Q1 2021 Axonics Inc Earnings Call

Okay.

Good day, and thank you for standing by and welcome to Axon ex Q1, 2021 results conference call.

And this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero and I.

I'd now like to hand, the conference over to your Speaker today, Neil Blood car Investor Relations. Please go ahead.

Thank you Peter good afternoon, and thank you for joining Exxon ex us and quarterly results and update call presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and CFO and Dan will provide prepared remarks on first quarter financial results commercial progress and a general business update followed by a <unk>.

Q&A session before we begin I would like to remind listeners that statements made on this conference call that relate to future plans events prospects comment.

Our forward looking statements as defined under the private Securities Litigation Reform Act of 1095, while these forward looking statements are based on management's current expectations and beliefs. These statements are subject to a number of risks uncertainties assumptions and other factors that could results to differ materially from the expectations Express.

On this conference call.

These risks and uncertainties are disclosed in more detail and Exxon ex as filings with the Securities and Exchange Commission all of which are available online at Www Dot SEC Dot Gov listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date may 6th 2021.

Except as required by law Exxon ex undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances are anticipated unanticipated events that may arise.

Now I'd like to turn the call over to Ray for his remarks.

Thank you Neil.

I'd like to welcome everyone. Joining the conference call. This afternoon and for folks who may be dialing in for the playback.

I am pleased to report that Exxon ex generated $34 $4 million of revenue and the first quarter of 2021, which represents an increase of 31% compared to the same period of 2020.

We're proud of this result, considering the strong headwinds in January and February, which disproportionately affected elective procedures as well as the normal seasonal impact of patients not having yet met their insurance deductibles.

The good news is that in the U S. We saw a solid rebound and sales in March that has continued into April and early may buy.

By contrast, much of Europe continues to remain and lockdown.

And we're confident however that as more people are vaccinated and we return to a more normalized elective procedure environment and the months ahead that Exxon ex is poised to continue to grow revenue meaningfully in 2021 and beyond.

There is no doubt that the U S sacral neuromodulation market is growing.

And this will become much easier to measure once the pandemic receipts.

The opportunity for Exxon ex is significant considering how vastly under penetrated the market is for treating any form of incontinence.

Sacral Neuromodulation is poised to expand into a multibillion dollar annual market in the United States based on the fact that tens of millions of women are suffering from these conditions.

Now response to our recent acquisition of bulk and that has been overwhelming overwhelmingly positive as anticipated the.

And the expanded offering has elevated exxon ex stature with the urology and Youre going to college community.

Bocom and has a strong strategic fit for Exxon ex given that our commercial team is already calling on these customers clinician.

Clinicians arent, Louisiana stick to offer the safe and efficacious next generation bulking agent to women suffering from stress urinary incontinence, and we see book and that is providing us with an opportunity to sell more sacral neuromodulation in particular to those accounts and the United States that have not yet converted their sacral neuromodulation.

Asian business to axon ex.

Physicians working with Exxon ex now have a complete set of tools to treat patients presenting with stress urinary incontinence urge urinary incontinence mixed incontinence urge urinary frequency urinary retention as well as Val and continents.

Integration and training for Bocom and is ongoing and is anticipated to be completed during this quarter at which point, we will able to we'll be able to fully leverage our 250 person commercial team and rollout bolcom and more broadly in the United States.

Internationally, we're also working to get Bocom and sales representatives trained on second and modulation and for the axon ex SM team to be trained on bulk of it.

Our commercial success continues to be grounded and providing our customers with exceptional support while simultaneously or significantly I should say improving the quality of life for their patients. We continue to hear from clinicians that more of their patients are saying, yes to cycle and a modulation therapy than ever before.

And if theyre excited to incorporate <unk> into their practices.

As we speak the overall market for <unk> is expanding driven by technological advances strong clinical outcomes and increased patient awareness.

We believe that Exxon ex will continue to be cause and the matter of driving durable sacral neuromodulation market growth in the years ahead.

Now for the first time and our history as a public company, we're instituting full year revenue guidance.

To that and for the full year of 2021, we anticipate revenue to fall between 176, and $180 million, which represents an approximate 60% increase compared to revenue of $111 5 million in 2020.

We expect slightly more than 90% of that revenue to be attributable to sacral neuromodulation sales and the balance to bulk of it.

And now changing topics on the subject of clinical and regulatory.

We continue to enhance the patient experience and build a strong body of clinical evidence for Exxon ex sacral Neuromodulation therapy.

A few notable items from the past quarter include.

And then in January.

Of 2021, a manuscript discussing the two year outcomes of our artisan <unk> pivotal study were published in neurology.

Neuro urology and Urodynamics the official journal of the <unk>.

International Clinton and Society.

The two year responder rates and the artisan <unk> pivotal study represent the highest ever reported in this body of clinical literature.

Moreover, the clinically significant and durable symptom relief and high degree of patient satisfaction reported by study participants is being replicated every day by our customers around the world.

In February.

The FDA approved exon ex third generation implantable neurostimulator.

And as a reminder, the third generation.

Stimulant has upgraded embedded software, which enhances the functionality of the device system and the patient remote control. These modifications give patients the ability to make broader stimulation parameter adjustments at home, including selecting a second therapy program that was set post operatively based on inter operative findings.

And we began shipping the third generation implantable neurostimulator in the first week of March and the feedback from both physicians and patients has been overwhelmingly positive.

We also have a registry study registry study called artistry.

And that study is now enrolling and implanting patients at a nice clip we have over 50 patients already enrolled and the registry towards our goal of approximately 300.

On the product development front, we continue to make strong progress on our non rechargeable or primary cell neurostimulator.

We are working diligently and expect to file with the FDA before the end of June.

And are optimistic that we can have the product approved and in the market in the United States and the first part of 2022.

Yes.

With that said I'll turn the call over to Dan who will review, our first quarter 2021 financial results Dan.

Thank you Ray for the first quarter of 2021, Exxon ex generated net revenue of 30 $34 $4 million.

This represents an increase of 31% compared to $26 $3 million and the prior year period.

Sacral Neuromodulation revenue was $32 9 million of which $31 $7 million was generated in the United States.

And the remainder and select international markets.

<unk> revenue for March was one 5 million of which $578000 was generated in the United States.

And the remainder overseas.

<unk> contribution this quarter was for only one month and one day as the acquisition closed on February 25 of this year.

Overall total net revenue from the United States accounted for $32 $3 million with certain international markets contributing $2 $1 million of revenue.

Gross profit for the first quarter of 2021 was $24 million.

Representing a gross margin of 59, 3% compared to 62, 4% for the three months ended March 31 2020.

The decrease in gross margin for the quarter is due to lower absorption and manufacturing variances, which included a lower yield rates and anticipated as we continue to work with our contract manufacturers to increase our manufacturing output.

While we expect to see some variability and gross margin quarter to quarter, we fully anticipate gross margins will increase during 2021 and land and the low to mid seventies and the next few years.

Total operating expenses for the first quarter of 2021 were $42 million.

Included in this figure is $4 $4 million of one time legal consulting and advisory expenses related to the bulk of net acquisition.

Also included in operating expenses is $700000 of amortization of intangibles expense related to the acquisition and.

Adjusting for these items operating expenses were approximately $36 $9 million in line with our budget and reflective of increased head count compared to the prior year period.

And the year ago period operating expenses totaled $31 1 million.

We expect operating expenses in Q2 to be and the range of $43 million to $45 million. This increase is mainly due to the additional operating costs for bulk and met this.

And this estimate includes approximately $3 million and incremental operating expenses and $2 million and amortization expense on the acquired intangible assets net.

Net loss for the first quarter of 2021 was $22 5 million compared to a net loss of $14 6 million and the prior year period cash and cash equivalents per $131 million as of March 31 2021.

I will now turn the call back over to Ray for additional remarks.

Thank you Dan.

So I'd like to add some color on a number of items.

First.

As of April 25, we now have over 503 employees at Exxon ex this has more than doubled since this time and 2020.

The number of employees engaged and field activities is about half of our total head count.

And now in the U S. We have a total of 107 salespeople and sales managers we have.

And nearly 110 clinical and therapy support specialists.

Handful of field marketing specialist and a clinical edge education group.

Representing.

And which represents five professionals and they are led by our Chief Medical officer, and one of the world's foremost experts and eurobond oncology Dr. Karen Noblett.

And Europe between <unk>, salespeople, and sacral Neuromodulation salespeople and clinical specialists, we have 27 individuals.

Now.

And I think this is an important comment to make considering the variation and the gross market for the first quarter and that is our average selling prices over the past three quarters have been stable.

Although the mix of where purchase orders are coming from or are originating from has shifted.

Whilst all procedures are performed in outpatient settings, either and the hospital and ASC now now nearly two thirds of our purchase orders come from hospital systems.

This is resulting from the fact that we have signed agreements to supply our second new modulation system to over 200 national and regional Ivy and and local facilities and we've accomplished this over the past year.

And as stated in the past these agreements are mainly hunting licenses with certain volume targets.

We are now adding bulk of med as an addendum to many of these agreements.

Now I know theres been some interest and hearing more about our marketing efforts and particularly direct to consumer advertising.

So during Q1, we invested approximately $1 million and a combination of activities, including Facebook ads paid Internet search and search engine optimization. In addition, we worked with our customers to support mailings from physicians through their own patients.

From local print advertising and some short TV spots suffice it to say we've reached tens of thousands of potential patients. We've generated hundreds of leads and appointments and physician offices and are now seeing this interest turning into procedures.

Our messaging will.

Now include offering solutions for all types of incontinence, regardless of whether its stress or urge incontinence.

We believe this will also increase our response rates lower cost per lead and drive even more patients into the practices of the physicians who are loyal to Exxon ex.

We are now live and 42 markets and the United States up Fourfold from December 2020, and we will continue to expand into more markets and invest a reasonable amount of additional capital into these efforts throughout 2021.

Now and closing with respect to prepared remarks, we're incredibly bullish about the outlook for our sacral neuromodulation portfolio and bulk commit over the next several years, we're grateful for the trust that physicians patients and shareholders have placed and Exxon ex and.

