Q4 2020 Nevro Corp Earnings Call

Good afternoon My name is Catherine.

Operator today.

I would like to work on every line.

The fourth quarter 2020 financial results conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Like to ask a question during this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question the press the pound key.

I would now like to turn the call over to Julie Dewey for introductory.

Please go ahead.

Good afternoon, and welcome to net road fourth quarter 2020 earnings Conference call. We appreciate you joining us and Julie Dewey never owed VP of IR and corporate Communications with me today are Keith Grossman, Chairman, CEO, and President and Rob Mcleod Chief Financial Officer the for.

Format of our call today will be a discussion of fourth quarter trends and business results from Keith followed by detailed financials from broad and then we'll open up the call for questions.

Please note there are also slides available related to our fourth quarter performance on the narrow investor relations website on the events and presentations page.

Earlier today <unk> released its financial results for the fourth quarter ending December 31 2020.

A copy of our earnings release is available on our Investor Relations section of our website at never O Dot com.

This call is being broadcast live over the Internet to all interested parties on the February 'twenty four 'twenty 'twenty, one and an archived copy of this webcast will be available on our Investor Relations website.

Before we begin I'd like to remind everyone that comments made on today's call may include forward looking statements within the meaning of federal securities laws or results could differ materially from those expressed or implied as a result of certain risks and uncertainties. Please.

Please refer to our SEC filings, including our form 10-K to be filed later today for a detailed presentation of Rick.

The forward looking statements in this call speak only as of today and we undertake no obligation to update or revise any of these statements.

In addition, we will refer to adjusted EBITDA, which is the non-GAAP measure the happened for us to understand Nevertheless, ongoing business performance.

Please refer to GAAP to non-GAAP reconciliation tables within our earnings release.

And now I'll turn the call over to Keith.

Thanks, Julie Hello, everyone and thank you for joining us.

Today, we reported fourth quarter 2020 worldwide revenue of $109 7 million, representing a decline of 4% compared to the fourth quarter of 2019 on a sequential basis worldwide revenue increased 1% over the prior quarter.

The U S sales declined 3% of of prior year to $94 6 million in the fourth quarter, but increased 4% sequentially over the prior quarter.

International revenue decreased 8% year over year as reported or 14% on a constant currency basis with two of $15 1 million in the fourth quarter and that represents a sequential decline of 14 per cent over the prior quarter.

Both U S and international revenue was meaningfully impacted by the resurgence of Covid activity in the second half of the quarter.

U S trials per day per <unk> per day in revenue.

All improved over Q3 results. Despite the on kras, increasing COVID-19 activity now while encouraging it's important to note that activity started stronger at the beginning of the quarter and degraded over the course of the quarter as Covid activity increased.

Compared to prior year fourth quarter of total U S. Permanent implant procedures decreased 1% with trial procedures declining 8% approximately 200 scheduled U S. Permanent implant procedures are roughly $5 million and sales were canceled and still on recovered at the end of the fourth quarter with the majority of those occurring.

In the month of December.

Reductions in both trials on firms in the quarter were caused by a combination of both facility reduction of electric procedures patient reluctance to move forward due to COVID-19 concerns or the exposure of diagnosis of health care providers with the Covid virus themselves.

Throughout 2020 and.

And despite the impact on our business of Covid, we delivered strong progress across our business.

First we maintained our work force during an unprecedented and challenging pandemic environment and enabled our net ROE team to do their jobs safely and most cases virtually and effectively.

We also added key members to our leadership team our field team continue to support our customers and patient side by side with frontline health care workers and patients.

We use our unique never of cloud capabilities to reach out to patients and have now had over 800000 remote patient interactions throughout the challenges of the COVID-19 environment, both optimizing therapy of from for our patients.

And getting canceled cases back on the calendar for our customers faster than our competitors could.

We continue to capture share in our U S market throughout 2020 and expanded our competitive advantage with the ongoing omnia launch in fact.

Over the combined course of 2019 end of 2020, we think we've picked up four to five U S market share points.

Our R&D and clinical teams prioritize in advance of future products and an indication of growth drivers, including the first major upgrade to our omni of platform, which you'll hear more about later in this call.

On the intellectual property front, we were successful in our offensive litigation against both the Boston scientific and Stim way, maintaining exclusivity for high frequency SCS therapy.

We completed the successful capital raise within weeks of the onset of Covid, adding over $300 million to our balance sheet and demonstrated prudent expense management throughout the year delivering adjusted EBITDA positive performances in both the third and the fourth quarters.

We kicked off a project to establish our own manufacturing operations in Costa Rica, and we expect to be approved to make and sell our own products sometime next year, improving our cost position and our manufacturing flexibility.

Continuing our longstanding commitment to our growing body of clinical evidence data from both our P. D M and MSR of BP randomized clinical trials was accepted for the late breaking abstract session at the hands.

Positioning us to help physicians treat new and underserved patient population suffering from debilitating chronic pain.

We ended the year on a high note by announcing our FDA submission to seek approval for the treatment of chronic pain associated with P. D M.

This condition affects millions of patients who are suffering today with no really good options.

In any year I think these are accomplishments that we would be proud of but in 2020 of our team accomplished these goals during the global pandemic I don't want to thank the entire never team for all of they did not only of respond to the pandemic, but for keeping the company moving forward in spite of it.

So let me update you on the current state of the Covid impact on our business as of today Covid continues to impact patient demand case scheduling and cancellation rates with procedures still strongly impacted as were seeing in December.

We continue to think that this impact will diminish with each sequential quarter of this year as vaccine availability improves and patients begin to again seek elective care at a more typical pace.

Rod will get into a bit more detail on what that means going forward from the standpoint of our guidance.

We believe many patients are continuing to differ treatment until they feel comfortable visiting our position, particularly as they perceive of vaccine to be just around the corner.

Similar to the demand trends experienced in the second and third quarters of 2020, we expect the resurgence of Covid in the fourth quarter of 2020 and first quarter of this year will create another period of pent up demand recapture as infection rates subside and vaccine availability improves and starts to positively affect the patient behavior.

Now, obviously, the timing and size of the recovery is really difficult to predict.

While the environment continues to be of difficult one today on a relative basis. We believe we continue to capture market share in the core of lower back and leg pain market throughout 2020.

As a result of our best in class H F 10, Ses technology.

Our expanded omni of platform, new and important indications and sharpen our commercial execution.

I really believe we're well positioned for attractive and sustainable growth as the as the pressure of Covid on our business subsides.

We had another terrific Nan's conference this year with data presented from 'twenty clinical abstracts, including late breaking abstract results from our sons of P. D N and sense of MSR V. P randomized clinical trials, both of which demonstrated highly favorable results to nearly all pre specified endpoints at six and 12 months in the PD on study.

And three months of the MSR V P study.

No other SCS treatment of demonstrated such positive results in treating these patient populations and we believe these are significant opportunities for a number of them.

We announced that we submitted our PMA supplement to the FDA in December to seek approval for P. D M and that the submission was accepted by the FDA in early January.

