Q1 2021 Vapotherm Inc Earnings Call
And then.
[music].
Good day, and thank you for standing by and welcome to the <unk>, Inc. First quarter 2021 financial results conference call. At this time, all participants are in a listen only mode of it.
Of the speaker's presentation, there will be a question and answer session to ask the question during the session you'll need the price.
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Sorry zero.
I will now turn the call over to your speaker today, Mr. Mark Klausner. Please go ahead.
Good afternoon, and thank you for joining us for the vehicle from first quarter 2021 financial results Conference call.
Joining us on today's call are <unk>, President and Chief Executive Officer, Joe Army and at the Senior Vice President and Chief Financial Officer, John Landry.
I would like to remind you that this call is being webcast live and recorded a replay of the event will be available following the call on our website.
Listen to the webcast. Please visit the events link and the IR section of our website at <unk> Dot com.
Before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements. These statements are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including those identified in the risk.
And your section of our annual report filed on form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 24, 2021, and our quarterly report on form 10-Q for the quarter ended March 31, 2021, which was filed with the SEC.
On May five 2021, and and any subsequent filings with the SEC.
Such risk factors may be updated from time to time and our filings with the SEC, which are publicly available on our website. We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise unless required by law.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available and the earnings press.
Release and I'll.
Its relations portion of our website.
It's my pleasure to turn the call over to <unk>, President and Chief Executive Officer, Joe Army.
Good afternoon, and thank you for joining us today I will begin by discussing our first quarter results.
And then I will hand, the call over to John Landry, our CFO to provide the financial details of our first quarter 2021 results.
I will then update you on our key areas of focus for the remainder of the year before taking questions.
First quarter was another strong quarter from April.
We generated $32 $3 million and revenue of 69% increase over first quarter 2020.
And increased our worldwide installed base by nearly 200 units.
<unk> 30829 units.
Of note, we significantly increased our installed base and Latin America, which we expect will pay dividends for years to come.
Lastly, we printed of 40 or 53% gross margin for the quarter.
And our adjusted EBITDA loss was $5 2 million and roughly half of our adjusted EBITDA loss from the first quarter of 2020.
As I mentioned on our last earnings call our objectives for 2021.
Our two one ensure the current installed basis of productive.
To grow the installed base and three launch <unk> to point out.
Let me walk you through the progress we've made towards each of these during the quarter and addition, I'd like to update you on our recent H G E Digital health acquisition and share a little more color on our plans for this business from 2021.
Our first objective is to ensure the current installed base as productive, especially the precision flow units that were installed in 2020.
And the first quarter, we were able to continue driving increased awareness of our technology and.
And education.
Particularly in our key targeted gold and silver EDI accounts, which represent the top 2000 and the hospital.
As measured by respiratory discharges.
And then of the end of the first quarter 2021, we were in nearly 500 E. The gold and silver accounts from the U S, which reflects nearly a 50% increase from a year ago.
Recall these are important to us and so over 50% of all hospital admissions coming through the E D.
These gold and silver EDA accounts are especially important to us because they are some of the largest accounts and the U S treat a significant number of patients and our <unk>.
Highly referenced simple accounts.
As COVID-19 of hospital operations decreased across the United States from the early January peak, we were able to accelerate our customer education efforts, specifically, our 181 day or one of the hospital one day strategy.
This is of customer education focused strategy, we're a member of our team.
And needs with one of the hospital customers either in person or remotely.
And educate all the stakeholders across each care area of that hospital on how to use high velocity therapy to treat patients and respiratory distress for either of hypoxic.
Most importantly of hyper Kathryn.
You may recall hypoxic patients such as COVID-19 patients amount of absorbing enough oxygen and other systems.
Hyper Catholic patients such as COPD patients have difficulty clearing carbon down from their systems.
In addition to our on site and virtual business. We've had good success with our virtual Baneful film Academy.
And now educated over 28000 clinicians on the efficacy of our high velocity of therapy.
For treating patients and respiratory distress, where either hypoxic or I per cabinet.
We continue to develop new content and wanted to drive more traffic to this important clinical education resource.
