulatory and reimbursement pathways for standard surgical risk patients in 2020.
We have been in regular discussions with these stakeholders on what is desired.
What is required and what is the right approach to meet all stakeholder needs and what will ultimately support widespread physician adoption.
We look forward to providing updates on our standard surgical risk pathway as we obtain further clarity during the year.
Finally, our third priority is focused on continued pipeline development. We are committed to the continued development of additional and next generation products to support an improved key car to meet the involving needs of physicians and their patients first and foremost we will continue to seek ways to improve the.
Speed ease and convenience of T. car to support continued adoption.
And to potentially increase the per procedure revenue opportunity by integrating existing products and developing new products.
Further with a broad intellectual property property platform and core competencies in both direct carotid access and neuro protection, we are leveraging our expertise and the physiologic and engineering advantages made possible by our trans carotid approach and the development of new.
Products targeting targeting procedures.
And vascular disease states in the heart aortic arch and rain.
These are areas, where we believe significant unmet needs remain and we're excited about the potential for trans carotid therapies in acute ischemic stroke and other areas.
We look forward to sharing more details about our progress on our pipeline products and clinical strategies in the future.
In summary, we expect gross and performance in our core U.S.T. car market, where we still have substantial market opportunity in front of us while we continue working to progress our other longer term growth initiatives. We are excited about the opportunities across our entire platform and we are committed to.
Delivering improved patient outcomes by seeking out unmet clinical needs and working to develop new solution.
With that I will now turn the call over to Lucas Buchanan, our Chief Financial Officer.
Thank you Erica.
Revenue for the three months ended December 30, Onest 2019 was $18.6 million P. 62% increase from 11.5 million to the same period for the prior year.
We continue to see strong reorder rates from hospital accounts, driven by when procedure volumes across both new and tenure cheaper physicians.
Gross margin for the fourth quarter of 2019 was 75% as compared to 68% in the fourth quarter the prior year.
Gross margin improvement was driven primarily by leveraging manufacturing overhead costs across higher revenue and the realization of manufacturing inefficiencies.
Due to the timing of certain manufacturing engineering projects and increased investment in infrastructure projects to support long term growth and risk mitigation. We expect gross margins in 2020 to be flat to slightly down as compared to 2019.
Total operating expenses for the fourth quarter of 2019 or $21.4 million, a 42% increase from 15.1 million in the fourth quarter of 2018.
R&D expenses for the fourth quarter of 2019 were $3.3 million compared to 3.4 million in the fourth quarter of 2018.
The slight decrease was primarily driven by the completion of our roadster to post market study and associated costs.
Sales general and administrative expenses for the fourth quarter of 2019 were $18.2 million compared to 11.7 million in the fourth quarter of 2018.
The increase was primarily attributable to expenses related to growth in our commercial team and marketing efforts.
As well as costs related to being a public company.
We expect continued growth in operating expenses in 2020, as we expand our commercial team invest in R&D and incur rising costs associated with a competitive labor market as well as being a public company.
Net loss for the fourth quarter was $8.2 million or a loss of 27 cents per share as compared to a net loss of $15.6 million 40 loss of $14 in 12 cents per share for the same period of the prior year.
We ended 2019 with $90.7 million of cash cash equivalents and short term investments.
Turning to our outlook for 2020, we expect full year revenue to be in the range of $92 million to $95 million representing growth of 45% to 50% over 2019 revenue.
$63.4 million.
As our business continues to evolve we enter twentytwenty with an increasingly experienced commercial team covering an established base hospital accounts and trained physicians.
That drive the majority of carotid procedures in the United States.
And as such we are increasingly focused on driving deeper adoption among physicians already trained.
Bear in mind that it often takes 12 months or more for physician to get to 10 plus procedures during their appropriately conservative learning curve.
Threshold, we believe is necessary to build the confidence for increasing adoption longer term.
Simultaneously, we are still committed to growing our footprint in 2020 and have set goals to train approximately 450 physicians and expand to roughly 45 sales territories in order to stimulate and serve the growing demand.
We expect our growing physician base to perform in excess of 13000 procedures for the year.