And I can assure you we continue to work diligently every day to fulfill our mission of changing the lives of patients suffering from bladder and bowel dysfunction and being the market leader for sacral Neuromodulation.

At this time, we're happy to take some questions. So we'll turn it to the operator.

As a reminder to ask a question you will get the breast star one on your telephone.

Please standby, while we compile the Q&A roster.

And your first question comes from the line of Bob Hopkins with Bank of America.

Oh, great and good afternoon, and congrats on a strong quarter.

Thank you Bob I appreciate the detail, maybe just a couple of clarifying questions on the.

And it looks like Youre guiding to about $18 million of bulk and mid sales for the year.

And about $160 million on the sickle nerve modulation side.

Is that first of all is that correct.

No okay, it's not it's not.

I think you are.

You are about $4 million higher on the Bocom and based on your comment so that should be put into the second and modulation side of the ledger.

Okay. So you're.

On the guidance like $14 million.

Is it I mean.

And that would imply that you have no improvement in monthly run rate from here on Bocom and is that just right. So liberated from her yes, let me let me just make a comment about that Bob I appreciate that and I appreciate that question and a chance to clarify so look we clearly.

Over achieved in the month of March I mean, I don't think any of us expected to generate nearly $1 $5 million of revenue.

In March.

Now in Q2.

Things are going to not be at such a great clip right. In other words. If you took March times. It by three you would say Wow, you guys should do $4 $5 million, but here's the difference we had a nice strong result in the United States in March.

However, those individuals that were involved and selling that product are the ones that are training or 110 clinical specialists and the salespeople and all of that and that's happening in Q2.

No.

We're a little bit shy really about even the analyst consensus of $3 4 million and Bocom, Ed and we're a little more comfortable around $3 million, just because we are diverting resources.

Selling resources to do training and also just to underscore the point our own cycling a modulation sales force is not out selling bocom and at this time, we are still in the mode of training people and getting up to speed.

They will start to contribute in Q3 of 2021. So the increase if you may over and above consensus.

Is from sacral Neuromodulation and Bob as you saw from the numbers, we over achieved in that category in Q1, and we're saying, okay fine, let's take that number put it into the overall consensus number and then we're suggesting that we could we could be higher.

By some millions beyond that so hopefully this kind of clears up.

The story.

And it does but just one follow up on the bulk of mid size and then just obviously.

Yes.

Is that sort of what you saw in April and early may in terms of more like a $1 million monthly run rate versus the $1 five and March yes, just because as I mentioned, we've diverted resources I mean, we've trained nearly 60 people already.

And in these weeks.

In April and May and obviously.

And our people can't be in two places at one time right, they're good but they're not that good.

So.

That's kind of the situations. So look we were optimistic but the other issue just to put a finer point on it even further.

Germany is under lockdown until the middle of June.

And that's that's almost all of the quarter.

Not really seeing any action with everybody is still hide and under their desks in Germany. The UK is not and not much better shape and as you can as you have seen from the historical numbers.

And the number was much bigger internationally than it was and the United States, which is the market that's just coming around so.

And really so that's the issue right. We've got U S people involved and training and then we got the international markets most of them still having problems from COVID-19. So we'll just we'll do fine I think it'll be respectable, but we're just trying to provide some color. So that people really can have a better sense about what to expect from the.

Company and the short term and then.

When does that sacral nerve modulation sales force really go out and market Bocom and when does that happen it won't happen until well into the third quarter right.

And it's one thing to get cyclical modulation and salespeople and clinical specialists to our engaged and highly technical.

<unk> Dan implants.

It's one thing to get them up and running on Bocom and it's a little more of a heavy lift to go the other direction. So.

But it all come together and we'll see some benefit from from the synergy as we go forward.

We'll add just one more comment since ive been sounds like I'm talking downhole committed and we're really not because the demand for this product right now is significantly higher than our ability to actually get to these customers.

Okay. Okay.

Got it that's helpful. One quick last one in terms of just the core sacral nerve modulation business.

Given it's such a unique quarter just wondering if we get any rough sense for.

How how march was and whether or not April was better.

Yes, Thanks, Bob.

Yes March was a really good solid month I think you've heard this refrain from all the other companies that have reported.

April continued even though is the first month of the new quarter. It continued at that good pace and into the first weeks and first days here of March things and looking pretty good so.

This is why we're being more bullish.

Even in the short run and Theyre, suggesting that we.

We could even see an increase over analyst consensus for Q2.

In the short run so I think things are good and it's just great to see more people getting vaccinated elective procedures opening up and.

And so forth so things are definitely getting better and we're seeing incremental improvements and literally month to month now.

Excellent thanks for taking the questions.

Thanks, Bob.

Your next question will come from Chris Pasquale with Guggenheim.

Thanks, and congrats on the quarter guys Ray and just curious whether you saw scheduled procedures cancels in the early part of the quarter that you then we're not able to makeup and March wed love to get a sense for whether there is a new group of sort of pent up demand patients that could come back in here over the next cut.

Months.

So Chris you know look there were some cancellations.

In the January, particularly like and the January period.

But.

And they are nowhere near.

As.

Much of a problem as what we saw in Q4, right, where we actually went out there did a survey.

Put a number two and I think it was 320 odd procedures that were canceled and Q4.

We just did not see anything near that in Q1, So really there is not much for us to say about it.

I think.

And the number the numbers that we generate and Q1 I think they speak for themselves. So it was a good quarter for us and.

Sure.

And we're obviously seeing incremental increases and optimistic about.

About.

Uptake of the product as we continue.

That's helpful.

And then I appreciate your comments around the DTC.

Campaign, and and the work you're doing with customers.

And $1 million is not insignificant, but it feels as though the market is sort of kicking off in advance of some of the investments that you guys had really talks about from.

And the market development standpoint are you feeling that and how is your <unk>.

Experience over the past call it nine months or so.

Color your view on what's going to be necessary to get to that multibillion dollar.

Level of adoption that you spoke about in your script.

Yes, I think it's a good question, Chris and I think that this is happening also and a very much of an organic basis, we continue to say.

And we said this line of many times.

Patients are saying, yes to the therapy more often than ever before that's what docs are telling us that's what our customers are telling us. So there is a groundswell of interest that is happening organically. The fact that there are letters going out to patients from practices.

Suggesting that they may want to come back in and talk about new technology. The fact that we're on Facebook and that there is a lot more action out there and more awareness.

Even our competitors starting to do a little something and this particular area, which we applaud.

And so rising tide.

And to help all players in the marketplace. So there.

And there is.

And there it's happening I mean, even.

Look I'm not a subscriber to Harper's bazaar, but when you when you hear that the pelvic floor is getting a PR makeover.

I mean, theres a lot of interest now starting out there.

And.

How should we say.

And the world and particularly in the United States.

About this particular topic, so I think youre going to see that this is going to happen.

From an organic standpoint, just increased awareness people talking to each other and Theres just a lot more action going on and but here's the bottom line. When it comes to <unk> modulation and this is really more about physicians being more comfortable with talking about the therapy, because we've got a better product and its long.

Lift and it's MRI compatible and it's easy to use and youre going to get a great clinical results. This is the big difference. This is no longer a therapy of last resort, which is which is what it was before we entered the market and so it's a new day.

Here and I think what we're trying to do is just put some more gas.

On the fire, so to speak and keep things moving and the right direction. So.

And I don't mean to be talking down DTC, we got tens of thousands of people who raise their hand and said they're interested but it is a long term process to convert that initial interest and to actually somebody showing up for our procedure right. So.

It's a multiyear effort and and if I just look at inspire medical I mean, I think they disclose this and hopefully.

Reporting something everybody knows but they spent $27 million on DTC and 2020.

And we applaud that we think that's great.

And quite we're not quite there yet and we're not the only player and the marketplace either so it.

It takes time and there will need to be continued investments overtime.

But where we're trying to do this and a smart way Chris.

And kind of do the blocking and tackling before we get over our skis. So I think youre hearing a little bit of conservatism from us.

We'll continue to invest additional money and DTC.

But we want to try to keep it and kind of a rational vein and really focus on how we're processing those leads and how they're landing and physicians offices, how theyre being followed up. So we are really heavily engaged and kind of process of how these things really work because.

And our operators and Thats, just Canada or background, and we want to make sure that we're getting a return on investment.

Makes sense. Thanks.

Thank you Chris.

And your next question will come from Kyle a problem with <unk> Securities.

Yeah.

Hi, guys, thanks for taking our questions and and all the detail on the guidance.

One of the things and Im curious about is how youre, assuming vulcan that can have a halo effect on the net because.

Because I mean, a lot of patients have had both <unk> and R&D and so I guess are there essent and patients who actually have and and.

And <unk> implant today that could benefit from a bulk and that injection.

Just curious how youre thinking about from dis synergies between the two businesses.

Thanks, Kevin So you're correct I'll take the technical part of the question first you are correct that.

There are a.

Group.

Maybe as much as 20% of patients, who we call mixed and continents patients. These are patients that have a form of stress urinary incontinence, and urge urinary incontinence and <unk>.

Many times the docs tried to do a differential diagnosis may be using.

Different techniques and and your dynamic testing and things of that nature.

To make that differentiation, but really it's about which is the greater bother for the patient and we all know that if you've got urge urinary incontinence I mean.

That's.

It's happening and real time, and the fact of the matter is we've got accounts that we've not been able to sell second and modulation too that have invited us in because of ultimate and they are now open and some of them have already started working with us on cycling modulation. So.

The theory or the hypothesis behind doing the acquisition.

Is playing out in real time and is happening very quickly. So we're really thrilled about that and that's going to help also fueled the growth of our cycle no modulation business, not only and 2021, but beyond.

Great. Okay, and then we heard from from a search and he does a lot of that or at least historically did a lot of things and he thinks the market could go day 80 per cent I I've bulking and within the ask the guy market, <unk> and and largely again, because the bulk and that so what's your reaction to that estimate or.