Our growing base of clinical evidence further demonstrates our technologies the ability to treat patients and respiratory distress, including hyper Catholic patients with the same efficacy and the other forms of non invasive ventilation.
But with the ease and comfort of the management.
Your line.
And the first quarter of study of out of Argentina.
Focused on hyper Catholic patients was published and critical care explorations and <unk>.
Journal of the society of critical care Medicine.
We found in the study to be impactful from the following reasons.
And one clinicians reported over and had success rate and avoiding intubations for severe hyperkinetic patients when treating patients here.
Two when it works it works within the first hour and.
And three reductions and C O true as measured by of blood gas draws were comparable to levels of cheap.
The other forms of non invasive ventilation primarily bipap.
Fish and we continued to make progress on our hyper ex study and the U S, which is focused on providing further support of our technologies ability to treat hypercatalectic patients the.
The study is designed to demonstrate among other things that patients with severe hypercalcemia and treated with our equipment will achieve relief of shortness of breath comparable to positive pressure and noninvasive ventilation.
Patient enrollment has been slower than expected at the outset due to fewer than usual visits to the emergency department for such patients during the pandemic.
But we believe enrollment will accelerate as vaccines rollout and pull the 19 of hospitalization decrease.
One of the other ways, we're looking to increase the productivity of our installed base is through the introduction of additional products Inc.
<unk> recurring revenue products like our oxygen assist module or own.
Recall that the AUM devices designed to help caregivers maintain patients within a physician prescribed oxygen saturation range.
And while requiring significantly fewer manual adjustments to the device.
We are pleased with the initial results from our full launch and the U K Europe Middle East, where now in 10 countries and.
And like that recurring revenue model. The one provides.
Given the ohms of initial success, we are now working on quantifying homes economic value the.
And the potentially pursue reimbursement and the U K and other EU markets.
We're also continuing to work with the FDA treat the breakthrough devices program to clear AUM and the U S.
I am pleased to announce that our I D. E. Clinical study was approved which represents the first step and this process.
We expect to begin enrolling patients in this clinical study in the near future.
Our second objective is to increase our installed base the.
Focus here is the continued to drive the growth of our installed base and both existing and new accounts by leveraging our expanded sales force and both the U S and internationally.
And the U S. We grew our installed base by over 850 units and added 21, new gold and silver E. D accounts this quarter.
The international grew our installed base by over 1300 units largely driven by high rates of COVID-19 of hospitalizations and Latin America.
Our final objective is launching H B T two point of worldwide.
H B and T to point out we will have its own built and air compressor technology, which will allow us to break free from the need to be connected to the hospitals piped and air.
This will allow us to expand our footprint into areas of the hospital that don't have price and air, which we estimate to be 50% of all hospital beds and units.
Rates.
We're pleased to have received a CE mark for H B T to point out and expect to initiate a limited market release, and the EU and the site.
Before moving into full market release later in the year.
And the U S. We anticipate bringing the HPT two point of the market and the second half of 2021.
And the first quarter, we received an emergency use authorization and the U S to treat COVID-19 patients and respiratory distress during the pandemic the.
The <unk> 2.0, EUA does not change our overall timing per full market release.
Instead, it provides us with an additional way to serve our customers and the unlikely event COVID-19 demand exceeds our ability to supply of precision flows into the market.
Our initial focus with HPT to point out will be on the hospital market, where we have and existing customer footprint and.
In addition, we will use the second half of the year to learn how our HPT to point out might be able to help patients and the MFS and home settings.
Including in conjunction with our Hte digital health services.
As you May recall H G E.
Patient monitoring platform, which we acquired in the fourth quarter of 2020.
And to empower COPD patients providers and payers to manage day to day symptoms at home.
We reduce or prevent E D visits.
Lower costs and improve their quality of life.
And the second quarter, we expect to begin working with certain hospital customers the law.
Launch of a pilot program from monitor patients at home for 30 days post discharge.
We believe the by monitoring COPD patients and the home. It may help R. E D Gold hospital customers reduced their 30 day readmission rates.
As a result of COVID-19, we've seen of desire toward treating these patients at home instead of and the hospital to improve patient quality of life and reduce costs.
We believe H D E and remote patient monitoring program.
And with our high velocity of therapy.