If approved the sense of system would be the only spinal cord stimulation system FDA approved with the specific on label indication for treating P. D M and.

And assuming a six month review cycle from acceptance and approval from the FDA will also position us to initiate.

The U S launch activities in the second half of 2021.

As a reminder, there are over 5 million patients in the U S diagnosed with P. D M and approximately $2 million of these patients are refractory to or failing conventional medical management and the need of a new solution to treat their chronic pain.

That represents of roughly $47 billion prevalence pool of the U S and an estimated annual incidence rate of approximately $5 billion.

I have to say I'm I'm about as excited for this launch as any I can remember our goal is to get off to a fast start in the second half of the year and referral and trialing activity setting the stage for an exciting revenue impact in 2022 I'd like to spend a couple of minutes are setting the stage for the rest of this year's PD on launch activities.

We submitted our six months of PD and trial results for publication, which have been accepted in the Premier peer reviewed journal.

We plan to submit 12 month data later this year. In addition, the health economic data will be analyzed from submitted for publication later this year, along with real world evidence from our never of cloud platform analyzing the long term outcomes of H F 10 patients diagnosed with P. D M.

An important aspect of our launch is to ensure market access we have already started approaching payers with the goal of expanding policy coverage to include PD on patients where it doesn't exist today.

So far it seems the data will be compelling for those payers, particularly given this patient population, where they just haven't received much traction with the other therapeutic options that they're paying for.

Part of our message to payers is that the quality of the clinical evidence and the outcomes reported as well as the potential FDA approval approval will all be unique to H F 10 therapy and should be treated as such through their coverage policy decision, making.

We think there is already a meaningful percentage of patients that will have coverage at the time of our launch through local coverage determinations of the Medicare contractors on Max we estimate approximately 50% of Medicare beneficiaries should have access at launch.

On the commercial side the majority of commercial health plans have not historically included P. D M in the SCS coverage policy.

So in aggregate between the two groups, we estimate that roughly 25 per cent of our PD on patients will have access at launch.

While some payers may require 12 month data, we expect to have that data by the time, we receive FDA approval with this in mind, we expect our commercial coverage to increase over time as additional commercial payers expand coverage throughout 2022.

Our research has shown that while pain physicians are very interested in treating PD on patients. They don't see a lot of them referred to them today.

So education of those referring doctors will be a key part of our commercial launch.

We've analyzed U S claims data and identify the doctors that are treating the most PD on patients today in the U S. The top 1% of physicians ranked by P. D. M patients treated which is around 2200 doctors treat approximately 10% of all of P. D on patients.

In the top 10% of physicians treat approximately 21 per cent of all PD on patient. This relatively concentrated referring physician channel consists of primary care physicians endocrinologists internal medicine and podiatrist.

To reach these referring doctors, we will be staffing of dedicated referral sales sales organization as well as remote selling resources ready to begin calling on these referring doctors with the goal of educating them on the benefits of H F 10 therapy and how their patients can access it.

In addition, we will be driving awareness with the referring doctors via digital marketing programs.

Our existing sales force, who are now focused on the pain Medicine community will also have information on tools and resources to provide European physicians. So that they may begin to conduct outreach within their own referring physician communities.

Our research found that referring physician enthusiasm for age of tenant in PD on patients is very high in fact, when presented with our trial data 75 per cent of referring physicians rated H F 10 of five or six on a six point attractiveness scale for treatment of P. D M.

Theres also a strong desire to use H F 10 prior to prescribing opioids. Our research indicates that physicians expect to refer of nearly 90% of their refractory PD and patients for each of 10 therapy before recommending opioids, providing hope of a new solution for the millions of patients suffering today.

We've also formed the PD Ed Advisory Board, which consists of across the specialty of physicians to refine our initiatives helped shape PD and clinical guidelines and advise on future study designs.

We plan to increase our presence of key diabetes conferences, starting with this year's American Diabetes Association conference to drive awareness, beginning with scientific abstract submissions and evolving to a broader footprint upon FDA approval.

In addition, we've also completed research with PD on patients. These patients are truly suffering and are desperate for new solutions as one patient told us.

Quote it got to the point, where I couldn't tell what was worse the pain of the side effects of my medication I wasn't able to concentrate when the pain was there, but if I took my of medication. It was like I was a zombie I wasn't even there and quote the sentiment pretty appellees summarizes what we hear from the majority of the PD on patients that we speak with.

About 84% of PD on patients. We surveyed said they would go see as of pain specialists for age of 10 therapy once referred.

We know that these diabetes patients take an active part of their care and our highly engaged online. So we're building upon our success and director of patient digital marketing to our back and leg market and we're expanding that focus even now so that as many PD in patients as possible will already be informed by the time of new treatment option is available to them.

In summary, 2021 is about gaining FDA approval for P. D M. Educating physicians that treat these underserved patient driving awareness with the PD on patients themselves and facilitating payer coverage expansion.

Our 2021 investment and the activities I've listed and many others by the way will total approximately $22 million. This year and will be included in the forward looking details Rod provides in just a moment.

Because of the timing of the expected approval and of course of the time needed to then move patients through the referral to trial to Perm pathway. We expect only of mid single digit millions of revenue contribution from PD and on the back half of 'twenty. One on most of that will be in the fourth quarter.

But then setting us up for a broader penetration in much larger revenue contribution in 2022 and beyond.

Internationally, we will be executing phase launch plans in the U K, Germany, and Australia. We expect these activities to mirror U S timing and launch plans to expand as we progress into 2022. So we're hoping for a a really exciting year for this new indication.

I'm also pleased to announce that we recently received FDA approval for our first major omnia upgrade.

If you recall when we originally launched on me on one of the unique benefits was of the platform is upgradable. So our patients can continue to get the benefit of innovation without requiring a brand new IPG.

We're launching a limited market release of this upgrade in March with a full market release in Q2 in the U S on Australia.

We've also submitted our application for approval in Europe and expect to have clearance later in Q2 net.

This upgrade will give on the ability to accept the loading of 35 programming options for a patient immediately after implant instead of the current limit of just five.

This change combined with the changes made to the new patient remote device means that many of the future therapy adjustments that are now re programming events that need to be done in person by our field team.

It can become a simple program selection by the patient guided by one of our expanding team of therapy support specialists over the phone.

The 35 programs originally selected will be done under the oversight of our clinicians as always and the order in which of patient would be directed to select them in the future. We will be driven by the same never of cloud informed algorithms that are used by our field personnel today.

Finally, the new upgraded patient remote will also include on auto and Pete in the Shack feature of the MP in check as necessary to verify connection between the IPG and all of the electrodes on both leads.

Currently a member of our field team needs to be physically present.

This happens in the or at the time of every implant when leads are connected to the IPG the.

The impede the Shack has also performed at a hospital or satellite imaging facility when any patient with one of our devices requires on MRI.