You know your your view there as I'm sure I get and you've had more a lot more conversations with that with customers that and then we've been able to thank you guys got and yeah. Thanks. Thanks, So yeah no doubt about it. So you know it's interesting I'm I'm Gonna I'm Gonna quote a study that was done actually in and England.

And it was under the banner of.

And what woman, what women want and it was with respect to not.

Other things, but what they want in terms of treating their stress urinary incontinence.

67% of the respondents and this was hundred's not just a dozen people right. There's hundreds of people who responded that broke and that is what day would prefer as a treatment as compared to an operation for slink. So I was that that was a pretty impressive number right. When you go out and give some basic information and and people respond.

<unk> and that way. So we may never get to 80 per cent, but the point is it's gonna be better than 50 and made may be approaching this kind of number the fact is people.

Would prefer to have an injection and the urethra with a material.

That doesn't have.

Adverse events.

That is going to last for five to seven years.

That can be done in the office that's.

That's a fifth less than 15 minute procedure I mean, given the choice why would you choose and operation now there may be other reasons and and maybe some patients that are more suitable for a swing based on the severity of their condition and bulk amid is never going to be exactly as efficacious as Ah.

Swing, but you know you are talking about something is gonna give you 70%.

Relief in terms of your symptoms as opposed to 90, but it turned out to be a 10 or 15 minute procedure and a doctor's office as opposed to.

An operation with recovery time, it's pretty clear what the preferences of these patients are so now the key thing is to get the dogs that are out there to talk to their patients to give them. The option explain the benefits and I don't think there's any question that we're going to see a sea change here.

And how stress urinary incontinence is treated.

In America, and we already have seen it happen in the UK as an example, right.

And the UK. This is the standard of care for patients with S U y.

Thank you guys.

Thank you.

And your next question will come from an Arabic Olsen with Wells Fargo.

Hi, Larry.

Hi, it's actually calling and for Larry Thanks for taking my question and you wanted to start with a comment you made about there was some backlog and the queue for there are some cancellations did that backlog at result, this quarter. So we got a little bit of benefit from now.

You know, it's it's one of these things where.

We have not spent a lot of organizational energy and tracking these patients by name so.

I can't really answer that question and any kind of definitive terms clearly some of these patients came back.

I would say a fair number of them have not come back yet I mean.

And we're still if you think about where we are in terms of explanation and America.

Maybe 40% of the population so clearly.

A lot of those patients that cancelled had not had not been vaccinated and are still not vaccinated for this moment so.

And I cannot say that Oh, the increase and Q1 was a big pickup over cancellations from Q4.

Got it okay. So it sounds like maybe there is still some pent up demand whether it's from queue for early part of key one just based on procedures can cancel and may not be fully rescheduled.

That's a correct statement and I think it really boils down to the environment right elected procedures are starting to come back.

Institutions are willing to allocate more time and resources and so and so forth. So I think it's it's not one thing. It's a combination of many factors, but I do believe that what you're going to see and I've said. This before is that if you draw a line and you trace the percentage of people that are being vaccinated with me United State.

And you'll see that the ex Sonics revenue will will follow that trend line.

Got it Okay. That's helpful. And then just another question around that revenue. So you mentioned that you.

And that's your getting trained and I'm a new product.

Would that have some sort of effect on the revenue Caden and Q2 versus second half of the year just from time to be trapped and off the off the field for training.

So to put a finer point on it.

We're training are clinical specialist.

First.

And these are the people that are going to be doing wet lab training and they're gonna be there to support the initial injections in.

And patients. So this is this is more about our clinical specialist staff not so much our sales people. We are not taking time out of sales people scheduled to have them become experts on how to do injections. That's not their job right. They can talk about the benefit of the product and how it can.

People practices and all the rest of it but we're not getting our sales people bogged down and becoming experts on how to inject this material because they're not going to be the ones that are going to be there to support these cases, so and with respect to clinical specialist.

These are the folks that are focused on pace coverage and we have the ability obviously to manipulate these calendars and to keep the wheels on the bus as we're taking these people out of the field for two days or three days at a time so.

That you will not hear this as an excuse from us.

Oh Gee, we had to train people and therefore, we didn't make our numbers you will not hear that excuse from us.

Got it Okay and then just last question and your primary held device you plan to file that by the fighting and a chance he just pocket and.

<unk> potential advantages.

Over the competition like interest and tail.

Thanks again for taking the question.

Thank you. Thank you I really appreciate that question and.

We'd be happy to speak and more detail about it because I think that.

This is.

This is really important and this is a huge value driver for for exotic so here are the facts.

And the device is.

Approximately 11, and Ccs, which is about twice the size of our existing implanted neurostimulator. It's about that's about 20% for a little over 20%.

Mauler than the interest and too.

It's a profile is different it's much sooner than the interest into all these things will accrue to our benefit in terms of place and this device and the body.

The device will last for a nominal setting meaning the average patient, we'll get 10 years or more out of this device. This is a watershed completely different story compared to what is available from the competition, where there. Despite what they might say there are dozens of clinical studies would suggest that that device will.

Last about four years, some people aren't so lucky it only lasts for two or three years and their body.

So the key thing is longevity and the body.

Size is going to be attractive a couple of other key points. This uses constant current technologies at the same technology, we use and our existing rechargeable device. So we expect excellent efficacy with this device no change.

From that standpoint.

It uses the same lead technology right. So we have the same leave that goes with the the device and I think the most important thing here is now we're going to have.

Physicians that we'll be able to direct their patients or give them choice as to which way. They would like to go so think about the lineup and you've got a non rechargeable device that could last 10 years and the body it'll be the first recharge free system in cycling or modulation.

What do I mean by that.

You don't have to recharge the stimulator and our patient remote doesn't have replacement batteries doesn't need to get plugged in the wall and you don't need to stand on your head to make it connect to the implanted stimulator. So we got a recharge free system, that's going to be long lived that's going to generate high levels of efficacy based on the constant current technology.

And it's got a nice footprint in terms of the size and the shape. So that's the specs.

And those are the key things that that matter and I Dare say that we are very anxious to get this product and the market. Because we think this is going to be a big runner and it's going to put a lot of pressure on the income Vince franchise.

So thanks to that question.

And your next question is from Michael Polack with bird.

Hey, good evening I guess, the veil has been lifted on the.

Primary sales so thanks for that right.

And the question I had is I think and the last disclosure you at 600 centers signed up for Us and.

Mentioned and the prepared remarks that obviously both committed.

And opportunity to call and folks that aren't using ex sonics.

<unk>.

Like last year or the year before it was you know give or take a thousand and centers explain.

80% of the SMN volume historically so.

Curious not gonna hold your feet to the fire on this but.

You know.

And what are your and and the latest and greatest internal expectations for how many of these centers may.

They take your call and and start.

Engaging with a sonics and us and them as a result of bulk amid over the course of the next year or two.

Yeah.

Michael Thank you for the question that's a really hard question for me to answer I mean.

Tell you what our philosophy is and the things that I tell our own people, we want all the business.

I mean, we want them, all and we're not going to rest until we get our fair share of the market, which we defined as at least 51%. So we're at it we are added every day and.

It's hard to make a prediction.

And any kind of precise terms, so I'm not trying to be evasive and it just really.

Really difficult question to answer, but we're on it and the.

The hypothesis is working and.

Clearly.

To look to bring as many of those.

Important accounts to axon ex as we can and as fast as we can that's that's the game that were apply and.

Fair enough follow up easier on perhaps her Dan I appreciate the carve out of the and tangible landlord and and deal related expenses and <unk>, the $4.4 million and deal related expenses and <unk> heard of that is there anything like that you expect and <unk> or is is <unk> really ah.

Core Opex number plus the that day.

Deal related and more.

That's correct, we're not expecting anything and the order of magnitude of obviously $4.4 million and one time and expensive for not planning on doing another country or acquisition.

And if you assume the current operating expense run rate for Q2 prior to bulk and that and put that at $30 million to $39 million and then if you add the incremental expense associated with the bulk of Mad Opex, we expect to see those expenses, excluding amortization of approximately $42 million and then amortization of the intangible.

And what is going to run at about $2 million per quarter going forward.

Got it thank you.

Thanks, Mike Thank you.

The next question is from Mike Mats, and we'd need them and company.

I just wanted to clarify a few of the comments you guys be during the drink and portion.

And I think dance, maybe maybe not but the asp's. So I think he said it was they were stable, but the mix change. So I guess I was confused by what that means does that mean day.

And this now purchase orders coming from from those institutions.

And so that's those are the two messages I was trying to get across.

Okay. Thanks Thats helpful.

And then.

Wanted to ask.

The bulk of it now that you've got it.

In the.

Your own hands and Youre out there selling it so.

What kind of.

Reorders are you seeing and I think part of the premise here is that the customers once they kind of get trained and start using it and they'll continue to use it on your own and you won't need to have your reps. There for every case and I mean is that actually playing out that way.

3rd%, Mike 100%.

People once they get trained we don't need to be there. The idea is you do a wet lab do you get them up and running get to practice you get some patients that are either that day or the next morning.

You support them with those first three four and $5 six patients wherever it might be and then they're on their own and then you're just going to pop and as you normally would do as a company to make sure. Your customers are happy and things are going well, but we don't need to be there and and that's great because.

It helps us a lot.

It's a light touch from that standpoint, so, but what I will say is that.

Given that we have not unleashed our own sales force.

On the market, we have seen nice brisk pace of Reorders.

And we are seeing.

We are seeing physicians, becoming evangelists about this product.

Is.

This is really amazing and well beyond our own expectations that the physicians that got trained and 2020 on this product they are making the most effusive comments that you could possibly imagine.

Kayla mentioned.

Our very experienced physician, who said hey, I think that bulk and that is going to take up 80% of the swing market. Even so we're seeing that kind of enthusiasm.

A willingness of these urologists and youre going to colleges to speak.

Publicly about their experiences.

We referenced previously that people should give a listen to that.

Session that took place at <unk> The conference, which we have a playback on our website.

And that playback you can hear from three <unk>.

Physicians that are using bocom and that werent, even our customers they werent, even exxon ex customers.

