Q2 2020 Axonics Modulation Technologies Inc Earnings Call
He knew ladies and gentlemen, and welcome to the Exxon <unk> cute you. The 20th 20th results Conference call. At this time all participants are in a listen only moments later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance during the conference police restaurant and then zero.
On your Touchtone telephone.
I would like to try to conference over to your house, Mr. O'neill Blocker Sonics Investor Relations. Sir Please go ahead and.
Thank you and thanks for everyone joining the Exxon X quarterly results an update call presenting on the call. This afternoon or Raymond Cohen, Chief Executive Officer in Dan Deren, President and Chief Financial Officer, Randan will provide prepared remarks and commentary on second quarter financial results U S commercial progress and a general business.
Update followed by a Q&A session before we begin I'd like to remind didn't listeners that statements made in this conference that relate to future plans events prospects are performance or forward looking statements is defined under the private security is litigation Reform Act of 1995, while these forward looking statements are based on manager.
Current expectations and beliefs. These statements are subject to a number of risks uncertainties assumptions and other factors that could cause those results to defer materially from the expectations expressed in the conference call, including the risks and uncertainties disclosed the next Sonics filings with the Securities and Exchange Commission all of which are available online.
Www Dot S. S. C. Dot Gov listeners are caution not to place undue rely on Sundays forward looking statement, which speak only as of today's date August 6th 2020, except as required by law Exxon X undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances.
[noise] anticipated events that may arise, but that's it I like now to turn the call over the array remarks.
Thanks Neil.
I'd like to thank everyone who's dialing in for today's call and for those of you joining by webcast before I get started.
[noise] on behalf of <unk> I'd like to express, our our gratitude and add to the courageous and selfless of health care workers, providing care for those impacted by Cove at 19.
I would also like to recognize all of our employees and thank them for their dedication to our physician customers and patience during these extraordinary times.
Now onto the business at hand.
Following the exceptional first quarter results that we reported in early May ask Sonics has continued to stay focused on supporting practices. During the coke with 19 pandemic along with building finished inventory signing agreements with national and regional hospital systems, and gaining F. D. A poodle's.
We've hired dozens of new employees during the pandemic in manufacturing as well as additional U S field base clinical specialist to support our growing case volume.
We have now just over 400 fulltime equivalent attic sonics with approximately half of our personnel engaged in field based commercial activities in the U S and select European countries.
As previously disclosed in our pre announcement Exxon X generated 15.2 million a sales and the second quarter.
And as you've heard from many of our other companies in our industry, while new order flow was de Minimis in April we began to see a gradual recovery during may as restrictions were lifted in certain states.
New order flow continued to improve in June and approximated 70% of our weekly average achieved in the first quarter of 2020 prior to the Kobe 19 related postponement of elective procedures in mid March.
I will provide some additional color on July after Dan finishes his remarks.
On the innovation and regulatory front, we announced three significant FTA poodles and the last few months that continued to enhance the patient experience.
These approvals included.
In mid April the F D. A approved or next generation rechargeable implantable neurostimulator, the new I N S decrease decreases.
How frequently a patient needs to recharge their implanted device.
The interval between recharging is now only once a month for approximately one hour and for some patients they'd be able to <unk> may be able to charge as infrequently is once every two months for approximately one hour.
We began manufacturing this new implantable neurostimulator, an early cute too and we have literally just started shipping it tuf's customers.
Now in June the F D. A approved a new wireless patient remote control with what we have branded smart MRI technology.
The new remote control simplifies the process to confirm a full body MRI can be safely performed.
Now how it works using the patient's remote control immediately prior prior to an MRI. The MRI technician can confirm that the weed and the implant are intact and by performing a very simple check this avoids the need for the patient to visit there and planting physicians office or four involving any personnel from it.
Sonics.
Now in July the F. D. A approves are implantable device for full body MRI scans with a three Tesla MRI scanner with this incremental labeling approval.
[noise] Sonics devices MRI compatible for both one five T N three T full body scans and our conditions for these MRI scams are the best and least burdensome of any cyclonal modulation device.
And just last week, we announced two year topline results from our artisan S. N M pivotal studying.
The clinical results underscore the door a boat durability of response.
The most efficacious ever reported in S N M clinical literature.
As a reminder, or study design was a true intend to treat analysis meeting that we did not called the heard by doing external trials and then only implanting the folks that had responded to the trial.
Every patient got the permanent implant.
Now I think that's important when you when you take into consideration the actual clinical results, which at two years post implant, 88% of all implanted patients worst therapy responders. Now this is consistent with the 89% therapy respond to right we reported add one year.
In addition, 80% of patients achieved greater than a 75% reduction in the number of urinary leaks in.
And in fact.
37% of the patient patients were completely dry.
Moreover, the safety efficacy and patient satisfaction reported and are clinical study is being replicated every day in real world settings across the United States.
So given all that we are confident.
That from a technological standpoint, Sonics has brought to cyclonal modulation.
Products that have a life changing impact and are improving the quality of life of patients and we are driving meaningful expansion or we believe that there will be meaningful market expansion in the days in years ahead.
So with that said I'll provide some additional business updates and some more color on today's call, but first Dan Darren our President and CFO, We'll review the second quarter 2020 financial results pass it to you dance. Thank you Ray.
For the second quarter of 2020 tectonics generated net revenue a $15.2 million.
[noise] compares to $1.5 million in the second quarter of 2019.
Net revenue from the United States accounted for $14.6 million with certain European markets in Canada accounting for the balance of second Carter 20th 20th Avenue.
There were no stocking orders in the corridor.
Gross profit for the second Carter of 2020 was six $8 million, representing our gross margin of 44 four per cent.
Margin and cute too was lower than Empire quarters, due primarily to lower overhead absorption related to the cover at 19 pandemic. We anticipate gross margin will return to low to mid sixties and the second half of 2020 and continued to anticipate low to mid seventies over the longer term.
Total operating expenses for the second corner of 2020 or $26.2 million, which is an increase of six $2 million compared to the same period in 2019.