The new patient remote can eliminate the need for our sales rep to be there in person to force pro form either of these impedance checks and by the way. These development projects kicked off just months ago as part of our rapid response to the Covid challenges and our team did a great job of bringing these upgrades to market in record time.

This new package of omni upgrades will not only help us to be more responsive to patient needs, but importantly, all of these changes are also going to make our sales team much more efficient over time and will be on important part of the efficiency with which we scale over the next few years.

We're also expecting to launch our new trial stimulator model of module in the first half of this year. Once it's approved the new modules are designed to provide improvements in patient comfort of through of smaller more streamlined the cable for a system that simply allows patients to focus more of their pain relief and the logistics of the trial system.

We're going to begin the early steps of developing the non surgical portion of our market using the new three months MSR B P data presented at <unk>.

Our work will start with surgeons patients and payers and with six and 12 month data coming and our competitors eventually helping to push on this underpenetrated market. We think this patient group will help to drive SCS market growth in the coming years.

One of the areas of I'm, particularly proud of is our ability to manage expenses and drive operating leverage without eroding our team for our core capabilities to drive growth.

Prior to the pandemic, we took steps to focus on our overall cost structure in place an emphasis on improving operational efficiencies.

Even with the decline in revenue in 2020, our operating expenses as a percentage of revenue dropped 700 basis points from 2019 levels.

On a dollar basis, we were able to reduce operating expenses by more than $50 million compared to 2019.

While we expect operating expenses, particularly sales and marketing costs to increase as we emerge from the pandemic and continue investing in our PD on launch preparations leveraging the income statement will continue to be a top priority.

So while we're certainly still on the midst of this pandemic, we do see of light at the end of the tunnel and we remain very bullish on the longer term growth drivers for this business first of still Underpenetrated SCS market that should continue to grow we believe for years to come.

Second the pent up demand of all of those elective procedures that have been COVID-19 deferred over the last year that will begin to seek care again as the year progresses and COVID-19 starts to recede.

If you look at where a healthy market should have been last year relative to 2019.

Those numbers suggest deferred procedures and the worldwide SCS market in 2020 represented as much as half of $1 billion worth of product sales.

We believe many of these patients will make their way back to SCS therapy in the quarters following COVID-19.

Third our ability to continue to increase our share of this market over time with better technology, better outcomes and better execution.

And fourth market expanding clinical data like MSR, B P and new market, creating indications like P. D M.

As we think about our ultimate emergence from the pandemic it should be the beginning of a really attractive growth period for this company.

And lastly, I want to once again express my appreciation and gratitude to the entire never team for their efforts throughout what was a very challenging 2020, which enabled us to deliver on our commitments to our customers our patients our employees on our shareholders.

And with that I'll pass the call over to Rod.

Thanks Keith.

I'll begin with our worldwide revenue for the fourth quarter of 2020, which is of 109 7 million a decrease of four 1% compared to $114 4 million in the prior year period.

Gross profit for the fourth quarter of 2020 was $78 million, a decrease of 4% compared to $81 3 million in the prior year period. The decrease in gross profit was driven primarily by the year over year reduction in revenue.

Gross margin in the fourth quarter was 71% consistent with the prior year period.

Operating expenses for the fourth quarter of 2020 were $78 $9 million of 15% decrease compared to $92 9 million in the prior year period the.

The year over year decrease in operating expenses was primarily related to a decrease in clinical trial expenses related to our PDL and SRV Pea studies lower travel related expenses as well as management's continued initiatives to drive leverage throughout the business, which had begun well before COVID-19.

Fourth quarter operating expenses also benefited from accrued bonus expense for one K match payroll taxes and project expenses, all of which will be higher in the force.

In the first quarter as we start the new year.

Legal expenses associated with patent litigation were $5 1 million for the fourth quarter of 2020 compared to $1 7 million in the prior year period.

In December we announced an agreement to conclude our patent lawsuit in the Northern district of California against Boston Scientific.

We continue our ongoing patent cases in the district of Delaware and at the patent office relating to patents for other spinal cord stimulation technologies unrelated the high frequency therapy.

Net loss from operations for the fourth quarter of 2020 was 900000.

On 93% improvement compared to a loss of $11 7 million in the prior year period.

Non-GAAP adjusted EBITDA for the fourth quarter of 2020 was $15 $7 million compared to $1 5 million in the prior year period.

Non-GAAP adjusted EBITDA excludes certain litigation expenses interest taxes, and noncash items, such as stock based compensation and depreciation and amortization. Please.

Please see our financial tables for GAAP to non-GAAP reconciliations.

During the pandemic, we continue to focus on cash preservation, while balancing the need to reinvest in the recovery process and our growth initiatives in P. D N and MSR BP cash cash equivalents of short term investments totaled $588 million as of December 31, 2002.

20 this.

This represents an increase during the fourth quarter of 2020 at $15 $1 million.

Turning now to 2021 guidance.

It is important to note that we will be using non-GAAP financial measures to describe our outlook for the business.

Non-GAAP adjusted EBITDA excludes certain litigation expenses interest taxes, and non cash items, such as stock based compensation and depreciation and amortization.

Once again, please see the financial tables in our press release issued today for GAAP to non-GAAP reconciliations.

As Keith mentioned earlier, the impact of Covid coming into the first quarter of 'twenty 'twenty. One is little changed thus far from the end of fourth quarter of 2020 as high case volumes and new variance add additional uncertainty.

<unk> expects first quarter of 2021 worldwide revenue of approximately 84 million to $86 million in sales.

This assumes COVID-19 headwinds in the first two months of the first quarter of 2021 with improvement beginning in March of 2021.

The company expects operating expenses in the first quarter of 2021 of approximately 83 million to $86 million.

This includes the litigation expenses and additional investment in PD and market development.

As for the full year, it's clear that we and many other companies are struggling with the topic of if and how to provide 2021 guidance, though we believe it is important to give you some visibility into how we are thinking about the totality of 'twenty 'twenty, one as well the.

The full year guidance provided today is highly sensitive to the company's COVID-19 recovery assumptions.

Which include an ongoing and steady recovery in the U S and key international geographies, leading to more normalized key scheduling an elective procedure levels beginning in the second quarter of 2021.

This guidance also assumes the impact from COVID-19 will diminish with each sequential quarter. This year as the vaccine availability improves and patients begin to again seek elective care and typical levels of.

Of course.

If the vaccine rollout takes longer recovery is delayed or patient willingness to seek treatment is slower than anticipated or alternatively, if recovery is faster or there is the larger recapture of pent up demand and anticipated than any of our all of these factors can quickly and easily impact our guidance range.

With that in mind, we currently expect worldwide revenue for full year 2021 of approximately $430 million to $450 million.

This range assumes FDA approval of P. D N at the beginning of the third quarter of 2021.

And of mid single digit million dollar of revenue contribution from P. D on in 'twenty 'twenty, one with the majority of generated in the fourth quarter.

For full year 2021 gross margin is expected to be approximately 69% as we will be incurring about 100 basis point impact to margins as we build out of operations and the Costa Rica plant. This year, we're very excited about the Costa Rica expansion, we believe it will deliver considerable leverage.

