Q3 2020 Silk Road Medical Inc Earnings Call
[music] good afternoon, ladies and gentlemen, and welcome to the Silk Road medical 2023rd quarter earnings.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call as being recorded.
I would now like to turn the conference over to your host Ms. Caroline Paul Ma'am. Please go ahead.
Thank you and thank you all for participating in todays call. Joining me are Eric or Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating Officer.
Earlier today Silk Road medical released financial results for the quarter ended September Thirtyth 2020.
A copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that 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, those relating to our operating trends and future financial performance.
Dr. COVID-19 on our business and prospects for recovery expense management expectation for hiring physician training and growth in our organization and reimbursement market opportunity guidance for revenue gross margin and operating expenses in 2020 commercial expansion label expansion and product pipeline development are based upon our current.
Estimates and various assumptions these.
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 statements. Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factor section of our quarterly report on form 10-Q filed with the Securities and Exchange Commission on August 13th 2020.
This conference call contains time sensitive information and is accurate only as of the live broadcast today November 10 2020.
So Craig medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise and with that I will turn the call over to Erica.
Thanks, Caroline good afternoon, everyone and thank you for joining us for Silk Road Medical's third quarter earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Our third quarter results are a testament to our team's steadfast commitment to stroke prevention and the underlying severity of carotid artery disease.
We achieved total revenues of $20.1 million, reflecting growth of 18% year over year, our topline performance was driven by 25% growth in procedures for a total of approximately 2825 in the quarter.
These encouraging trends, we remain cautiously optimistic about the fourth quarter, recognizing strength and procedure volumes and underlying demand, but also acknowledging the very recent trends and potential negative impact of the COVID-19 resurgence that being said we are incredibly proud.
About two ever recently crossed the 25000 cumulative procedures milestone a testament to our team's drive and the underlying market opportunity.
Over the course of the year, we have been strengthening our ability to drive long term growth. We are investing meaningfully in R&D initiatives expansion of our commercial team and the recent launch of our new website, featuring our brighter campaign the future of Silk Road is indeed right.
We are also positioning our leadership and organizational structure for growth ahead.
As we announced earlier in the year, Andy Davis is spearheading our commercial efforts in the newly created position of Chief commercial officer.
Andy continues to have a monumental role in our commercial success by driving safe adoption of key car across the United States, while gearing up for future label expansions product launches and international strategies.
We are also pleased to have announced bill Whalen as our executive Vice President of R&D Bill brings two decades of scientific and development leadership to Silk Road, where he is responsible for advancing our pipeline and expanding our intellectual property portfolio.
Bill has a passion for identifying and solving unmet clinical needs and a proven track record leading innovative R&D teams he will be instrumental to our growth both today and tomorrow.
And finally I am excited about the promotion of Lucas Buchanan, who now has an expanded role as our Chief operating Officer. In addition to Chief Financial Officer, Lucas his deep knowledge of our business and strong leadership skills make him the ideal COO as we scale our order.
Physician and pursue new strategic initiatives, while maintaining operational excellence.
Turning now to the three strategic initiatives for 2020 that we outlined at the beginning of the year.
We are making significant progress on all three.
US commercial execution developing our strategy for label expansion and coverage for the standard surgical risk patient population and further pipeline development.
Starting first with us commercial execution.
We remain focused on our large untapped market opportunity to drive key car penetration in high surgical risk patients through increased physician utilization.
While expanding our base of sales territories hospital accounts and trained physicians.
We have continued to add to our talented commercial team and remain on track to end 2020 with 40 to 45 active territories.
Our team has also done an excellent job training physicians in new and innovative ways that adjust to the realities of the COVID-19 environment.
After the dip in training in Q2 that we talked about on last quarter's call. We have successfully pivoted to new methods and we are quite pleased with our training progress in the third quarter demand for key car training remains strong.
As further validation of our platform. We are also honored by the recent peer reviewed publication of the ongoing T. car surveillance project in Annals of surgery in September and our roadster to study in the American Heart Association Journal stroke. This past July.
These data sets in high impact factor journals.
Enabled the benefits of T. car to reach a broad base of referring and treating physicians across.
The stroke care continuum, and further validate our ever growing clinical evidence base as it reaches payers regulators medical societies and other critical stakeholders.
Collectively these papers represent over 7000 patients worth of data published in just this quarter.
In this business clinical data is a major tailwind for long term growth.
And now shifting to our second key priority, providing more clarity on the regulatory and reimbursement strategy for standard surgical risk patients.
We continue to make meaningful progress on our ongoing discussions with key stakeholders, including the FDA.
