Q2 2021 Silk Road Medical Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Silk Road Medical <unk> 2021 second quarter earnings at this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session.
<unk> to ask the question during the session you will need to breast are 1 on your telephone. Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your speaker today.
<unk> Paul Investor Relations. Please go ahead.
Thank.
Thank you and thank you all for participating on today's call.
Joining me on 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 3 months ended June 32021.
A copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future financial performance the impact of COVID-19 on our business and prospects for.
For recovery.
<unk> management.
Expectations for hiring physician training and adoption growth in our organic business.
Station of reimbursement market opportunity commercial international expansion label expansion and product pipeline development are based upon our current estimates of 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.
Our business. Please refer to the risk factors section of our quarterly report on form 10-Q filed with the Securities and Exchange Commission on May 10th 2021.
This conference call contains time sensitive information and is accurate only as of the live broadcast today July 29.2000.
So on.
Silk road medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to Erica.
Thank you Caroline good afternoon, and thank you all for joining our second quarter 2021 earnings call. Joining me today is Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
At Silk road, we have set out to compete and win against invasive surgery and establish T car.
20th standard of care, we are back on offense and doing just that.
The body of evidence supporting T car as a clinically proven less invasive treatment option continues to expand including for the first time into standard surgical risk patient population.
As the last year, we took significant procedural share from carotid endarterectomy and we also became the number 1 share leader in both units and revenue for carotid stents by a significant margin.
As we continue into the second half of 2021 and beyond.
<unk>.
Separately from <unk>.
<unk> to leverage our robust base of clinical evidence proven T car efficiencies trained physicians and committed commercial organization to drive <unk> adoption in advance our impact on the lives of patients at risk for stroke due to carotid artery.
<unk> disease.
Our primary strategic objective in 2021 is U S commercial execution and our second quarter performance resulted in roughly 3650 <unk> procedures.
Importantly in each of our physicians.
<unk> segments, our efforts aimed at increasing adoption are gaining traction for.
Procedures per physician were up 17% sequentially in the quarter coming back to pre pandemic levels across a significantly larger trained physician base.
Additionally.
Initiatives aimed at driving adoption among physicians newer T car bore fruit.
As nearly 300 physicians from our recent training programs perform procedures in Q2, most of whom who had not performed a procedure in the prior quarter. Additionally.
Additionally, the time to.
<unk> and the 10th key car cases post training continue to shorten.
Overall, we are seeing improved adoption trends across each of our physician segments.
Driven by the improving healthcare backdrop and growing utilization, we achieved total revenue of 20.
Of the FERC $5 million in the quarter.
Reflecting 75 growth of 75% year over year.
On an adjusted basis total revenue increased 92% compared to the same period of the prior year when excluding the recognition of $1.3 million in deferred revenue.
In the second quarter of 2020.
Based on the positive trends, we are observing in the field, we are raising our full year revenue revenue guidance to $104 million to $109 million.
Turning to our second strategic objective for 2021.
6 we advanced our preparations for a potential standard surgical risk label expansion as a reminder of the on route stent is currently indicated for patients considered at high risk of adverse events from traditional carotid endarterectomy or high surgical risk.
Though the high surgical risk population is a very.
Very large opportunity for us on locking access to the additional subset of standard surgical risk patients would increase our U S. Tam by roughly 50% and more importantly put us on a level playing field with CBA.
We are pleased to highlight.
Light that on analysis, comparing T car versus CA in standard surgical risk patients utilizing real world evidence from the vascular quality initiative will be presented by Dr. Patrick Liang of Beth Israel Deaconess and the plenary session on August 18 at the upcoming society for vascular.
Surgery annual meeting or van in San Diego.
This is the first ever presentation of outcomes for T car in standard surgical risk patients.
The abstract shows compelling outcomes and as the Viewable on the <unk> website.
We expect.
<unk> significantly more details around the data will come in the presentation and ultimate publication, and we look forward to sharing those details as they become public.
The data to be presented advance are similar to the data provided to FDA in our Q1 'twenty.
<unk> 21, PMA supplement submission with slightly different statistical analyses to meet regulatory objectives.
For the submission of real World evidence in the filing followed multiple collaborative pre submission interactions with the FDA to refine our regulatory.
<unk> strategy and statistical approach.
Overall, we are pleased with our progress with the FDA, including productive interactions since filing which have largely centered around statistical programming questions.
Given the progress in the quarter. We are currently refining our standard surgical risk launch strategy.
<unk> engaging with CMS regarding coverage and anticipating FDA post approval study requirements.
Please note that our current 2021 revenue guidance does not assume any contribution from treating standard surgical risk patients.
In addition to our focus on our.
Q2, 2021 strategic objectives, we continue to invest in additional long term growth drivers, including new and improved key car products expansion into international markets, and new Trans, Colorado therapies, and neurovascular and carotid disease States.
For example, we are making progress on a new trans.
Our top of Guidewire, and a new trans Colorado balloon catheter that we could see approvals in 2022.
Stay tuned on these initiatives that we believe are beneficial for continued penetration of <unk> into the market on.
On the international front, we are pursuing regulatory approvals in both Japan.
Corrado lineup in the second quarter, we filed our shown in applications with <unk> in Japan for both of the on route Neuro protection system and the on road stent and we submitted to NPA in China for this debt with the NPS system already under review.
We have also begun to take preliminary commercial.
Non interest in both countries and have advanced our discussions with potential distribution partners in both Japan and China.
We remain committed to exploring T car globally and these steps Mark the first phases of unlocking our global total addressable market of.
<unk> point $1 billion.
As a reminder, we do not expect any revenue this year from Japan or China.
Turning to our neurovascular acute ischemic stroke program, we are in the process of initiating sites for our night, 1 feasibility study, which as a reminder stands.
For neuro protection and Trans carotid Embolectomy me the FDA approved this ITE during the first quarter and we expect the study to begin enrollment this year.