Previously so they had a very much of an unbiased view.

So anyway, it's really going quite well I mean, this is a product that really works.

And as and truly as easy to inject and is getting great results on these patients immediately and you can imagine you go in for a set of injections and then.

A bit of a cough test and then they walk out dry I mean, that's incredible so we're going to start to see a lot of goodwill being generated from patients and these practices those patients talking to other family members friends and so on and so forth about their experience and having satisfied our physicians who are helping make their patients better and that is the.

Aim of the game.

And of the day right the docs love the idea to get the instant gratification that they're doing something that's really helping a person and increasing the quality of life and it happens immediately.

No delayed reaction they can see it right there before the patient leads and leads the practice so all in all it's great.

But we just remind people that this is a product that sells for like a $1000 per patient right. So compared to almost 16004 sacral neuromodulation. So the meter doesn't move quite as fast.

And when you're when you're selling bulk and that are really good customers going to do between 100 200000 and for us and that represents a 100 to 200 patients which is fantastic, but the revenue it just doesn't add up.

And the way the cycling and modulation and revenue adds up having said all that it's great for our business, it's great for our position and the marketplace and for creating these long lasting relationships with our customers.

Okay, Great and I mentioned, Dan and I have to get one and for him, but it actually is for him.

So gross margins. This manufacturing issue that you called out can you maybe just explain what that was and then you'll have to ask the obligatory semiconductor supply question.

Sure Youre going to have adequate supply there given all the headlines we've seen about that thanks.

And that's a great question, so as I said and that caused the decrease and the margin for the quarter is really just the result of manufacturing variances, which included more yield loss and we had planned.

And it's just as straightforward as that as we as we produce more products and work through these inefficiencies and we will see margin improvement and our target is still to reach.

Mid seventies at scale and Theres no change and plan. If you look at the balance sheet, we increased the amount of inventory and if you look at the amount of finished goods and we have in particular, we have plenty of product on the shelves to continue to meet demand for the foreseeable future.

And we are actually quite pleased given the worldwide shortage on chips capacitors and resistors and so I'd love to tell you that we were strategically brilliant and we looked forward and saw this coming as a result of the pandemic, but the truth of the matter is look we were preparing for rapid growth, which we've experienced and and just so happens.

<unk> significant inventory is going to be to our advantage given the shortages other people are experiencing.

Okay, great. Thank you.

Thank you.

Your next question is from Adam Maeder with Piper Sandler.

Hey, guys. Thanks for taking the questions here and congrats on the and I start to the year two from that.

First one is on sacral market growth.

I think you've talked a little bit and the past about a potential long tail of S and am accounts or implants or Suez.

Maybe been a bit underappreciated or overlooked historically, so I'm wondering how much of the market growth that we're seeing.

Seen today is from new or newer docs to the procedure and.

How do you think about the.

And the contribution to growth from this group or this opportunity going forward and then I had a follow up.

Okay sure. Thanks, Adam it's a good question so at the moment.

I would tell you that we are definitely adding some of these customers from the long tail alright, that's happening.

But they are primarily up till now physicians that are looking to just get back into the game and a bigger way, particularly coming out of the pandemic rate everybody's practices have been down and we got a better mousetrap and all that so they seem to be enthusiastic and we'd like to get those <unk>. The people that are doing well.

A month, which is we've signed a number of them recently.

And if you can get them up to two and three per month and they are right and the fat part of the business for US. So there is some of that now we've also learned because of the pandemic we had to figure out how could we do virtual training and Dr. Noblett in particular has spearheaded this.

Initiative, where we now have tools that we can actually train people virtually.

With pretty sophisticated tools and really bring them through best practices and so on and so forth. So for the first time and this was not part of our strategy in 2020, and I was very clear that in 2020, we only called on people that were doing cycle and a modulation already now in 2021, we're now just starting.

To bring some physicians into the game, who want to be doing sacral nerve modulation that have never done it before because we are now in a position to be able to support that initiative.

Got the tools, we've got the people we have a whole clinical education Department now that we didn't have before with five professionals and it led by Dr. Noblett, So youre going to start to see.

Some of that.

<unk> to the growth and so forth. So Adam it's not one thing right as you can imagine.

A number of all of these types of initiatives that we're doing conspiring together to help fuel the growth and the marketplace.

Okay.

And your next question comes from the line of Cecilia furlong with Morgan Stanley.

Hi, This is marisa thanks, Sean and Francis here I, just wanted to go Bob and the promo all device progress. So we understand you plan to submit that to the FDA and the next month or so.

Is there anything more specific you can powerful trial launch plans per day, and our second quarter and next year.

And are you preparing to commercialize it and as you have FDA approval or are there any further step from prototyping or.

And then trailing that we would need to see and thank you very much.

Sure. Thanks, Chris look where we are.

And look to launch this product.

Immediately after FDA approval.

Where we are ramping up.

Our manufacturing capabilities, if you may be able to produce the product ahead of the approval. So we'll build product.

I mean, I shouldnt say at risk because there's no risk, but we'll build product we are revamping.

Space and our manufacturing facility.

And this also by the way has a small part to play and kind of some of the comments that Dan has made.

And so forth so things are a little bit influx now as we get prepared to produce this new new product, so nothing that would stand and our way per se.

We're not.

Our philosophy has been that we don't go to market with prototypes, we don't put prototypes and People's bodies.

So.

And we're talking about a and a finished commercial product that I'd be comfortable to put and my mom.

I may sound corny, but that's our philosophy right. So.

Now, having said that we run some type of post market.

Studies, so that we can.

Ill provide additional comfort to the market certainly we will I think artistry is representative of our commitment to these types of things and we will obviously look to to do some of that work as well with the non rechargeable product, but this will be a a ready to rock and roll full blown commercial product that we will look to.

And to ship.

As quickly following FDA approval as possible, which has been our custom by the way. If you look at whether its second generation or third generation devices that we've put out.

Write off stuff like we haven't been right and off these previous models, we sell them out and we plan and prepare.

For the new version as it comes out so we feel really comfortable about this.

I wish that we could put the product and the market today.

But then again.

This is the best we could do given COVID-19 and everything else that has transpired until now so we'll we'll take it in 2022.

And.

We're excited about.

The impact that this product can make on the company and the market.

And your next question will come from Daniel unhealthy with SBB Leerink.

Hi, Thank you and Thats, how long for a day now.

I wanted to circle back to Pelican that can you update us on your head count and sales rep.

And you're correct.

Okay, operator, we seem to have lost.

Rebecca.

Okay.

And then.

Danielle please repeat your question.

Yes. My first question is can you update.

Head count and gone through apps and clinical specialists, including relative that you got from Coke and that.

Next question I understand there are potential sales.

And that Keith and.

And you said you are obviously growing and modulation and that well continue to focus on that <unk>, Inc. Third quarter, and so could you give us more color here, Andrew jackets, and deploy those sales reps and clinical specialists to.

Drive same store sales right now without distraction to your core seeker, and <unk> modulation and business. Thank you so much.

Okay. So Rebecca in my prepared remarks, I thought I had provided.

Some very detailed numbers.

I'll repeat it.

In the United States, we have 107 sales people, including sales managers, we have nearly 110 clinical and therapy support specialists.

And we've got less and almost a half a dozen field marketing specialist and a clinical edge education group of five so that's if you run those numbers total is up pretty quickly and in Europe.

We have 27 people that are selling either <unk> or <unk> modulation and so that's how you get to the 250 number.

Alright.

Yes in terms of how do you how do you introduce a new product and the marketplace without screwing up your existing business I think that was your question and.

And I think the only real answer is professional sales management and strong leadership and guidance from the people who run the business.

You can't focus all your energy as a sales person on a product that sells at a $1000 a patient versus one that could be around 16000 right. So the good news is that sales people.

Our.

How should we say their nature. They are inherent nature is that they take the path of least resistance and they go where the money is and that's why you hire professional salespeople to do this job. So let me just say that I am 100% confident.

In my Chief commercial Officer Al <unk>.

And our sales managers that are out there and the United States and internationally that they are expert at this business and they know how to manage people and we do not expect to see any drop off or any cannibalization, let's say of our energy.

People understand that sacral nerve modulation as our core business.

And what keeps the lights on so to speak.

And that's where they're heavily incentivized of course.

<unk>.

To spend their time people.

People get paid commission and our company based on volume so it's pretty straightforward right.

<unk> taken a modulation you sell the more money, you're going to make and if bocom and can help you get into accounts that you are not in and you can make some of your customers happy and all of that with this product and win win win all the way around for everybody.

Thank you speakers Q&A session is now complete I don't know ill hand, it back over to Raymond Cohen for closing remarks.

Thank you operator, thank you to all the analysts to.

Volunteer to question on today's call very helpful. Also from me to get the rest of the story out and we really appreciate your interest and to all shareholders. We appreciate your confidence in the company and we look forward to talking with you again shortly you'll have a nice evening.

This concludes today's conference call. Thank you for participating you may now disconnect.

And.

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Good day, and thank you for standing by and welcome to the Axon ex Q1, 2021 results conference call.

Time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Neil Ballade car.

Investor Relations. Please go ahead.

Thank you Peter good afternoon, and thank you for joining Exxon ex us quarterly results and update call presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and CFO.

And Dan will provide prepared remarks on first quarter financial results commercial progress and a general business update followed by a Q&A session. Before we begin I would like to remind listeners that statements made on this conference call that relate to future plans events prospects or performance are forward looking statements and defined under the private.

And Securities Litigation Reform Act of 1095, while these forward looking statements are based on management's current expectations and beliefs. These statements are subject to a number of risks uncertainties assumptions and other factors that could result to differ materially from the expectations expressed on this conference call These risks and uncertainties.

Our disclosed and more detail and Exxon ex as filings with the Securities and Exchange Commission and all of which are available online at Www Dot SEC Dot Gov listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date may 6th 2021.

And that is required by law Exxon ex undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances are anticipated unanticipated events that may arise and I'd like now like to turn the call over to Ray for his remarks.

Thank you Neil.

