Q2 2021 CVRx Inc Earnings Call

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Good day and thank you for standby, we'll continue the CVR ex second quarter 'twenty, 2 and 1 earnings call at the sign all participants are in listen on the net after the speaker's presentation. There will be a question and answer the question to ask the question. During the session you will need the press the star 1.

On the telephone if you require any further assistance. Please press star Zero as a reminder, this conference call is being recorded and I'll like to turn the call of break to Mr. Mike Belly of Westlake. Please go ahead.

Good afternoon, and thank you for joining us today per CVR <unk> second quarter 2021 earnings conference call.

Joining me on today's call are the company's President and Chief Executive Officer, and Nadeem, Your Ed and it's funny Chief Financial Officer Jarrett Ocean.

The remarks today will contain forward looking statements, including statements about financial guidance.

These statements are based on plans and expectations as of today, which may change over time.

In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified and the earnings release issued prior to this call and and the Companys SEC filings, including the upcoming form 10-Q.

That will be filed with the SEC.

I would now like to turn the call over to CVR ex as President and Chief Executive Officer Nadeem you are right.

Thank you Mike and thank you everyone for joining us this afternoon for our first earnings call as a public company.

First I'm very grateful to all of my colleagues of <unk> to our board of directors to our partners our investors our customers of the health care providers and.

And most importantly to other patients.

You all of trusted US you believed in US we stood tall and your shoulders and for that we will be forever grateful.

It has been a long journey to this point from the time of joined the company and 2006 and.

Im incredibly proud of the continue with the efforts of this group the results of which are going to change the way patients are treated for heart failure.

Before providing an overview of our performance during the quarter I would like to start by giving an overview of who see the Rx is for those of you who are not familiar with our story.

We are the medical device company focused on transforming the lives of patients suffering from cardiovascular diseases by developing manufacturing and commercializing innovative and minimally invasive neuromodulation solutions, which we believe offer a compelling value proposition for large and cigna.

Secondly, underpenetrated markets.

Our primary focus is on the treatment of patients with heart failure.

And I'll tell you it was 1 of the most prevalent cardiovascular diseases.

We estimate that globally, approximately 26 million people suffer from heart failure, including approximately $6.2 million people and the U S and $8.6 million people and the 5 largest European countries and.

The year, 1.3 million new heart failure patients are diagnosed and the U S and $1.4 million and the 5 largest countries in Europe.

Heart failure and easily developed from an and balance of the autonomic nervous system.

Our proprietary platform technology, better stim is designed to leverage the power of the brain to address this imbalance.

Better stem therapy utilizes a widely accepted mechanism of action.

It works by sending electrical pulses to better receptors of the carotid artery to signal of the brain to decrease sympathetic activity also known as the fight or flight mechanism and.

The increase parasympathetic activity, which is commonly referred to as the rest and Digest response.

Our second generation product better stem Neal is the first and only commercially available neuromodulation device indicated to improve symptoms for patients with heart failure with reduced ejection fraction, which we refer to as half graph.

Better stim is implanted joining of 1 our minimally invasive procedure that is typically performed on an outpatient basis.

How is that patients are treated with guideline directed medical therapy that often include 3 classes of medications diabetics beta blockers and Ace inhibitors. Some have enough patients are indicated for cardiac leasing colonization therapies.

CFT and short.

Which actually are Biventricular pacemakers.

<unk> CRT devices have proven to be an effective therapy, but we estimate that the majority of half of patients are not eligible to be treated with CRT and debt is what our device is now and option.

And our solution, but it's the new is approved by FDA to address the symptoms of heart failure and the significant population of half of RF patients not indicated for CRT and who is empty pro BNP is less than 60, and 100 Picogram per milliliter, we estimate that our initial annual market opportunity for <unk>.

Yes.

And is $1.4 billion and the U S and $1.5 billion.

And the 5 largest countries in Europe.

And the second quarter of 2021, we continue to build out our commercial organization and.

And the early results from our commercial strategy are encouraging.

Total revenue and the second quarter.

It was $3.1 million and increase of approximately 150% over the second quarter of 2020.

This growth was entirely driven by continued strong performance in the U S and heart failure, which generated $2 million.

We are very happy with the early adoption of <unk>. The U S. Physicians during the first half of 2021, we have seen and growth in the U S coming from new centers that are treating the first patients and from existing centers that are treating more patients that they have and the path.

In addition to our strong operational performance, we continue to add talent to the leadership of the organization.

In early July we announced the appointment of Martha shading to our board of directors.

Martha brings a long track record of success and helping to commercialize med tech innovations for both startups and large companies and we look forward to leveraging current experience. During this critical growth phase of our business.