The increase was primarily due to a higher personnel cost for the U S commercial team and in other parts of the organization.
This was partially offset by temporary salary reductions in Q too as well as reduce travel expenses.
We expect quarterly operating expenses for the second half of 2022 increase to approximately.
$32 million to $35 million per quarter, given recent and anticipated increases to head count.
[noise] commissions as sales ramp back up and the resumption a full salaries for employees.
Net loss for the second quarter of 2020 was $19.8 million as compared to a net loss of $19.1 million and the second quarter of 2019.
Operating cash burnt and the second Carter was $13 million.
Cash in cash equivalents, where approximately $288 million as of June 30th 2020, and as a reminder, axon X rays to $140 million in net proceeds from an equity offering an early may.
I will now turn the call back over to re thanks, Dan.
So is dance is Dan has mentioned and I've mentioned earlier on the pole, it's clear that second quarter results were impacted by the coronavirus in the curtailment of elective procedures in the U S and in Europe.
However, our sales momentum has recovered and the velocity of new orders in the United States. During the month of July It gives us confidence in meeting or exceeding analysts consensus estimates in the back half of.
2020, despite the resurgence of Cove at 19 in certain Geography's.
Europe continues to lag in particular in England, where elective procedures are not expect it to begin until September.
Now we are greatly encouraged by these trends and believe that <unk> as well positioned for growth and the second half of 2020, while recognizing that a sustained recovery an outpatient elective procedures is contingent upon factors that are outside of our control.
Physicians outpatient surgery centers in hospitals are all eager to generate income for their practices and their respective institutions.
<unk> as well positioned to take advantage of this opportunity given synclinal modulations short procedure time and solid reimbursement.
And with respect to that you may have read that CMS has proposed increases in reimbursement of 8% and 6% respectively for hospital outpatient departments and ambulatory surgery settings.
If these rates hold as proposed we think this could be an incremental tailwind fork sonics in 2021.
Now from the time of exotic inception.
We have consistently said that bladder and bowel dysfunction is underreported.
Under diagnosed and significantly undertreated.
Now this is particularly true when it comes to third line therapy.
We believe this is partially due to lack of patient awareness that synchronal modulation even exists.
Many physicians have viewed seiko neuromodulation in the past as a therapy of last resort given the need for frequent replacement surgery. Every few years, the lack of MRI compatibility the less than optimal efficacy in the fussiness of the incumbents product.
Now given all these factors, we believe that the Synchronal modulation market is significantly underpenetrated and poised to double over the next several years based on our introduction of obese spoke fuss free long lasting device. That's MRI compatible patients are recharging with ease and appreciate that are.
[noise] devices designed to last a couple of decades in the body.
Now we're pleased to report that feedback from implanting physicians in their patients continues to be overwhelmingly positive.
And our two year therapy efficacy and responder rates demonstrated in our artisan study are being replicated every day in commercial practice with our device.
Now these FDA approvals, we received this quarter over these past few months combined with the robust clinical literature. We have accumulated is resulting in the sonics system, becoming the preferred therapy for urinary in bell dysfunction.
Physicians are enthusiastically recommending sonics therapy to their patients and more of their patients are saying, yes than ever before.
Suffice it to say where bullish about the future and setting aside cove at 19 headwinds we fully expect this market to expand meaningful in meaningfully and both the short and long term.
Now I will now briefly address the FDA approval Medtronic received earlier this week for its rechargeable device is we can appreciate that this is the topic of interest for the investment community.
Let me start by saying over the last two months I've personally conducted over 100 individual video calls with physician customers of Exxon X.
[noise] purpose of these calls was to express appreciation to these physicians for putting their trust and <unk> and to demonstrate are steadfast commitment to the continued innovation in support of their patients I believe it's important and impactful that these customers here this directly from the C E O.
I asked physicians about their experience with our product and respect and requested any constructive feedback now physicians have shared with me quite a number of things and I'm going to share a few of them here today.
They say that the sonics product and field support has exceeded their expectations.
They say patients are reporting very high levels of efficacy and satisfaction consistent with what we have seen in our pivotal study <unk>.
Physicians have noted that patients who received and <unk> replacement for their interesting device are particularly a few sieve about the higher level of efficacy and satisfaction with the ease of use of our patient remote control and charging device.
Physicians have told me that the burden on their own clinical staff has gone down significantly as patients do not require repeat reprogramming and sharp contrast to their experience.
With interesting.
Physicians are also said that the sonics fields personnel, our first class and they conduct themselves with integrity and dedication and they're providing a level of service and support that goes above and beyond.
In a nutshell physicians are delighted with our product now aside from continued product.
Innovation I have informed our customers that we're working on various marketing programs designed to raise patient awareness in this category.
And as you could imagine this as a resulting in strong physician loyalty and goodwill towards Exxon X.
Now these physicians indicated to me that the number one reason they took a chance on <unk> is in part due to our unrivaled clinical data.
We now have four years of European clinical data in two years of data from R. U S. Pivotal study that is the best that has ever been reported and S. N M clinical literature.
The second most sided reasons physicians have switch to <unk>, our product features and the devices ease of use and lack of fussiness.
We brought our cyclonal modulation device to market as the first small long lived MRI compatible device.
Now, it's not lost on physicians that Medtronic, a company with vast resources.
<unk> not to invest in innovation for well over a decade until the Sonics came to the U S market in November 2019.
By comparison, Medtronic is bringing their rechargeable product to market with no clinical or performance data whatsoever. Therefore, the efficacy of the Interstate micro is a complete unknown and remains to be seen bottomline marketing hype that quotes expected performance or expected performance does.
Substitute for actual clinical in real world data.
Okay now that Medtronic has FDA approval for a device that looks similar to our device on paper. The question is how easy will it be for their patient remote to communicate with a small implantable device.
What will be the patient recharging experience, how satisfied will patients be with the therapy. There are no answers to these questions since once again, there's no clinical data.