As previously disclosed we have been targeting the end of this year to discuss our strategy in this area in more detail.
Well nothing substantial has changed in the assessment of our strategy the process of working through it with the FDA CMS and the society of vascular surgery is simply taking more time.
As a result disclosure of our strategy is likely to occur after the end of the year.
Our goal all along has been to reach an optimal path forward to obtain not just expanded FDA label, but also Medicare coverage and ultimately adoption and we remain on that path.
Finally, our third strategic priority is focused on continued pipeline development, we consider ourselves experts and transcribe it access and neuro protection and we have made meaningful progress on product development not just for T. car, but also in acute the scheme mix stroke.
We are expecting to move into clinical and regulatory activities for our Neurovascular program next year.
While much has been achieved in acute stroke thrombectomy in recent years significant unmet needs remains in terms of patient outcomes and we are excited about the potential for trans carotid therapies to usher in a new paradigm.
In summary, we are continuing with our progress on our long term initiatives and we believe our opportunities in stroke prevention and acute stroke treatment are brighter than ever with.
With that I will now turn the call over to Lucas to review our financials in more detail.
Thank you Erica Red.
Revenue for the three months ended September 32020 was $20.1 million at 18% increase.
From $17.0 million in the same period of the prior year.
Growth was again driven by increased adoption of CICC are across an expanded base hospital accounts trained physicians and active sales territories.
Partially offset by regional headwinds related to COVID-19.
There were approximately 2825 T. car procedures performed in the third quarter of 2020, representing a 25% increase compared to the same prior year period.
Gross margin for the third quarter of 2020 was 73% as compared to 76% in the corresponding prior year period.
The gross margin decline was due to unfavorable production variances as a result of temporarily idled manufacturing operations early.
Early in the quarter related to COVID-19 as well as the timing of certain manufacturing engineering projects.
Total operating expenses for the third quarter of 2020 or $23.9 million, an 18% increase from $20.3 million in the third quarter of 2019.
R&D expenses for the third quarter of 2020 were $4.7 million compared to $3.2 million in the third quarter of 2019.
The increase was driven by an increase in personnel related expenses and product development initiatives.
Sales general and administrative expenses for the third quarter of 2020 or $19.2 million compared to $17.1 million in the third quarter of 2019.
The increase was primarily attributable to expenses related to growth in our commercial team and personnel related expenses.
Expense growth was partially offset by the continued reduction and travel trade show and other expenses due to COVID-19.
Net loss for the period was $10.3 million or a loss of 31 cents per share as compared to a net loss of $8 million or a loss of 26 cents per share for the same period of the prior year.
We ended the third quarter of 2020 with $153.9 million of cash cash equivalents and short term investments.
To further strengthen our balance sheet and cash flow on October 29th we successfully refinanced our long term debt at a significantly lower cost of capital with a new $50 million loan facility.
As we approach the under the year, we would like to provide some additional commentary on our strategic priority of us commercial execution with the caveat that COVID-19 resurgence could impact our ability to achieve these.
We currently have 40 active sales territories and expect to begin 2021 with 43.
As it relates to physician training, we expect to have trained approximately 325 physicians by year end, which would bring our total trained physician base to just over 1770.
As Eric mentioned demand for training remains strong.
Regarding our revenue outlook for the remainder of the year. We are cautiously optimistic as we continue to execute during the fourth quarter, but we want to be transparent about the difficulty estimating the impact of the pandemic on our near term financial results.
That said our team is resilient our balance sheet is strong and our therapy delivers value, which positions us well as we close out the year and look forward to 2021.
At this point I would like to turn the call back to Erica for closing comments.
In closing, we are well positioned for continued growth and we remain dedicated to meaningfully impacting both stroke prevention and acute stroke treatment and in fact, we recently observed world stroke day on October 29 every year. This provides an excellent opportunity to raise aware.
Dennis of the serious nature and high rates of stroke and the huge burden that places on over 40 million people worldwide, who are directly and indirectly affected by this catastrophic disease.
This year. It is just as important as ever to highlight the prevalence of stroke and remind people not to delay their health care.
I want to thank all of our many partners for collaborating with US on this important cause our team is working us alongside them on this journey to change the standard of care and improve patient lives with innovative technology.
As we like to say at Silk road, delivering brighter patient outcomes through brighter clinical thinking at this point I would like to open the call for questions.
Thank you ma'am, ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue the spreads to pound key.
Your first question is from Robbie Marcus from Jpmorgan. Your line is open.
Oh, great. Thanks for taking the question and congrats on a nice quarter.
I'll just ask both my questions upfront.
You've made to.