In summary, we are thrilled with the progress that our team is making on U S commercial execution preparation for standard surgical risk expansion.
The <unk> long term pipeline development and international expansion the second quarter marked a noticeable overall elevation of our organization driven by operational improvements a new facility in Minnesota expanded leadership and leadership capabilities and regulatory.
Spansion free clinical quality and R&D and the continued addition of top commercial and sales force talent.
With that I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Thank you Erica revenue for the 3 months ended June.
June 32021 was $26.5 million of 75% increase from $15.1 million from the same period of the prior year.
Growth was driven by increased adoption of <unk> across an expanded base of hospital accounts trained physicians and active sales territories.
Our revenue for the second quarter of 2020.
It includes the recognition of $1.3 million of deferred revenue due to a decrease in the provision for sales returns related to certain prior sales with the shorter shelf life couple.
Coupled with the downward trend on our historical return rates.
Excluding the contribution of the $1.3 million second quarter revenue in 2021 decreased $90.
2% compared to the same period of the prior year.
Gross margin for the second quarter of 2021 was 75% compared to 65% for the second quarter of the prior year.
As a reminder, gross margin in the 3 months ended June 32020 was impacted by unfavorable production variances due to temporarily.
Idle manufacturing operations driven by COVID-19.
Total operating expenses for the second quarter of 2021 were $29.8 million, a 56% increase from $19.2 million in the second quarter of 2020.
R&D expenses for the second quarter of 2021 were $7.3.
Sellers compared to $3.4 million in the second quarter of 2020.
The increase was primarily driven by growth in personnel and investment in new and ongoing R&D programs.
Sales general and administrative expenses for the second quarter of 2021, or $22.5 million compared to $15.8.
For the second quarter of 2020.
The increase was primarily attributable to the expenses related to growth in our commercial team as well as the resumption of travel trade show and other expenses of the impacts of COVID-19 declined compared to the second quarter of 2020.
We expect continued growth in operating expenses in the second half of.
2021, as we further expand our commercial team invest in continue to new R&D initiatives and expand our presence in Minnesota.
Net loss for the second quarter was $10.5 million equating to a loss of 31 per share as compared to a net loss of $10.5 million or a loss of 32.
<unk> per share for the same period of the prior year.
We ended the quarter with $128.1 million of cash cash equivalents on short term investments.
As we continue broadening our team and footprint. We are excited to have recently expanded our operations to include a temporary 18000 square foot facility in.
Minnesota part of the broader Minneapolis, St Paul region.
We have also initiated construction on our larger 62000 square foot building in Plymouth, which we expect to begin moving into early next year.
This region has a rich history of technological innovation and serves as a great talent pool complement to our continued and growing.
<unk> from Silicon Valley.
Lastly, as Erica mentioned, we are raising our guidance to $104 million to $109 million representing growth of 38% to 45% over 2020 revenue of $75.2 million.
Our confidence is driven by the continued demand for and pace of new.
New physician training or.
Our progress in hiring in the commercial organization.
And continued strong trends in average selling prices and procedures per physician, both new and tenured.
At this point I would like to turn the call back to Erica for closing comments. Thank.
Thank you Lucas for.
Before.
Are we close I would like to highlight how honored we are to have recently added doctor to Nisha carino to our board of directors. Dr Arena with the widely esteemed health policy expert with over 20 years of experience in health care leadership positions across governmental for profit and nonprofit sectors.
Her insight will be an important asset as we drive T car towards standard of care and push forward our efforts in new indications, new therapies and global expansion.
Entering the second half of the year, we are bolstered by our business performance and the trends that we are seeing for the health care delivery system.
Overall, we are making a real difference in the lives of patients and the physicians, who treat them and we are committed to advancing new indications and new therapies to drive significant growth in the years ahead.
With that we will now open it up to questions.
Joining me and Lucas Buchanan today for the question and answer portion of our call is our Chief commercial officer, Andy Davis of.
Operator.
Thank you at this time I would like to remind everyone in order to ask the question Press Star then the number 1 on the telephone keypad.
Again by the Star then the number 1 on the telephone keypad.
For just a moment to compile the Q&A roster.
Okay.
We have the first question.
The same coming from the line of Robbie Marcus with Jpmorgan. Your line is open.
Hi, This is actually Lili on for Robbie Thanks for taking.
So 2 quick ones I'll ask them. Both upfront you know the street is that 28 million for third quarter is on a level that you're comfortable with and are there any concerns that you have with regards to the adult variant in the third quarter and.
And second.
The cost of its nice to hear about the step up in utilization was any of that tied to a catch up in procedure volumes of backlog.
Gives you the confidence that you'll be able to sustain the the increasing trends in utilization over the back half of the year. Thank you.
Sure.
I'll take the first part.
1 and maybe part of the second 1.
So in terms of the third quarter, the third quarter as we all know is a quarter thats typically affected by seasonality in the form of vacations in <unk>.
<unk> tends to be back half loaded of school gets back in swing and certainly that is the case this year and Theres a lot of.
Discussion around patients and physicians taking.
Vacations, just after a tough year on change behind us. So that's part of it obviously, we're cognizant of a lot of the Delta Varian trends in and how those are impacting certain parts of the country.
So.
So that that I think influences all of our thinking on on Q3 and hope to be.
Back to even more normalization in Q4.
And the only this is erica thanks for joining us I can take the back half of your question, there, which is utilization and the potential influence of the Covid backlog look I think it's safe to say.
In Q1, we really started to emerge back to a place where elective procedures. We're on schedule for the most part and so you know.
For the most part we don't believe that the that the procedures per physician were driven by any backlog effect in the second quarter, but more.
There have been by just getting back to the business of medicine and back to the business of stroke prevention.
And as we said in our prepared remarks, we returned it to a procedures per physician level that look more like where we were in 2019 prior to the pandemic, but I do want to point out that that is on a large.
