Q1 2021 Silk Road Medical Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Silk Road Medical <unk> 2021 first quarter earnings conference call.
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I'd now like to hand, the conference over to your first Speaker debate Mascara line, Paul from Investor Relations. Please go ahead.
Thank you and thank you all for participating in today's call current.
And me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating Officer.
Earlier today Silk Road medical released financial results for the three months ended March 31 2021.
Copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call. The include forward looking statements within the meeting and within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
And even statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future financial performance the impact of COVID-19 on our business and prospects of recovery expense management expectations for hiring physician training and adoption growth and our organization and reimbursement market opportunity commercial and international.
The expansion label expansion and our product pipeline development are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our yearly report on form 10-K filed with the Securities and Exchange Commission on March one 2021.
This conference call contains time sensitive information and is accurate only as of the live broadcast today may 4th 2021.
Silk road medical disclaims any intention or obligation, except as required by law to update or revise any financial projections of forward looking statements, whether because of the new information future events or otherwise.
And with that I will turn the call over to Erica.
Thanks, Caroline and good afternoon, and thank you for joining our first quarter 2021 earnings call.
Joining me is Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
With the beginning of the end of the pandemic insight we are on the precipice of and exciting time, not only for silk road, but for the health care delivery system as a whole.
As of April 28th confirmed COVID-19, hospitalizations have fallen by 70% since early 2021. Furthermore, nearly 70% of the Medicare age population in the U S is fully vaccinated and getting back to routine health care activities physicians are back to the important.
And work of caring for patients with carotid artery disease, and we are intensely focused on moving our trained physicians up the adoption curve to capitalize on the recovery. We are beginning to see across the U S. We have ushered in the trans carotid era and yet we are just beginning to see.
Scratch the surface of our total addressable market opportunity.
Our long term goal is to leverage of our proprietary technology and expertise in new markets and expand the pool of patients that we can address to.
To this and we are pleased with our meaningful advancements not only towards driving the adoption curve and the U S. But also towards new indications new therapies under development and expansion outside the U S.
Our first quarter performance was characterized by substantial progress across our commercial and operational initiatives.
Missions performed almost 3000 T car procedures in the quarter and we achieved total revenue of $22 $1 million, reflecting growth of 16% year over year.
Based on the strength of our first quarter results momentum exiting the quarter and expectations for continued recovery throughout the year, we expect top line revenue for 2020, one to be in the range of $103 million to $108 million representing year over.
The year growth of 40% at the midpoint.
As anticipated significant COVID-19, hospitalizations and November and December persisted into the first two months of this year.
Followed by a strong recovery in March with the which has continued into the second quarter.
We're optimistic that the pace of recovery will continue to accelerate and patients will become increasingly comfortable re accessing both routine and inpatient care.
Turning to our two strategic priorities for 2021, which we outlined during our fourth quarter earnings call.
We continue to make meaningful strides on both number one U S commercial execution and driving the adoption curve and number two preparation for a potential standard surgical risk label expansion for the on road stacked.
Starting with the adoption curve as we've said in the past the majority of our procedures are driven by trained physicians with at least one year of T car experience.
That being said, it's no secret of the past year has been a challenge for providers patients and industry personnel of like trying to deliver health care as usual and of constrained pandemic environment.
Now that we are seeing some but not all of these constraints lifted we're intensely focused on our already trained physician base of over 1800 physicians exiting 2020.
Many of those physicians were trained in the latter part of 'twenty 19, and early 2020, just before the pandemic began.
As we've stated in the past the first year. Following training is crucial for physicians to create a foundation from which to confidently increase their adoption of T car.
To better serve the.
These physicians, we have refocused our commercial and professional education organizations to provide additional hands on in person training and workshops to further adoption of T car and reinforce its benefits.
As well, we continue to develop targeted marketing and sales tools segmented by physician T car experience and behavioral attributes and our measuring the impact of such efforts.
We are pleased with progress made during the pandemic and excited about our momentum as it subsides the.
As always we are focused on the large untapped market opportunity in front of us to drive T car penetration in high surgical risk patients.
Moving onto our second key priority preparation for a potential standard surgical risk label expansion for the on route stent.
As a reminder of the on routes dense current indication is for patients who are considered at high risk for having an adverse event from carotid endarterectomy or high surgical risk.
The standard surgical risk simply denotes an absence of ore.
Of one or more high surgical risk criteria.
While there is ample market opportunity within the high surgical risk patients gaining access to the standard surgical risk patient population would increase our tam by approximately 50%.