I'd like to welcome everyone, joining our conference call. This afternoon and for folks who may be dialing in for the playback.

I am pleased to report that Exxon ex generated $34 $4 million of revenue and the first quarter of 2021, which represents an increase of 31% compared to the same period of 2020.

We're proud of this result, considering the strong headwinds in January and February, which disproportionately affected elective procedures as well as the normal seasonal impact of patients not having yet met their insurance deductibles.

The good news is that in the U S. We saw a solid rebound and sales in March that has continued into April and early may.

Contrast, much of Europe continues to remain and lockdown.

We're confident however that as more people are vaccinated and we returned from a more normalized elective procedure environment and the months ahead that Exxon ex is poised to continue to grow revenue meaningfully in 2021 and beyond.

There is no doubt that the U S sacral neuromodulation market is growing.

And this will become much easier to measure once the pandemic receipts.

The opportunity for Exxon ex is significant considering how vastly underpenetrated and the market is for treating any form of incontinence.

Michael Neuromodulation is poised to expand into a multibillion dollar annual market in the United States based on the fact that tens of millions of women are suffering from these conditions.

Now response to our recent acquisition of bulk and that has been overwhelming overwhelmingly positive as anticipated the.

And the expanded offering has elevated exxon ex stature with the urology and Youre going to college community.

Bocom and has a strong strategic fit for Exxon ex given that our commercial team is already calling on these customers clinicians aren't susie aspect to offer the safe and efficacious next generation bulking agent to women suffering from stress urinary incontinence, and we see bocom and is providing us with an opportunity to sell more.

More sacral neuromodulation in particular to those accounts and the United States that have not yet converted their sacral neuromodulation business to axon ex.

Physicians working with Exxon ex now have a complete set of tools to treat patients presenting with stress urinary incontinence urge urinary incontinence mixed incontinence urge urinary frequency urinary retention as well as valve and continents.

Integration and training for Bocom and is ongoing and is anticipated to be completed during this quarter at which point, we will able to book be able to fully leverage our 250 person commercial team and rollout bocom and more broadly in the United States.

Internationally, we're also working to get bulk and med sales representatives trained on second and modulation and for the axon ex S and M team to be trained on bulk and mezz.

Our commercial success continues to be grounded and providing our customers with exceptional support while simultaneously or significantly I should say improving the quality of life for their patients. We continue to hear from clinicians that more of their patients are saying, yes to second and modulation therapy than ever before.

And that Theyre excited to incorporate bulk and ed into their practices.

As we speak the overall market for S and EM is expanding driven by technological advances strong clinical outcomes and increased patient awareness.

We believe that Exxon ex will continue to be cause and the matter of driving durable sacral neuromodulation market growth in the years ahead.

Now for the first time and our history as a public company, we're instituting full year revenue guidance.

To that and for the full year of 2021, we anticipate revenue to fall between 176, and $180 million, which represents an approximate 60% increase compared to revenue of $111 $5 million in 2020.

We expect slightly more than 90% of net revenue to be attributable to cyclical modulation sales and the balance to bulk and Matt.

And now changing topics on the subject of clinical and regulatory we continue to enhance the patient experience and build a strong body of clinical evidence for Exxon ex sacral Neuromodulation therapy.

A few notable items from the past quarter include.

And in January.

2021, a manuscript discussing the two year outcomes of our artisan <unk> pivotal study were published in neurology.

Neuro urology and Urodynamics the official journal of the.

International Continent and society.

The two year responder rates and the artisan <unk> pivotal study represent the highest ever reported in this body of clinical literature.

Moreover, the clinically significant and durable symptom relief and high degree of patient satisfaction reported by study participants is being replicated every day by our customers around the world.

In February.

The FDA approved exon ex third generation implantable neurostimulator.

And as a reminder, the third generation <unk>.

<unk> stimulant has upgraded embedded software, which enhances the functionality of the device system and the patient remote control. These modifications gives patients the ability to make broader stimulation parameter adjustments at home, including selecting a second therapy program that was set post operatively based on inter operative findings.

And we began shipping the third generation implantable Neurostimulator and the first week of March and the feedback from both physicians and patients has been overwhelmingly positive.

We also have a registry study a registry study called artistry.

And that study is now enrolling and implanting patients at a nice clip we have over 50 patients already enrolled and the registry towards our goal of approximately 300.

On the product development front, we continue to make strong progress on our non rechargeable or primary cell neuro stimulator.

We are working diligently and expect to file with the FDA before the end of June.

And are optimistic that we can have the product approved and in the market in the United States and the first part of 2022.

With that said I'll turn the call over to Dan who will review, our first quarter 2021 financial results Dan.

Thank you Ray for the first quarter of 2021, Exxon ex generated net revenue of 30 $34 $4 million. This represents an increase of 31% compared to $26 $3 million and the prior year period.

<unk> modulation revenue was $32 9 million of which $31 $7 million was generated in the United States.

And the remainder and select international markets.

Welcome and revenue for March was $1 $5 million of which $578000 was generated in the United States and the remainder overseas.

<unk> contribution this quarter was for only one month and one day as the acquisition closed on February 25 of this year.

Overall total net revenue from the United States accounted for $32 $3 million with certain international markets contributing $2 $1 million of revenue.

Gross profit for the first quarter of 2021 was $20 4 million, representing a gross margin of 59, 3% compared to 62, 4% for the three months ended March 31 2020 the.

The decrease in gross margin for the quarter is due to lower absorption and manufacturing variances, which included a lower yield rate and anticipated as we continue to work with our contract manufacturers to increase our manufacturing output.

While we expect to see some variability and gross margin quarter to quarter, we fully anticipate gross margins will increase during 2021 and land and the low to mid seventies and the next few years.

Total operating expenses for the first quarter of 2021 were $42 million.

Included in this figure is $4 4 million of onetime legal consulting and advisory expenses related to the bulk of net acquisition.

Also included in operating expenses is $700000 of amortization of intangibles expense related to the acquisition and.

Adjusting for these items operating expenses were approximately $36 $9 million in line with our budget and reflective of increased head count compared to the prior year period.

And the year ago period operating expenses totaled $31 1 million.

We expect operating expenses in Q2 to be and the range of $43 million to $45 million. This increase is mainly due to the additional operating costs for bulk cement.

This estimate includes approximately $3 million and incremental operating expenses and $2 million and amortization expense on the acquired intangible assets.

Net loss for the first quarter of 2021 was $22 $5 million compared to a net loss of $14 6 million and the prior year period cash and cash equivalents were $131 million as of March 31 2021.

I will now turn the call back over to Ray for additional remarks.

Thank you Dan.

And so I'd like to add some color on a number of items.

First.

As of April 25th we now have over 503 employees at Exxon ex this has more than doubled since this time and 2020.

The number of employees engaged and field activities is about half of our total head count.

And now in the U S. We have a total of 107 salespeople and sales managers we have.

Nearly 110 clinical and therapy support specialists and.

A handful of field marketing specialist and a clinical edge education group.

Representing.

Which represents five professionals and they are led by our Chief Medical Officer, and one of the world's foremost experts and Europe oncology, Dr. Karen Noblett.

And Europe between Bocom, and salespeople and sacral Neuromodulation salespeople and clinical specialists, we have 27 individuals.

Now and.

And I think this is an important comment to make considering the variation and the gross market for the first quarter and that is our average selling prices over the past three quarters have been stable.

Although the mix of where purchase orders are coming from or are originating from has shifted.

Whilst all procedures are performed in outpatient settings, either and the hospital are and ASC now and now nearly two thirds of our purchase orders come from hospital systems.

This is resulting from the fact that we have signed agreements to supply our second new modulation system to over 200 national and regional Idms and local facilities and we've accomplished this over the past year.

As stated in the past these agreements are mainly hunting licenses with certain volume targets.

We are now adding bulk of med as an addendum to many of these agreements.

Now I know theres been some interest and hearing more about our marketing efforts and particularly direct to consumer advertising.

So during Q1, we invested approximately $1 million and a combination of activities, including Facebook ads paid Internet search and search engine optimization. In addition, we worked with our customers to support mailings from physicians through their own patients.

From local print advertising and some short TV spots suffice it to say we've reached tens of thousands of potential patients. We've generated hundreds of leads and appointments and physician offices and are now seeing this interest turning into procedures.

Our messaging will.

Now include offering solutions for all types of incontinence, regardless of whether its stress or urge incontinence.

We believe this will also increase our response rates and lower cost per lead and drive even more patients into the practices of the physicians who are loyal to Exxon ex.

We are now live and 42 markets and the United States up Fourfold from December 2020, and we will continue to expand into more markets and invest a reasonable amount of additional capital into these efforts throughout 2021.

Now and closing with respect to prepared remarks, we're incredibly bullish about the outlook for our sacral neuromodulation portfolio and bulk commit over the next several years, we're grateful for the trust that physicians patients and shareholders have placed and Exxon ex.

And I can assure you we continue to work diligently every day to fulfill our mission of changing the lives of patients suffering from bladder and bowel dysfunction and being the market leader for sacral Neuromodulation.

At this time, we're happy to take some questions. So we'll turn it to the operator.

Thank you as a reminder to ask a question and you will need to press star one on your telephone.

Please standby, while we compile the Q&A roster.

And your first question comes from the line of Bob Hopkins with Bank of America.

Oh, great and good afternoon, and congrats on a strong quarter.

Thank you Bob I appreciate the detail, maybe just a couple of clarifying questions on the.

And it looks like you're guiding to about $18 million, a bulk of them and sales for the year.

And about $160 million on the sickle nerve modulation side.

Is that first of all this day is that correct.

No it's not it's not.

I think you are.

You are about $4 million higher on the Bocom and based on your comment so that should be put into the second and modulation side of the ledger Oh, okay. So you're.

On the guidance like $14 million.

Is it I mean.

That would imply that you have no improvement in monthly run rate from here on Bocom and is that just right. So liberated from her yeah. Let me let me just make a comment about that Bob I appreciate that I appreciate that question and a chance to clarify so look we clearly.