Roger denominator of larger base of physicians trained and to answer the last part of your question. Yes. We are confident that we can sustain the growth in procedures per physician because that's what we are all about and that is our focus really for this year is moving physicians continuously up the adoption curve.
Great. Thank you.
We have our next question coming from the line of Rick Wise with Stifel. Your line is open.
Hey, guys. This is actually doing the Hasan correct.
I wanted to ask 1 on standard risk.
Just on <unk>.
What are you doing a per pair.
And thinking about the launch strategy.
And in terms of the Commons on loving the leveling the playing field do you think there's a way to frame whether you see more incremental opportunity in terms of currently trained docs converting standard risk patients T car for more for docs, either not doing CCAR are using.
The smaller subset the more readily adopt.
Yeah sure let me take some of that and then I think Andy Davis is isn't really the best Guy to answer most of that bill and thanks very much for joining us. So in terms of what is the launch strategy.
As you can imagine there are just some basic kind of nuts and bolts of the have to be done.
Using it to get ready for this type of a launch we do consider it.
Big launch, we're going to make quite the fanfare about it as you can imagine in.
And that will include new educational materials, new marketing materials, obviously, the change in packaging labels and things like that too.
On the new potential label expansion.
But I think most importantly, it's really how we're thinking about the conversation with physicians and changing the way that we talk about T car as the procedure for high surgical risk and I think with that Andy I'll, let you take the back half of that.
Sure.
As Erica mentioned the conversation that we've been having with the physicians.
Over the course of several years is the differentiation between high surgical risk.
And potentially patients that arent art high surgical risk, but what we've learned.
Considering the scale of surgeons don't necessarily speak in.
That language, so as Erica referenced with the.
The onset of standard surgical risk label indication, we will be able to then.
All patients.
On the even playing field as it relates to how doctors can choose.
Is the best what they feel is best for that patient. So we have a lot of doctors that have or.
Very.
Levels of adoption with CCAR and the individual practices and those particular physicians they will be the ones that will move.
The 2.
To the higher levels of adoptions adoption now that this distinction is.
<unk> been taken off the table, but.
As it relates to everybody else every doctor will come along on their own.
The again March towards there there are there their own adoption.
Use of of T car based on their own experiences so.
It's still going to be we still of a lot of a lot of.
Opportunity ahead of us and our current.
Addressable market and that is the high surgical risk patient patient population. So we will keep.
Working very hard with those doctors to move them along.
Option curve.
But where we're really going to see.
Movement in the short term upon this label indication is with those positions.
That have already achieved.
Higher levels of adoption. So we still have we still have a long way to go but we're very encouraged by being an even playing.
The adoption so we do get this indication.
Great. Thanks.
And I just had another on sales force expansion and adding new territories.
The other way to provide color on the timing of those new territories in terms of how long they take to start opening new.
New accounts in those new territories and driving incremental procedures.
Yeah, let me take the front half of of that.
<unk>.
We ended last year with 40 Act of territories, obviously had some additional sales reps and training we guided.
You'll do in excess of 50 by the end of this year and we've talked historically about building towards 75.
Our hiring this calendar year is slightly second half biased and so we have.
Some more territories, becoming active in Q3 and more so in Q4.
For with some additional reps that will be on training and entering next year and again building towards that 75, I'll, let Andy comment on.
How he thinks strategically about territory design as we as we grow over a relatively concentrated group of docs on hospitals.
Yes, so we have.
I spent a lot of time over the course of the last several months.
Doing some studies on the optimization and efficiency of size of territories, a number of accounts size of the total addressable market and what we've really.
We're trying.
Steve is our territories that we can again as Erica referenced we can continue to drive adoption go deep and our trained user base and the way to do that.
To create smaller more efficient of territories that are the optimized so.
We are marching.
2 of which are very aggressively towards that 75 territory on.
Target, where we're on pace.
And we're really starting to see the benefits, where we haven't been able to achieve the smaller more optimal efficient territories, where we are driving.
Higher market shares.
Deeper penetration, we have several examples of where.
We've been able to.
I get to that level.
Early in this process and it's paying huge dividends. So over time, when we have full of 75 territories with trained reps on <unk>.
Very confident and that will.
We will be able to continue to drive higher penetration with more focused and more time for our reps to go deep.
Alright, I appreciate you guys taking the questions.
We have our next question coming from the line of Joanne Wuensch.
With Citi. Your line is open.
Hey, this is Anthony on for Joanne Thanks for taking our question I'm.
So my first of on utilization. So how does the utilization of physicians that were trained on 12 months ago on either of the patent on that how does that compare to their utilization this quarter, and then sort of break it down a bit further how is the utilization.
Comparing to physicians that were trained pre pandemic that had about a year of CCAR experience under their belt and then I had 1 follow up.
Yes, Erica touched a little bit this on her prepared remarks, but if you think about during the pandemic. The overall procedural volume was down for carotid repair.
Elevation of mineral and we took share against Cta so.
Taking taking share as the overall procedural national procedural volume was was depressed so we like those metrics.
And she also mentioned there was some real targeted efforts.
In the second quarter.
And just on relatively recently trained physicians.
That.
Didn't have as much.
Ability to 2 cases during the peak of the pandemic and those efforts bore fruit.
And we're back to pre pandemic levels.
And marching upward from there across a larger trained physician base. So all of those things are encouraging trends if that answers most of your question.
That's helpful. And then my second 1 is on the 91 trial. So 1 of the inclusion criteria of patients that failed.
<unk> thermal therapy on which I'm guessing some of this aspiration of Trevor So should we think about the the Novus neuro protection system as the second line treatment once patients have al trends from roller how should we be thinking about that.
Well look I really appreciate that question and thank you for paying attention to.
The trials in that.
The study.
So first of all of the sale trends from Royal therapy. This is really just because this is the feasibility trial for the first time really looking at this method of neuro protection.
While we're doing of stroke thrombectomy procedure and so it's a very much kind of walk before.