While also positioning us on a level playing field with see a for clinical decision making.
During our fourth quarter earnings call. We indicated that we have made substantial progress with respect to our regulatory strategy by submitting a PMA supplement for the expanded indication.
Furthermore, we are busy developing our launch strategy defining reimbursement pathways and anticipating post approval study requirements.
In addition to investments and our top two priorities, we continue to invest in long term growth initiatives aimed at strengthening our ability to deepen and broaden our presence as well as open up new market opportunities.
These include investments in new and improved T car products, new Trans Colorado therapies and international expansion.
And we have made meaningful advancements in all three.
With respect to our product pipeline I am very pleased to announce that the FDA recently approved and I D E for our night, one feasibility study in acute ischemic stroke.
And night, one we will be assessing the role of trans carotid access and flow reversal of our two core competencies in a new procedure, we call neuro protection in Trans carotid Embolectomy me or night and I T E.
We believe this is the first study of its kind to be conducted under a U S. <unk> and represents an important step toward realizing a future of trans carotid therapies for neuro vascular diseases.
Our vision is big and bold and we believe Knight and other trans Colorado procedures will solve difficult clinical problems and the treatment of complex neurovascular disorders, and become and important part of the treatment paradigm in the future.
Leapfrog innovation typically require and accumulation of clinical evidence and night, one is likely the first of multiple future studies toward that and.
While there are many milestones on the journey toward commercialization.
And this study should advance our understanding of the clinical benefits night can provide in the context of acute ischemic stroke.
The era of Trans carotid therapies, and neuro vascular diseases has begun and.
And silk road is leading the way.
We look forward to sharing more details as 2021 progresses and in the years ahead.
To summarize we are very pleased with the progress that we're making on all fronts as we continue to invest in our long term growth. We are excited to announce that we are expanding our operations to include a facility in Minneapolis, which is an important talent pool for aspiring and.
The med tech professionals and a great complement to our continued and growing presence and Silicon Valley.
With that I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Thank you Erika.
Revenue for the three months ended March 31, 2021 was $22 $1 million, a 16% increase from $18 9 million and the same period of the prior year.
Growth was driven by increased adoption of <unk> across an expanding base of hospital accounts trained physicians and active sales territories, partially offset by regional headwinds related to COVID-19.
The gross margin for the first quarter of 2021 was 75% compared to 72% from the first quarter of the prior year, which was driven primarily due to lower fixed cost per unit from increased production volume and comparison with the prior period.
As a reminder, gross margin and the three months ended March 31, 2020 was impacted by unfavorable production variances as a result of temporarily idled manufacturing operations due to COVID-19.
Total operating expenses for the first quarter of 2021 were $26 $7 million of 17% increase from $22 8 million and the first quarter of 2020.
R&D expenses for the first quarter of 2021 were $5 $5 million compared to $3 1 million and the first quarter of 2020.
The increase was primarily driven by the timing of research and development initiatives.
Sales general and administrative expenses for the first quarter of 2021 were $21 $2 million compared to $19 7 million and the first quarter of 2020.
The increase was primarily attributable to expenses related to growth and our commercial team and personnel related expenses.
Expense growth was partially offset by the continued reduction in travel trade show and other expenses due to COVID-19.
We expect continued growth and operating expenses over the course of 2021 as we expand our commercial team and invest and a number of continued and new R&D initiatives.
Net loss for the first quarter was $10 7 million or a loss of 31 per share as compared to a net loss of $9 5 million or a loss of 32 cents per share for the same period of the prior year.
We ended the quarter with $136 $1 million of cash cash equivalents and short term investments.
Regarding the accounting impact of the voluntary recall of certain lots of our own route stent. The obligation to customers was recorded as an accrued liability, whereas the replacement product from our supplier it's considered a receivable.
As such these effects were confined to our balance sheet as of year end 2020, and first quarter and 2021.
Turning to our commercial strategies that Eric discussed earlier and on our fourth quarter of 2020 call.
We continue to be focused on driving the adoption of <unk> among our increasingly large trained physician base.
And the first quarter and to put this through the pandemic lens of the almost 3000 procedures performed over three fourths were performed by physicians trained and 2019 or prior.
With our continued focus on driving adoption for less tenured physicians trained and late 2019 and in 2020, we expect to bear the fruits of these efforts throughout 2021 and beyond.
We are also on track towards our goal of training at least 200, new physicians and 2021 to continue filling the pipeline.
With respect to our commercial organization. We are also on track towards our goals and the year with 50 or more active sales territories.