Our plan is to utilize our first mover advantage to become the global leader in minimally invasive Neuromodulation solutions.

And that improve the health of patients with <unk> and other cardiovascular diseases.

Our main strategic levers to drive growth out of the following.

1 continue building, our commercialization infrastructure with a specialized direct sales force and marketing team in the U S to promote awareness amongst physicians and patients to accelerate adoption of breast and Neil.

To continue our innovation of perished and Neil to enhance our value proposition.

3 expand upon our significant body of clinical evidence and for over the long term leverage our platform technology to expand into new indications and strategically pursue new international markets.

Regarding the first lever of key component of our strategy to drive adoption is the expansion of our commercial infrastructure.

In particular, our direct sales force and the U S.

During the second quarter of 2021, we added 2 new U S territories, and bringing the total to 8.

We expect to have a total of 14 territories by the end of 2021.

The territory managers of supported by group of field clinical engineers, whose role is to provide the clinical and technical expertise to healthcare providers.

The outpatient veteran and procedure as currency map to APC 540, <unk> 5 for which the center of Medicare services, CMS Reimburses and National average of 29000 and $500 approximately.

In addition, CMS granted CVR ex at transitional pass through add on payments GPT to cover the cost of the device for 3 years, which took effect in January 2021.

We estimate the Medicaid covered have ref patients represents 67% of all patient population.

4 of patients covered by private payers, which we estimate to be 19% of our patient population our market access team has implemented the program to support the prior authorization requests modeled on our industry's best practices and the initial results from this program are encouraging.

Regarding our second growth lever continuous innovation of our products. We are developing a new generation of the implantable pulse generator that has 20% longer battery life on average this new IPG is expected to be released and the first half of 2022, but the R&D program that I'm very excited about is the develop.

Third of the new ultrasound guided implant toolkit that we called batch wire, we believe batch wire could potentially expand our addressable patient population by allowing the inclusion of more frail patients. In addition, as the result of the simplifies implantation of process, we believe more physicians.

Including Electrophysiologist would be comfortable implanting barest, and Neal and June 2021, the first clinical procedure using backfire was peripheral and here in the U S.

Regarding our third of the growth lever the expansion of the clinical body of evidence we have the post market study of beat H F. This is a randomized controlled study designed to demonstrate and mortality and morbidity benefit of better stem and the half draft patient population.

The post market study has been completely enrolled and has entered the follow up phase, which allows for the accrual of mortality and morbidity events, we expect to accrue all of the events needed for the final analysis by the end of 2022 and and blind the data in early 2023.

Finally regarding the long term growth lever expanding into new indications. We have received breakthrough designation by FDA for 2 additional indications the resistant hypertension and heart failure with preserved ejection fraction or half path.

Our focus and the short term is to grow our penetration and <unk> before we begin our clinical efforts and expanding to new indications such as the resistant hypertension or debt or exploring any potential clinical benefits for the arrhythmia or chronic kidney disease.

We are incredibly excited about what we have been able to accomplish as an organization over the years.

We recognize that our journey has not been a straight line, but the organization and more importantly, our team has shown exceptional resilience to reach this point. It is still early and our U S heart failure of commercialization efforts, but we are encouraged by our progress during the first half of 2021.

Yes.

We have put a tremendous foundation in place that we believe will allow us to help bring relief to a huge population of heart failure patients who have not had a device based treatment option before.

And now I would like to turn the call over to Jared for a financial review.

Thanks, Nadeem and.

Before turning to an update on our performance I wanted to outline the key components of revenue and what information will be disclosed we will be disclosing going forward.

And we generate revenue through direct sales of our devices to hospitals, and the U S and Germany and to a lesser extent to distributors and other European countries. In addition to key revenue metrics. We will also be providing updates on key drivers of revenue which include U S. Active implanting centers, which are customers that have completed at least 1.

Non commercial heart failure of implants in the last 12 months and ex metric.

And European sales territories, which are the number of active commercial sales territories as of the end of the quarter and the final metric is revenue units, we will be providing heart failure revenue units sold in the U S and total revenue units sold in Europe.

As for the second quarter results total revenue generated in the current quarter was $3.1 million, which is an increase of $1.9 million or 150% when compared to the same period last year.

Revenue generated in the U S was $2.1 million and the current quarter, which is an increase of $1.9 million or 969% over the same period last year heart failure revenue in the U S totaled $2 million and the current quarter on a total of 67 revenue units as compared to only $65000 and the second quarter.

<unk> of last year for 2 revenue units.