Before you run.
And the sales transfer morale is really the.
Because we're in the feasibility phase and you don't want to.
Net patient patients up for potential failure of failure on the front end the.
The definition of failed attempt is very broad and it does not necessarily mean.
What you said it meant.
It really the failure can be lots of different reasons why there was a failed attempt so I wouldn't read too much into what that means.
So it's really about understanding the therapy the benefit of this therapy in considering this failed transformer.
Femoral, that's sort of the beachhead from which to expand.
Great. That's helpful. Thank you.
Okay.
All of our next question coming from the line of Adam <unk> with Piper Sandler Your line is open.
Hey, Erica.
Hi, Lucas congrats on the nice quarter.
Maybe just to start wanted to ask a little bit more about the progression in Q2.
If youre willing to give it by month end and even kind of how July played out just trying to get a better sense for recent trajectory and exit momentum and if youre seeing any kind of early impact from.
On the Delta variant in past weeks, and then had a follow up thanks.
Okay.
Adam I think we will keep our comments to Q2, we had talked on the Q1 call about kind of.
The strong March heading into Q2 things.
Things are not linear.
Lynn linear for some time and they probably won't be.
Perfectly linear for for another quarter of at least but I think.
The tone and the trends in the stats as we're really confident in the underlying fundamentals of the business and the setup.
For not just the rest of this year, but 2022 and beyond.
And we'll all continue navigating.
What's happening.
With with Delta and patient behavior, and all of those things in the meantime.
Adam I think the best way to kind of some of our sentiment.
The back on offense.
Got it okay. Thanks, guys, it's crystal clear.
And then maybe.
The next question just on standard surgical risk.
I guess this is a multipart question, but.
First there was in the abstract release from the the <unk>.
In CCAR surveillance project it showed.
The non inferiority to CA in standard surgical risk.
In your opinion is this enough to kind of force a sea change in physician behavior in that patient cohort and then you also talked a little bit in the prepared remarks about refining not strategy.
<unk> engaged in with CMS.
Just wondering if you can shed any additional color there on.
Reimbursement pathway on how youre thinking about things.
Sure Adam first let me, let me just kind of frame this up which is that if you go back in time to 30, plus years ago and transfer Emerald Kaz was trying to tell.
Takeover carotid endarterectomy. The first question on everyone's mind is is it as good as CEO and the protection against the stroke and death in the first 30 days can you protect against the stroke and the long term without creating the stroke or a debt in that first 30 days and of course transfer of milk has.
To live up to that expectation and so the first and foremost question of any modality to get at carotid artery disease is how does it do in that first 30 days.
And what you saw on the abstract which is the first ever abstract in the standard surgical risk patient population in a propensity matched.
<unk> comparison.
The T car is equal to CBA in that particular measure what you don't see in the abstract Adam is all of the other color that we expect will be added in the presentation advance in the ultimate publication and that is likely to include things that this group has published on.
Pay offs, such as length of stay such as such as home discharge such as cranial nerve injury myocardial infarction and all of the rest.
So we have shown in the most difficult patient population in the high surgical risk patient population.
That we are superior to CA in every other measure.
We don't expect that will change in the new patient population.
Regarding the second part of your question on reimbursement, we have been working all along in conversations with CMS and FDA since the very beginning.
On our long term strategy of opening up first high surgical risk and second standard surgical risk those conversations are ongoing cut.
Coverage typically follows.
Approval and so we will update you on more details as we get closer to approval.
Very good thanks so.
Hello Erica.
Thanks, Adam.
Well for our next question coming from the line of Rebecca Wang with SVP Leerink. Your line is open.
Hi, this is sort of back at all for Danielle until day, 1 was for a lot on the <unk>.
Ratio of patients. So you don't have 300, new physicians pro forma the T. Kaka the figures for the first time, Inc, Q2 of which are.
It's I think hires on the number of physicians trained in recent quarters are there some positions that were trained inc.
<unk> 2019 or early 2000.
<unk> much for the kind of immediately before the pandemic.
Indeed in the theater.
After the routine.
On.
Sure.
With Atlantic starting to each of the range.
Ramp that we saw.
Well for <unk>.
Ratios from utilization.
<unk> pushed back.
Rebecca This is Lucas I'll take that.
Think you're slightly.
Slightly misinterpreting Erica his prepared comments, we didn't give kind of a.
When exactly those those folks were trained and.
It's a bowl of bolus of <unk>.
Physicians.
On a particular time period, not necessarily 1 quarter I think the way.
To think about all of this as we entered the year with 1800 trained physicians right and we've talked about training in excess of another 200. This year, but if we just focus on the <unk> thousand 800, we've made progress.
<unk> in every single way that we segment decile or quartile behavioral tenure, all sorts of different ways every which way we look at it there.
We're making progress and you have to you have to filter through the noise of Covid, but we have analytical ways to do that so we're building targeted programs and efforts to.
The different segments of physicians and it's working.
And if you just simplify the math and said okay could we take those 1800 docs and get them to do a single incremental procedure over the course of a year.
Our 7 at our Q2 revenue per procedure of roughly.
$7000.250 million.
That's that's over $13 million in incremental revenue, so small incremental improvements to procedures per Doc off of a large trained physician base.
Yield of lot of a lot of growth, that's where the organization is.
Focused and.
We're finally.
Maybe 1 quarter away from from all of the Covid noise, but we're really well positioned given the trends we see in the assets we have across trained docs tenured territories clinical evidence.
Products new.
Index, and hopefully new indications coming.
Alright. Thank.
Thank you.
Thank you Rebecca.
Okay.
Thank you there are no further questions at this time I will now turn the call back over to the Erica Rogers CEO.
Thank you all very much for attending the call today.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Good day, and thank you for standing by and welcome to.
So for the medical for 2021 second quarter earnings at this time, all participants are in a listen only mode.