Over the next several years.

Operating expenses are expected to be approximately $370 million for 2021. This includes litigation expenses and ongoing investment in PD and market development, which I will speak about shortly.

We expect full year 2021, non-GAAP adjusted EBITDA to be in the range of zero to $15 million, which compares to a non-GAAP adjusted EBITDA loss of $3 9 million in 2020.

We also want to provide some additional color regarding our commercial launch of P. D N and its impact on the income statement.

We believe that these investments will drive some early revenue contribution from P. D N in the third and fourth quarters of 'twenty 'twenty, one, but more importantly position us for the solid run rate of patient referrals and trials as we enter 2022.

On the expense side, we expect to spend approximately $22 million of operating expenses in 2021 to support of successful <unk> launch as well as the market development with roughly 60% of the expenses occurring in the back half of this year.

Given the significant opportunity of the PDL represents we believe this investment is appropriate to support the successful launch and optimize growth in 2022 and beyond.

Finally, I think it's important to review our progress on our journey to drive growth and scale profitably in our core business.

Let's look at our operating expenses as a percentage of revenue for example over the years operating expenses have gone from 93% of revenue in 2019% to 86% of revenue in 2020, and our guidance for 2021, excluding the 22 million of <unk> expenses.

Suggests operating expenses of 73% to 76% of revenue for 2021.

Additionally, our 2021 expense assumptions, even assume an additional $11 million of patent litigation expenses over 2020, which represents an additional 250 basis points of leverage.

Many of the changes we're investing in this year such as our integration of manufacturing early development of the PD end market and the Omnia upgrades of facilitate greater <unk>.

Commercial productivity are designed to provide continued improvement in our financial leverage as we grow.

We believe that with these investments we can create even greater leverage in the coming years, though please keep in mind that even including all of the investments I've just mentioned our total operating expenses would only be about 1% higher than those operating expenses in 2019.

In closing, we entered 2021 and of great position strategically with best in class SCS technologies share gain momentum future growth opportunities in P. D N and MSR VP of superior clinical data and a strong commercial organization.

We have made significant progress on our operating margin expansion efforts over the past year and we have ongoing opportunities to continue to improve in this area as well as driving continued leverage in the business in 'twenty 'twenty, one and beyond.

That concludes our prepared remarks, I'll turn the call back over to Julie to moderate the Q&A session.

Thanks, Rod before we start the Q&A session, we'd like to ask that you. Please limit yourself to one question and one short follow up.

Later, we are ready for the Q&A instructions.

At this time I would like to remind everyone in order to ask a question. The press Star then the number one on your telephone keypad.

For adjusted moment to compile the Q&A roster.

Your first question comes from the line of Adam <unk> with Piper Sandler.

Hey, guys. Thanks for taking the questions and congrats on the progress made in 2020.

I wanted to ask about latest trends and what youre seeing in the business. What you saw on the business in January and thus far into February it sounds like the environment still remains a bit challenging so I wanted to better understand where permanent implants on trial sit today and how those have progressed year to date.

Just any color there would be helpful on that I had a follow up thanks, Yeah, well Adam you know over the course of last year, we tried to give a little bit more intra quarter color on things like trials, because we were.

In a period of time, where we didn't have a guidance in place.

We've put guidance in place now for the quarter and the year.

So I wanted to be a little bit careful we don't get too deep into our metrics for the month of January or December, but so let me, let me speak a little bit more generally.

I would say you know January probably started out about like December maybe maybe worse from just a general level of activity standpoint.

<unk> of trials cancellations et cetera.

February.

Marginally better despite the added complication of weather around the country on the in the U S.

And I would say early signs that things are going to begin getting better in March. So that's a that's an expectation of at this point of course, not a not a reality.

So I would say if you look at the December mid December to end of January timeframe that was probably about about the worst six week period for.

For general activity in this therapy since probably the may to early June timeframe of last year.

So we don't certainly expect to ever see what we saw last March and April are again, but but there was an awful lot of.

<unk> COVID-19 related complications around around procedural activity.

The case cancellations center close down of shutdowns.

The et cetera that is that is starting to get better now here in the in the second half of February.

That's really helpful color Keith I appreciate that and then for the follow up maybe to ask about MSR BP.

You know I just wanted to ask for an update on how those conversations are going with payers if youre seeing any positive read throughs from the the data that was presented at NAND and I think historically MSR VP of the band.

Of around 30% of your mix. So how do you think about the impacts from the data. This year does that mix increase just trying to understand if that's going to be a key tailwind in 'twenty, one or if it's more of a 'twenty two in kind of medium for longer term benefit. Thanks, so much yeah.

I think it's a little bit too early to say on the payer feedback of the MSR BP we have.

Gotten off to a little bit quicker start talking to payers.

About the reactions to P. D M. I think in the case of MSR BP, while we will be having those those per meeting throughout the year. We recognize that most payers are going to want the six or even 12 month data on the nonsurgical refractory back pain side of things so.

More to come maybe we can give you a little bit more of a reaction later in the year certainly our expectations for that population of patients has some impact on our expectations for this year generally I think it's relatively small this year and it begins to grow in 2022 and 2023.

Your next question comes from the line of Joanne Wuensch with Citibank.

Owen.

Yes, Hi, this is Matt Henriksson in for Joanne.

Keith you gave some great color on just the.

Kind of number of patients that have delayed but have been on.

The recoverable with procedures.

As we think about 2021, and we look at kind of that backlog being filled.

Filled out.

Is there something along the lines of what we're looking at that kind of second half seeing a bolus of those backlog patients or do you expect that kind of process to open up immediately kind of things subside.

Well that is the question of the day [laughter] of that May be the question of the year.

I think trying to trying to predict.

When and why that and at what pace that begins to open up as is the is the challenge in in thinking about this year and the challenge that we face and in providing guidance.

For this year I think in general we've done an awful lot with studying patients and physicians through market research what they expect what they plan to do.

I think at this point of lot of a lot of patients are really waiting for the vaccine.

We saw on the first quarter of little bit more impact from from centers I think I think in early February we had 90 hospitals in the U S debt had shut down electric procedures now that's not a big percentage of our hospitals, but it's not insignificant on either and we haven't seen really of center impact on institution impact for for quite some.

That's now beginning to show signs of opening back up but for the most part of this has been of patient tissue and of patient reticence to seek care until the environment.

You know their needs and that means in most cases, the availability of the vaccine and.

And reduced infection rates in their local communities.

So I do think if if you look at most of the forecast and the forecast that we believe internally, we think that means patients begin returning to elective care not just ses, but returning to the.

These types of electric procedures.

In second quarter and that the pace really begins to pick up in Q3 and Q4.

Now that's based on a lot of macro assumptions about how things play out with a worldwide pandemic. So are.

We don't have any particular or unique expertise on that topic.

We're following it as closely as we can and as closely as most of them, but that's sort of our view of things right now.