One piece of feedback that has consistently come up and nearly all of my calls with physicians is that the patient facing remote currently use with interest into that will also be used with interest in micro is not easy to use and that patients are having difficulty getting the remote two pair and communicate with their implant in fact, some physicians indicated.
So poorly designed that they don't even give it to the patients therefore, adding to the burden for the office staff.
Now we are aware. In addition, we are aware that Medtronic as stated publicly that they have quote unquote taken back 40% of customers in Europe. Following an inter stims micro for the interest in micro launch in January.
Now we find this off hand anecdote dubious for the following reasons.
One the device receive CE Mark on January 13th.
Europe went into locked down nearly a month later due to the Covid 19 pandemic.
And an Medtronic zone slide deck, it says and I quote inter stim micro launched delayed due to cope with 19.
Now, we're not aware of any accounts that Medtronic has quote unquote taken back in England, the Netherlands, or Switzerland, which are the only markets in Europe, we're working in.
The centers that we are aware of that had been planted a device with microaire centers, we consider medtronic loyalists.
And that we've not had much if any business from.
Now we would also challenge.
<unk> comment that they're devices quote unquote, 50% smaller than <unk>.
And just to state some facts the actual dimensions of their device are as follows. It has the length of 47 millimeters a height of 17 millimeters and the thickness of five millimeters are device is 42 by 22 and six millimeters thick, we cannot imagine anyone is going to choose one.
Of ice over the other based on dimensions that are difficult to differentiate particularly if you hold the products and your hand.
Now I'll conclude on this topic with the following.
Physicians in patients to like have been delighted with our product.
Accounts that we have converted had been sticky and we are confident that more accounts will continue to come our way and we expect.
To be the market leader in this category in the not too distant future.
Now as you all know this as a significantly underpenetrated market that is ripe for market expansion and there's ample opportunity for both companies to be incredibly successful in this category for years to come.
Now.
Turning to business development, we continue to make significant progress on customer acquisition and the contracting front.
So I'm going to provide some additional fax.
Our manufacturing quality team has been very productive during the second quarter was productive during the second quarter, having built a significant quantity of finished goods inventory.
We know ship product to customers are the same day and order is placed.
Now given the fast paced nature of our business and the fact that customers do not want to hold inventory. This is an important success factor Fork Sonics.
Over 4000 patients had been implanted with the Ixodic system since our commercial launch last November.
Most orders received from no more than two systems, indicating the customers are consistently reordering and not stocking. Moreover sales in the U S are widely distributed such that our top 20 accounts represent less than 20% of our total business in the United States.
Now are data moving onto some other data points. So our data continues to show that nearly 90% of patients trialled with our external trial system, our implanted with a permanent device.
As a reminder, this is about 10% to 15% higher than what has been historically reported in clinical literature.
Now interestingly over 20% of our implants to date had been associated with physicians, replacing their interest them devices with <unk>.
Now none of these patients requiring external trial and Moreover, they have a unique and powerful influence on the practice since these patients have a direct basis of comparison.
So when these replacement patients come in for a follow up praising the ease of use ease of use improved comfort and symptom relief, they're getting from the Ixodic system. It provides physicians and their staff with categorical firsthand validation that they have made the right choice and switching their business to <unk>.
And I was at the end of July we have over 540 unique accounts in the United States. Now these are ambulatory surgery centers in hospitals.
Who have implanted patients with the Ixodic system.
As you can imagine some centers have multiple implant or so we are reporting out only about the about the number of centers not the number of physicians.
Over 100, new accounts implanted device devices in May and June and another 60, new accounts were added in July.
So these 540 accounts represent approximately 50% of the top and planting centers.
That practice synclinal modulation in the United States and we further estimate that these accounts or the centers account for approximately 15 to 20000 implants on an annualized basis.
Now further since R. U S launch in November 2019 over 135, corporate agreements with national and regional ideas as well as large urology groups and ambulatory surgery centers have been find that allow us to allow us access to do business in these facilities.
Now included in this group or 12 of the largest 17 national I D N as in the United States.
And we also have dozens of additional agreements currently in process and expect that the majority of these remaining agreements will be wrapped up by the end of the third quarter.
No on the R&D front, we are working diligently diligently on a long lived.
Non rechargeable device to round out our line of Seiko no modulation systems.
Now in closing.
I'd like to say that we continue to make excellent progress on our vision of being the global leader in cycle No modulation, we're grateful for the trust.
A rapidly growing number of physicians in patients had placed in <unk> <unk>.
Innovation that were bringing to second modulation gives us confidence that exotics therapy is on our way to becoming the preferred treatment for urinary Val dysfunction, where bullish about the future prospects of <unk> and then they said many times before we are working diligently every day to fulfill our commitment to the implanting community and their patients.
So at this point.
I would say that we're happy to answer any questions that analysts may have at this time and I'd ask the operator, two Q folks up thank you for them.
Thank you for centuries, ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove your thoughts on the Q.
The pound key.
Our first question is from David Louis from Oregon Stand you line is open.
Hi, This is marissa on for David can you hear me okay.
Perfectly high Marissa.
Hi, great.
So the first thing I wanted to ask is just a confirmation of something you indicated on recovery.
I believe you had indicated last clear that you'd like tracking it around three.
We can be revenue run right I'm tired of Coca 19 is that correct state, you're indicating today that you're talking.
I thought that level.
Pretty close.
Okay, Great and then the second thing I wanted to ask is just.
On the lines with a 540 unique center. Thank you have today can you confirm that that G.
The 350 centers that that I believe you gave us last corner and then secondly, if he could help us understand how the concentration of implants as being spread across the 540.
And maybe if we looked at back at the 350 account that you had.
As of last corner help us understand kind of what percentage I P. R.
And perhaps are coming from Dallas Center, Arizona.
Or penetration within those centers.
Kentucky definitely.
How the balance as.
Penetration and fucking today, thank you very much true yeah.
That's a pretty interesting question, it's a good questions. So.