After the Speakers' remarks, there will be a question and answer session to ask the question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded.
For any further assistance please press star zero.
I would now like to hand, the conference over to your speaker of today.
Paul Investor Relations. Please go ahead.
Thank you and thank you all for participating on today's call joining.
Joining me on Erica Rogers, Chief Executive Officer, and Lucas Buchanan.
If you ever Quinn, Chief Financial Officer, and Chief operating Officer.
Earlier today Silk Road medical released financial results for the 3 months ended June 30th 2021.
A copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management.
You can't statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future financial performance the impact of COVID-19 on our business and prospects for recovery.
<unk> management expectations for hiring physician training and adoption growth and our organic.
On reimbursement.
We'll make the market opportunity commercial the international expansion label expansion and product pipeline development of based upon our current estimates on 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 of.
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 quarterly report on form 10-Q filed with the Securities and Exchange Commission on May.
<unk> 'twenty 'twenty 1.
This conference call contains time sensitive information and is accurate only as of the live broadcast today July 29th 'twenty 'twenty 1.
Silk road medical disclaims any intention or obligation, except as required by law to update or revise any financial projections.
Hey, Ted or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to Erica.
Thank you Caroline good afternoon, and thank you all for joining our second quarter 2021 earnings call. Joining me today is Lucas Buchanan our.
<unk> financial Officer, and Chief operating Officer.
At Silk road, we have set out to compete and win against invasive surgery and established T car as the standard of care, we are back on offense and doing the just that.
The body of evidence supporting.
The car as a clinically proven less invasive treatment option continues to expand including for the first time into standard surgical risk patient population.
Over the last year, we took significant procedural share from carotid endarterectomy and we'd also became the number 1 share.
Cheaper in both units and revenue for carotid stents by a significant margin.
As we continue into the second half of 2021of them beyond we are exceptionally well positioned to leverage our robust base of clinical evidence proven T car efficiencies trained physicians.
Our leaders and committed commercial organization to drive T car adoption and advance our impact on the lives of patients at risk for stroke due to carotid artery disease.
Our primary strategic objective in 2021 is U S commercial execution.
Physician and our second quarter performance resulted in roughly 3650 T car procedures.
Importantly in each of our physician segments, our efforts aimed at increasing adoption are gaining traction for.
Seizures per physician were up 17.
Percent sequentially in the quarter coming back to pre pandemic levels of cross a significantly larger trained physician base of.
Additionally initiatives aimed at driving adoption among physicians newer to T car bore fruit as nearly 300 physicians from our.
Our recent training programs for foreign procedures in Q2, most of whom who had not performed a procedure in the prior quarter of.
Additionally, the time to the first and the 10th key car cases post training continue to shorten.
Overall, we are seeing improved adoption trends.
The 17 bras each of our physician segment.
Driven by the improving health care backdrop, and growing utilization, we achieved total revenue of $26.5 million in the quarter, reflecting 75 growth of 75% year over year.
The adjusted basis total revenue increased 92% compared to the same period of the prior year when excluding the recognition of $1.3 million in differed revenue in the second quarter of 2020.
Based on the positive trends, we are observing in the field, we are raising our full.
On other revenue revenue guidance to 104 million to 100 of $9 million.
Turning to our second strategic objective for 2021, we advanced our preparations for a potential standard surgical risk label expansion.
As a reminder, the on road stent is currently indicated.
<unk> full year patients considered at high risk of adverse events from traditional carotid endarterectomy or high surgical risk.
Though the high surgical risk population is a very large opportunity for us on locking access to the additional subset of standard surgical risk patients would increase our U.
The us Tam by roughly 50% and more importantly put us on a level playing field with CPA.
We are pleased to highlight that an analysis comparing T car versus CPA in standard surgical risk patients utilizing real world evidence.
<unk> from the vascular quality initiative will be presented by Dr. Patrick Liang of Beth Israel Deaconess and the plenary session on August 18 at the upcoming society for vascular surgery annual meeting or <unk> in San Diego.
This is the first ever presentation of outcomes.
CCAR in standard surgical risk patients.
The abstract shows compelling outcomes and is available on the <unk> website.
We expect significantly more details around the data will come in the presentation and ultimate publication, and we look forward to sharing those details.
For sure on public.
The data to be presented advance are similar to the data provided to FDA in our Q1.2021, PMA supplement submission with slightly different statistical analyses to meet regulatory objectives.
The submission of real world evidence in the filing followed multiple collaborative pre submission interactions with the FDA to refine our regulatory strategy and statistical approach.
Overall, we are pleased with our progress with the FDA, including productive interactions since filing.
As they become largely centered around statistical programming questions.
Given the progress in the quarter. We are currently refining our standard surgical risk launch strategy engaging with CMS regarding coverage and anticipating FDA post approval study requirements.
Please note that.
<unk> with 2021 revenue guidance does not assume any contribution from treating standard surgical risk patients.
In addition to our focus on our top 2.2021 strategic objectives, we continue to invest in additional long term growth drivers, including new and improved key car products expansion.
Our current and into international markets, and new Trans, Colorado therapies, and neurovascular and carotid disease States.
For example, we are making progress on a new trans carotid guidewire and a new trans Colorado balloon catheter that we could see approvals in 2022.
Stay tuned on these initiatives.
Spanish debt, we believe are beneficial for continued penetration of <unk> into the market.
On the international front, we are pursuing regulatory approvals in both Japan and China in the second quarter, we filed our shown in applications with <unk> in Japan for both the on route Neuro protection system and the on routes debt.
And we submitted to NPA in China for this debt with the NPS system already under review.
We have also begun to take preliminary commercial steps in both countries and have advanced our discussions with potential distribution partners in both Japan and China.
We remain.
<unk> committed to exporting T car globally, and the steps Mark the first phases of unlocking our global total addressable market of $5.1 billion.
As a reminder, we do not expect any revenue this year from Japan or China.