Over achieved in the month of March I mean, I don't think any of us expected to generate nearly $1 $5 million of revenue.

In March.

Now in Q2.

Things are going to not be at such a great clip right. In other words. If you took March times. It by three you would say Wow, you guys should do four and $5 million, but here's the difference we had a nice strong result in the United States in March.

However, those individuals that were involved and selling that product are the ones that are training or 110 clinical specialists and our salespeople and all of that and that's happening in Q2. So.

And a little bit shy really about even the analyst consensus of $3 4 million and bulk <unk> and we're a little more comfortable around $3 million just because we are diverting resources.

Selling resources to do training and also just to underscore the point our own cycle and a modulation sales force is not out selling bulk and add at this time, we are still in the mode of training people and getting up to speed.

They will start to contribute in Q3 of 2021. So the increase if you may over and above consensus.

Is from sacral Neuromodulation and Bob as you saw from the numbers, we over achieved in that category in Q1, and we're saying, okay fine, let's take that number put it into the overall consensus number and then we're suggesting that we could we could be higher.

By some millions beyond that so hopefully this kind of clears up.

The story.

Yes, it does but just one follow up on the bulk of them inside then just obviously.

Yes.

Is that sort of what you saw in April and early may and in terms of more like a $1 million monthly run rate versus the $1 five and March yes, just because as I mentioned, we've diverted resources I mean, we've trained nearly 60 people already.

And in these weeks.

In April and May and obviously.

Our people can't be in two places at one time, they're good but they're not that good.

So.

That's kind of the situations. So look we were optimistic but the other issue just just to put a finer point on it even further.

Germany is under lockdown until the middle of June.

And that's that's almost all of the quarter.

Not really seeing any action with everybody is still high and under their desks in Germany. The UK is not and not much better shape and as you can as you have seen from the historical numbers.

And the number was much bigger internationally than it was and the United States, which is the market that's just coming around so.

And really so that's the issue right. We've got U S people involved and training and then we got the international markets most of them still having problems from COVID-19. So we'll just we'll do fine I think it'll be respectable, but we're just trying to provide some color. So that people really can have a better sense about what to expect from the.

Company and the short term and then when does that sacral Neuromodulation sales force really go out and market Bocom and when does that happen.

Don't happen until well into the third quarter right.

It's one thing to get second and modulation and salespeople and clinical specialists, who are engaged and a highly technical product and implants.

It's one thing to get them up and running on Bocom and it's a little more of a heavy lift to go the other direction. So.

It will all come together and we'll see some benefit from from the synergy as we go forward.

I'll add just one more comment since ive been sounds like I'm talking down bulk <unk> and we're really not because the demand for this product right now is significantly higher than our ability to actually get to these customers.

Okay. Okay.

And that's that's helpful. One quick last one in terms of just the core shekel Neuromodulation business.

Given it's such a unique quarter just wondering if we could get any rough sense for.

How how march was and whether or not April was better.

Yes, Thanks, Bob.

Yes March was a really good solid month I think you've heard this refrain from all the other companies that have reported.

April continued even though it was the first month of the new quarter. It continued at that good pace and into the first weeks and first days here of March things and looking pretty good so.

This is why we're being more bullish.

Even in the short run and Theyre, suggesting that we.

We could even see an.

And increased over analyst consensus for Q2.

In the short run so I think things are good and it's just great to see more people getting vaccinated elective procedures opening up and so forth. So things are definitely getting better and we're seeing incremental improvements and literally month to month now.

Excellent thanks for taking the questions.

Thanks, Bob.

Yeah.

Your next question will come from Chris Pasquale with Guggenheim.

Thanks, and congrats on the quarter guys.

And just curious whether you saw scheduled procedures cancels in the early part of the quarter that you then we're not able to make up and March we'd love to get a sense for whether there is a new group of sort of pent up demand patients that could come back in here over the next couple of months.

So Chris you know look there were some cancellations.

In the January, particularly like and the January period.

They're nowhere near as.

Much of a problem as what we saw in Q4, right, where we actually went out there did a survey.

And put a number two and I think it was 320 odd procedures that were canceled and Q4.

We just did not see anything near that in Q1, so really there's not much for us to say about it.

Thank you.

The number the numbers that we generate and Q1 I think they speak for themselves. So it was a good quarter for us and we.

We're obviously seeing incremental increases and optimistic about.

About.

Uptake of the product as we continue.

That's helpful and.

And then I appreciate the comments around the DTC.

Campaign, and and the work you're doing with customers.

And $1 million is not insignificant, but it feels as though the market is sort of taking off in advance of some of the investments that you guys have really talked about.

From a market development standpoint are you feeling that and how is your <unk>.

Experience over the past call it nine months or so.

Colored your view on what's going to be necessary to get to that multibillion dollar.

Level of adoption that you spoke about in your script.

Yes, I think it's a good question, Chris and I think that this is happening also and a very much of an organic basis, we continue to say.

And we said this line of many times.

Patients are saying, yes to the therapy more often than ever before that's what docs are telling us that's what our customers are telling us. So there is a groundswell of interest that is happening organically. The fact that there are letters going out to patients from practices.

Suggesting that they may want to come back in and talk about new technology and the fact that we're on Facebook and that there is a lot more action out there and more awareness.

Even our competitors starting to do a little something and this particular area, which we applaud.

And so rising tide.

And to help all players in the marketplace. So there.

And there is.

And there it's happening I mean, even.

Look I'm not a subscriber to Harper's bazaar, but when you when you hear that the pelvic floor is getting a PR makeover.

I mean, theres a lot of interest now starting out there.

And.

How should we say.

And the world and particularly in the United States.

About this particular topic, so I think youre going to see that this is going to happen.

From an organic standpoint, just increased awareness people talking to each other and Theres just a lot more action going on and but here's the bottom line. When it comes to cycling a modulation and this is really more about physicians being more comfortable with talking about the therapy, because we've got a better product and its long.

Lift and it's MRI compatible and it's easy to use and youre going to get a great clinical results. This is the big difference. This is no longer a therapy of last resort, which is which is what it was before we entered the market and so it's a new day.

Here and I think what we're trying to do is just put some more gas.

On the fire, so to speak and keep things moving and the right direction. So.

And I don't mean to be talking down DTC, we got tens of thousands of people who raise their hand and said they're interested but it's a long term process to convert that initial interest and to actually somebody showing up for a procedure right. So that's.

It's a multi year effort and and if I just look at inspire medical I mean, I think they disclose this and hopefully.

Reporting something everybody note, but they spent $27 million on DTC and 2020.

And we applaud that we think that's great.

And quite we're not quite there yet and we're not the only player and the marketplace either so it.

It takes time and that will need to be continued investments overtime.

But where we're trying to do this and a smart way Chris.

And kind of do the blocking and tackling before we get over our skis. So I think youre hearing a little bit of conservatism from us.

We'll continue to invest additional money and DTC.

But we want to try to keep it and kind of a rational vein and really focus on how we're processing those leads and how they're landing and physicians offices. How they are being followed up. So we are really heavily engaged and kind of process of how these things really work because.

And our operators and Thats, just Canada or background, and we want to make sure that we're getting a return on investment.

Makes sense. Thanks.

Thank you Chris.

Yes.

Yeah.

And your next question will come from Kyle a problem with <unk> Securities.

Yes.

Hi, guys, thanks for taking our questions and and all the detail on the guidance.

One of the things I'm curious about is how youre, assuming bulk and that can have a halo effect on the <unk> because.

Because I mean, a lot of patients have <unk> and <unk>. So I guess are there essent and patients, who actually have and and Exxon and implant today that could benefit from a bulk and that injection.

Just curious how youre thinking about from the synergies between the two businesses.

Thanks, Kevin So you're correct I will take the technical part of the question first you are correct.

There are a.

Group.

Maybe as much as 20% of patients, who we call mixed and continents patients. These are patients that have a form of stress urinary incontinence and urge urinary incontinence and.

How many times the docs tried to do a differential diagnosis may be using.

Different techniques and and your dynamic testing and things of that nature.

To make that differentiation, but it really it's about which is the greater bother for the patient and we all know that if you've got urge urinary incontinence I mean, that's.

That's a lot more bothersome than coughing, sneezing, and lifting and object and leaking a little bit of Europe. So there is no question that existing patients who may already have a cyclical modulation device and their body or maybe in the process of.

Getting worked up for that could also benefit from bulk.

Bulking injections Bocom Ed.

And their urethra.

So that's the kind of the technical part there is this crossover of these patients they are not completely unique from one another.

But the bigger question that you're asking really gets to why did we buy bulk commit okay. Yeah. We are excited about the product. It's cool it's great and we think we can do $50 million by 2024, but the main reason and really is that we believe that bulk amid is helping US right now in real time and will continue to help us sell.

More cyclical modulation, because we're able to get into accounts with Bocom Ed that are they have been and the Medtronic camp in terms of taken a modulation business so getting getting in there working with those accounts letting them see who Exxon ex is how we go about doing our business being professional and all the other things that we do.

And engender confidence and that account and that customer and that physician and their staff and puts us in a position for them to give us a shot so that we can prove to them that in fact, we've got a better product and superior service and so on and so forth on the second modulation side I will tell you Kayla it is happening it's happening.

And real time, and the fact of the matter is we've got accounts that we've not been able to sell cycle and a modulation too that have invited us and because the bulk of med and they are now open and some of them have already started working with us on sacral neuromodulation. So the theory or the hypothesis behind doing the acquisition.

Is playing out in real time and is happening very quickly. So we're really thrilled about that and thats going to help also fueled the growth of our sacral neuromodulation business not only in 2021, but beyond.

Great. Okay, and then I mean, we heard from from a surgeon who does a lot of that we're at.

At least historically did a lot of things.

Market, you've got an 80%.

Bulking and within the assay by market.

And then largely again because the bulk of that so what's your reaction to that estimate.

Sure.

Your view there as I'm sure again, you've had more a lot more conversations with that with customers and then we've been able to you. Thank you.

Yes. Thanks, Thanks, Scott Yeah, no doubt about it so you know it's interesting.