Let's call it incremental new announcements on the call here, one about the new stroke scheme of stroke pipeline product. The other about the strategy for standard risk, maybe you could address them separately first.
There is a lot of the ski make stroke products out there I've always viewed two car is a delivery system do we look at this as a delivery system for an existing scheme at stroke product or do we think about this as a totally independent.
New product up your own.
Then second on the standard risk approval pathway, maybe you could give us a little flavor for whats, causing the delays at co bid or otherwise and what's what's the chance, we still need a new trial from start to finish to get that thanks a lot.
Hi, Ravi Thanks, very much for the question good to hear from you today, Let me take those in the order. They were asked let's talk about our initiatives in acute ischemic stroke first.
So I think it's it it starts by saying, we're taking a very differentiated approach to what is available in the market today, Robbie and you know as you well know and as you pointed out it's a very competitive space and therefore, we believe it's not in our best interest to disclose.
All of the details right now there will become a point in time, where it makes more sense to talk about the products very specifically, but I will say this which is we have always been a company dedicated to improving outcomes.
And when we look at the statistics on the outcomes from acute stroke, thrombectomy and find that less than half of the patients do well.
Other words can live independently after a procedure, we see that as an opportunity for innovation and for improvement and so I think it's safe to say, our our approach is quite differentiated and will be aimed at outcomes.
On the second part of your question on standard Rick really nothing substantial has changed Robbie it is simply a matter of time this.
This just took more time.
Then we had all hoped and that's in part due to the fact that we're working with.
The multi headed.
Partnership here with the society of vascular surgery, and the FDA really ahead of all of that and while these entities have been very forthright and forthcoming in their in their assistance in this project throughout the year I think it's safe to say there is some distractions.
Around the table that don't necessarily always make silk road their very first priority and so while nothing substantial has changed we feel good about the path that we're on as we were in the last call. We just need some more time.
Great and maybe just to clarify on the stroke product because the two car system right now use as a core does that.
Is the the whatever device that's going to be used for scheming stroke can you say, if that's a third party products or will it be.
An all inclusive in house product.
Yeah, I think at this point, we're not really disclosing any of the details, but I will say that silk road has been as disclosed in our EPS, one Robbie way back in the day.
Has been working on products in this area for some time and Weve really spent this last year honing.
Our internal efforts.
Great. Thanks for the questions.
Thanks Robin.
Your next question is from Joe and went from Citi. Your line is open.
Hi, good evening, everybody great to virtually to you.
Thank you for the update on standard risk and other products can we talk a little bit of on international expansion and what you're thinking about there.
Yes, Hi, Joanne and good to hear from you sure. We you know we haven't disclosed anything on international in terms of the specific timing other than to say.
Were first working on removing the regulatory barriers to entry in certain markets and throughout the year. We've said, we're focused on regulatory processes in both China and Japan.
It's certainly ending his new role as Chief commercial officer. He has international responsibility now which is providing.
Some additional focus but for now we're not reviewing the details of timing.
Thank you and then my second question has to do a little bit with.
About.
2021 and.
Im not asking for guidance, but what I'm trying to get my head around is how you think about training the impact of a vaccine on your business.
And in terms of any patients that may be sort of in a watchful waiting state that are looking for that entry to come into the pool. Thanks.
Yeah really interesting question Joanne you know we the news on the vaccine is obviously fairly new I think we all knew it was coming eventually.
And so I think it's hard to pinpoint exactly how thats going to change or not change.
Patient behavior physician behavior hospital behavior all of that.
I think it is safe to say that.
Organizations like the American Heart Association, our physician partners their hospitals, they're all working really hard at patient education to make sure that patients don't defer their healthcare obviously, there was strength in our procedure volume in Q3, which I think is a good sign ups.
Patients are doing what they need to do to get their healthcare as it relates to physician training as we said in the prepared remarks.
The demand for training remains high.
And we've been pleasantly surprised by by that focus among our physicians, who also have a lot of other things to be thinking about in this period.
I think we're really proud of our team who has.
Completely pivoted and learned a new and innovative ways to train that that in many cases me may be more efficient and better.
Wonderful thank you.
Thanks Joanne.
Your next question is from Rick Wise of Stifel. Your line is open.
Hey, guys. This is actually done on for Rick.
I just had a question around the procedure number for the quarter.
It kind of seems to imply that the July through September procedures per month on average were similar a little bit better than exar in June which is around 900, and I think that you said on the last call July started off maybe a little less than that just wanted to.
Hear from you any comments on sequential trends you saw within the quarter.
Sure I think I think as Q3 typically is Dylan absence, a pandemic it tends to be back half loaded and there was a little bit more noise in the quarter, but certainly.