Turning to our neurovascular acute ischemic stroke program, we are in the process of initiating sites for our night, 1 feasibility study, which as a reminder stands for neuro protection and Trans carotid Embolectomy me. The FDA approved this ITE during the first quarter and we expect the study to begin enrollment this year.
Year in summary, we are thrilled with the progress that our team is making on U S. Commercial execution preparation for standard surgical risk expansion long term pipeline development and international expansion. The second quarter marked a noticeable overall elevation of our organization.
Driven by operational improvements a new facility in Minnesota expanded leaderships in leadership capabilities and regulatory clinical quality and R&D and the continued addition of top commercial and sales force talent.
With that I will now.
I'll turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Thank you Erica revenue for the 3 months ended June 32021 was $26.5 million of 75% decrease from $15.1 million from the same period of the prior year.
Growth was driven by increased.
Instead of T car across an expanded base of hospital accounts trained physicians and active sales territories.
Our revenue for the second quarter of 2020 includes the recognition of $1.3 million in deferred revenue due to a decrease in the provision for sales returns related to certain prior sales with the shorter shelf life.
Coupled with the downward trend.
The Doc historical return rate.
Excluding the contribution of the $1.3 million second quarter revenue in 2021 increased 92% compared to the same period of the prior year.
Gross margin for the second quarter of 2021 was 75% compared to 65% for the second quarter of the prior year.
<unk> as a reminder, gross margin in the 3 months ended June 32020 was impacted by unfavorable production variances due to temporarily idle manufacturing operations driven by COVID-19.
Total operating expenses for the second quarter of 2021 were $29.8 million a 56.
The percent increase from $19.2 million in the second quarter of 2020.
R&D expenses for the second quarter of 2021 were $7.3 million compared to $3.4 million in the second quarter of 2020.
The increase was primarily driven by growth in personnel and investment in new and ongoing R&D programs.
Sales general and administrative expenses for the second quarter of 2021 were $22.5 million compared to $15.8 million in the second quarter of 2020.
The increase was primarily attributable to expenses related to growth in our commercial team as well as the resumption of travel trade show and other expenses of the impacts of COVID-19.
19 declined compared to the second quarter of 2020.
We expect continued growth in operating expenses in the second half of 2021 as we further expand our commercial team investing continue to new R&D initiatives and expand our presence in Minnesota.
Net loss for the second quarter was $10.5.
$5 million equating to a loss of <unk> 31 per share as compared to a net loss of $10.5 million or a loss of 32 per share for the same period of the prior year.
We ended the quarter with $128.1 million of cash cash equivalents and short term investments.
As we continue.
Any of our team and footprint. We are excited to have recently expanded our operations to include a temporary 18000 square foot facility in Plymouth, Minnesota part of the broader Minneapolis, St. Paul region. We.
We have also initiated construction on our larger 62000 square foot building in <unk>, which we expect to begin moving into early next year.
Broadest region has a rich history of technological innovation and serves as a great talent pool complement to our continued and growing presence in Silicon Valley.
Lastly, as Erica mentioned, we are raising our guidance to $104 million to $109 million representing growth of 38% to 45% over 2020.
The revenue of $75.2 million.
Our confidence is driven by the continued demand for and pace of new physician training.
Our progress in hiring in the commercial organization and.
And continued strong trends in average selling prices and procedures per physician, both new and tenured.
At this point I would like to turn the call back to Erica for closing comments.
Thank you Lucas.
Before we close I would like to highlight how honored we are to have recently added doctor to Nisha carino to our board of directors Dr Arena with the widely esteemed health policy expert with over 20.
Years of experience in health care leadership positions across governmental for profit and nonprofit sectors. Her insights will be an important asset as we drive key car towards standard of care and push forward, our efforts and new indications new therapy and global expansion.
Entering the second.
On half of the year, we are bolstered by our business performance and the trends that we're seeing for the health care delivery system. Overall, we are making a real difference in the lives of patients and the physicians, who treat them and we are committed to advancing new indications and new therapies to drive significant.
Growth in the years ahead.
With that we will now open it up to questions joining me and Lucas Buchanan today for the question and answer portion of our call is our Chief commercial Officer, Andrew Davies.
Operator.
Thank.
At this time I would like to remind everyone in order to ask the question Press Star then the number 1 on the telephone keypad again by the Star then the number 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Okay.
We have the first question coming from the line of Robbie Marcus.
<unk> with Jpmorgan Your line is open.
Hi, This is actually of Lilly on for Robbie Thanks for taking the question on.
So 2 quick ones all of them both upfront.
On the street is at $28 million for third quarter.
On a level that you're comfortable with.
Is there any concerns that you have with regards to the adult variant in the third quarter.
And second.
Yeah, it's nice to hear about the step up in utilization was any of that tied to the catch up in procedure volumes in backlog and what gives you the confidence that you'll be able to sustain the the increasing.
Alright, then utilization over the back half of the year. Thank you.
Sure.
I'll take the first part of that 1 and maybe part of the second 1.
In terms of the third quarter, the third quarter as we all know is a quarter thats typically affected by seasonality in the form of vacations in.
<unk> tried the back half loaded of school gets back in swing and certainly that is the case this year and there's a lot of discussion around patients and physicians taking.
The vacations, just after a tough year on change behind us. So that's part of it obviously, we're cognizant of a lot of the Delta.
The varian trends in and how those are impacting certain parts of the country.
So that that I think influences all of our thinking on on Q3 and hope to be.
Back to even more normalization in Q4.
And Louie this is erica thanks for joining us I can take the back half of.
It tends to in there which is utilization.
On the potential influence of the Covid backlog look I think it's safe to say that in Q1, we really started to emerge back to a place where elective procedures.
We're on schedule for the most part and so.
Sure.
For the most part we don't.
Believe that the procedures per physician were driven by any backlog effect in the second quarter, but more driven by just getting back to the business of medicine and back to the business of stroke prevention.