Let me just.
Clarify a few numbers right. So today, we have 540 unique.
Accounts in the United States.
We reported out recently in our pre announcement the number was 485 or 486.
So the delta between those two numbers is the number of accounts that we we've added in July.
And then from.
The pre pandemic number alright.
Which which.
Neil 375, Okay, which was I think 375 at the end of Q1. So we went from 375 to 485 those are the.
We picked up in May and June.
And then some additional accounts that came on board in July.
Now what I tried to communicate in my prepared remarks is that these customers are not stocking right and that they are consistently reordering product. So what I can tell you is that we I don't know of any instance, where a customer John joined us or started with a say in November or December and.
It has not re ordered from the company people are reordering consistently from from from the company now as you know.
The recovery from Covid has not been.
How should I say consistent across the board so as I've been talking with these physicians personally I hear a lot of different stories. Some people say other close to back to where they were some people say there at 80% some people say less than that.
Some people talk about lots of procedures that had to be rescheduled and or patients that had been lost now completely dropped out because they don't have a job and they don't have insurance all kinds of other stories and reasons and so I think it's very very difficult right to really speak about these numbers.
And try to come up with hard trends that are meaningful.
Somebody to try to predict the future just because it's scattered and it's all over the board and there is no two stories that are consistent so.
I hate to give a mish mushy confusing answer, but I think that's as bad as authentic as I could be in terms of providing the details now.
We have not yet done and analysis that is detailed enough for me to sure about quote unquote same store sales right. So as time goes on and we begin to Normalise.
We will consider reporting out on.
Okay, great. Thanks, again, and congrats on the corner.
Thank you so much.
Your next question is from Bob Hopkins from Bank of America, You line is open.
Technical difficulties apparently.
Bob if you're there you might be on mute.
Okay. Good in the next question, operator, and will come back to Bob.
And you just try this one.
Mr. Hopkins Your line is open.
Can you hear me perfectly thanks, Bob Pine Oh, sorry.
Okay, and you're prepared remarks, you said something to to check the 20% of your implants have been.
Micro replacements or sorry interest and replacement did I hear that correctly.
Yes, Sir 100% correct.
So.
That's an interesting statistic because I doubt a patient is going to that's gotta be entirely physician driven at this point and is that a significant uptick from because I thought that number was just a a small handful and maybe that's the previous quarter. So just wondering if you could just sorta classics that out a little bit.
No. It's been interesting I mean, it's been one of the phenomenon that <unk>.
<unk> seemed really from the introduction of our device. So this number of around 20% or above 20%. We've kind of stated it both ways has been pretty consistent.
And continues to be.
A trend that we're seeing.
Now clearly.
It's not as if we've done a bunch of DTC advertising patients are coming in and actually asking right for <unk>.
In the future that might be nice that that would happen but.
Is clearly a physician driven initiative right, they're the ones that are suggesting to the patient who are coming in.
For any one of a number of reasons that could be battery.
<unk> and it could be need for MRI it could be that there don't want to sign up for multiple surgeries I mean.
Many reasons that that they have shared about why they're doing this.
The facts are that this is actually what's happening.
It's.
A positive surprise for our business, it's not something we counted on.
But it turned out to be a phenomenal.
How should I say.
Situation for us because these patient they're acting as their own control right. They are able to see and feel and experienced the difference in symptom relief with our device versus what they had had historically in their body.
And that is without exception without exception these patients are coming back in.
Talking about the outstanding symptom relief that they are experiencing and they also talk about how easy it is to be able to interface with our device with our patient remote so I could go on and on but give you a chance to ask a follow up or something else. So.
Yeah. Thank thank you. That's that's helpful. Just curious given uniqueness of the times are in.
Can you tell me what percentage of the revenue in the second quarter what happened in June and then I was wondering if you could comment on how would you lie compared to June.
July was definitely better.
And then then June I mean.
What I I.
I think Marissa may or May have asked this in some way but.
So we saw in July.
Kind of a return if you may to the pace of orders that we had experienced kind of let's say in the February into March period of time right January we were ramping.
And then the third week of March the bottom fell out and this is not.
Does not new information for anybody here, so but June.
The first really good month for us and that was about 70% of kind of the historical average now we don't have a year over year comparison, because obviously, we weren't selling in the United States last year.
But July was definitely better than June and buy a pretty good margin.
And we are and I can tell you that so far August is looking really solid as well so.
Were real real pleased with the pace of business right now, it's not to say and I'm sure that should come up anyway. So I'll just answer it it's not to say that we don't have headwinds in certain geography's and this.
I don't want to spend a bunch of time, saying the same thing that every other reporting company has talked about this week, but we all know that.
Is difficult it's slow sledding in Miami right now.
Places in South, Texas or difficult, there's other hot spots in Arizona and other places around the country. So.
There are these geography's.
That are difficult right now and that we're starting that we've seen headwinds.
But this is this is the world we're living in today and we continue to persevere.
And for every area that has a bit of a slowdown we're getting a pick up in other areas that don't have as much virus activity. So.
Hopefully that gives you some context, Bob about what's happening in real time.
No it does and I just I just Wanna ask one more question in terms of when you look at the accounts, where you're having success.
Is it the current situation where you're getting.
And the account that you're in a significant amount of market share or is it more of that it's 50 like are you are you 30% sure.
Across the board or is it more like 80 and someone's here I just wanted to get a sense for the variability in market you are in the account since you're penetrated thank you and I'll joke yet okay. Thanks, Bob. So fuck. This is also really good question and as you could imagine there is no consistency to that answers so I have to be.
A little careful in the way that I state. This so what I would say to you is that for the most part.
We have wholesale switching to <unk>.
Alright, and they're more folks that we are working with that's exactly what they've decided to do.
I don't have exact percentages and this is in some respects will always be a bit squishy.
As you might imagine.
But we have a lot of our customers that are absolutely, 100% all in with exotic.
Now there are some.
That have been splitting the business.
Which obviously is something we would like to change alright, and we're working diligently.