And we expect to have additional sales professionals hired and and training for further territory expansion and 2022.
These collective efforts will aid in further of driving the adoption curve, but also prepare us for the potential standard surgical risk indication.
Lastly, we are updating our guidance range for 2021, we now anticipate revenue to be in the range of $103 million to $108 million.
The representing growth of 37% to 44% over 2020 revenue of $75 2 million.
As such we are increasingly confident that our physician base will perform over 14005 hundred procedures. This year.
Our guidance assumes continued normalization and.
And both the health care delivery system and patient behaviors as well as continued progress with vaccinations.
At this point I would like to turn the call back to Erica for closing comments. Thank.
Thank you Lucas as.
As we exit the first quarter, we remain confident that our fundamentals are intact and our business outlook remains strong.
During the first quarter, we made headway on product clinical regulatory and commercialization fronts.
Further expanding our leadership as the sole player innovating trans carotid therapies.
I'd like to conclude with a reminder, that may is national stroke awareness month, and the COVID-19 pandemic has served as an unfortunate reminder of the consequences for people, who are unable or unwilling to access and receive timely care for life threatening carotid artery disease.
We remain steadfast and our commitment to prevent and treat strokes and needless to say, we continue to see enormous potential for our technologies to transform stroke prevention and care pathways globally.
With that we will now open it up to questions operator.
And.
And as a reminder of a question given the need the breadth of star one on your telephone.
Do we draw your question press the pound key.
Please standby, while the compile the Q&A roster.
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First question comes from the line of Robbie Marcus from Jpmorgan.
Your line is open.
Hey, guys. This is actually Allen on for Robbie I had two quick questions for the first one was.
And just wondering if you could comment on kind of the trends that you saw over the course of the quarters day like January to February and March and what you're really seeing so far in April.
Scott and Sao Paolo and color from.
Other peers outside of the aerospace really highlighting the <unk>.
March and then April were significantly better. So I was wondering if and you should assume the same for you guys.
Yeah, I mean, as we talked about in the prepared remarks, certainly we saw the effects of the pandemic heading into the first part of Q1, you know January and February deeply affected by hospitalizations and just our whole.
Crimping of the health care system, and I'll, let Lucas kind of comment on where we are today.
Yes, Alan we like to call kind of Thanksgiving through February Q five of 2020.
And we were anticipating.
Rebound in March and indeed, that's played out and as Erica mentioned continued into April.
March also had the most selling days, but it also had kind of the least.
The COVID-19 barriers around it relative to prior months.
Got it and then the second question is really on the 91 trial is there any day are there any detail you can kind of give us on the end point the amount of.
In terms of what Youre looking for in terms of the time and point and just any details you can provide us and that would be very helpful. Thank you.
Yeah sure obviously most of it with some more details will become public as we move forward throughout the year, but I think you know, let's calibrate and that this is a feasibility study and so that means that the endpoint really what we are aiming to accomplish is looking at the feasibility and safety.
Of the use of transfer out of the access and flow reversal in the presence of large vessel the vessel occlusion.
And so it's really all about that all about studying the feasibility and safety as we move forward in that study.
I think the.
The point that I would like to emphasize here is that we're really excited about night. One obviously this is the major event and certainly moving moving the treatment of stroke forward and a significant way, but the but the headline really is that the trans carotid era has begun for neuro.
<unk>.
And that this is the first of what of what we hope to be many initiatives in this space.
Sorry, one more quick follow up.
Can you provide some color on like when you look at the existing devices on the market today just in a few words what are the like the shortcomings of that Youre really looking to address we've obviously seen the key current makes the procedure much safer compared to <unk>, but we don't have the same kind of safety data so to speak for stroke, So where exactly are the flaws and looking to address.
Yes, thank you very much.
Yeah and I appreciate the question because like T car, we really looked at the fundamentals of carotid endarterectomy and the fundamentals of transfer of <unk> to understand why what were the shortcoming and those two procedures and what was potentially leading to poor patient outcomes and some cases and so you know this this.
This is not a new endeavor for the company, we've been involved and looking at acute stroke and other neuro and vascular disorders for a long time.
And we believe there is room for improvement and stroke, particularly around the things that we know lead to a poor outcome eagle with complete cannot recapitalization and things like first pass efficacy, we know matters things like <unk> and new territory, we know matters to outcomes and the and so.
These are just a couple of examples of the things that we think are potentially interesting to address here.
Okay.
Alright next question comes from the line of Rick Wise of Stifel.
Hey, guys actually Bill and Haas on for Rick Thanks for taking the question.