And they enable these patients to be treated at home more effectively and the future.
Paul I'm proud of our strong start to 2021 and our team is continuing to perform each day and and unprecedented operating environment.
I am very excited for what two <unk> and the remainder of the year holds for our business.
And at the time details of our financial results I'll spend some time outlining our focus for two Q and 2021 John.
Thank you Joe.
As mentioned revenue and the first quarter of 2021 with $32 3 million, representing a 69% increase over revenue of $19 1 million and the first quarter of 2020.
Revenue was $22 1 million, representing an increase of 54% over the first quarter of 2020 revenue of $14 3 million, while total international revenue of $10 2 million, which represented an increase of 115% over the first quarter of 2020 revenue of $4 8 million.
Disposable revenue was $17 2 million and the first quarter of 2021, representing a 38% increase over revenue of $12 4 million and the first quarter of 2020.
And the first quarter of 2021.
The roughly 170 and just.
Both of those worldwide disposable revenue was $12 5 million and the U S compared to $9 7 million and the first quarter of 2020, representing 29% year over year of growth.
International disposable revenue was $4 $7 million compared to $2 seven volume and the first quarter of 2020 representing growth of 72%.
Worldwide service revenue was $1 7 billion and the first quarter of 2021, which grew by $1 million of the first quarter of 2020, largely due to the hte revenue and increased service and other revenue.
Our worldwide installed base grew by 2179 units and the work.
As of the end of the first quarter. Our installed base consisted of 30829 units, reflecting 73% year over year of growth.
Our monthly U S disposable utilization rate for the first quarter of 2021 was 181 and compared to $2 five one and the prior year.
Our installed base expanded significantly to the COVID-19, and as expected and will take time for these newly installed units to become fully productive.
In addition, the decline in U S disposable utilization, but also due to little to no flu or RSV, because of social distancing and mask wearing and lower growth rates worldwide and in the prior year.
The monthly international disposable utilization rate for the first quarter of 2021 of $2 two one as compared to $2 two nine and the first quarter of 2020.
Gross profit and the first quarter of 2021 of $17 2 million and increase of $8 million over gross profit of $9 2 million and the first quarter of 2020.
Gross margin was 53, 1% and the first quarter of 2021 compared to 48, 2% and the first quarter of 2020.
The gross margin improvement was due to significantly higher revenue and production volume and comparison to <unk> 2020, as well as an increase and average selling prices and the U S on both capital and disposable sales.
Operating expenses were $26 9 million and the first quarter of 2021 and increase of $5 million or $21 9 million and the prior year.
The increase and operating expenses was primarily due to an increase and general and administrative costs due to increased head count.
Auditing and compliance costs as well as the increase in research and development expenses due to the development costs for our next generation platform HPT to point out.
Net loss from the first quarter of 2021 of $10 4 million or <unk> 40 per share compared to $13 8 million or <unk> 66 per share and the first quarter of 2020.
Adjusted EBITDA loss for the first quarter of 2021 was negative $5 $2 million compared to negative $10 2 million and the first quarter of 2020.
The reduction and adjusted EBIT loss was primarily due to higher revenue and gross margins.
As we drive to adjusted EBIT of positive revenue growth gross margin improvement and operating expense leverage we expect adjusted EBIT of positive roughly of 125 million and annual normalized revenue, assuming a 65% to 70% gross margin.
As of March 31, 2021, cash and cash equivalents from $93 8 million compared to $113 7 million as of December 31, 2020 and.
And the first quarter, the $20 million and cash of this amount of $12 6 million was used to fund working capital primarily related to our inventory build to ensure uninterrupted supply to our customers and to support our HPT two point of launch.
The balance of seven $4 million of used to fund operations.
And we've reduced our inventory balances to more normalized levels, we expect to realize the.
The benefit over the balance of the year.
In terms of guidance recall that we are only providing annual guidance.
Based on our results of <unk> of 2021, and our expectations for the full year, we will not be changing of previously issued guidance for the full year.
The assumptions, we made related to our fiscal 2021 outlook remain the same as provided on our fourth quarter earnings call held on February 24 2021.
However, given the impact of COVID-19, and our international markets. We now expect a higher contribution of revenue from the international market than our historical levels, especially in the second quarter of 2021.