To get more of their business because of the reasons, sometimes that we get as to why they might have been still splitting their business or just simply not logical.
They're not on the merits okay.
They may be some relationship piece, they et cetera, et cetera, so, but there's very rare do we actually have an account which is dabbling with our product right. That's that's really we don't see that hardly at all so.
That's the best way I can frame it but.
Just so we're clear.
If you run numbers and we look at the end of third quarter, and we look at our revenue and I don't know, we're going to get equivalent reporting from Medtronic likely not.
But the fact is if somebody concludes that we have X percent of the market, 25% 30, 35%, 40% whatever the numbers that you all conclude.
The fact that the matter is like what I can tell you that's not indicative of the sure we're getting in the accounts that we're working in.
That's indicative of the factors half of the market has not come our way yet for one reason or another.
Very helpful. Thank you. Thank you bye.
Your next question is from <unk> from Wells Fargo. Your line is open all right. Thank you for taking the question shelving for Levy.
I was wondering if you could talk a little bit more about the face of recovery that you saw and the second half of July going into August horses.
The second half of June going into July just thinking about the trends here.
And then.
And then with respect to competition and thank you for providing the color that but I'm just wondering if there's any change the a strategy given that mechanic well can you look to bundle that go ethanim devices, the prime resale, Linda rechargeable device as well as the broader product portfolio and then I have a follow up.
So I think your question was.
They're distinctions between the beginning of July versus the end of July and the answer is no. The July start start the velocity.
Or exited velocity of June was very good it continued that way through the entire month of July I do not have a.
I track these numbers very closely literally every single day.
And the fact is there wasn't like.
Lower volume in the beginning of July followed by much higher volume in the in July it's been pretty consistent in that level of new orders coming in has been consistent.
From the beginning of July through the end of July into the first three business days of August so.
So really not much to report about that.
This concept of bundling.
Completely disagree with the way you frame that.
The fact that matter as a patient needs either.
They need to Synchronal modulation device.
There.
Either Exxon X or Medtronic, and what you don't see as a lot of these customers who want to carry a bunch of different product right. That's not what they want to do so typically going to go with either us or they're going to go with Medtronic. That's just the reality of the situation.
And.
No bundling of anything else with Synchronal modulation, let's be clear about that.
<unk> and you're going to college Medtronic doesn't sell other products.
There's nothing for them to bundled together and you're not going to bundle.
Old interesting to with the with their new product right, they're just going to.
Offer what they offer and patients are going to make their selections however, it might be.
And what we have not found.
Is that somehow mother, Medtronic has been able to bundle all their other products that they sell and somehow keep us out of the supply chain arrangements in hospitals. So that's just not something we've seen and it may have been.
The fact that they had a monopoly and they never thought about it it wasn't where I'm concerned about it I don't know what their strategy might have been or whatever but I think I'll just add finished by saying.
Customers appreciate competition.
Okay. They get it they understand it they think it's good.
As we do so we think it's great and by the way congratulations to Medtronic for stepping up in developing a small rechargeable device. That's MRI compatible that's fantastic and the rising tide is going to float everybody's boat in this market. So we applaud them for for making that investment.
We believe we've got a better product, we believe we will prevail in the end and.
We're going to we're going to match them clearly and we're going to continue to innovate and do things that delight our customers.
That's really helpful color if I could just ask a question on pipeline you plan to file your primary sell device in early 2021, what percentage of patients prefer primary so.
And then how are you thinking about the pipeline beyond your time resale devices and thank you for taking the questions.
So I'm not going to answer the second part of the question Alright, I think we.
We probably disclose way too much to begin with.
So we'll leave it at that <unk>.
We have said that.
We do intend to introduce a primary sell device I can tell you that that devices well down the path and we're entering into our validation of verification testing and that we fully expect to be able to get that file into the FDA in the early part of 2021 now.
Can't Rush these things because if you want to claim long life in the body you have to do accelerated life testing and there's a lot of other.
Work that needs to be done to provide the test data so that it can get into the FDA with a good file and not to get bogged down.
And back and forth with the FDA with technical questions and so forth. So we've been pretty good about putting really solid files in front of the FDA as you've seen we know how to do that.
And we've been very successful, particularly of late in 2020 and getting things approved by the FTA. So we're going to continue on that on that street. So thank you very much for those questions.
Thank you.
Your next question is from Adam meter from 5% or.
Your line is opening.
Hi, guys. Thanks for taking the questions and congrats on all of a success so far.
Maybe just to start on.
New accounts, you've obviously made a lot of progress thus far into launch. Thank you talked about being in more than 540 accounts to the end of July and we can see the the strong sales numbers and sorry, if I missed the snare prepared remarks, but it would be helpful to to get a better sense for higher thinking about the pace of new account adds going forward.
And then I think you said that you're in 12 17 largest idms do you have disability or line of sight on the remaining five and then I had a follow up.
Sure.
So thanks, Adam so.
I'll take it backwards.
Yes of course, we have line of sight on the other five because we're working on them.
And what I indicated is I would expect that we would have those agreements wrapped up by the end of this quarter.
It's nothing of this is controversial just takes time and some of them.
Faster and more attentive to.
And others.
Some of these.
Large hospital systems have indicated.
Oh Gee, we got Cove, it and we're not taking on new things at this time or they all have their stories that they like to tell.
And we just have to kind of work through that so we will we get every single one of these.
[noise] no right I mean that would that's pretty high bar right.
Full sweep across the board.
But we're working.
We've been really successful I mean, we have I think the number I indicated was 135 or so now. So this is a normal course of doing business for us and and it's necessary as you know Adam unless you get the Green card from these hospital institutions are these large large institutions you can't go in there and sell the product.
Have there been a couple of across the country that have been very very difficult.
Because they fall into the wireless camp and they put up these fake barriers sure there's been some like that and we just need to keep moving on.
Now I'm going to ask Neil to help me repeat your first part of the question pace of customer ads for that Okay got it.