That's good color and as my follow up you also provided a lot of good color on your opinion on strategy.

As you start looking at the data it's been a month since then.

<unk>.

What kind of has been the data point that is.

Surprised you the most of my kind of makes the argument even more compelling of potentially.

I'm sorry, the data point that has surprised us the most in the in the clinical trial data.

Yeah.

Yeah, I think theres two things that.

That have really been received well by the clinical community. One is the sustainability of the pain relief. So if you. If you look at what was really dramatic.

Pain relief at the three month point I think the the big question that it raised among most was hey look this is great.

But it's three months can we really sustain.

The pain relief this dramatic at six and 12 months.

So I think what has gotten a lot of discussion a lot of attention and it will be reported on.

In the future publications as the great of which we've been able to keep pain relief in these patients over time and I think that's what patients what referring doctors and importantly, what payers.

We'll want to see.

We continue to see.

Sensory restoration in these patients at six and 12 months a.

We continue to see quality of life improvements in these patients we know that those are going to be important to payers and the referring doctors and our research.

And so I think just the.

The ability to sustain some of these things that were so dramatic of three months out of six and 12 months, particularly in those areas are the things that have been received particularly well.

Yeah.

Your next question comes from the line of.

On <unk> with Canaccord Genuity your line is open.

Great. Thanks, Good evening, thanks for taking my questions.

I'm just.

Areas with obviously.

Obviously, we're seeing an impact on procedures.

Listening to other companies report their quarters and some of them a little better some of little worse and I'm just what true.

Trying to understand what gives you confidence that it truly is a center of patient issue and not a share.

Loss issue as weak as we come into the fourth quarter and into January and then I have a follow up yeah.

Well, we well we track the market I mean, we do it internally and we use third parties and we're very confident that it's not a market share issue in fact quite the opposite we've picked up share.

We think in every quarter of 2020 and throughout most of 2019.

So I don't think this is of share issue. This is a fact on I'm certain of that.

This is the market issue and as we dissect all the things that might make up of market issue. It really comes down to patient behavior.

And its patient behavior relative to pandemic.

Infection rates and vaccine availability I mean, it is its a relatively complicated landscape, but if you really tease through the unimportant to get to the important that's that's what this is about.

Great. Thank you and then on the PD and watch I think you've given a lot of color about kind of of the timing of the costs and the general buckets of the cost.

I'm trying to understand is you.

As you spend on this launch how much of these expenses are onetime in nature building all of the materials building all of the programs what have you maybe starting some of that of direct to patient versus ongoing in nature.

Yes.

Theres some substantial portion of each I mean.

On the other hand project related program.

Design.

The consulting building out of initiatives those are one time.

<unk> expenses in the year that doesn't mean, you won't have other similar expenses in the following years. So it's kind of difficult for me to say that hey of this invested amount. This year you can expect X percent to be repeated in the following year.

I will say this is probably of particularly intensive here.

From an investment standpoint, because we want we want to launch this right. We think this is a a uniquely good opportunity for the company and we want to get it right. The first time.

Okay and clarification on Costa Rica will close the REIT to be up and and shipping product. This year or is that of the 2022 of event.

Yeah, Yeah, Bill that's a 'twenty two event, so we assume that where the FDA approved on shipping commercial product sometime in 'twenty two.

Thank you.

Your next question comes from comes from the line of of Bob Hopkins with Bank of America.

Oh, great. Thank you and good afternoon, Hi, Bob.

Hey, Keith.

I appreciate your quantification of the potential backlog of the half of 1 billion to the industry.

Given your share of that's maybe.

To win in and maybe $100 million of that or more I realize theres. Some of that's some pretty simple math, but I'm curious how you went about thinking about the guidance that you just provided us for for 2021 as it relates to that backlog I'd like can you share any thoughts on how much of that backlog you assumed you would capture.

In the year versus sort of normal trend growth and just kind of curious how you went about constructing the guidance relative to the backlog.

Well of.

Of course, we don't start with guidance, we start with an internal plan and in that internal plan, we don't really assume because there's no way for us to assume that debt demand for the therapy that seemed to vanish.

In 2020 over 2019 comes back at a certain pace for certain are of certain share of that because there's just no way to really know that now the part of the uncapped demand.

That we can quantify our patients that we know where in the funnel and we've talked about those a lot. So canceled cases deferred trials cancelled trials canceled firms.

We track them, all pretty thoroughly and carefully internally those we can we can be relatively certain when theyre going to come back how many will come back in 2021, we can always pinpoint the month or even the quarter, but we have a pretty good idea of what contribution that plays.

In this year's plan.

Of course, we haven't broken those things out but in terms of the guidance.

There's a lot of uncertainty around around some of the things that we've been talking about and we felt it was important to give guidance. We had guidance withdrawn for the last year. There was a fair amount of complexity that we wanted to be able to communicate to you. This year round PD on spend revenue contribution.

The timing and cadence of et cetera, and felt it would be difficult to do that without giving some guidance. However.

It's a pretty fuzzy environment right now the implication there for guidance is that you know you're probably going to air towards the larger range and you're probably going to err toward some measure of conservatism.

And that's in fact, where we've where we've where we've ended up but but to say what what wasn't part of our calculus. Bob was just say hey, there's 500.

Of market in 2019 that just wasn't there in 2020, we even though we know the patients where there are therefore, we're going to get 20% of that and it's going to happen over the next 22 and a half months. It's it's it's not that precise and it's frankly not reflected in our in our in our guidance or even in our internal projections.

Okay.

It sounds logical I appreciate that.

The other question I wanted to ask you is just it's a little bit more of a 2021 question and I realize there's a lot of legitimate excitement about what you guys could do towards the end of the year on into 2022 and beyond.

But you know coming off Nance Theres, a lot of competitors talking about a lot of new waveforms new technologies.

And just just curious as you're out in the marketplace recently because of a lot of these things are brand new.

Your thoughts on the competitive landscape as we look to the.

The next 12 months here before you've got these new indications really kicking in and just you're seeing anything different on that front relative to all of the noise of we heard at advance.

No I mean, there's really there's really not much significant debt that's new I mean, I think the I think the the newest thing probably was Medtronic the introduction of the D. T M way for them.

Theres really not that much else out there that's new that's really meaningful are that different.

Now there are some things coming.

We've talked about the the <unk> introduction of the Biotron introduction.

We are hearing.

Late this year or first half of 2022 in both cases.

Really none of that is new that we've been talking about those things for the last of last couple of quarters. So I don't I don't know that we see the the competitive landscape that differently than we did before.

Your next question comes from the line of Larry Nicholson with Wells Fargo.

Sir your line is open.

Good afternoon. Thanks, so much for taking the question. This is Kevin on for Larry This evening.

I wanted to follow up on Bob's question around the guidance.

Completely understand that it's very difficult to forecast I guess I was curious with with 10% to 15% growth over 19.

Do you have a sense or kind of the assumptions you used around U S SCS market growth in the number and.

I appreciate that the funding all of it is difficult to understand but you know kind of if you assume that similar percentage came back of.