And as we said in our prepared remarks, we returned it to a procedures per physician level that look more.
Like where we were in 2019 prior to the pandemic, but I do want to point out that that is on a larger denominator of larger base of physicians trained and to answer the last part of your question. Yes. We are confident that we can sustain the growth in procedures per physician because that's what we're all about and that.
We're focused Lilly for this year is moving physicians continuously up the adoption curve.
Great. Thank you.
Many of our next question coming from the line of Rick Wise with Stifel. Your line is open.
Guys. This is actually doing Hasan correct.
I wanted to ask 1 on standard risk.
Just on what are you doing the prepare and thinking about the launch strategy.
And in terms of the comments on loving the leveling the playing field do you think there is a way to frame, whether you see more incremental opportunity.
In terms of currently trained docs converting standard risk patients the T car for more for docs, either not doing the T car or using it in a smaller subset to more readily adopt.
Yeah sure let me take some of that and then I think Andy Davis is a is really the best Guy to answer most of that billing and thanks very.
Joining us so in terms of what is the launch strategy.
As you can imagine there are just some basic kind of nuts and bolts of they have to be done to get ready for this type of a launch we do consider it a big launch we're going to make quite the fanfare about it as you can imagine.
Much for engine that will include new educational materials, new marketing materials, obviously change in packaging labels and things like that to consider the new potential label expansion.
But I think most importantly, it's really how we're thinking about the conversation with physicians and changing.
And the way that we talk about key car as the procedure for high surgical risk and I think with that Andy I'll, let you take the back half of that.
Sure.
As Erica mentioned the conversation that we've been having with the physicians over the course of several.
Years is the differentiation between high surgical risk.
And potentially patients that arent art high surgical risk, but what we've learned is the vascular surgeons don't necessarily speak.
In that language, so as Erica referenced.
At the onset of standard surgical risk label.
Indication, we will be able to then.
Put all patients.
On the even playing field as it relates to how doctors can choose what they feel is best for that patient.
So we have a lot of doctors that have our.
Very high.
High levels of adoption with CCAR and the individual practices and those particular physicians they will be the ones that will move to.
To higher levels of adoptions adoption now that this distinction is.
<unk> been taken off the table, but.
As it relates to everybody else every.
We'll come along on their own.
As they again March towards there there are there their own adoption of of T car based on their own experiences. So.
It's still going to be we still of a lot of a lot of.
Opportunity ahead of us.
Doctors are current.
The addressable market and that is the high surgical risk patient patient population. So we will keep.
Working very hard with those doctors to move them along the adoption curve.
But where we're really going to see.
Movement in the short term upon this label indication is with those positions.
Of that have already achieved.
Higher levels of adoption. So we still we still have a long way to go but we're very encouraged by being uneven playing field. Once we do get this indication.
Great. Thanks.
And I just had another on.
Sales force expansion and adding new territory.
<unk>.
The only to provide color on the timing of those new territories in terms of how long they take to start opening new accounts in those new territories and driving incremental procedures.
Yes, let me take the front half.
Of that.
We ended last year with 40 Act of territories, obviously had some additional sales reps and training.
We guided to in excess of 50 by the end of this year and we've talked historically about building towards 75%.
Our hiring this cash.
Calendar year is slightly second half biased and so we have.
The more territories, becoming active in Q3 and more so in Q4 with some additional reps that'll be on training entering next year and again building towards that 75% I'll, let Andy comment on.
<unk>.
Thinks strategically about territory design as we as we grow over a relatively concentrated group of docs on hospitals.
Yes, so we have.
Spent a lot of time over the course of the last several months.
Doing some studies.
<unk> on the optimization and efficiency of size of territories.
Number of accounts.
<unk> of total addressable market and what we've really.
We're trying to achieve as our territories that we can again as Eric referenced we can continue to drive adoption go deep.
And our trained user base and the way to do that.
Smaller more efficient of territories that are that are optimized so.
We are marching.
Very aggressively towards that 75 territory on.
Target.
On.
On pace.
And we're really starting to see the benefits, where we haven't been able to achieve the smaller more optimal efficient territories, where we are driving higher market shares.
A deeper penetration we have several examples of where.
We've been able to.
Get to that.
Level and this early of this process and it's paying huge dividends. So over time, when we have full of 75 territories with trained reps I'm very confident that we'll be able to continue to drive higher penetration with more focused and more time for our reps to go deep.
Alright, I appreciate you guys taking the questions.
We have our next question coming from the line of Joanne Wuensch.
<unk> with Citi. Your line is open.
Hey, this is Anthony on for Joanne Thanks for taking our questions on.
So my first is on utilization so how.
Utilization of physicians that were trend around 12 months ago on the head of the pandemic how is that comparing to their utilization this quarter and then to break it down a bit further how is the utilization comparing to physicians that were trained pre pandemic that had about a year of CCAR experience under their belts in the Netherlands follow up.
Yes, well Erica touched a little bit this on her prepared remarks, but if you think about during the pandemic. The overall procedure volume was down for carotid repair in general and we took share against CA. So.
Taking taking share as the overall procedural national procedural volume was was depressed.
So we like those metrics.
And she also mentioned there was some real targeted efforts.
In the second quarter on relatively recently trained physicians.
That.
Didn't have as much.
Ability to 2.
2 cases during the peak of the pandemic and those efforts bore fruit.
And we're back to pre pandemic levels.
It's been marching upward from there across a larger trained physician base. So all of those things.
Our encouraging trends.
The predecessors most of your question.
Yes, that's helpful and then my second on this on the.
The 91 trial, so 1 of the inclusion criterias.
<unk> debt failed transdermal therapy.
I'm guessing for munis. This aspiration of our assistant Treasurer. So should we think about the Novus neuro protection system.
As of second line treatment once patients have failed transform roller how should we be thinking about that.
Well look I really appreciate that question and thank you for paying attention the details in the first.