The increase was primarily driven by continued growth following the U S heart failure commercial launch in 2020, which resulted in the expansion into new sales territories and increase the physician and patient awareness of barrels of them at.

And at the end of the current quarter, we had a total of 31 active implanting centers compared to 19, and Q1 and 2021.

The number of sales territories and the U S increased from 6 in Q1 of this year to 8 during the current quarter.

Revenue generated in Europe was $1 million and the current quarter, which is a decrease of $35000 or 3.3% of at the same period last year.

Total revenue units in Europe decreased from 49 in Q2 of 2000.2047, and the current quarter relatively.

The relatively flat performance in Europe is primarily due to the continued impact of the COVID-19 pandemic in Germany and.

Number of sales territories, and Europe remained consistent at 6 during.

During the current quarter.

Gross profit was $2.2 million for the current quarter, which is an increase of $1.3 million or 144% over the same period last year.

Gross margin decreased to 78% per the current quarter compared to 72, 4% for the same period last year gross margin and the current quarter was lower due to a larger percentage of our revenue units coming from treating new patients versus battery replacements for existing patients.

New patients receive a pull system that includes and ITG and the stimulation lead and therefore have a lower gross margin than the Standalone IPG used for our battery replacement.

This was partially offset by an increase and our average selling price we believe that the negative impact to gross margin for treating more and new patients will be offset in the near term by increasing production to meet the increased demand, which will in turn drive down the cost of our devices over time.

R&D expenses were $2.3 million for the current quarter, which is an increase of $1.1 million or 5.8% when compared to the same period last year. This change was primarily due to an increase in stock based compensation expense from approximately $10000 and Q2 of 2020 to 100.

And $90000 and Q2 of 2021.

SG&A expenses were $5.6 million for the current quarter, which is an increase of $3.8 million or 207% when compared to the same period last year the <unk>.

Primary driver was an increase in compensation, including salaries and commissions, mainly as a result of the increased head count. In addition stock based compensation expense increased from approximately $20000 and Q2 of 2020 to $430000 and Q2 of 2021.

Other expense net was $11.4 million for the current quarter compared to income of $33000 for Q2 of 2020 this change.

And was primarily driven by an $11.4 million increase and of noncash expense related to the increase and the fair value of the convertible preferred stock warrants.

Net loss was $17.7 million or $48.48 per share for the current quarter as compared to a net loss of $3.7 million or $10 and 18 per share of the same period last year net loss per share was based on approximately 366000 and weighted average shares outstanding for the.

The current quarter and approximately 360000 weighted average shares outstanding for the second quarter of 2020.

The weighted average shares outstanding were adjusted for the 1 for $39.548 reverse stock split that became effective in June of 2021.

Turning to our balance sheet update at.

And at the end of the current quarter cash and cash equivalents were $47.1 million compared to $54 million as of March 31.2021.

On July <unk> 2021, we closed on our IPO of $8 million 50000 shares of common stock at a public offering price of $18 per share, which included 1.050 million shares of common stock issued upon the full exercise of the underwriters option to purchase additional shares.

The net proceeds from the offering after deducting the underwriting discounts and other operating expenses was approximately $133.3 million. The IPO also triggered the conversion of all outstanding shares of our convertible preferred stock into an aggregate of approximately $11.93.

And shares of common stock.

Pro forma cash and cash equivalents as of June 32021 was $184 million after including the net proceeds from the IPO and we added approximately $23 million pro forma shares of common stock outstanding at the end of the current quarter.

This is after adjusting for the conversion of outstanding shares of preferred stock in the shares of common stock and the sale of shares of common stock in the IPO.

Net cash used in operating and investing activities were $6.8 million for the 3 months ended June 32021, compared to $2.3 million for the same period last year and the primary driver was an increase in compensation, including salaries and commissions, mainly as a result of increased head count across the entire organization.

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Now turning to guidance.

As a matter of practice going forward, we will be providing formal guidance on full year total revenue gross margin and operating expenses and.

And next quarter total revenue for.

For the full year of 2021, we expect total revenue between $13, 3 and $13.9 million.

Gross margin between 70% to 74% and operating expenses between 34 and $36 million per.

For the third quarter of 2021, we expect to report total revenue between 3.3 and $3.6 million.

I would now like to turn the call back over to Nadeem.

Thanks Janet.

We are very optimistic about the future of <unk> ex <unk>.

The vascular diseases in particular heart failure and have a tremendous impact on of patients' quality of life.

These patients cannot do the things day enjoy like playing with their current kits, let alone. The most basic day to day tasks like walking up and down stairs.

And with better Stim, we offer patients of the chance to get their lives back.