We continue to expect full year revenue to be between $82 million and 88 million, which represents a two year compound annual growth rate of 33% at the midpoint of this range.
We continue to expect full year gross margin to be between 46% to 48% and full year operating expenses of $97 million to $99 million.
This concludes my remarks, I'll now turn it back of any Joe.
Thanks, John.
For opening the line for questions I would like to review, what we will focus on and QQ and for the remainder of the year.
We will place heavy emphasis on ensuring the.
She was productive, especially all of the precision flow units that were installed in 2020 and the first quarter of 2021.
We accelerated our one of hospital one day program as COVID-19, hospitalizations decreased and the U S and we will continue to educate our customers on how our technology treats both hypoxic and especially of hyper Catholic patients throughout the hospital.
Our field team will also continue to be focused on adding new gold and silver and the accounts, while our clinical team will continue to develop clinical evidence demonstrating our ability to treat hyper Catholic patients.
The launch of AUM will be expanded throughout the EU and U K and we will be working closely with the FDA on our own.
Pathway and the U S.
We will continue to focus on growing our installed base and both the U S and internationally and we'll be ready to meet our customers' needs and strict COVID-19 of the hospitals and increase or and remain at the elevated levels. We're currently seeing and Latin America.
We will also prepare for the launch of our new <unk> two point of platform and the second half of 2020 one.
Finally, we expect with the H T E pilot work, we will be conducting and select U S geographies will help inform our home strategy.
Last but not least I'm excited to let you know that we will be hosting our first ever investor day.
On June 23rd of 10, a M and.
And the morning Eastern time this event will be held on site and our New Hampshire facility.
And webcast for those who still can't travel.
We have a great day planned with the facility tour and new product demos I really look forward to share more about our vision for the future and it will be great Seawell and New Hampshire.
Before closing I'd like to share the following patient story, which came to me from one of our team of field team members and the last couple of weeks.
I was out of silver EDI account this week doing education from the respiratory therapist or <unk> for short.
And Pulmonologists. This account was of COVID-19 hotspot for so long that they wanted to go back to the basics and how to handle hyper Catholic patients.
After several education sessions, one of the our team that was in the ICU asked us to go and what kind of patient with them.
The patient was a 56 year old male and anxiety issues and COPD.
The patient's work of breathing was extremely high as respiratory rate was 56 breaths per minute versus teams for a healthy adult.
And as oxygen saturation level came in at 76% well below 100 per cent.
The RT place the patient on our gear after of failed Bipap attempt and although the patient was anxious and kept trying to remove our gear. He eventually calmed down long enough to get and arterial blood gas drop.
Within 30 minutes of the patient's P H and carbon dioxide levels were normal.
Patient's respiratory rate went from 56, the 34 and it is S. P. O two increased from 76% to 95 per cent of the time it took the RT or check the arterial blood gas and come back in the.
The RT immediately got the Pulmonologists to show and how much better and how much of the patient changed and such a short amount of time.
Based on this patient's experience will change their minds about using vapor from only per hypoxic COVID-19 patients as a result, the EDI and pulmonary doctors Bob to use our gear before any other device from most of the respiratory distress patients.
In conclusion, I'm very proud of efforts of our entire organization put it into the first quarter of 2021 to ensure we met our customers' needs worldwide.
And I'm confident that with the strong start to the year and our teams tremendous work ethic, we will accomplish our 2021 and objectives. We're excited about the opportunity to drive further adoption of our high velocity therapy for both hypoxic and hyper catheter patients.
For the hospital and beginner and move into the home care setting.
Thank you for trusting us with your capital it means a lot of us.
I'd like to open it up for questions.
And at this time, if you would like to ask any question you will need the press star and one on your telephone keypad again that interest.
Your line and your telephone keypad.
Your first question comes from the line of Bob Hopkins from Bank of America. Your line is open.
Hi, Brad Bowers on for Bob today, and thanks for taking our questions.
So I appreciate the color that you gave on the decline in the U S disposable and obviously a little bit below historical and so I was just wondering what conversations you're having that sort of give me confidence that you can return to normal utilization and how the progress and its going out with making sure that those boxes and the U S. That you placed are getting used.