And I just had a question related to the standard risk one and the filing and one on the potential patient of adoption.
And just as both the upfront first.
On the filing and could you provide any sort of color on the.
Feedback or discussions you've been having with FDA and then just as we think about the potential pace of adoption post approval.
How are you guys thinking about how fast uptake could be among currently trained docs ones that we speak to something already more aggressive about treating some of their patients others more conservative and just kind of trying to understand how you guys think about how quickly they can flip the switch on that.
Sure. Appreciate the question with respect to the I E I'm, sorry, with respect to the PMA supplement.
We're just not in a position to give any more color at the moment. Obviously, we have filed the supplement the clock is ticking and there really are no meaningful updates beyond that at this time other than we continue to prepare.
The four.
For the moment, if and when approval comes our way and that preparation and looks like getting the commercial team ready the reimbursement strategy as outlined and the potential.
Post approval studies outlines so that's that's the work that we're really engaging and now.
Got it.
And then.
Yes.
About guidance for the full year.
And it's essentially it seems like kind of raised the lower and by the.
The relative to what we have and the first quarter and just trying to get any other added color on how youre thinking about the rest of the year weather and still being conservative about current trends and.
And the extent of which they'll continue.
And he added color on that just kind of curious what youre thinking about guidance.
Sure Bill and I can take that one we're really kind of two months into the.
And to the normalization process, so to say with March and April with with January and February.
B.
And being really COVID-19 affected so it so our guidance assumes continued normalization as we commented in the health care delivery system as a whole as well as patient behaviors.
But in hindsight throughout the pandemic those two aspects have been at times and.
The predictable and and are variable and so there is some continued.
The acknowledgement of that as well as typical things like seasonality in Q3, driven often by vacations amongst providers and patients and as we and others have said and.
And the past.
2021 could be a year, where vacations are.
A bigger effect and so that's all part of the.
Thank you.
Thanks for taking the questions guys.
You.
Next question comes from the line of Daniel and policy of SBB Leerink.
Hey, good afternoon, everyone. Thanks, so much for taking the question congrats on a solid quarter.
And just a question for you Erica around this.
Sounds like a of sort of new or maybe more focused initiative to ramp and efforts around your existing physician base and I think Lucas you gave US you gave a data point around the number of.
Procedures that your earlier trained physician did in the quarter, but I guess I'm just curious to see how quickly. So so with these new efforts, how we should see the.
These physicians that were trained later in 2019 and early 2020 two kind of immediately pre pandemic.
Now that the pandemic is starting to ease should we expect to see a similar ramp that we saw with the earlier trained physicians from a utilization perspective or is there something different amongst the physician base that we need to be mindful of that might drive a little bit of a slower ramp. That's my first question and I have one follow up.
Okay. Thanks, Danielle Hi, and thanks for the for the question Yeah, I think what's fair to say is there is nothing fundamentally different about gains the physicians in terms of.
Their DNA, if you will but what is different is the moment in which they came into their T car experience. If you think about it.
If you got trained and certified as the T car physician and ladder of 2019 or early 2020 really early and then all of the sudden were slammed with a pandemic and your overall procedural volumes go down and patient stopped coming into your office you stop being able to engage the way you would like to with your Silk Road.
Sales professional team all of those things that really have an impact on how these physicians moved early in their adoption journey and so the focused effort Danielle is really to make sure that those physicians are really on the same footing.
As all of the other physicians that we've trained thus far and so we are of very focused effort. We've segmented. These physicians by behavioral traits and where they are and their journey. We are targeted engagement tools. We have hands on programs that are in person that are targeted for.
Each of these segments.
So I'm Super pleased with the commercial team's approach to this Danielle and I think it ensures that these physicians can get off to the same journey as the physicians we trained previously.
Okay got it that makes sense. So this is more just a little bit more handholding from immediately coming out of the pandemic is maybe the right way to think about it and anything fundamentally different about the physician base, we're talking about.
I think that's a fair comment.
And Danielle just real quick my comments were intended to highlight that there is.
Theres real upside because again the the <unk>.
Growth of the procedures were really driven by the more experienced physicians so as we get.
Programs and tools and tactics to the less experienced.
And we hope that bears fruit.
Understood got it and then I was curious if you could comment on.
Erica you you've mentioned and the path, particularly during the pandemic from centers actually shifting and accelerating shifting to the less invasive and shorter length of stay T car procedure versus the EBITDA for the patients that they weren't doing albeit likely at a suppressed level of volumes overall.