Cancel of cases in the bolus that you saw in Q3, how does that factor into the numbers.

And I was curious kind of as you think of the low and the high end of the range is it fair to say that the 10% is a floor of based on what you see today with no additional wave of Covid and an increase the vaccine adoption. Thanks, so much.

Yeah, I mean, I think from a guidance standpoint, it's it's a the guidance kind of stands on its own I mean, that's the low end of the range. So we would consider to that of floor look I could sit here and and in this kind of environment I could easily color of case of download downside below our guidance on upside of above our guidance. So.

But our guidance attempts to contemplate.

The at the lower end, what we would consider to be of floor.

Reasonable floor of performance in terms of the growth of the market.

Decided that we don't want to be the the Oracle of market growth here. It never of a couple of years ago, and so haven't weighed in on that very much but if you look at the growth over in the U.

The phrase it versus 2019, but I think our the range of our guidance over 2020 as something like 16 to 24 in the three for 19% to 24%.

Our assumptions are that at 19% to 24% from Min Max on our guidance range that we continue to gain some market share. This year. So it's it's safe to assume that our assumptions about market growth or are lower than the assumptions that we're giving you for our growth rates.

Super helpful. Thank you okay.

Your next question comes from the line of the David Lewis with Morgan Stanley David Your line is open.

Good afternoon, just two quick ones for me I guess, one just back on the first quarter guidance on I was just sort of taking a look at seasonality.

Seasonality Youre looking for in the first quarter is basically debt in line with the seasonality of you've seen in the last two or three years for the last two and I'm just trying to figure out does that make sense that seasonality would be traditional heading into the first quarter relative to the last couple of years. It seems like that would not be the case and then you had a quick follow up.

I would say there is nothing about normal quarter to quarter seasonality that is factored into our first quarter guidance in this environment I don't I don't know how much of that would matter.

We're sitting here of further then midway through the quarter we've got.

A fair amount of exposure to the quarter on what's happening with our patients on our centers and it has everything to do with where we actually think of the quarter is gonna be.

The other words.

For me as I think about first quarter seasonality relative to Q4 would be an output not on input.

To my thinking.

David you I assume youre, saying it under.

Under normal course, it should be higher or lower in your view.

Well it should be the <unk>.

Pointed.

You've kind of answered the question, which is that it may just be happenstance that it comes out that way because of this particular quarter I can't think of anything that's normal it doesn't sound like you relied on historical seasonality you get to the quarter. It sounds like you did it bottoms up of the numbers landed where they landed.

That's exactly right okay.

Okay, and then can you just related to that and I'll ask of US My little questions. Here. The first of all of you typically have a trial of from ratio Thats pretty predictive did you assume that predictive trial. The perm ratio and then the back half of the six weeks of the quarter or did you assume the more conservative number and then I'll ask my second question just right now of just on PD on Keith it's hard to know at that $22 million whats reps.

But that could be 50 reps is that kind of in the ballpark for year for all for us and where does that refer for us have to be in terms of total rep count to win here over the next several years. Thanks, so much okay. Yeah on the on the.

On the forecast Theres a lot of ways, we triangulate to of forecasted internally only only one of those tools is the is the model using Ah trial, the Perm <unk>.

<unk> rates.

So now it we might rely on that a little further as we look at say on an annual number but for a quarter. We're halfway through it it's only part of the it's only part of the calculus. We are we are.

Actually got patients already on the surgical calendar et cetera. So that's the.

That's kind of how we think about the forecast halfway through a quarter. It is an input but it's not.

It's not the only thing we're relying on on the on the spend.

Estimate for PD and.

That includes Youre not too far off David that includes field head count of between 30, and 40 folks that will be in a separate detail organization. This is of referral organization. They won't have anything to do with procedures.

Surgical procedures with patient programming there'll be there'll be detailed reps that will be out talking to those highest volume, referring doctors and detailing data.

Et cetera and.

That's about the the size of that initiative for this year.

Your next question comes from the line of Robbie Marcus with JP Morgan.

Hi, guys. This is actually Allen on for Robbie.

So when we think of a PD on and kind of you know.

Of the gating factors to the launch the pace of getting coverage educating physicians, how should we really think about that playing out over the course of so anytime they want on into 2022, you highlighted the expecting the have you know like a pretty good funnel heading into 2022, but how should we really think about that building up.

Yeah.

I want to make sure I understand the question Robbie So you're on.

Are you asking how we're thinking about.

It kind of the calculus between the number of patients referred or Trialed in 'twenty, one versus expectations for 'twenty, two with PD and or maybe it could be a little bit more specific.

I just want the gating factors behind actually you know.

Getting the new referring organization to the stocks and then obviously, it's not exactly you have to get those patients into the right place. So how should we think about the kind of delay and lag to actually getting patients on to an SCS system.

I see well I mean.

If you look at the numbers that we've talked about today.

It assumes there's a there's a definite delay.

We don't we don't want of anyone's expectation to be the day, we announced we of FDA approval that we're starting to put in.

Implants and people, we've got to go out and educate.

Something that we can't do on label until we have that FDA approval.

That education has to show up in the form of referred patients who then have to move on the trials and then perm. So it's up.

It's a it's a treatment pathway that takes a little bit of time, thus the.

Thus, our our guidance.

So you should be thinking about I would say look our research suggests that both patients and referring doctors.

Our extremely receptive.

To this data are the ones who have seen it most haven't yet seen it so we've got to get out to the ones of managing most patients educate them and begin to get that referral stream started I think it'll be I think we will be pleased with the activity. That's that's just my opinion I think based on the research we've done we're going to see the referral stream pickup relative to.

Quickly, we don't have any experience yet with the rate at which those referred patients convert to trials.

And then firms.

What I want us to come into 'twenty, two with a lot of patients having been referred and beginning at the very least to enter the trial part of that algorithm.

And then as a quick follow up so the CMS finalized the decision to essentially you know mandate.

Authorization for FCS patients of you've highlighted in the past how this isn't exactly as relevant for your business and how you view this as more of an issue for primary cell devices, rather than rechargeable, but how should we read anything about the impact of that going forwards both for yourself on the broader Sts market.

Yeah. This is.

Actually this is for any SCS procedure, it's and it's for Medicare fee for service patients in the hospital setting.

So that all kind of Whittles down on what I said, if you take each step of Whittles down to something like a mid teens I think percentage.

Of our patients, but it's not necessarily just primary cell devices. It. It's all SCS devices that fall into that category that comes into effect mid year I think July one.

And frankly that'll put that patient group kind of in line with most of the patients we treat that already go through of prior off.

Procedure. So it's it's it's not both of the percentage on the conformity with the rest of our patients make it change that we're not.

Terribly worried about we don't we prefer it not happen, but we're not terribly worried about it from a business standpoint.

Your next question comes from the line of.

Danielle and policy from SBB.

Good afternoon, everyone. Thank you so much for for taking the question.

Yes.

A kind of higher level question I hope it has been out there.