What I would say is this it's difficult for me to predict this right I don't have visibility right to how many new customers are coming on board I would just say to you that we are the company.
Are absolutely thrilled with the pace of customer acquisition and exceeded and has exceeded and continues to exceed our own expectations. I mean that is the first way to say it I think Adam if I had told you or any of the analysts on the call today that we would have in the middle of a pandemic over 500 customer.
Which of come our way and ordering product from Ixodic. So if I had said that to your six months ago. You to said man you got to go.
Get one of those tests done right.
Make sure that you still got all your faculties right I mean, it as far exceeded our expectation I think it's testament to the fact that a we've got a great product we've got great people in the field, but Moreover, the words out alright, we got the goods product patients are doing really well with our device and I've said, many times and we say to these cut.
Tomorrow for X Sonics it starts.
With the patient experience, that's what we're focused on when I focused on marketing propaganda, making up stories, we're focused on making sure that our patients get good implants, because we are competent people in the field and that they get programmed well and they don't need reprogramming. So the address that one in advance alright and that these patients.
To do well and they come back in and they tell the physicians, how well, they're doing and they talk about how easy it is for them to communicate with our with their implanted device because of our patient remote control system and.
Characterization that we have this plastic thingamajig with one program.
That's just really inappropriate right I mean, that's the star of our show people love that patient remote because it's easy to use.
And by the way it looks like an Audi key Fob goes on your key chain fits nicely in a woman's purse and it doesn't look like a medical device full-stop. So thank you for those questions.
Thanks for.
For all that color and just maybe for my follow up if I may I know market awareness therapy awareness is.
An important part of the strategy you said just would love to get your.
Thoughts around DTC initiatives I stopped that you may be potentially had pulled for those timetables just give them a strong start.
Is that correct and maybe just help us thanks Bro.
Timelines and kind of a give us a better central what Olsen.
Those will until thank you so much sure. Thanks, Thanks, Adam look I think that.
It's.
Kind of difficult position because.
We have only one thing to talk about right went out of 30 billion dollar revenue company and so we want to be.
We want to keep some stuff in our back pocket here and not just lay out the entire strategy with tactics so that.
Our friends in Minneapolis.
Can can replicate what we're doing so.
What I will tell you is that we fully intend and we are working on dipping our toes into the DTC waters, we're going to do it responsibly, we're going to measure it and we're going to make sure what we're doing makes sense. So.
We are engaged on working on content, we're looking at doing stuff and the digital world.
And in the real World and I'll just leave it at that for now and I will tell you that when we have things to report about.
We will right when we have some actual stuff.
The fact that matter is there are predicates here.
Or or analogous companies to look at we know and you know directly.
Inspire medical has done a really nice job and creating awareness for there are no modulation device for sleep apnea.
And euro lift which is now we all know owned by Teleflex has done an excellent job as well in this area. So the notion that device companies can't do DTC and can't get results has already been debunked and proven that companies can generate additional interest in their product beyond just what physicians can do.
Across the table from a patient and so.
Obviously.
We are paying close attention and.
Whatever we can do too.
Create some more awareness in this category.
I think is the responsible thing to do and I think it's the position that a company that intends to be the market leaders should be doing.
Very helpful right. Thank you.
<unk>.
Your next question is from Kristen Stewart for Barclays. Your line is open.
Hey, everybody. Thanks for taking my question.
I don't know.
If you could maybe help me reconcile just.
Add a number of the accounts that you guys are making great progress I'm, just with the run right itself.
Not to kind of nitpick by any means but I'm just trying to reconcile.
Added the great number of accounts at this point that.
Yourself running at run right, that's pre pandemic levels, and maybe just more of a meeting indicator rather than.
Backward looking number I should be thinking about.
Let me let me let me stop you let me stop you there just to address that Chris and that's a really good question and maybe I Should've said it.
Because it is a leading indicator yes. It is a leading you've got to get the account and they need to order.
System or to to get started first before you're going to start to see the revenue follow so it is absolutely a leading indicators the tip of the sphere.
And that's the reality now the other part is that we are in a pandemic. Okay. I mean, this is not normal times and you cannot.
Measure these things.
In the normal kind of way because each practice has got their own challenges right I mean as as I've been speaking directly to these accounts I'm really surprised that the variability.
You got somebody who did came out of the box really fast with US did a bunch of procedures in November and December and January and then things started to go downhill.
Obviously in March and then their business just stopped and then it took them a while to get back right. We even had some physicians who who got.
Corona virus so.
We just need to all be a little bit patient I think.
And so forth and but we're not making apologies on the fact that <unk>.
60, something new accounts decided to give us a orders in July and that 110 or 100, whatever the number was that came onboard in may and June and we need those accounts. If we don't have those accounts, we're not going to get put the numbers on the board. So.
I think you correctly have made this assumption that it's more of a leading indicators and that's the reason that we're we're sharing that information alright, we want to give some insights into the direction that our business is going and that this gives us. This is what gives us the confidence.
Alright.
The business will continue to increase over.
The short and longer term.
And then I guess on that new have confidence you feel with.
We're kind of.
Numbers are.
Just given what you've seen so far with July.
Trends.
Consensus numbers, I guess out there would indicate kind of.
<unk>.
Kind of 50 ish millions spread out between.
Third and fourth quarter.
The year.
Just kind of brighten that $15 million I don't think you quantify it exactly how much of the revenue was kind of out in June and all that but it certainly sounds like it was perhaps a fair chunk, but it seems like you're running at a pretty good clipped to be able to to that.
Sure I think I think what <unk> said without we've been consistent this year. We may change are tuned for next year.
Because we will have some comparison, but.
What I said in my remarks, where that we are fully confident that we will meet or exceed analysts consensus in the second half of the year and that by the way includes Q3. Okay. So this is not a backloaded tricky comment that I'm, making so things are going quite well for the company.
And were highly confident about this and.
Honestly unless once again unless other factors conspire against US that we are unaware of at this time I E. The pesky virus gets in our way then were highly confident that.