And I'm going to I'm going to quote a study that was done actually in England.

And it was under the banner of.

What women and women want and it was with respect to not.

Other things, but what they want in terms of treating their stress urinary incontinence.

67% of the respondents and this was hundreds not just a dozen people write these one hundreds of people who responded that bocom Ed is what they would prefer as a treatment as compared to and operation for sling, So I would say that.

That was a pretty impressive number right. When you go out and give some basic information and and people responded in that way. So we may never get to 80%, but the point is it's going to be better than 50, and maybe approaching this kind of number. The fact is people would prefer to have.

And injection and the urethra with our material.

That it doesn't have.

Adverse events.

That is going to last for five to seven years.

That can be done and the office, that's a fifth less than 15 minute procedure I mean, given the choice why would you choose and operation now there may be other reasons and there may be some patients that are more suitable for a swing based on the severity of their condition and bulk of med is never going to be exactly as <unk>.

Efficacious as.

Sling, but youre talking about if something is going to give you 70%.

Leaf and terms of your symptoms as opposed to 90, but it turned out to be a 10 or 15 minute procedure and a doctor's office as opposed to.

And operation with recovery time, it's pretty clear what the preferences of these patients are so now the key thing is to get the docs that are out there to talk to their patients to give them the option and explain the benefits and I don't think Theres any question that we're going to see a sea change here.

And how stress urinary incontinence is treated.

In America, and we already have seen it happen in the UK as an example, right.

And the U K. This is the standard of care for patients with <unk>.

Thank you guys.

Thank you.

And your next question will come from Mary <unk> Olsen with Wells Fargo.

Hey, Larry.

Hi, its actually calling in for Larry Thanks for taking my question.

And I wanted to start with Dan comment you made about there was some backlog in Q4, there were some cancellation and does that backlog get resolved. This quarter. So we can benefit from that.

It's one of these things were.

We have not spent a lot of organizational energy and tracking these patients by name so.

I can't really answer that question and any kind of definitive terms clearly some of these patients came back.

But I would say a fair number of them have not come back yet I mean.

And we're still if you think about where we are in terms of vaccination and America.

And maybe 40% of the population, so clearly and all.

A lot of those patients that canceled that had not been vaccinated and are still not vaccinated for this moment so.

I cannot say that the increase in Q1 was a big pickup over cancellations from Q4.

Got it okay. So it sounds like maybe there is still some pent up demand whether it's from Q4 or early part of Q1, just based on procedures can cancel and may not be fully rescheduled.

And I think Thats, a correct statement and I think it really boils down to the environment right elective procedures are starting to come back and.

Institutions are willing to allocate more time and resources and so on and so forth. So I think it's.

Not one thing it's a combination of many factors, but I do believe that what youre going to see and I've said. This before is that if you draw a line and you.

Trace the percentage of people that are being vaccinated in the United States and Youll see that the Exxon ex revenue will will follow that trend line.

Got it Okay. That's helpful. And then just another question around that revenue. So you mentioned that your ethanol.

And Thats Youre getting trained on the new product.

Would that have some sort of effect on the revenue cadence in Q2 versus the second half of the year just in terms of attracting after after field for China.

So to put a finer point on it.

We're training our clinical specialists.

And these are the people that are going to be doing wet lab training and theyre going to be there to support the initial injections in patients. So this is this is more about our clinical specialists staff not so much our salespeople we are.

Not taking time.

Out of salespeople schedule to have them become experts on how to do injections and that's not their job right. They can talk about the benefit of the product and how it can help people practices and all the rest of it but we're not getting our salespeople bogged down and becoming experts on how to inject this material because theyre not going to be the ones.

And that are going to be there to support these cases, so and with respect to clinical specialists and.

These are the folks that are focused on case coverage and we have and the ability obviously to manipulate these calendars and to keep the wheels on the bus as we're taking these people out of the field for two days or three days at a time so.

That you will not hear this is and excuse from us.

The <unk>, we had to train people and therefore, we didn't make our numbers you will not hear that excuse from us.

Got it Okay and then just last question and your primary cell device you plan to follow that by the before the end of Jan can you just talk a bit about potential advantages.

The competition like interest and too.

Thanks again for taking the question.

Thank you I really appreciate that question and I.

I would be happy to speak in more detail about it because I think that.

This is.

This is really important and this is a huge value driver for <unk>. So here are the facts.

The device is.

Approximately 11, and Ccs, which is about twice the size of our existing implanted neurostimulator.

About that's about 20% a little over 20%.

Waller then the interesting too.

It's our profile is different it's much thinner than the interest and to all these things will accrue to our benefit in terms of placing this device and the body.

The device will last for a nominal setting meaning the average patient we will get 10 years or more out of this device. This is a watershed completely different story compared to what is available from the competition, where there. Despite what they might say there are dozens of clinical studies would suggest that that device will.

Last about four years, some people aren't and so lucky and only last for two or three years and their body.

So the key thing is longevity and the body.

Size is going to be attractive a couple of other key points. This uses constant current technology. That's the same technology, we use and our existing rechargeable device. So we expect excellent efficacy with this device no change.

From that standpoint.

It uses the same lead technology right. So we have the same lead that goes with either device and I think the most important thing here is now we're going to have.

Physicians that we'll be able to direct their patients or give them choice as to which way. They would like to go so think about the lineup and you've got a non rechargeable device that could last 10 years in the body it'll be the first recharge free system in sacral Neuromodulation and what do I mean.

And by that you.

And you don't have to recharge the stimulator and our patient remote doesn't have replacement batteries doesn't need to get plugged and the wall you don't need to stand on your head to make it connect to the implanted stimulator. So we got a recharge free system thats going to be long lived thats going to generate high levels of efficacy based on the constant current technology.

And it's got a nice footprint in terms of the size and the shape.

So that's the specs and.

And those are the key things that.

That matter and I Dare say that we are very anxious to get this product and the market. Because we think this is going to be a big runner and is going to put a lot of pressure on the incumbents franchise.

So thanks for that question.

Yes.

And your next question is from Michael <unk> with Baird.

Hey, good evening, I guess avail has been listed on the.

Primary sales so thanks for that Ray.

The question I had is I think the last disclosure you had 600 centers signed up for us and them.

You mentioned in the prepared remarks that obviously, both <unk> and.

And opportunity to call and folks that arent using Exxon ex I think.

Back last share of the year before it was give or take 1000 and centers explain.

80% of the SMA and volume historically so.

Curious not going to hold your feet to the fire on this but.

Yeah.

And what are your latest and greatest internal expectations for how many of these centers may may.

And they take your call and and.

Start.

Engaging with Exxon ex and us and them as a result of bulk amid over the course of the next year or two.

Yes.

Michael Thank you for the question that's a really hard question from me to answer I mean.

I'll tell you what our philosophy is and the things that I tell our own people, we want all of the business.

And we want them, all and we're not going to rest until we get our fair share of the market, which we defined as at least 51%.

We're at it we're at it every day and.

It's hard to make a prediction.

And any kind of precise terms, so I'm not trying to be evasive.

Difficult question to answer but.

On it and.

The hypothesis and is working and.

And clearly.

We're going to look to bring as many of those and.

Important accounts to axon ex as we can and as fast as we can and that's the game that we're applying.

Fair enough follow up easier one perhaps for Dan I appreciate the carve out of the intangible amort and and deal related expenses and <unk>. The $4 4 million of deal related expenses and <unk> heard that is there anything like that you expect and <unk> or is <unk> really.

And your core Opex number plus the deal related and more.

That's correct, we're not expecting anything and the order of magnitude of obviously $4 $4 million and one time expenses are not planning on doing another country acquisition.

And if you assume the current operating expense run rate for Q2 prior to bulk cement and put that at 30% to $39 million and then if you add the incremental expense associated with the bulk of net opex, we expect to see those expenses, excluding amortization of approximately $42 million and then amortization of the intangibles.

And it's going to run at about $2 million per quarter going forward.

Got it thank you.

Thanks, Mike Thank you.

Next question is from Mike Matson with Needham and company.

Hi, just wanted to clarify a few of the comments you guys made during the <unk> portion.

I think Dan maybe maybe not but the asp's. So I think you said it was they were stable, but the mix change I guess I was confused about what that means does that mean day.

Look at the average price of every day you sold it was unchanged or within particular categories. It was it was unchanged with the mix shifted and that caused the overall ESP to change.

Okay. So thank you for making us clarify that remark and maybe combined two thoughts together in the same sentence without a period.

Okay.

So let me share so I apologize for that so let me let me clarify.

Our average selling prices are stable and they have been stable over the last three quarters in other words, there I mean literally within a couple of dollars difference.

Quarter to quarter, so its theyre, 100% stable and I thought that was an important comment from me to make Mike because I didn't want people to think given that we had this hiccup on the gross margin which is really.

And kind of non big it's not a big deal it's something when you're early in the cycle. The way we are as a company youre going to see some variability from quarter to quarter, depending on how much product you make or don't make and things that way so.

Prices are stable.

No.

No sliding of our average sales price okay period.

And now what I did say is that purchasers the purchase orders that we get as a company now two thirds of those purchase orders are coming out of hospital systems.

Posed to the last time I talked about it I said it was kind of a split half and half if you may between hospitals and <unk> and.

And so given the number of big National IV, and and regional <unk> that we signed up we're just.

Getting more business now purchase orders coming from from those institutions.

Alright. So that's those are the two messages I was trying to get across.

Okay. Thanks Thats helpful.

And then.

I wanted to ask.

The bulk of it now that you've got it.

And the.

And your own hands and you're out there selling it so.

And what kind of.

Reorders are you seeing and I think part of the premise here is that the customers once they kind of get trained and start using it or don't continue to use it on your own and you won't need to have your reps. There for every case and I mean does that.

And actually playing out that way.

100%, Mike 100%.

People once they get trained we don't need to be there. The idea is you do a wet lab do you get them up and running get to practice you get some patients that are either that day or the next morning.