We are laser focused on driving its widespread adoption to bring the benefits of the therapy to as many patients as possible.

We are and the early stages of our commercialization, but we believe the recent influx of capital.

Will help fuel the acceleration of our growth for years to come.

And now I would like to open the line for questions.

Just curious here as a reminder, if you want to ask the question. Please press star and the number 1 key on your Touchtone telephone and if your question has been answered or you wish to remove yourself from the queue press the pound key.

But at the moment to compile the Q&A roster.

Your first question comes from the line Robbie Marcus with Jpmorgan Your line's now moving.

Okay.

Thanks for taking the question and congrats on the first quarter public.

And really just 2 questions from me first and I'll ask them upfront first.

And so really nice.

U S heart failure performance it'd be great to get a sense and out.

Second quarter is and the rear and and <unk>.

For the full year of little above the street would be great to get a sense of what youre seeing out in the field of what the reception is from free.

And planters, how its going training doctors and getting hospitals on board and just any any qualitative or quantitative comments, you could give about what youre seeing and the field so far and.

Over the summer and then the second 1 I'll just ask.

Price came in really nice in the second quarter and the U S. How should we be thinking about pricing for the balance of the year.

Yeah.

Thank you Robbie for the question, let me answer the first 1 and then I will ask Jonathan the question is regarding pricing.

Got the feedback from customers and the field.

And we had the heart and society meeting.

The last week, although the attendance was lower than usual I would estimate it to be 1 quarter to 1 third of the attendance.

And my 25 years plus experience in medical devices I have never ever been as busy as last week and the medical conference and from my perspective is that it is the testimony here because the interest that we're seeing from Electrophysiologist, which I think and important group of customers we have.

1 of the feedback I would like to and they came from a very important key opinion leader and Electrophysiologist.

And I respect the.

Coffee that chunk of the Covid.

This key opinion leader of treated 3 patients and last quarter.

The <unk>.

And his feedback to me was I've seen enough and I put them a little bit more of the understand what has he seen enough I mean, the data is the data and we have data from <unk> the chose the improvement and the quality of life.

And the comment was that the visible impact on the patient goes beyond what the numbers show on the Minnesota living with Hudson and your question they had escaped with.

Talk about 11, 12.13 points of improvement depending on the which side we're looking at all the.

The data, but what he is seeing and this patient is the visible visible impact and is very impressed with it and he was actually talking to another and Electrophysiologist about this so and obviously my perspective, so far of the feedback is overall positive.

The reception, we received at HRS was exceptional and despite the low attendance and I'm very excited and here. So I don't know if you have any follow up questions.

Maybe turn it to <unk> the answer the question regarding pricing.

Yes, sure and Nadeem I'll jump in on the pricing question that Ravi has so yes, Robby we did come in with about $2 million of U S heart failure revenue on the 67 units and <unk>.

Net average selling price and works out just shy of $30000 per unit.

That is above what we have been modeling internally and we've seen this now for a couple of quarters, where we've seen a higher average selling price for the U S heart failure business, but we have not shifted our internal plans and expectations for our base selling price for the U S and really the main reason just comes back to the commercial.

Ramp and the number of New center centers that we plan to bring on over the next couple of years, we know that price is going to continue to be and area of focus for the value analysis committees and so at this point, we're still not ready to shift our internal models to a higher price.

Great. Thanks for both the answers.

Got it.

Yes, good idea and again, thank you for your comments about our first earnings release of the public company, both Jack and I are very excited.

Your next question comes from the line of Matthew O'brien with Piper Sandler Your line is now open.

Afternoon, and thanks for taking my questions and let me reiterate robbie's comment on.

First quarter out of the gate here.

So the dean.

You mentioned, how busy you were at HRS.

And just all of the interest level that you're getting is there any thought to.

And then coming out of the IPO of having more capital available accelerating the sales ramp and kind of on schedule and the curious 6 Q1 youre up to 8 now any thoughts now of just given the feedback you've seen recently with that capital go on ahead and accelerated the number of sales.

Sales territories and the U S.

Excellent question.

And I wonder in here.

We are not going to put a cap on our growth rate.

Now when we talk about our sales ramp.

First we are very happy with the results that we're seeing and the U S and.

Related to the early commercial and Im no question about it and we are continuing to hire and the expected space actually we are seeing is the new accounts managers now getting up to speed quickly with our technology and getting great response from physicians as the physicians become aware of that of stem Neal no.

Does that said 2 things you have to take into account. The number 1 of course, we will be opportunistic and of course, when we see and excellent talent out there that matches. The outstanding talent that we have been able to attack the clock absolutely will go above any planned the giada at the splits and place. So the plan that <unk> had the split in terms of adding 3 of the apps per quarter.