And I'm curious to hear if you've seen that trend sort of broad and we continue to move through the pandemic and physicians are more focused now and getting more patients just in general through through.
Procedures, not just you know carotid procedures the procedures overall of their juggling a lot of hospitals are very.
Cash Crunch you know what have you have you seen the benefit of the shifts to.
More predictable and less costly say per procedure like T car and how sticky is that now as we come out of the other end of the thanks so much.
Yeah really insightful question, I think youre right and your insight and death.
The physicians and hospitals are keenly interested and getting back to the business of treating patients and I sort of alluded to that and my prepared remarks, which is physicians are back and certainly against that backdrop efficiencies are an important part of the story.
And I think it's not only efficiencies for physicians and hospitals and all of the cost benefits and sort of productivity benefits that come along with that.
But it's also reflected in how patients.
Re emerge and re enter into the health care system. So I think net overall and the efficiency of key car the improved outcomes. The less invasive nature of T car all of that continues to serve as a tailwind for adoption and I think it's also safe to say that.
And the physician groups and and individual physicians, who really took advantage of the efficiencies during COVID-19 I think we're we're pleased about the stickiness of that we haven't seen of reversion in other words and and why would you write the after you've experienced the.
The experience the efficiency of T car why would you go backwards and that's in fact, what we're seeing.
Thanks for that.
Again to ask the question you will need to press the star one on your telephone and withdraw your question press the pound key.
Your next question comes from the line of AD the meter of Piper Sandler.
Congrats on the solid start to the year and thanks for taking the question.
So first one from me is just on the procedure environment.
It sounds like things got a lot better in March and April but wanted to ask you a little bit more color. There. So what are you seeing from a hospital or ICU capacity side of things. What are you seeing from kind of a patient willingness standpoint, and then also the diagnostic funnel.
Kind of back to pre COVID-19 levels are 80%, there and 90% just any color there would be helpful and.
And then at the follow Purdue Thanks, so much.
Yeah, Adam I think I can give you some high level color on those three things only and try to unpack them one at a time, so and so on hospital capacity I think the good news is.
With vaccination is really increasing and and greater than 70% of the Medicare population and vaccinated and again, that's our patient population right.
We are seeing hospital admissions go down for COVID-19 and certainly deaths.
Fully going way down so hospital capacity is less and less of an issue as.
As well as hospital resources. So it's not just about beds. It's also about people and I think we're seeing more resources come up as the pandemic waned here as it relates to patient behavior of this is this is the real interesting one.
There are some real tailwind to patient behavior, not the least of which is vaccination and and elderly people just feeling better about being out and about the world. I think also beneficial is the fact that they can enter the health care system and have a family member beside them you remember during COVID-19, Adam you couldn't bring of family.
And remember to the hospital or even to your Doctor visit so things like that are really having a positive impact on getting patients back to the business of routine maintenance and routine care.
And certainly many of them deferred that routine maintenance and care for a long time and so I think that speaks to your final piece, which is the funnel.
And there are not only brand new diagnoses occurring but also patients who deferred there kind of just routine follow up of dam on their carotid.
Who are now coming back into the system and and in many cases disease has progressed.
Further than it might otherwise have.
Got it that's helpful color. Thanks for that and then I guess and maybe I missed this in the prepared remarks, but just any.
Update on the.
The international.
Expansion initiatives that youre pursuing and China and Japan.
And just wondering if theres an update on the progress and potential timelines. There. Thanks, Yes, yes. The update is we are making progress and so nothing specific to report nor nor timelines here on this call, but we're pleased with the progress that we made in the quarter.
Okay, Okay got it.
Sorry for the feedback there and then one last one Erica if I can sneak it in just maybe.
I'm curious about.
The carotid market more broadly and.
And how you think debt recovered and if you think you took share.
And the first quarter sequentially and if you did take share if that came at the extent of CCA or or transfer and will stenting. Thanks. So much.
Adam I'm I'm happy to take that one.
And we don't have all the data.
Net from 'twenty to 'twenty, but we do believe overall procedure volumes were down as a function of of COVID-19, and obviously our procedures were up.
And so we are kind of taking share at a debt of national level and we're looking at debt.
And individual physician level, two there's they're depressed as well, but we continue to grow the adoption curve. So the trends are positive and that environment and certainly coming out of it.
And CA continues to be the.
Gold standard and that's that's where we're focused on taking share from because that's where most of the procedures are.
That's really helpful. Lucas Thanks, so much.
Showing no further questions at this time I would now like to turn the conference back the Erica for closing remarks.
Thank you all very much for attending the call today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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