The study so.
So first of all the sales trends from oral therapy. This is really just because this is the feasibility.
Trial for the first time really looking at this method of neuro protection, while we're doing a stroke thrombectomy procedure and so at the very much kind of walk before you run.
And the sales transfer moral is really because we're in the feasibility phase and you don't want to.
Set patient patients up for potential failure of failure on the front end of the definition of failed attempt is very broad and it does not necessarily mean, what you said it meant.
It really the failure can be lots of different reasons why if there was a failed attempt so I wouldn't read.
Read too much into what that means.
So it's really about understanding the therapy the benefit of this therapy and considering the failed trans femoral of sort of the beachhead from which to expand.
Great. That's helpful. Thank you.
Yeah.
Sure.
All of our next question coming from the line of Adam Rider with Piper Sandler Your line is open.
Hey, Erica and Lucas congrats on the nice quarter.
Maybe just to start wanted to ask a little bit more about the progression in Q2, if youre willing to give it by month end and even.
Kind of how July played out just trying to get a better sense for recent trajectory and exit momentum and if youre seeing any kind of early impact from the Delta variant in the past weeks and then had a follow up thanks.
Okay.
Adam I think we'll keep our comments to Q2, we had talked on the Q.
Q1 call about kind of of <unk>.
<unk> March heading into Q2.
Things are not linear they've not been linear for some time and they probably won't be.
Perfectly linear for for another quarter of at least but I think.
The tone.
And the trends in the stats as we're really confident in the underlying fundamentals of the business and the setup.
For not just the rest of this year, but 2022 and beyond.
We'll all continue navigating.
That's what's happening.
With with Delta and patient behavior, and all of those things in the meantime.
Hey, Adam I think the best way to kind of some of our sentiment is we're back on offense.
Got it okay. Thanks, guys, it's crystal clear.
And then maybe.
Next question just on standard surgical risk.
Yes.
I guess this is a multipart question, but.
First there was an abstract released from the the <unk> in CCAR surveillance project it showed.
Non inferiority to CA in standard surgical risk.
In your opinion is this enough to kind of force a sea change.
And physician behavior in that patient cohort and then you also talked a little bit up in the prepared remarks about refining lot strategy engaging with CMS.
Just wondering if you can shed any additional color there.
Reimbursement pathway on how youre thinking about things.
Yes.
Sure Adam first.
Let me just kind of frame this up which is said if you go back in time to 30 plus years ago when transfer Emerald Kaz was trying to take over carotid endarterectomy. The first question on everyone's mind is is it as good as CEO and the protection against the stroke and death in the first 30 days.
Can you protect against the stroke and the long term without creating a stroke or a debt in that first 30 days and of course transfer of milk has failed to live up to that expectation and so the first and foremost question of any modality to get at carotid artery disease is how does it do in that first 30 days and.
And what you saw on the abstract which is the first ever abstract in the standard surgical risk patient population in a propensity matched comparison.
The T car is equal to CBA in that particular measure what you don't see in the abstract Adam is all of the other color that we expect will be added.
In the presentation advance and in the ultimate publication and that is likely to include things that this group has published on in the past such as length of stay such as such as home discharge such as cranial nerve injury myocardial infarction and all of the rest.
And so we have shown in the most difficult patient population in the high surgical risk patient population that we are superior to CA in every other measure we.
We don't expect that will change in the new patient population.
Regarding the second part of your.
Question on reimbursement, we have been working all along in conversations with CMS and FDA since the very beginning on our long term strategy of opening up first high surgical risk and second standard surgical risk those conversations are ongoing.
Coverage typically follows.
Approval.
Provable and so we'll update you on more details as we get closer to approval.
Very good thanks, so much for the color Erica.
Thanks, Adam.
Well for our next question coming from the line of Rebecca Wang with SVP Leerink. Your line is.
Yeah.
Hi, you're supposed to go back kind of also Daniela and taught day.
It was still up on the utilization on questions. So you don't have 300, new physicians performed the T cockpit figures for the first time in Q2 of which are.
It's I think higher than the number of physicians trained.
Within the quarters I've noted some positions that were trained in late 2019 or early kind of it kind of immediately before the pandemic.
And didn't do procedures. After they were trained 1 of them now as the kind of starting to eat.
Should we say a similar ramp that we saw was the only was the cause of.
Physicians from a utilization perspective.
Okay.
Rebecca This is Lucas I'll take that kind of I think you're you're slightly misinterpreting. The Erica his prepared comments, we didnt gift.
Kind of a what.
When exactly does those folks were trained and.
It's a bowl of bolus of physicians and.
And of particular time period, not necessarily 1 quarter I think the way to.
To think about that all of this as we entered the year with 1800 trained physicians right.
And we've talked about training in excess of another 200 this year, but if we just focus on the <unk> thousand 800 <unk>.
We've made progress on every single way that we segment decile or quartile behavioral tenure, all sorts of different ways every which way we look at it.
They're making progress.
And you have to you have to filter through the noise of Covid, but we have analytical ways to do that so we're building targeted programs and efforts to different segments of physicians and it's working.
And if you just simplify the math.
Net okay could we take those 1800 docs and get them to do a single incremental.
Procedure over the course of the year.
At our <unk> at our Q2 revenue per procedure of roughly $7000.250 million.
That's over 13 million incremental revenue, so small incremental improvements to procedures.
Our mental lockup of of large trained physician base.
Yield of lot of a lot of growth, that's where the organization is focused and.
We're finally.
Maybe 1 quarter away from from all of the Covid noise, but but we're really well positioned given the trends.
We see and the assets we have across trained docs tenured territories clinical evidence great products new products.
And hopefully new indications coming.
Alright, that's helpful.
Thank you.
Thank you Rebecca.
<unk>. Thank you there are no further questions at this time I will now turn the call back over to the Erica Rogers CEO.
Thank you all very much for attending the call today.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.