I apologize lots of ball.

With me here right now.

Yeah.

We look at the never came out initially with the first sort of randomized clinical trial.

Administrated of meaningful benefit versus the existing by now you've got the TVN.

You've got the nonsurgical refractory back pain data I mean at some point of it feels like the data.

Continuing to validate the efficacy of the device for I guess.

My question is how has the conversation.

With the addition.

And specifically those that had been maybe like late adopters or doubters about the technology.

The recent data change that conversation and then the second part of the question I'll ask now is when you look at aspirational market shares in this market given the fact that you do have all of this data what should we be thinking about with you now.

Nevertheless, let's back up.

Within the core players.

Yes.

Well I think every little bit helps.

I think the the combination of the original RCT data that we brought to the market initially with high frequency SCS.

Combined with countless smaller datasets along the way and then the addition of these two larger RCT datasets in MSR V. P. M. P D and they all they all add to the story. They all make a difference and I think they all make us a more attractive option for doctors and patients.

I think the proof is in is in the pudding. It's in it's in utilization.

I think what we've seen over the course of 2019 and 2020 is the best reflection of of whether or not of matters. We think it does matter along with other things, but we think the gains in market share that we've made of late.

On the back of of many of these datasets.

Is the best way to answer your question I think that will continue to be the case and I think.

We will enjoy.

I think we will enjoy the PD end market.

Really not it's not completely to ourselves I think we will enjoy the lion's share of that market for some time to come.

And so I think if you if you consider PD on as part of the overall SCS market I think that of course, all by itself will help grow our market share, but if you look at just lower back and leg pain market as it exists today.

Market share by the way, let me, let me preface this by by Disclaiming the debt.

The market share is really tough to put your finger on in this market for lots of reasons that most of you know on so I won't I won't bore you with them but.

But it is it is rather opaque having said that we think for ending 2020 on a dollar basis in the U S whereabout of 20% to 21%.

Market share of participant the.

The leader in this market is probably in the low thirty's. So.

The market share of spread not evenly but somewhat evenly over for participants.

I think look the challenge to our organization is that over the next five years, we want to be a leader in this market. We think we can be and with the fact, we think we should be a leader in this market what that means in terms of market share of that'll change over time, we'll have more market participants.

The market growth could vary over that timeframe do you include PD on or not if we're the only ones participating.

But I think we deserve to think of ourselves as a market leading technology in this business over the coming years and I think that that's certainly our aspiration and expectation for this for this business.

Okay. Thanks, so much.

Our next question comes from the line of Calix Com with true of Securities.

Okay.

Great Hi, Thanks for taking our questions on just a couple of on PD on for us. So.

You guys said you may have about a quarter of the market covered by payers at the time of launch I mean, how quickly do you think other payers will follow and is it a function of of needing more data for those those other payers or is it a function of timing of policy updates, which just generally happen in January of and the.

Sure.

It's both.

It is both.

Keep in mind some of these payers, we just they haven't even had the conversation yet some of these payers may not even be aware of the data yet.

So where we are in the.

Process of implementing a plan that will put us in front of all of these payers with the data.

So that they can make sensible decisions I mean, most of their non coverage policies that are in place are in place simply because there wasn't a reason to have it coverage policy. They didn't have data they didn't have explicit approval for this etiology.

And so it's not that they had on an inherent bias against treating these patients with this technology. They just didn't have any one approved.

Who had RCT data so I think our progress will be good it's really hard for us to quantify Gee. We think we can get from this per cent to this percent over the course of one year cycle.

Because this is the first time going through this with this indication of this data and these payers.

So I'm I'm I'm really reticent to give you any predictions other than I think of the interactions. We've had so far we're encouraged by the reception to the the data that we've had.

That makes sense. Thanks, Keith and then just if PD and contributed $5 6 million in the fourth quarter I mean annualized debt.

The 20 to 25 million. So I guess, what would you consider that sort of the floor for what <unk> could represent in 2022 are what in your view would push that number higher or lower thank you.

Yeah look.

Look I mean, I wouldn't expect I don't want the guide for 'twenty two.

Want to get multiyear of PD and guidance, but I certainly.

Would expect Q4.

It may not be a high for some reason in other words, if we were to use your number of five or six in Q4.

Yes.

One around this table would be a bit surprised of 22 was the simple forex of of that number I would expect.

You can I think judge by the way we're investing in it this year I would expect 22 PD on revenues to be some interesting multiple of whatever we're able to.

Turn in in and in this year's performance on Forex Q4 would seem to be of reasonable way to think about of floor. Yes.

Thank you.

Your next question comes from the line of Matt Taylor with UBS.

Hey, guys. This is young Li in for Matt Thanks for squeezing the fan.

I guess on the on the international launch plan for Pee Dee Ann can.

Can you maybe just.

Hum.

Think about the market size and the opportunities in the three countries. The mentioned relative to the U S. And then maybe you can talk a little bit about the pathway for.

The other countries to come on line in the coming years.

Yes, I think I think we actually spoke of that in the in our prepared remarks, we're gonna be rolling.

We're gonna be rolling out, our PD and marketing initiatives and most of our markets in the in about the same timeframe, we're rolling them out in the U S. So the so the second half of the year I'm not prepared today with total PDL populations in those markets.

That's something we might be able to speak to him in future calls, but certainly there's significant interest you know, Australia and European markets and in some isolated pockets. There are at the beginning to look at patients for PD on now where they have where they believe they have approval.

But we don't expect to put a lot of our own.

Initiatives in place until the second half of this year when we're launching more broadly so I would say maybe more to come on on some of the market size of it for the O U S markets in the next couple of quarters.

Okay, Great that's helpful.

And then I guess, maybe this one on longer term margins.

Remember last year at the NAND the debt.

In person one you talked about on guiding to positive EBITDA and a year later now youre guiding to a similar level of in terms of revenue and EBITDA.

You know of lots happened over the past year. So I was just wondering you know in your view in.

In terms of the longer term margin potential for net Roe.

Now all of us.

Have you changed compared to or thinking about a year ago.

Yeah.

Yeah, well in the short term of course has been to a completely different.

The picture now than it was at prior year's NAND, which was before anybody was thinking about COVID-19.

I don't think the longer term view has changed as we as we think about a business like ours that is you know in the.

The roughly 70% gross margin.

Range, we think obviously as Rod mentioned.

Mentioned, a moment ago with our own manufacturing, we think the gross margin profile can be better than that over.

Over time, we think there's lots of ways that we've already articulated that will see efficiency.

And our cost of growth going forward and particularly on our in our commercial costs.

I would say look and if you look across the the med tech landscape at scale and you know, let's say of scale. As you know 500 millions of 1 billion of have companies that are in that range for gross margin are typically.

And the 20% to 30% operating income range and probably are closer to 30% in 'twenty.

Think of those kinds of scales, we wouldn't have a different expectation for this business. So.

I think we feel as though this this business scales.

Very very attractively over the next $500 million in revenue.