At this point I would like to turn the call back to Erica for closing comments. Thank you Lucas.
As we reflect on 2019 and look ahead to 2020, we have defined three strategic pillars that will be critical to our continued success this year and beyond us commercial execution label expansion and pipeline development, we have created a strong foundation and culture.
Fosters a patient first mindset and positions us well for the long term, we are deeply committed to improving the lives of the millions of patients at risk of stroke from carotid and other vascular diseases and remain steadfast in our efforts with this in mind I would like to acknowledge and thank our entire research.
Okay and development organization, which includes our engineering and product teams as well as our clinical regulatory quality and medical Affairs Department.
Their commitment to improve and expand our portfolio of trans carotid therapies and drive consistent compelling outcomes for broad base of physicians and patients is truly remarkable I am grateful to be working alongside these teams everyday.
Our research and development capabilities and unique insights will enable us to continue down a path of growth and innovation. These teams have been and will continue to beat the backbone of silk Road medical.
With that we will now open it up to questions.
Operator.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your touched on California. If your question has to be answered all you wish to remove yourself from the Q. Please press the banking.
First question comes from the line of Robbie Marcus with JP Morgan Robbie Your line is open.
Hi, This is Alan on for Robby I just had one quick question to start off on the pipeline I think we've heard you talk about a balloon as being kind of the first product that you might be looking at slot into the portfolio to add on with T. cars should we expect that to be something about you talked a lot more for 2020, and maybe even kind of launch.
In that timeframe.
Other types of devices do you guys really have in mind for 2020, and maybe 2021.
Right. Thank you for that question, Yeah, as I said in the in the prepared remarks, you know our goal first and foremost is always to improve speed ease and convenience of t. car and to continuously seek ways to improve the already excellent outcomes and among the products that are under consideration.
And or things like balloons, and other accessory products at this point, we're not giving specifics as to what 2020 might look like but we look forward to doing that as the year progressive.
Got it and then I guess like.
So your original plan for 2019 was the train over 500, new physicians, you clearly surpass that by pretty healthy amount on to get to your Fourteenforty number to end the year, how should we view the kind of Fourfifty guidance you gave for 2020, obviously.
There's going to be a little bit of a slowdown you know there's still some level of low hanging fruit, especially as you're writing the high of the roadster two data and she kosovans product data that you.
Presented this year, but should we expect that to be like how much room is there for upside to that I guess.
Right well you know training physicians is one of many levers that we pull onto drives the business. You know, we're constantly asking ourselves step on the gas pedal pull off on the gas pedal train more physicians or go back and work on the adoption curve of the already existing installed train physicians. So this is okay.
I want to push and pull as you can imagine and certainly what we saw in 2019 was was two things really the recognition.
That our system of training carefully and methodically and moving physicians up the adoption curve was working outcomes were excellent and being reported is excellent.
And that kind of gave us the confidence that we could accelerate the training for the back half of 2019, and so you know we remain able to respond to those kinds of market dynamic as we see fit to grow the business, but as I stated in the prepared remarks, you know our primary.
Focus for 2020 is moving our already trained physicians up the adoption curve.
Because we do have a next question comes from the line of Bob Hopkins of Bank of America. Bob. Your line is open Oh, Thanks, and good afternoon, and congrats on a really good year.
<unk> Erika I wanted to ask a little bit about a metric of your the number of procedures being done by the average change surgeon because while the business is clearly doing well and make the growth is really strong in your exceeding expectations. You've trained a ton of physicians and if you just look at them.
For a physician trains divided by the number of surgeries the numbers.
You know super low even if you use number doctors trained a couple of years ago divided by the never procedures, you're still talking about on average doing sort of fewer than two per month.
So I'm just trying to reconcile that with this except for the company is it just seems like a.
A little bit of a different metric I, just I'm trying to understand how should be interpreting that metric because it seems.
Lower than I would think but at the same time that this is obviously doing well so.
Yeah, how do you how do you think about that.
Yeah, Hi, Bob I'm. Thanks, so much for the question.
First of all it starts with the recognition that debt you're right. We train more physicians in 2019 responded to the increased demand the kind of followed off of the data presentations mid year. So I think it's important to first and foremost recognize that almost half of our train physicians were trained in.