We saw strong September as we did in Q3 of 2019.
So those that that trend played out and so.
As physicians and patients.
Potentially took a break and vacations and the July and August timeframe, and some other seasonality and as the different.
Good and bad amplitudes of various regional virus activity plays for US we still had a very strong September.
Got it thank you and set a question on yet.
Moving docs further up the adoption curve and it felt like.
Going into this year.
That would maybe an increasing focus.
With the number of docs that you already had trained not for lack of interest in demand for new doctoring, but yet a large base.
Seems like you'd be spending more time and effort there, but it's always a bit challenging for us to kind of measure or get a sense of the progress there given new docs to dilute the procedures per quarter number maybe coded. So just any way you could provide some color on.
The progress you're making on the adoption front, whether that be more docs moving into a bucket that are doing say, 50% or more procedures as D car anyway, do you want to frame that.
Sure well there again, there is certainly more noise quarter to quarter. This year with the puts a pandemic, but I think the shorter answer the short answer is we continue to like the metrics, we see Q3.
Was a return to a lot of the analytics, we look at internally, including procedures per Doc per time period Q3 was similar to Q1 in that regard. So so a nice recovery back to almost pre coated.
Type metrics, even as we continue to dilute the denominator with with our trading activities in Q3, So thats the good news and.
Looking forward to 2021 and beyond as we've always said we've spent many years building.
Really concentrated footprint of of a commercial team going after a concentrated group of docs and hospitals and what will be our driver of growth in the years to come is the adoption curve. So that is still.
Very much the focus of the team even though we continue to train new docs and add new accounts and add new sales territories, the bias more and more over time is really focused on driving.
Physician utilization and driving procedures in each individual physicians adoption curve.
And so I think I think absent coated overall and some of the different trends, we've seen each quarter throughout the year.
We're still on the right path, which is why we've continued to invest.
Kind of across the board right in the commercial team in physician training events and product development to position ourselves well for the long haul and so tobey never deterred us from that.
That goal those goals and we have the balance sheet to do that.
Great. Thanks for taking the questions guys.
Thank you your next.
Your next question is from Danielle Antalffy from SVB Leerink. Your line is open.
Hey, good afternoon, everyone. Thanks, so much for taking the question congrats on a good quarter and I was just wondering if you could give any color on what's happening. If you have any visibility into that sort of new patient final coming into the system and I don't know if the right way to look at that is sort of a mix of asymptomatic versus Cincinnati.
And how that shifted in sort of.
And the early days of coal bid on or or what and whether you can comment. If you look at Q4. It feels like backlog has largely been worked down and so all of the growth from here would likely be coming from new patients into the system and I didn't know if that was an accurate assessment or not.
Hi, Danielle I'm. So glad you asked that question. It's a question that was on our minds as well [laughter] instantly and so we actually looked at some recent data to try to get a sense of how many patients are kind of new patient visits.
Versus kind of existing already diagnosed kind of patient visits and what we saw was what you would expect is this sort of big dip in new patients in that March April early may timeframe.
And then it was interesting to see how.
Flip back to kind of.
And in that timeframe existing patients continued to come into the into their physicians offices, but but albeit at a slower rate.
What we saw recently was that existing patients are strong and new patients are on the rebound so let.
At least across the board patient.
Visits to the healthcare provider are going up in both categories, both both as new patients and existing patients which.
We find to be encouraging.
One of the other things that happens of course in our businesses. There is a fair amount of the business that is symptomatic is typically about a third of our procedure volume and those those patients tend to be kind of more urgent in nature and those continue to happen.
Throughout this last quarter.
Got it that's helpful and then just.
Another question I know, it's kind of anecdotal during during cold but.
Like you saw a little bit of a shift in at least in some centers to a higher percentage of our procedures versus CEA given the shorter length of stay predictability safety et cetera. So I was just wondering if that.
Yes sort of continued or accelerated is there any trend.
Sort of been sustained as we've sort of been coming out on the other side of Cove and not that we're out on the other side, yet but anything of note. There that you guys could point out that could be a more sustainable trend one cove. It is hopefully done.
Yeah, It's a good question Danielle the of.
Of course, the data are lagging so it's hard to answer that with anything that's kind of data driven in nature, but we can tell you anecdotally that we hear more stories like the one we told at the last earnings call and the one before that where physicians are choosing t. car over its efficiency.
Fees, it's less burdensome to the patient to the hospital to the system.
And patients have a higher probability of going home versus a stepdown type facility and that's all good in the pandemic. So we continue to hear more stories like that but we haven't put any numbers behind it yet.