We can go above it very easily once we see the talent that we're interested in.

Number 2 the interest of them that we saw at HRS was not only from physicians you know that.

The industry participates.

And in these meetings and the network among each other and they saw the buzz debt, we are creating and that would help us and has already helped us and yet and our recruitment strategy you have to take into accounts and that is when the mother of elements. When we talk about our commercialization strategy feet on the street is an extremely important.

But that is 1 element of the puzzle.

We have to make sure that we have the training capacity to absorb the increase in headcount that you were doing we need also to be able to absorb the accused invest at the same level and marketing and awareness creation and those go hand in hand so.

I can tell you we will not stop we will not GAAP, but at the same time don't assume that we can go from zero to infinity.

With the.

Our vertical and lineup that has to be at Amp and here and we have to be careful of the expectations fluids.

Hey, John and Joe to add anything and hear about the talent retention and attraction.

No I think Nadeem you hit most of it yes.

So far we've been really happy with the level of talent that we've been able to recruit with the publicity of the IPO of there's obviously a lot of inbound interest.

Others within the industry as well that being said we.

We like to have a pretty steady state as far as the number of reps that we bring on at CVR ex so that we can make sure that we are training them up and the right way and getting them effective as quickly as possible. So I think that's still going to be the base case for us.

Okay very helpful. I appreciate that and then.

Can you just touch ever so briefly on <unk>.

The number which is a little bit light of what some of us for modeling and I really don't think it's the end of the world, but just touch on that but more importantly for me of the.

<unk> 67.

Implants that you did and the U S and Q1.

The majority of that was really at the 11 sites that you had when you were exiting.

Q4 of last year, and what I'm really getting at is are you starting to see some of those sites.

And then you mentioned 1 of the conditions to 3 and plants last quarter alone are you starting to see some of these guys really start to ramp up and that you can get more comfort that some of the sites can do 3 or 4 or more per quarter. Thanks. So much.

Oh excellent questions plural and here you have so many questions. So if I forget.

And so at any 1 of them.

So I won't address the question regarding Europe and.

And then I'll turn it to <unk> to take the second question and we keep going from there. So the first question is.

Germany, and Europe put us most of our sales in Europe are coming from Germany and.

The Q2 Q1 for the first half of this year, we were still.

Plugging with Covid.

And we hired a new vice president of sales and marketing.

Thomas Hanke sell out and he started on January the <unk> with us.

It wasn't until June.

Thomas was able to meet with his own team face to face.

And so everything was being done remotely on the phone and that is the limit of how much you can do so from that perspective Europe was slow Q1 Q2, but we are hopeful that now that he is able to meet with the team and with customers face to face things will start going back slowly back to moment and Luckily for us the <unk>. The U S has been of.

Which is our area of focus and interest has carried the bag and put us in Q2 and covered this GAAP got it.

Yes.

And I can cover kind of the breakout of the 67 U S heart failure revenue unit so.

We've been trying to slice and dice the data and I think the simple answer is that we're still early in this commercial ramp and so it's really hard for us to segregate.

Early.

Active implanting centers versus those that were just joining.

This last quarter and just a reminder for everyone. Here. So we had 11 active implanting centers, leaving the end of 2020 of.

Of those 7 had done their first implants and just in the fourth quarter as well. So I mean, we're talking 27 of the 31 implanting centers.

Their first case and in the last 9 months. So I think we need a little bit more time before we can start to really segregate. These longer term accounts from the newer accounts and seeing what levels of productivity. We're seeing at each 1 of them that being said we have seen a handful of accounts that have started to exceed our long term goals and just for everyone on the phone are long term.

Expectation for the sites are that they are treating at least 1 patient per month or 12 patients per year, and we have seen a handful of our longer term sites that have started to exceed that long term goal for us already. So there is some positive signs, but I think the data is just a little too early to start breaking out kind of the existing centers versus the new 1.

<unk>.

Got it makes sense. Thank you so much.

Thank you Mike.

Your next question concerns of the lineup Megret Margret <unk> with William Blair. Your line is now open.

Hey, guys. Good afternoon, and thanks for taking the questions and maybe I wanted to start with the act of implanting centers, because it seemed to come on and come in above our expectations.

So could you give us a sense of what drove that success, maybe the profile of some of these accounts and as we look forward I guess that both with the knees and.

Some of your pipeline.

And how does that implanting and clinician base look like as you go deeper with them.

Thank you for the question Margaret So.

Simply.