In 2019.
And almost half of those were trained in the back half of 2019 and as we've talked about before that early early part of the learning curve is the most critical part.
The physician adoption journey that has to go well in order to see long term deeper penetration and so we and the physicians are careful and methodical in the beginning and we've talked about before that physicians trained in 2019 are probably I'm going to be overly meaningful to 2020.
He physicians trained in the back of 2018, not meaningful to 2019 et cetera. So there is this kind of lag effect as physicians come up their slow and methodical adoption curve and you know we continue to look at that Bob and continue to see that 10 to 15 cases before that acts.
Celleration really picked up and that 10 to 15 procedures.
Hey, 12 months or even longer in some of these physicians. So one way to think about it is that this cohort in 2019 and certainly the back half of 2019 are just getting started and I can handed over to Lucas for some finer points on the matter sure I mean, I can just add a little bit.
I mean, I mean does the stats on the last two years of training. If you look at our physicians trained 18 and 19, that's almost three quarters right. So it's not just the fact that half of them came from 19. So this is still a very young business in terms of T. car experience and all the things we've talked about in the past Bob.
Where some of the top physicians are doing 567 per quarter.
It's still the case on an absolute basis that cohort is bigger just just with the rising tide.
We've we've obviously accelerated the dilution of the denominator, which affects the average, but we like the trends we're seeing for some more experienced cohort.
And it's still as a minority of physicians driving a majority of procedures, but again that minority itself on an absolute basis, just getting bigger.
And the ratio has also getting bigger so we like the overall trends, we see and a lot of the decisions we make our with this kind of standard of care goal in mind sitting here.
At 5% penetrated we're trying to set set this up right for the long term and and really be super careful in terms of patient outcomes early in the learning curve and so we turned down cases and.
We make choices that that are.
Long term beneficial we think even if they're not.
Not not really contributing to short term results.
So yes. This is just one follow up that and then why you've already trained so many physicians you know is it the best user time to train another four or 500 this year rather than concentrating on the 1300 that you have given that theres only.
13000 cases that you're suggesting this year. It wouldn't you know wouldn't be better just a really hammer on the guys that are already trained and good penetration rates up there rather than allocating resources to training a lot more and they're not being critical I'm just trying to understand the dynamic because it seems like there's momentum in the business and I'm. Just wondering if you know the kind of the balance between training versus gas.
Any more procedures on the current installed base is that you know, what's the right mix of time.
Yeah, well no I can appreciate the question and I think you know as I said before the primary commercial execution focus. This year is on moving already trained physicians of their adoption curve, but one way to think about it is there sort of three phases to onboarding a physician the first is to train them.
And that's a process you know that requires vetting the account and vetting the physician and getting them into our trust every program and then there's the methodical start to their journey and this is kind of what we refer to is the long middle of their journey and that long middle can be long as we've seen in some cases a year or longer.
To get through that initial phase and so part of this Bob is getting the physician started on their journey right to kind of feel that long middle pipeline. If you will and then working them up through the acceleration phase. So we have positions at all levels of these three phase.
There is some many are in the acceleration phase some are still in their methodical start and if we think about the physicians trained in 2019 most of them are in this long middle phase and so it's always this balance of.
Starting to physicians on their journey. So that we can did over this long middle and up to this deeper part of the adoption curve.
And working on accelerating adoption in the existing train physician base and I'll just add on it on a mathematical basis, we are doing that.
450 versus over 650, and 29 teams for the absolute number.
Coming down at the same time are growing sales territories. So on a per territory basis, that's coming down even further and as Eric mentioned our bias is.
Increasingly towards the the already trained physician base and working on.
You know either in their long middle or up through the accelerated all of that analytics is built into our.
[noise] procedure guidance and obviously, it's reflective of so much of the train physician base still in that.
612, 24 month of of experience said overall.
Great. Thanks, very much appreciate the thoughts.
Your next question comes from the line of required of Stifel requires your line is open.
Thank you good afternoon people.
My congratulations on a superb finished the year.
Erica.
Thank you for being here about that standard risk.