$50 million in the second half of the year should not be a problem for us.
Okay. Thank you.
Thanks Kristin.
Your next question is from Kayla Chrome.
You're lying is open.
Hey rates, David rescue them for cable thanks for taking the questions.
I appreciate the commentary around some of the expectations for the second half of the year, but as we dig a little deeper as you think about the overall pipeline of patients who either we're already engaged physicians are those who it is scheduled procedure that was ultimately canceled.
Could you provide some color on the size of that backlog and maybe what portion of these procedures, we're performing the second quarter.
And then what the outlook for the mix of new patients versus those backbone patients would imply for the pipeline and Q3 Q for.
So that's an interesting question and I know this is a question that other companies have tried to answer and some provide more color than others. So here's my view right now on August the sixth of 2020.
We don't have a backlog of patients.
And there aren't anybody who cancelled because they lost a job and don't have insurance and have no money, they're not coming back okay, maybe when we have the vaccine.
So we're not tracking it when I focused on it it's just it for US we'll just.
Focused on what's happening today, we show up.
When we get our people are showing up for every procedure, we do the procedures when program. The patients I mean, we're just it's a normal course of business.
What any one individual physician has if they've got a couple of patients that are needing to be rescheduled that we're not we're not in that.
We're not in that mix right.
So it's not something we're tracking it's to me it's historical.
Whatever happened.
Got cleaned up in May and June and.
It's kind of completely irrelevant now might there be a few accounts that have a few patients that are being rescheduled or whatever the case might be sure, but that's not really in play for our company at this time and I want to remind everybody that the way. This works as that patients like they walk in the door and.
They get differentially diagnosed in there in that practice for quite some time before they actually get a implant alright. These are patients that.
Had to get worked up and that May have happened some time ago and I won't put a number on it but they got a drug how did that work et cetera et cetera that relieve their symptoms.
Nine nine to 10 times know.
And then the patient has got to come back and then they talk with them about.
Of the options, we can do botox, we can do cyclonal modulation people need time to think about it I mean, but.
<unk> doors, so to speak right patients are coming in every single day and some of them are ready for third lying therapy summer not et cetera et cetera.
It's a process and it's a process this different in every.
Clinic in every office and every institution and is no consistency here right.
So it's not something that we have this great visibility into any individual customers pipeline and to be honest with you. If you ask them, they're going to give you a very similar answer that I just gave you.
These are it's not like.
They're running some sophisticated metrics inside any one of these larger allergy groups or whatever they're they're just kind of dealing with stuff is it presents.
And that's just the truth.
Okay.
Okay. Thanks, that's that's helpful second one for me.
I think we've seen some of the players across the Med Tech who are a single product offering an a single market segment kind of outperforming and on a relative basis, and then gaming market share from competitors, who are more diversity offer more diversified portfolio. So in that context, I know you provide a lot of commentary around you know the approval there some micro but could you provide some some.
[noise] color just around how often all depend demick has changed the views on the competitive landscaping and ultimately what your your overall market positioning here contention it'd be just like I said, given the context I'm kind of these single offering company jail outperforming relative basis with some of these larger diversified portfolio companies. Thanks.
Oh, that's interesting question, but I don't really think I can answer it.
I'm a student of the game I pay close attention to other companies that are in our space in medical devices.
I think what.
Inspires doing and Shockwave and silk medical and <unk> and all of these other companies I mean.
This is are kind of crop or group of companies. As you say that are singularly focused on markets I think it just underscores that we're in good. We're good we're in a good position to do well as companies because we're focused 100% focused on the fries and so I think the whole group of US I think for the most part has.
Performed quite well and you should expect <unk> as well.
I'm not sure I could really add more color than that.
I appreciate the question.
Thank you. The next question is from Mike Madison from medium and company you line is open.
Alright, thanks, Thanks for taking my questions.
Guess, so I have one more kind of Medtronic related question I'm sure your secondhand certain days, but.
Just.
Based on their press release.
It seems like they were talking about this choice concept.
Offering rechargeable and non rechargeable versions of the product and I understand that.
I heard you answered on the bundling so I'm not asking about that but just the fact that they have two types of products and you guys. Only have one then look I know you've got a non rechargeable in development and you'll have one eventually but in the interim period.
How do you kind of account or that I guess.
Well I don't think.
Okay first of all thanks, Mike. It's a good question I. Appreciate the question I understand that may be a thought that other people have on their mind.
The fact that matter is that.
Is no recharge free system that is available in the Cyclonal modulation category today, using those words very carefully because I'm parroting, what the competition is saying about into stemmed too interesting to is not a recharge free system.
Interesting to has two elements that are part of their patient remote control system that need to be recharged they need to be plugged in the wall. So.
The fact of the matter is that is a short lived device and I think that the issue here is about length of time in the body alright.
And also the size.
Of the of the implant and someone so forth. So let's just go on length of time in the body.
The competition has a product today that only on average last three to five years.
You can't make up a story about it lasting longer because it doesn't okay. Now that is not a good alternative for patients and very few patients are going to pick a product that has a short life now even if you're 75 years old.
Alright, which is not the average patient our average patient is 55 to 57 years old and it's a woman.
Now the fact is that you're just not going to choose that one alright.
Why would why would you pick a device that's only going to last three to $5. In your body that is large okay and has been known overall these years to be really fussy. When you now have a choice to pick a long live device. So I think you're going to see that device no matter, what they say I think you're going to see.
Sales of that device start to really go down aggressively and by the way we're picking up those patients that had this device and their body in pretty big numbers as we have shared on this call today. So the focus here is not about choice.
One vanilla chocolate or Strawberry I think it's about length of time in the body and I don't think that that is an attractive alternative for people to choose now I can tell you that are rechargeable device is not going to be at three to five year device alright. So you get my sense about it so we're not going to come out with a meat two product that's short.
Lift.
So I really think Mike.
If people just take a step back and think about this I think you'll come to the same conclusion that even the older patient is not going to choose.