Mhm.
So I'll take that one giant hero of mine. So thanks very much for the question.
The first thing I'll tell you is that when you look at the quarters turn rates.
When you.
And not publish this information for you guys, but when we look at the the aggregate the components for that the monthly pieces the.
And the January turn rates for a very very strong very high and as we saw the COVID-19.
Hospitalizations begin to drop off from the dropped out very quickly. After they peaked in the first or second week of January.
We saw that drop off pretty rapidly.
From from well below what we've seen from historical norms. So we started talking obviously out of the field talking about all of the customers and what they were telling us.
There's no flu anywhere in the system at that point and time, and we haven't seen any flu in North America and any any capacity whatsoever. This year, nor are we seeing any kind of RSV.
But what it did do is it led our field team get back into the accounts.
And by the time, we got into February our people are back on the ground back to teach and train and coach.
So we're hearing stories like what I share with you guys on this call we're hearing more and more of those stores and now I'm able to get back into these accounts and ive been able the shape firsthand from 10.
And I think this year is going to be sloppy, but I'm very excited about what I see from the end of the year in terms of of reverting back to our historical norms and in fact because of the number of goal of accounts that we've been opening and you guys know that those gold E. D accounts turned at a higher rate the 90 day accounts.
So what we're what we're working on doing is to make sure. The we're educating the heck out of everybody argues English technology out of hyper Caprification smell and we can see that what we're going to get to by the end of the year and feeling very good we'll be back to historical norms.
Got it appreciate that that's true.
That's helpful. And then I guess, just one I guess, what caught of clarification, but on your confidence when.
Talk about having disposables and the U S showing year over year growth. It sounds to me like we might see the utilization I'd be a little bit lower than typical of other Q.
Q2, and Q3, so are you talking about from the floor there because I mean, it seems to me the implied that it would be maybe Q4 weighted a bit. So maybe just trying to think about the progression of that and thank you.
Yeah, that's probably the right and I think the other question that you gotta be factoring in is are people going to continued to wear masks because of where everybody's learned as the masks have a have an impact on the spread of flow.
Really what we saw the sheer mass and are the kids go to school or not because they are of vector for not only the RSV, but for flu as well so.
We're taking a one of the patients are back of the hospital, where treatment, but we got the suite of patients get back and the hospital first but I think from a modeling point of view, John it's probably better off not to the amount that that I have.
Yeah, that's right, Brad and that is for the full year year over year disposable growth we expect despite.
Some of the point that Joe made around.
Training and education and some of the downsides, we saw there in the first quarter. After COVID-19 hospitalization and decrease we're still confident that book through training and education book.
And on the EDI gold accounts and the hyper cap of patients specifically, we'll be able to grow that disposable revenue on a year over year basis versus 'twenty and then when you look at it on a two year compounded annual growth rate our U S. Disposables, we expect those to grow and the low <unk> on a two year compounded annual growth rate versus 2019.
And there's a lot of that sort of make their sales when you start to look at 2022.
And you think about the size of that installed base and that's what I'm thinking about it and that is a really really big installed base that we've been able to build durable stomach.
And that's why I'm, telling you and I think this year is going to be sloppy, but im very talking about what I'm seeing sort of 2022.
On the disposable front in particular.
That's all very helpful. Thank you very much.
And your next question comes from the line of Mitra teaser tens of millions of Baird. Your line is open.
Hey, Hey, guys. Thanks for taking the question.
The few things I wanted to follow up on the number one you talked about doubling of presence from Goldman from Marine deems, it's obviously been and bit of a land grab pre all spot, but as you look through this year and net share are you still saying repeat purchases from the newer accounts, meaning that you can and continue to see kind of the benefits of 'twenty two.
And in future years, and then how should we think of hospital capital budgets, China and through 'twenty, one and 22.
Well, let's see.
And the second part first strength, because I got to play and I don't think there's going to be much and the way of capital dollars are available on the respiratory front and we've just gone through a pandemic of it was it was the respiratory and central.
We're planning on and capital budgets being pretty limited for the next.
And I don't know couple of couple of quarters because of the next.