Okay. Thanks, so much thanks.
Thanks Daniel.
Your next question is from Adam Miller from Piper Sandler Your line is open.
Hi, good afternoon, thanks for taking the questions and congrats on the quarter I just wanted to ask about recent business trends and apologies if I missed this in the prepared remarks, but.
Sounds like you saw good momentum exiting Q3.
But just wanted to ask about recent volume trends for October and thus far in November as we started to see COVID-19 case count start to climb here. So just any details you can share there would be great and then I had a follow up.
At a mall I'll take that.
We obviously didnt provide any specific Q4 guide.
Guidance.
In the prior question, we said.
September was strong.
October was was similar a slight decline numerically on procedures and.
As we sit here on Tuesday, the 10th the virus situation is obviously quite fluid with with the news coming out of the mid Western state.
States, Utah state of emergency things like that those are those are real real time.
[noise] cobot related.
Effects that remain to be seen how it will affect the month of November and what will happen in December which creates some of the uncertainty even though we're fairly close to the end of the year, but the underlying business trends.
Absent those exhaustion us coated factors and patient behavior remained very strong.
Okay Thats helpful incremental color there Lucas I appreciate it and just for the follow up I.
I wanted to ask you about.
The neurovascular update and.
I know you're.
Keeping things a little bit closer to the best for competitive reasons, but just wanted to see if you could give any extra color around kind of.
Regulatory pathway forward plans to collect clinical evidence is this a five 10-K rpms pathway.
Any color that you could provide would be much appreciated. Thanks, so much.
Yeah, Adam I appreciate the question, but unfortunately, you know, we're just really want to keep the cards close to divest here you know I think you follow this market I know and I know that you know its highly competitive and there's kind of two ways competitors maintain their lead in this space one is their speed and the other is through intellectual property.
Okay.
And we're working on both.
So we're we're interested in kind of staying in stealth mode at the moment.
Okay totally fair.
Thanks Erica.
Your next question is from Bob Hopkins of Bank of America. Your line is open.
Okay, great. Thanks, and thanks for taking the questions good afternoon.
I just wanted to follow up a little bit on the the pipeline.
Commentary, you made and the standard.
Standard risk part and on the on the shared risk.
I don't I don't recall, if you said this but do.
Do you are you communicating at this point, whether or not you'll need to run a new clinical trial for standard risk or whether thats not likely to be required based on all the data youve gathered through other means I guess that's question one and then on these cubic stroke side. It sounds like you're going to need to do some clinical work. So is it fair to say.
This is from a commercial perspective, this is probably not a 2021 or or perhaps even 2022 opportunity for for you.
So ill leave it at that thank you.
Hey, Bob I'll take the second part of the question and hence into respect Erica, but but.
No you should not expect revenue associated with the neuro program in 2021, it's really R&D activities.
Yeah.
And you know obviously, Bob we're excited to talk about it.
Because just just in the last couple of years.
There have been multiple published papers looking at the safety and efficacy of trends carotid access for acute stroke and many of the authors have concluded that.
Outcomes can be significantly improved in patients, who have perfect prohibitive or difficult transfemoral or other access and.
So it's interesting that you know like T. car T car was a grassroots effort among vascular surgeons looking for a better way to do things and we're seeing that happening. So the same story is kind of playing out here. So we're very excited about what's coming ahead in stroke.
On standard risk you know, we have not talked about whether or not a trial is going to be required and we're going to continue to hold a comment on that Bob and we'll obviously provide an update as soon as it makes sense. What we've been trying to do all along is make sure that our partners here at the society vast.
Fuel surgery. After you pay in particular are really in lock step with the strategy.
And we just don't want to get ahead of them and that's in part kind of leading to us pushing this out a little bit here today.
Okay, and then one quick follow up but just curious on the stroke side.
Does your vascular surgeon customer base.
Treat acute stroke today or is this a are you going to have to kind of develop relationships with the interventional radiology and neurosurgery community that primarily does that today.
Yeah. It's interesting you know the short answer is there are some vascular surgeons, who are in the stroke continuum of care as you can imagine, particularly in symptomatic carotid artery disease that obviously makes real sense, but I think it's safe to say that we haven't really disclosed the specifics and wont today just.
Because we want to keep the cards close to the vest on what the plan is but it will reveal itself in time.
Okay I'll leave it at that thanks, so much.
Thank you Bob.
I'm showing no further questions at this time it will like to turn the conference back to Ms. Erica Rogers.
Thank you very much and thank you all for your questions and for listening in today have a good holiday season Bye bye.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation have a wonderful day you may all disconnect.
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