You support them with those first three four and $5 six patients whatever it might be and then they're on their own and then you're just going to pop and as you normally would do as a company to make sure. Your customers are happy and things are going well, but we don't need to be there and and that's great because that helps us a lot.

It's a light touch from that standpoint, so, but what I will say is that.

Given that we have not unleashed our own sales force on the market, we have seen a nice brisk pace of Reorders.

And we are seeing.

We are seeing physicians, becoming evangelists about this product.

Is.

This is really amazing and well beyond our own expectations that the physicians that got trained and 2020 on this product.

And are making the most of the <unk> comments that you could possibly imagine.

Kayla mentioned.

Our very experienced physician, who said hey, I think that bulk and that is going to.

Up 80% of the slain market, even so we're seeing that kind of enthusiasm a willingness of these.

I'll, just and Youre going to colleges to speak publicly about their experiences.

We referenced previously that people should give a listen to that.

Session that took place at <unk> The conference, which we have a playback on our website.

And that play back you can hear from three <unk>.

Physicians that are using bocom and that werent, even our customers they werent, even exxon ex customers previously.

Previously so they had a very much of an unbiased view.

So anyway, it's really going quite well I mean, this is a product that really works.

And as and truly as easy to inject and is getting great results on these patients immediately and you can imagine you go in for a set of injection.

And do a bit of a cough test and then they walk out dry I mean, that's incredible so we're going to start to see a lot of goodwill being generated from patients and these practices those patients talking to other family members friends and so on and so forth about their experience and having satisfied physicians, who are helping make their patients better and that is.

The name of the game in the end of the day right. The docs loved the idea to get the instant gratification that they're doing something that's really helping a person increasing the quality of life and it happens immediately.

No delayed reaction they can see it right there before the patient leads and leads the practice so all in all it's great.

But we just remind people that this is a product that sells for like a $1000 per patient right. So compared to almost 16000 and for sacral neuromodulation. So the meter doesn't move quite as fast.

And when you're when you're selling bulk and that are really good customers going to do between 100 and 200000 for us and that represents a 100 to 200 patients which is fantastic, but the revenue is it just.

It doesn't add up and.

The way the cycle and a modulation and revenue adds up having said all that it's great for our business, it's great for our position and the marketplace and for creating these long lasting relationships with our customers.

Okay, Great and I mentioned, Dan So I have to get one and for him that it actually is for him.

So gross margin. This manufacturing issue that you called out can you maybe just explain what that was and then you'll have to ask the obligatory semiconductor supply question.

Sure Youre going to have adequate supply there given all the headlines we've seen about that thanks.

Now it's a great question, so as I said and that caused the decrease and the margin for the quarter is really just the result of manufacturing variances, which included more yield loss and we had planned and it's just as straightforward as that as we as we produce more products and worked through these inefficiencies and we will see margin improvement and our target is still to reach mid <unk>.

And <unk> at scale and there's no change and plan. If you look at the balance sheet, we increased the amount of inventory and if you look at the amount of finished goods that we have in particular, we have plenty of product on the shelves to continue to meet demand for the foreseeable future.

And we are actually quite pleased given the worldwide shortage on chips capacitors and resistors and so I'd love to tell you that we were strategically brilliant and we looked forward and saw this coming as a result of the pandemic, but the truth of the matter is look we were preparing for rapid growth, which we've experienced and.

And and just so happens having significant inventory is going to be to our advantage given the shortages other people are experiencing.

Okay, great. Thank you.

Thank you.

Yes.

Your next question is from Adam <unk> with Piper Sandler.

Hey, guys. Thanks for taking the questions here and congrats on the nice start to the year two from me.

First one is on sacral market growth.

You've talked a little bit and the past about a potential long tail of S and am accounts are and planters and who knows maybe.

And maybe been a bit underappreciated or overlooked historically, so I'm wondering how much of the market growth that we're seeing.

<unk> today is from new or newer docs to the procedure and.

How do you think about.

The contribution to growth from this group or this opportunity going forward and then I had a follow up.

Okay sure. Thanks, Adam it's a good question so at the moment.

I would tell you that we are definitely adding some of these customers from the long tail alright, that's happening.

But they are primarily up till now physicians that are looking to just get back into the game and a bigger way, particularly coming out of the pandemic rate everybody's practices have been down and we got a better mouse trap and all that so they seem to be enthusiastic and we'd like to get those <unk>. The people that are doing one and <unk>.

Month, which is we've signed a number of them recently.

You can get them up to two to three per month, and they are right and the fat part of the business for us. So there is some of that now we've also learned because of the pandemic we had to figure out how could we do virtual training and Dr. Noblett in particular has spearheaded this.

Initiative, where we now have tools that we can actually train people virtually.

With pretty sophisticated tools and really bring them through best practices and so on and so forth. So for the first time and this was not part of our strategy in 2020, and I was very clear that in 2020, we only called on people that were doing cycling modulation already now in 2021, we're now just starting to <unk>.

And some physicians into the game, who want to be doing sacral nerve modulation that have never done it before because we are now in a position to be able to support that initiative and we've.

We've got the tools, we've got the people we have a whole clinical education Department now that we didn't have before with five professionals and it led by Dr. Noblett, So youre going to start to see.

Some of that are contributing to the growth and so forth. So Adam it's not one thing right as you can imagine.

It's a number of all of these types of initiatives that we're doing conspiring together to help fuel the growth and the marketplace.

Okay.

And your next question comes from the line of Cecilia furlong with Morgan Stanley.

Hi, This is marius that based on price is here I just wanted to go back and the promo allderdice progress. So we understand you plan to submit that to the FDA and the next month or so.

Is there anything more specific you can powerful trial launch plans per day, and our second quarter of next year.

Are you preparing to commercialize it in and you have FDA approval or are there any further steps and prototyping or.

And then trailing that we would need to see and thank you very much.

Sure. Thanks, Marissa look.

And look to launch this product.

Mediately after FDA approval.

Where we are ramping up.

Our manufacturing capabilities, if you may be able to produce the product ahead of the approval. So we'll build product.

I mean, I shouldnt say at risk because there's no risk, but we'll build product we are revamping.

Space and our manufacturing facility.

And this also by the way has a small part to play and kind of some of the comments that Dan has made.

And so forth so things are a little bit influx now as we get prepared to produce this new new product, so nothing that would stand and our way per se.

We're not.

Our philosophy has been that we don't go to market with prototypes we.

And we don't put prototypes and People's bodies.

So.

And we're talking about a and a finished commercial product that I'd be comfortable to put and my mom.

And may sound corny, but that's our philosophy right.

Now, having said that we run some type of post market.

Studies, so that we can.

<unk> provides additional comfort to the market certainly we will I think our history is representative of our commitment to these types of things and we'll obviously look to to do some of that work as well with the nonrenewable product, but this will be a a ready to rock and roll full blown commercial product that we will look to.

And to ship.

And as quickly following FDA approval as possible, which has been our custom by the way. If you look at whether its second generation or third generation devices that we've put out.

And right off stuff and I think we haven't been right and off these previous models, we sell them out and we plan and prepare.

For the new version as it comes out so we feel really comfortable about this.

I wish that we could put the product and the market today.

But then again.

This is the best we can do given COVID-19 and everything else that has transpired till now so we'll we'll take it in 2022.

And.

We're excited about.

The impact that this product can make on the company and the market.

And your next question will come from Daniel unhealthy with SBB Leerink.

Hi, Thank you if I kind of also getting now.

And I wanted to circle back to Pelican that can you update us on your head count and sales rep.

And.

Okay, operator, we seem to have lost.

Rebecca.

Okay.

Amy.

Danielle please repeat your question.

Oh and sorry, Yes. My first question is can you update us.

Head count in sales reps and clinical specialists, including relative that you got from <unk>.

And next question I understand there are potential sales.

Synergies and good day here I'll, let Jay Cohen modulation and that will contribute to <unk>, Inc. 's third quarter, and so could you give us more color EPS Android.

And Andrew it's Jack it's easy to deploy those sales reps and <unk>.

Our clinical specialists to.

And drive same store sales right now without distraction to the core and securing and modulation business. Thank you so much.

Okay. So Rebecca in my prepared remarks, I thought I had provided.

Some very detailed numbers.

I'll repeat it.

And the United States, we have 107 salespeople, including sales managers, we have nearly 110 clinical and therapy support specialists.

And we've got less and are.

Almost a half a dozen field marketing specialist and a clinical edge education group of five so that's if you run those numbers.

Total is up pretty quickly and in Europe.

We have 27 people that are selling you the bulk of them Ed or sacral neuromodulation. So that's how you get to the 250 number.

Alright.

Yes in terms of how do you how do you introduce a new product and the marketplace without screwing up your existing business I think that was your question and I think the only real answer is professional sales management and strong leadership and guidance from the people who run the business.

You can't focus all your energy as a sales person on a product that sells at a $1000 a patient versus one that could be around 16000 right. So the good news is that the salespeople.

<unk>.

How should we say their nature. They are inherent nature is that they take the path of least resistance and they go where the money is and that's.

And why you hire professional salespeople to do this job. So let me just say that I am 100% confident.

And my Chief commercial Officer Al <unk>.

And our sales managers that are out there and the United States and internationally that they are expert at this business and they know how to manage people and we do not expect to see any drop off or any cannibalization, let's say of our energy.

People understand that sacral neuromodulation as our core business.

And that's what keeps the lights on so to speak.

And that's where they're heavily incentivized of course.

Two.

And to spend their time.

People get paid commission and our company based on volume so it's pretty straightforward right.

More cyclical modulation you sell the more money, you're going to make and if bocom and can help you get into accounts that youre not in and you can make some of your customers happy and all that with this product and win win win.

And all the way around for everybody.

Thank you speakers Q&A session is now complete I will now hand, it back over to Raymond Cohen for closing remarks. Thank you. Thank you operator, thank you to all the analysts too.

Volunteer to question on today's call very helpful. Also from me to get the rest of the story out we really appreciate your interest and to all shareholders. We appreciate your confidence in the company and we look forward to talking with you again shortly you'll have a nice evening.

This concludes today's conference call. Thank you for participating you may now disconnect.