Year, or so, but what we are seeing as we continue to see when they have opened up the couch. They are continuing to buy more of our gear, whether it be the to use or the.
And they are rounding those fleets out so I like what I'm seeing there Margaret in terms of our ability to repeat what we've been doing which is you know.
60% of our capital equipment in any given quarter before this whole pandemic day, whereas the current accounts and we're expanding our fleet and so I think that we're going to continue to see that particularly with the launch of the H two pointed out the net.
That product is going to provide a lot of capability to take this technology throughout the hospital and hospital has been doing it but it's been very hard to do right. They have to buy of compressor and they have to move with true there. So despite all of that friction and that process.
Been doing it so I'm looking forward to seeing what happens when they don't have to go through all of those groups and we can put this thing anywhere they want.
Okay. So a couple of follow ups on that as well, if we think about and installed base growth versus capital equipment.
Ex budgets within hospitals, they have the Tim you're still thinking of the installed base.
<unk> growth this year certainly outside the U S growth this year and in future quarters as well as the for 'twenty, two but as you think about it and speaking to how comfortable are you pushing the top.
And and how do you think about the pricing structure and those types of devices.
They are around yeah, and the device and software committed contract.
Well.
No.
I think the timing of this thing is actually pretty interesting, especially when you start to think about different business models that can help hospitals deal with limited capital budgets, but still need the technology. So we're going to try a couple of different things and see how they work.
And really it's I have no doubt know Margaret and given the exposure that we've gotten during the pandemic. We've just scratched the surface of what we've got to do both in terms of the installed base and the accounts throughout the year, but also and the installed base of all of the accounts, we're not while we're in 500 of the.
2000, the largest hospitals from the country I mean 500 of the hospitals and were not and got and there's an awful lot of ground to cover.
Okay and.
And so let me and ask another one and <unk> two out of because you talked about the digital platform back and.
Can you remind us the cost benefit I guess of discharging the patient home and.
Not had any of the patient come back to the hospital that return if they were to come back would be it cost of the hospital, yes. So like what are the cost savings.
Associated with that digital platform.
The first and foremost you're going to improve the quality of the patient's life to begin with right. The <unk>.
Second thing of you Gotta do with Ht, He's been able to demonstrate is the 40% reduction and all cause utilization of people who are on there.
Monitoring platform at home, but I think for our gold and our silver accounts, what theyre thinking about is COPD readmissions within the 30 day window is the.
A big problem for them and it affects the entire CMS book of business, where they're going to pay penalties on the whole book not just from that COPD patient. So there's the cost of treating them. But then there are of the penalties imposed on that CMS book.
For all of the CNS business. So that's really we're kind of excited because it lines up really well with our existing book of business and what our hospitals are trying to accomplish which is treat these patients and then keep them out of the hospital and that's what that's what the east platform is designed to do.
Okay, great. Thanks, Scott.
You bet.
And your next question comes from the line of sales Pavan <unk> from Canaccord. Your line is open.
Hi, it's John from Bill Thanks for taking our questions.
First of all of them, taking also into the new HPE Satcom are there any hurdles or challenges reimbursement per home market of Jim the earning when design the business model.
Yes.
Well <unk> is a remote patient monitoring system, it's not and oxygen system per se right. So these these are the reimbursement has been established during the pandemic and it is it is all designed to take care of these patients in the home as opposed to in that.
Hospital, so the two of really the.
They're not connected at this stage now you can imagine at some point, while we are dialing in on what our home.
High velocity therapy products going to look like we're going to marry these two technologies together.
So we're really not going to be exposed to the home oxygen reimbursement, we're going to be looking more towards.
How do we keep these patients out of the hospital and.
And then how do we help the hospitals are and help the insurance companies save money and then how are we going to partner with them and that area.
Got it thanks, Jeff and then just wondering on the.
Hi, Brad trial, I know you first of all of general, but can you provide some timeline and expectations and how you plan to use.
And really drive the.
And kind of skew patients.
Well you know it's building on the body of data that we've already built and this is a big deal. When you think about what our technology is able to do it you could treat all comer respiratory distress and in the emergency Department with this you don't have to pick and choose right.
And if that patient comes in and they're hyper Catholic that technology high velocity of therapy is is going to be the frontline therapy for them every.