It is very much on the table for 2020.
As a goal and just if I heard you correctly.
Finalizing you're going to find lots and share the pathway you're in regular conversation with all the stakeholders and as you gain clarity on that path, you're going to sure yes.
Hi.
That's great, but you know far you appreciate if I could push a little from there.
Hi, maybe can you give us a little more detail on.
Other stakeholders Sta and doctors are left in the societies is this about reimbursement is it's about the need for.
Incremental.
Clinical trial work, what's the clarity that we.
Okay.
Sort of unfold, except that you can share it with us give us a little more detail.
Sure Hi, Rick happy too so.
In terms of the standard surgical risk labeled indication for this debt that is obviously, a regulatory activity and so ft. A is one of its not the he constituent around the table because it all starts there right we need the label indication.
But it doesn't serve the company well to have a labeled indication without coverage for that indication and that class a patients of standard surgical risk and so as we did before with our original high surgical risk strategy, which again is you know two thirds of the market opportunity as we did before.
We want these things to be in concert and so it's not only what is required from a pure regulatory standpoint, but it's also what is desired to open up a reimbursement sort of simultaneously.
And then there's the question of what will it take for physicians to adopt T. car in standard surgical risk and that's why we bring the society of vascular surgery. This physician constituents along the way all along the way in the conversation and these conversations Rick have been ongoing a they've been there.
And going on for a while now and all of these three parties are involved along with Silk Road and we look forward to bringing that clarity to you sometime later this year.
Okay, just if I could take one step further so if you know on this day, a 12 month and.
We're hoping wasn't enough that the path would be clear, we're hoping that.
Different trials required it's underway, we're hoping that reimbursements in hand or you know.
Where would we reasonably aspire dream that we'd be in 12 months.
Yeah I can fully appreciate the question Rick and we're just not going to get ahead of ourselves on this one is you can imagine the conversations are a delicate and were weaving the right balance with the three constituents.
Around the table. So I think it's safe to say, we'll have clarity on what is required.
That's right.
Turning to the pipeline commentary. It's finally be sure you be more vocal about that and I have to say just in my Doctor conversations every time I speech I talked about few CCAR ask about.
You know what don't feel like about the technology, what do you think it better and I don't know must be asking Enron doctors. They love it nobody screws has anything to offer.
A couple of questions. What what are you assuming in the 2020 numbers in terms of new products is that part of the outlook.
But on stuff and.
It's like.
What might be Oh first when you talk about the in rate existing or adding related products you know what.
How meaningful well before potentially be this year and whats in the numbers.
I'll take the first part Rick and then and handed over to Erica for the latter question. So no the any any.
New products are indications or or international that's not reflected in.
In the revenue guidance.
Yeah, and so you're right about the T. car product improvement you know, we often hear the same thing from physicians, but that said there are some improvements that can be made on the overall ergonomics of the devices are small iterative change is often and then there are some additional tools and accessories that.
Just makes a whole procedure either faster or easier.
And so we continue to want to improve those things I think you're right.
It is not our goal to to meaningfully change outcomes. Because there are so good already that we don't we don't foreshadow a need to change devices to improve outcomes in the base T. car procedure.
So it's really about making the procedure easier removing any barriers to adoption that might have to do with just convenience factors.
Okay, and just last from me if I could.
You mean tantalizing comments about using your technology in the heart, the Arctic arch and the brain.
Is it not order.
What should we.
Expected here.
In 2020, thank you very much.
Oh, you're welcome Rick So in terms of the intellectual property portfolio as we've said before we have a broad base of intellectual property covering those three areas that you just outlined in our core competencies, which are trends carotid access and embolic protection and so taking those two themes and looking at.
At unmet needs in those three disease areas that we articulated that said we are excited about the possibility that exist in unmet needs in acute ischemic stroke.
Thank you.
Because I'm not showing any other questions at this time I'd like to turn the conference back over to meet Erika Rogers Chief Executive Officer Ma'am. Please go ahead.
Thank you very much for listening in we appreciate your comments in question.
Ladies and gentlemen, this concludes today's conference call. Thank you all for joining you may now disconnect.
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