We are focusing and this phase of the growth of the company and number 1 on growing volume and non existing accounts and number 2 we're targeting the next wave, which we started that actually this year. The 200 accounts that have done the highest number of ICD and plants and John had mentioned earlier, our long term goal.

And as to get to 1 patient per center per month.

And average so we would have some doing more we would have some doing less and that.

With this in mind, we have.

To conclude the 1 more element you know that's many customers right now before they embarked on the new therapy like <unk>. It has to go through of contracting process and part of it is going through the value of assessments Committee, we have seen in some situations where the value assessment Committee.

And the physicians to do a certain number of units than the wait a period of time until they verify the payment is coming back profitable to the institutions and then day. It is June so when you see and accounts with the vertex doing 345 very quickly.

And then nothing for the next 3 months to 6 months.

It's not it's.

By design right. So we should not be very excited about it at the same time about the ramped very quick 3 to 4.3 to 5 and the first 3 months, but at the same token we should not panic when the sites, we slow down for the period of time.

And with this type of return at the Jared and here to answer the second part of your question.

Yes, and Margaret So we did see those 12, new active implanting centers come on in Q2, I don't think it shifts our plans as far as how quickly you were planning to bring new active implanting centers on over the long haul.

Part of it just comes down to timing with a couple of of the sites being able to treat some patients and June versus doing their first implants in early July and so longer term, we're not necessarily changing the rate at which we're expecting new implanting centers to be coming on.

Okay, that's the peaceful and youre touching on it a little bit and it's more around utilization and as we think about the second half of the year versus the first half and obviously utilization is pretty strong this quarter and and I understand of few of them are gonna be and doing these 3 or 4 procedures upfronts and.

And may be slowing down coming back on the same token you should continue to hire or add new centers I should say so.

And so if we look at your guidance.

Sort of implies over all of the utilization at least and our model coming down a little bit relative to what we saw and the second quarter.

I'm just curious if that math works out for you guys, especially as maybe some of the sites 6.9 months ago continue to ramp higher.

Yes, Margaret this is Jerry and I can take that 1 so I mean, just back and to Dean's point earlier, we have seen some of these new act of implanting centers come on with a bit of a governor assigned to them and saying that they can go out and treat a couple of patients step back and see what the reimbursement looks like including the transitional pass through payment.

And then be able to restart once they see positive reimbursement coming through at the hospital level and so.

Trying not to get ahead of ourselves here as far as utilization at each 1 of these sites and that we have that long term goal of each 1 treating at least 1 patient per month.

But we have seen some really positive results so far in Q1 and Q2 and.

Just don't necessarily want to make a significant shift and what we expect for productivity and Q3 Q4, just at this moment.

No that's fair enough and just last question for me I guess.

As mentioned in press release, and driving growth by increasing patient flow.

At the implanting centers and so.

Wanted to get a little bit more color of how you're doing that.

Is it driving the referral network.

The other clinicians and getting those patients to some of these and planning sites and yes.

And why shouldn't that that process continue to ramp and and improve as we go on and congrats on the quarter guys. Thanks.

Yeah excellent question again so.

And the 3 areas and hit of focus to drive the flow of patients number 1 is the covenants model right looking at the patients who have already to see the ICD and are coming back to the device clinic for the 6 month follow up visit the second is the incidence model. So educate the physicians and in mining of the healthcare providers every time they are talking to the patient.

The boat and ICD to mentioned medicine, and the third element of it is the deferral from the outside world 2 of them and then with expanding mentioned right now with 2 modern and number 1 our sales net are going to talk and educate the cardiologist in the community to make sure that once the here or if they hear from the patients about better stim they don't.

Have the ignorance or no awareness about the therapy and at the same token try to encourage them to send some of their patients who they may have not 10, 2 and electrophysiology of deposit or vascular surgeons to be treated with <unk>.

And that's 1 leg of the strategy of the second leg is wood experimenting as well with the direct to consumer education campaign now.

And did some of that back in the days and 2008 and 9 when we were conducting the hypertension thrive and most recently in 2016 and 17 loans at all and deep HFF.

We did advertisement on Facebook and other social media, but also sometimes TV <unk> and others.

It's the whole program. So it's not only getting of click on our website. It's everything that happened after the split to take of the patient and hand and generate the patient engagement and the patient follow up to convert that lead into and implanted and treated patients. So we're still at the experimental phase of growth.

Programs, we're looking very closely to what of the companies are doing for example of inspire medical.

With the device and Boston scientific with Watchman and we're learning.

And looking at those 2 good examples with US I don't know if that answers. Your question here about the there's kind of no yes, because once the why shouldnt that continue it will continue.