Everybody could see why it makes sense that you're going to be able to treat of hypoxic patients with this it was it is not obvious to them at the outset. When we first started down this path and we began that doshi trial that you could ever treat a.
Blow off the C O two of one of these patients with the nasal cable and it was just it was just something that clinicians had been trained for two generations, but the only way to do that with the pressure based therapy like of Bipap.
So when we think about our clinical strategy and how hyperactive into this it really is building on the building blocks of the Doshi study then the subgroup analysis, which showed how effective it was on the hyper Catholic patients than the Argentina trial, which was just published which was on more seriously hyper catheter patients the hyper Act prowess.
Designed for moderate to severe hyperkalemia patients, which is the it.
It will be a very very important piece of work to show and give clinicians the confidence that.
There's a lot of body of evidence out there now and it shows how to treat these patients frontline with our therapy. So we think all of these are going to continue to build together, we're just kind of keep building more and more of that clinical data for them. So they can see it our goal is that we're going to book.
And the respiratory distress patient that comes in and out of hospital hyper Capex hypoxic doesn't matter as long as their spontaneously breathing and our technology will be the first line therapy is what our goal is.
Thanks, and I apologize.
You bet.
And your next question comes from the line of Mary T Bells and <unk>. Your line is open.
Hi, Thanks for taking the questions and lot of good updates here and your comments today I wanted to ask a two part of maybe on the international business.
And you noted that you know and Latin America, and you saw quite a lot of demand for the capital systems. I'm curious if there are new countries that you've entered or new ways to sort of expand your international business and that Werent present in front of me the pandemic or maybe the slate of Spike and then also sort of on the O U S.
Side, how should we think about disposables.
After the pandemic.
Is resolved and should we think about it similar to the U S and now.
And without as much direct sales force, possibly there might be some difference and training and education that range, but just love your thoughts there.
Yes, I think you've hit the nail on the head there with the training of true of distributor networks. So we're spending a lot of time really working to help them develop and deliver on this hyper cabinet training. So I think that's going to be the case.
B I would be surprised if the international turn rates didn't mirror the U S churn rates at some level because there's been so much equipment, but starting at that installed base has grown a lot right.
So I would expect to see that same kind of lag and then that same kind of return.
And it's all going to be driven by that messaging and how tight we can deliver that education to those dealers and we have a very very good network.
<unk> and all of these different countries and Theyre very critically savvy and they understand how to treat these patients with them with respect the new countries Murray.
We have been using this as an opportunity to expand and the new countries and in Latin America.
And quite honestly.
Have a very strong partner of Latin America Lindsay the the gas company.
As our partner there and they've been our partner for a long time and they have a lot of infrastructure, and Brazil, and Mexico, and Colombia, and all of these countries, where we've been and a very good position to take care of those customers needs and our partners at the Super job, we continue to add distribution in new countries, but are there.
Pretty selective basis, we really wanted to stay focused on those markets, where we can see a path to being very successful in AR and the reasonable period of time. So we're gonna tend to continue to go into those countries that are.
And maybe more he developed.
And.
And it has been a it has been a.
The and opportunity for us and I think we've made a fair amount of hay with it that international business is performing very well the U S and as to the international guys have really done a great job with this.
Okay very good to hear and let me ask from then on.
And the FDA IDE study glad to hear that you are.
And about to get that kicked off and would love to hear of a little bit more about the design of and possible timeline around.
Data coming out of that and the potential approval and then over in Europe, and the U K what is it specifically of those bodies might want to see when it comes to reimbursement and granting reimbursement from thanks. So much sure you bet.
U S trial, we're going to lay out a lot more detail at our Investor day, and Joe. So we would love to see you there and be able to walk you through that and the more detailed fashion the way to think about this broadly speaking Murray is the trial that we ran at Oxford and St. Peters is the.
At a very good proxy for what we're going to be running and the U S. But my guess is the U S. One is going to be just a little bit bigger.
Probably a couple of more centers involved in it.
And you should expect to see some of the best Nic use in the United States participating in this trial and.
I would expect it's a pretty similar design to that we finish the enrollment and that thing and.
The year so.