Your next question comes from the line of the Margaret Kaiser William Blair.

Hey, guys. This is Maggie on for Margaret Thanks for taking my question.

So you launched on the about a year ago, now and maybe didn't get as much uptake as you would have thought because of COVID-19. What's your penetration in your accounts of Omnia today look like how do you expand the penetration into other accounts going forward and how impactful do you think the recently approved new ups.

<unk> can be an expansion of 11, okay. Thanks.

Yeah I think.

In the U S market Omnia is up two last time I looked around 74% of of 74, maybe 75 per cent of all utilization. So it's it's received pretty widespread adoption among our users.

Of those of those five market share points that we think we've gained over the last two.

Business cycles, we think are.

Somewhere between one and a half on three of those points came in 2020 since we launched omnia. Despite the COVID-19 environment.

And we think of you had a lot to do with that I think part of the value proposition that we laid out for our customers with Omnia. When we launched it was the promise that we would be able to make improvements make changes they wouldn't have to think about.

Re implanting patients are only getting access to those improvements in new patients that we would be able to upgrade the existing omnia and you.

You know less than a year later, we're already talking to them or about a year later, we're already talking to them about of major.

Upgrade that's responsive to in many cases their needs. So I think on me and we'll continue to allow us to get traction.

I've said this before it's not a typical.

The product.

Innovation cycle in the sense that.

It really was a major strategic shift for us it was going from just high frequency to offering high frequency uniquely as well as every other frequency are available.

And I think that's a that's sort of part of the value proposition, that's not that others can't replicate and that's pretty enduring. So we think for all of those reasons. We are able to continue to use on mute to capture share.

For some time to come and as we think about omni is impact I mean, it's an important part of of some of the growth expectations, we've talked about today.

Great. That's helpful and just for my follow up looking three to five years out what do you think the market will look like from the growth perspective than the penetration perspective, what do you think the next evolution of the market will be out of the past couple of years. We've seen different focuses on waveforms indication of the various device sizes. So what is never specifically.

Are you going to be putting more investment dollars behind us for future growth outside of new indications.

Yeah.

Well I'm not going to predict the market size for five years out I think it's going to be I think it's going to be one of those markets that given the size of the underlying Tam just continues to offer a year over year growth rates I don't I don't think it's a market that all of the sudden based on any innovation just because of the large addressable market.

All of a sudden grows 30 or 50% just because of the patient has happened to be there, but I do think it's a market that because of those patients are there grows at an attractive rate as technology gets better and awareness of the technology and the outcomes.

Comes higher over the over time.

And that's one of the things we like about the underlying markets as we think that they offer that kind of growth that we can build on.

What drives that kind of growth in terms of innovation book I think Theres I think theres a lot of interesting things coming if I. If I think about some of the things that we think will drive that kind of growth. It's it's innovation in the areas of of both frequency and wave forms of innovative form factors of the use of big data and AI.

To inform our therapy choices.

Joyce and improve outcomes.

The data to treat new patients and new categories of patients like we've seen in P. D and I think there's a lot of things that are capable of growing the market and all of those areas. I. Just listed are are areas in which we're making investment.

Yeah.

Your last question comes from the line of Suraj Kalia with Oppenheimer.

Good afternoon, everyone keeps can you hear me alright, we.

We can hear you.

Perfect. So Keith you gave a lot of commentary on PD and then I know of number of questions of being asked let me ask the same thing a little differently Keith.

Can you give us a specific example.

Of medical device surgical reps in the PCP and endocrinology suite.

That could possibly guide us on thought process on the PD and market development any other device that you all of our modeling or thinking through here of the reps, Dave or surgical reps in a piece of the endocrinology suite, making an argument to have patients jump over into surgery.

I'd have to think about it I'm not going to give you on.

Off the cuff, but I mean people have.

Have employed referral sales organization to call on the PCP market to refer patients.

For years.

On the pharma space for the device space as well.

I don't want to just come up with one off the off the cuff Suraj, maybe you up on it in mind and that's why you're asking but.

It's something we can think about it and and happy to talk to you about that later.

Got it and Keith of one last question and I'll hop back in the queue.

You've been there at the helm for two years, Keith as you look at the market from a bird's eye view perspective, what is your impression.

You know of switching cost in the market.

Just trying to piggyback on Bob's earlier questions in terms of the number of waveforms that is obviously, a new entrant that is going to be coming into the market and the the field checks.

To come back positive and I'm curious, how you see the switching costs from one platform to another as you've spent over the last two years. Thank you for taking my questions.

Okay.

Well look I mean.

Switching costs as I compare them to other segments of Med Tech I suppose are reasonably low I mean.

One doesn't have to.

Invest a $1 billion in capital equipment, and training and refurbishing of our suite and that kind of thing do you employ.

The use of of different implantable as we see them in in other segments. So if you're a doctor using one.

The one SCS system, the cost necessary to be trained and deploy another system I would say in my experience relative to other sectors is relatively low.

And I and I think that's.

That's true both our advantage and disadvantage right I think we've we've been capturing share.

And some of that is as come in competitive accounts or splitter accounts, and it's and we benefit from that from that very fact.

Maybe you can maybe you can.

Expand on your question Suraj and tell me, what you're actually trying to get to.

No Keith.

No no subliminal question, just trying to understand one of the key things is just on the overall space right wrong or indifferent the lack of head to head studies get of questions about durability X plant and so on and so forth everyone has a certain argument.

And there is obviously, a new entrant that is going to be coming in shortly so just trying to wrap around our head what should we see possibly in terms of share shifts and how you're thinking through that that was really the gist of the question. Yeah, I think look any credible new.

The competitor that does it right that has the resources and has good data and has and has a good system has the expectation of coming in and getting some share.

I'm not going to sit here and predict which entrant might get what amount of share from which entrenched competitors or existing competitors because I don't I don't know that if you look on one of you know one cases as new Vectra, where there was a lot of valuation and high hopes about the share of the debt.

The device would take in that and that didn't happen are there have been some other smaller devices that have come into the market I think with the intent of taking a.

More market share and they haven't.

This is not an easy market to come in and and and enter I mean, it requires more than the good technology more than good data of more than innovation of.

There's a significant market footprint that has to be an incredible one that has to be built for customers to begin to rely on you as a technology provider and it's not inconsequential.

And there are tough competitors in this market and we consider ourselves one of them.

So I think for someone new coming into this market they've got to do a lot of other than just bring new innovation now if they do those things then you've got to look at the innovation and say who is most likely to want to use debt, which doctors, who use which devices now and which patients.

And the vulnerability to a new entrant is not going to be the same on the part of every competitor in the space and those are things, we consider as well.

We feel like we're pretty well positioned.

And there are no further questions at this time on line I'd like to turn the conference back from Mr. Keith Grossman for closing remarks.

Okay. Thank you everyone for joining us we appreciate it and we'll look forward to talking to you the next quarter and giving you an update on our progress.

Ladies and gentlemen, this concludes today's conference call. The thank you for your participation you may now disconnect.

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