Ah device that is just going to last a few years in the body. So from that standpoint, now now I think now that we've debunk. This notion that somehow recharging is not something that patients with urinary about dysfunction are going to be willing to do we just like the pain patients have proven that in spinal cord stimulation, they're going to choose longer lived.
<unk>.
Now that we've debunk bat I think the games going to boil down to.
Which are you going to go with a you're going to go with a small rechargeable MRI compatible device from X Sonics or are you going to go with a small rechargeable device from Medtronic.
And quite quite frankly, I think we have significant advantages over what they have at this time and so we still feel like.
If there is going to be a choice and I think that you're going to find that most customers are not going to be saying, Hey, you want to buy the green one you wanted by the Blue one Bob Blah Blah I don't think it's going to go that way. These physicians don't want to carry a bunch of products. They don't want to have inventory.
If there in in ASC, it's either you can double underscore my comment and if it's in a hospital environment. The supply chain people. They also don't want to stock a whole bunch of products. So does that mean that there's some places that we may not be able to do business. Okay fine, but there's other places that they're going to have made their decision to go with <unk>.
That's the way it is going to be so sorry for such a long winded answer but on the other hand, I think it's important to provide this level of context to understand it's not like you've got.
Two fantastically great products into Medtronic basket, you got one product that has been proven it just doesn't work that well, it's not that attractive and you've got a brand new product that.
Other than the first patient who got implanted the other day in Cleveland No nobody has any information about how well this product works so time will tell.
No that that was very hopeful makes a lotta sense. So thank you and then my my other question, which is P. About the reimbursement changes that you called out six at 8% what does that translate to on one dollar basis I don't know if you have that information here, but but.
It's a good number and obviously, it's a good thing that it's going up but to me I'm not sure doesn't really seem like it necessarily be a needle mover, but it needs to your perspective on that thank you.
Mike Thanks.
At a needle mover I don't know, but.
It was interesting that some of the calls with physicians.
And the last couple of days base pointed it out there like Hey, Whoa I noticed that reimbursement is going to be going up so they're paying attention.
And.
I think you're talking about it's a few hundred dollars.
That.
That we're talking about in terms of increase is it going to is it going to add.
A big number to the size of the market no, but it's a lot better than moving and the other direction.
Yeah. Okay. Thank you that's all thank you. Thank you Mike appreciate the questions.
Your last question is from Daniel and Housie from SBB Leerink. Your line is open.
Good afternoon. Thanks, so much for taking the question.
Thank you Daniel.
Get that just write just to follow up on.
The commentary around Medtronic replacement and how.
It's been a upside surprise for you guys and for US I mean, we certainly weren't modeling any real revenue stream from that can you help frame what the opportunity is there on an annual basis going forward since that now it does seem like a real area where are you guys are winning that's my first question.
Yeah, I think you've got to you just got to go back in time right. So if you go back for years ago, and you say alright, how many implants did medtronic do and and the answer is let's just I'll pick a number it's probably around 20000 or 25000. Okay. So you know that that's how many patients now five years hence.
Will be available. So I think it's the math is pretty straightforward I don't have it off top my head, but you get the idea there's that many patients that in theory should be then available for for replacement. So it's a pretty it's a pretty good honeypot actually.
And.
I will give you an inside baseball comment.
Mechanic made a decision.
That.
They're old product.
Or I should I say their new product.
They've just introduced is not backwards compatible with the already implanted lead.
Nor is the ability.
For anybody to use the old lead and for the device to be MRI compatible.
So the fact that the matter is the decisions that they've made strategically from a product development standpoint put all of their patients and play.
Alright.
That's what's going on here alright, there is no. They don't have a product that is now backwards compatible that could be that could be MRI compatible as well so why would anybody.
Alright, just take an old interesting too and just plug it back in when the when that battery when the battery depletes of that existing product why would you just plug another interesting to into the ready plan and leave because now that patient once again, if they need an MRI they have to get an X plant.
Yeah.
And it's not going to last very long. So you can see what's happened here and.
That that is part of the reason why these patients are and play for us. So what's our goal. Our goal is that we want to get at least half of those patients.
In the <unk> camp and that's the game.
Got it and then one one last question for you here.
Yeah added the 1000 or so target center as you ran over 500 at this point, but you've talked to all of them. So are are there any similarities across the centers that you haven't gotten could penetrate yet and what's the strategy to flip though centers at some point in the future. Thanks, so much. Thanks.
That's a good question so.
We're continuing to call on all the centers around the country.
A lot of these accounts. If you may are embedded in hospital systems and the fact that we've just recently signed a bunch of hospital systems coming out of the.
Dark days of the pandemic I was going to say.
Post Cove it but that's that's not true okay, we're still dealing with this.
So a lot of it is that right. It's a lot of the remaining accounts that are out there are most part found in hospital system.
Alright, and these hospital systems, particularly these regional or national ideas. They have a lot of tentacles right.
It's not like there's two hospitals here, we're talking about systems that have.
2030, 5100 institutions, and so you're going to find that the new a lot of our new accounts are coming from hospital systems and that that is what we're seeing we we were able to get a lot of <unk> and the private dogs that are doing business in ase's, that's where the bulk of our business came from.
Earlier, alright, let's just say pre the pandemic.
Because these hospital systems take longer to get these agreements done now we're seeing a lot of the new accounts are coming from actually from those contracts from those hospital system. So our business is going to start to shift also.
As time goes on where it'll be more 50, 50 hospital outpatient procedures and asc's, whereas before we were more heavily weighted towards just ASC. So so that's the that's the most factual.
Answer I can give you and then you say how do you going to get an account well.
Good salesmanship and sharing quality information and also leveraging the.
Physicians and their experiences.
To get them to sure.
Across the board with their colleagues, how well things are going with this this new entrant with this new products. So it's just.
It's one O. One it's just basic blocking in tackling and going out there and doing the work.
Thank you so much.
Thank you Danielle.
Ladies and gentlemen that concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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