At the same time, you've got the dynamic of that you were talking about debt. We're adding so many sites that will go through the initial bolus of patients and then nothing for 3 to 6 month waiting for that day. So you've got all of that dynamic getting into play and looks really comfortable and here with the guidance that Jon It is the issue.

Your next question or your last question comes from the lineup of Bill Photonics. The Canaccord Your line channel opening.

Hey, great. Thanks, Good evening and thanks for taking my questions.

At this stage of year commercialization, and it's probably more about rep profile, making sure you have the right reps or idea of a handful at this point youre up to 8 and then the.

And the activities are doing our repeatable and reproducible and so my question wise and 1 in terms of the profile of the rep.

Where do you feel you are and that process and kind of dialing down you have a you have a couple of different him onboard I would assume so youre getting a little better feel for that and then the second is.

When do you think that you have a real repeatable reproducible kind of model that you can really start significantly adding to the sales force does this take 6 months 12 months 18 months I mean, youre essentially 2 quarters into all of the launch so I think any any help would be.

Greatly appreciated on that thanks.

Yeah, absolutely Ben and.

And it shows as well he had to go to the high.

A hybrid of experience being on the investment side, but also on the industry side.

Listen the profiles that we are hiring the surprise and they come from other med tech companies with the that that vast majority I'm talking here.

I do not to call of hiring anybody who does not have had previous experience and relevant and recent wins and med tech companies, particularly the large cardiovascular companies would not and limiting this to the companies a lot of operating in the CRM or of the electrophysiology space you would see us as 1 of the hiring some of other companies.

Is that how the similar to the third and.

Or a coalition building paradigm that we're quite we have with our therapy.

Let me, let me explain this a little bit more.

You know if youre selling of therapy that is the.

Substitute for an existing therapy.

Versus the few are developing and you said it would be that the acquired has been <expletive> coalition and.

As the hospital growth.

And sometimes 2 different concepts. So we look at other companies who have done more of the lack of creating of those coalition right and building them up and we look at sales reps, who have had demonstrated success doing these and other than those sales reps, who have been very good at the farming and existing.

Clients by just shifting from a therapy, a set of BB or of put exempting from ascent to attend the.

That said you mentioned.

Sales of that.

Those are the 8-K.

Territories.

And I will let <unk> explain the difference between what of Tenneco is and what of that is and then I'll answer your question regarding the ramp.

Got it.

Yes, I can chime in on that day.

So just for everybody's education here on the territory discussion. So these are account managers that have been and seat for at least 6 months and gone through the full training process and kind of gotten the ramped up and we've gotten to a point now where we can carve out of territory for them and so the number that were.

And year of 8 territories are those account managers that have been and seek for at least 6 months and have had the territory of assigned to them.

So anytime we're quoting a number.

It's the the 6 month lag for the training plus this is a net number and net net so the after taking this into account as Ron said, otherwise our plan is to hire the year.

That's per quarter.

And we feel comfortable with the strength very comfortably.

I don't know Jud and feel and add any detail and any color and here.

Yeah, and the only other thing I'll point back to us and kind of the prepared.

Prepared remarks that Nadeem mentioned debt our expectation is to end the year with 14 and territories and the U S.

And then thank you and then my final question is you know.

That was an impressive presentation and HRS that room was pretty the theater was well attended I'm just curious in terms of.

For the reps or the folks and the attendance.

Are you able to pull a lot of leads off of this and does this change kind of the thinking because I think this is really the first time, you've really got the profile of this product and why that of medical meeting.

Given the timing of approval and launch so just does.

And does this.

As you kind of look at the lead pipeline does this kind of change your thoughts and any way shape or form.

Yes and by the.

The way thank you for stopping by the hospitals and theater.

And we felt very excited about the tenders and if you recall that was the third presenter who of the slides were loaded and the system, but the operator would not be able to load them and the fantastic job going over the story without even slight to support them.

Anyway the.

It's hard sometimes to coordinate the excitement to the results.

So whatever I come back and tell the chatter about the excitement I see.

He's got the CFO hat on and he said well we need to see the numbers and the early indicators and your excitement the deal may not translate the different early indicators.

That said, we do have a secret weapon and I wish I could introduce it to him we hired a chief marketing officer, Paul the asteroid at the beginning of this year.

And.

He knows everybody and everybody knows him.

He asked us to do 1 more investment, which is book hotels for our leadership team at.

The hotel rooms at the hotel that was adjacent to the conference and we had so many sides of discussion sometimes going way after the midnight with some of the key opinion leaders here and data to suggest that you feel so.

The meeting very very excited I don't have the number of fleets, but at the same time the data would look at this as well and we would excitements doesn't mean anything we need to see the early indicators before we commit here at the higher numbers.