I think once we get this thing moving but that was also and a pre COVID-19 period right. So there's pandemic has added degrees of complexity of everything that we do across the board. So we would expect that we're going to kick that trial off here.
And we get to our like I said at our Investor Day in June we're going to be able to give you a little more Colorado.
In terms of reimbursement.
And Europe you know this is new for us because we've never we've never actually explore this area but.
And when the FDA made of made this and breakthrough technology and we started to understand the possibility of a.
Additional reimbursement and the U S for that we're like well, let's do the same thing in Europe. There is an awful lot of economic value of that this thing deliveries by improving those clinical outcomes and.
Creating more consistency of treatment effect oxygen is of you heard me say this a million times and is a deadly dangerous life, giving drug with a narrow therapeutic window and this thing does an outstanding job of delivering on that so we're learning about it it's new for our organization, but in the new.
And we really liked the fact that we'll get started on this this whole.
Reimbursement of exercise and Europe ahead of the time, so that by the time, we roll into the United States, We're going to know what we're doing on that front.
Alright. Thank you, we'll see you and Jim.
Excellent and looking forward to it Murray.
And our last question comes from the line of Jason Bednar from Piper Sandler Your line is open.
Hey, guys. Good afternoon, and thanks for taking the questions I wanted to start with the ISP increase taken out and the equipment and disposables here at the start of the year.
I was just wondering how could you can talk about how this price strategy lines up out of the HPT two point of rollout and then on the disposable side just curious how these changes of land with the installed base.
Sure and one of the key items to driving the ASP increases chase non the disposal side and the introduction of new products for the last year, we introduced our pro soft cannula as well as our air slides disposable patient circuit.
And those have higher the clinical utility for our customers and the patients that they utilize the technology lift and as a result of command the higher price than our legacy technology and legacy Cumulus and that space. So that's helped increase it as we've increased the mix of those new products have helped uplift the asps.
And as well as the typical medical CPI type increases and we're seeing there on the disposal front.
On the capital side, it's more of the mix situation and Jason where we've had a higher mix of per.
Precision flow units that either of V to you of course a compressor.
Which adds to the capital equipment revenue for the same amount of precision flow units that go out there so and that's really a mix issue.
And as well and again the medical CPI price increases that we've seen on the capital and as we look to HPT.
<unk> pointed out we're still and the initial stages of working through that with the limited market release type work and then we'll provide more color on that and get deeper and that process.
Okay, and just to be cleared and on and on this point of this is for both capital and disposables as most of that.
The mix issue or entirely of mix issue not a like for like price increase on either.
You have medical CPI, which would be the base price increase and any other mix on top of that.
Okay, Great and then.
As far as the follow up just wanted to touch on gross margins and unit.
Quick math from here would suggest maybe youre looking for margins to drop down to other was comparable to what we saw in 2019 and over the balance of the rest of this year. So I guess is that how youre thinking about things, John where the vision of the first quarter margin strength and they give you more comfortable about delivery and maybe at the upper end of the range of got out there.
Sure Jason Good question. So as we look at gross margins are.
Gross margin for the first quarter and for the year comes on the heels of our highest revenue per rep.
The year.
Expect based on the midpoint of our guidance roughly 40% of the revenues come through so based upon the production sales volume that we've had and the first quarter we've ever.
We had quite a tailwind there in terms of gross margin benefit and has.
As we go through the rest of the year and our volumes.
The decrease from here both on the production and sales side, we believe that we'll be generating margin day more in line with where they were and the 2019 timeframe, but long term high of three point gross margin improvement plan is intact and that as we come out of 2021 and go into 2022, we'll continue that trajectory and b and the <unk>.
22, gross margin range, which would be above where we came out of 2020. So we feel good about where they're going long term line gross margin improvement.
Alright excellent. Thanks, so much guys and see you in June.
Okay. Thanks, Jason.
Looking forward to of Jason.
And as there are no further questions at this time of I will now turn the call back to Mr and channel Army for closing remarks.
We just want to thank you all very much for your time today, and we look forward to seeing and as many of you as we could fit into the plant on June 23rd of protection and that will be back to you in August and the.
Talk to you about how the second quarter line. Thank you again and have a great day.
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Yeah.