The dynamic.

Yes, thank you very much.

That concludes our question and answer session for today I will now turn the call and back to Mr. <unk> for closing remarks.

Thank you operator, we appreciate here.

Everybody was able to join us for our first earnings call as a public company.

Some of the tone of my voice I am very excited to be CEO of a public company.

But at the same time and here and we're learning as we go and thank you for your patience with US we do appreciate your ongoing support and we look forward to updating you on our progress on our next quarterly earnings call. Thank you have and have a good night.

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

Okay.

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Good day and thank you for standby welcome to the CVR ex second quarter 'twenty, 2 and 1 earnings call at the time all participants are in the lesson on the net after the speaker's presentation. There will be a question and answer the question too.

And he asked the question during the session you will need to press the star 1 on your policy and if you require any further assistance. Please press the as far as a reminder, the conference call is being recorded I would now like to try and call of breakthrough and Mr. Mike belly of the snakes. Please go ahead.

Good afternoon, and thank you for joining us today for <unk> second quarter 2021 earnings Conference call.

Joining me on today's call are the company's President and Chief Executive Officer, and the Demir, Ed and it's finally, Chief Financial Officer Jarrett Ocean.

The remarks today will contain forward looking statements, including statements about the financial guidance.

These statements are based on plans and expectations as of today, which may change over time.

In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified and the earnings release issued prior to this call and and the Companys SEC filings, including the upcoming form 10-Q that.

And that will be filed with the SEC.

I would now like to turn the call over to CVR ex President and Chief Executive Officer, Nadeem Youre right.

Thank you Mike and thank you everyone for joining us this afternoon for our first earnings call as a public company.

First I'm very grateful to all of my colleagues of <unk> got ex to our board of directors to our partners our investors our customers of the health care providers and.

And most importantly to our patients.

You all have trusted US you believed in US we took all of your shoulders and for that we will be forever grateful.

It has been a long journey to this point from the time of joined the company and 2006 and I'm incredibly proud of the continue with the effort of this group the results of which are going to change the way patients are treated for heart failure.

Before providing an overview of our performance during the quarter I would like to start by giving an overview of who see the Rx and for those of you who are not familiar with our story.

We are the medical device company focused on transforming the lives of patients suffering from cardiovascular diseases by developing manufacturing and commercializing innovative and minimally invasive neuromodulation solutions, which we believe offer a compelling value proposition for large and significant.

Underpenetrated markets.

Our primary focus is on the treatment of patients with heart failure.

And it's 1 of the most prevalent cardiovascular diseases.

We estimate that globally, approximately 26 million people suffer from heart failure, including approximately $6.2 million people and the U S and $8.6 million people and the 5 largest European countries.

Every year, 1.3 million new heart failure patients are diagnosed and the U S and $1.4 million and the 5 largest countries in Europe.

I'll tell you I, usually develops from it and balance of the autonomic nervous system a per.

The prior to the platform technology better still.

And is designed to leverage the power of the brain to address this imbalance.

But as Tim setup, the utilizes a widely accepted mechanism of action.

It works by sending electrical pulses to better receptors on the carotid artery to signal the brain to decrease sympathetic activity also known as the fight or flight mechanism.

And increased parasympathetic activity, which is commonly referred to as.

The rats and Digest response.

Our second generation product better stem Neal is the first and only commercially available neuromodulation device indicated to improve symptoms for patients with heart failure with reduced ejection fraction, which we refer to as half graph.

<unk> is implanted during the 1 our minimally invasive procedure that is typically performed on an outpatient basis.

The first patients are treated with guideline directed medical therapy the dog.

Often include 3 classes of medications diabetics beta blockers and Ace inhibitors. Some half of patients are indicated for cardiac leasing utilization therapies CRT and short.

Which actually are bi ventricular pacemakers.

CRT devices have proven to be an effective therapy, but we estimate that the majority of <unk> patients are not eligible to be treated with CRT and that is what our devices now and option.

Our solution, but it's the Neal is approved by FDA to address the symptoms of heart failure and the significant population of half of RF patients not indicated for CRT and who is and key pro BNP is less than 60, and 100 Picogram per milliliter, we estimate that our initial annual market opportunity for <unk>.

<unk> is $1.4 billion and the U S and $1.5 billion.

And the 5 largest countries in Europe.

And the second quarter of 2021, we continue to build out our commercial organization.

And the early results from our commercial strategy are encouraging.

Total revenue in the second quarter.

It was $3.1 million and increase of approximately 150% over the second quarter of 2020.

This growth was entirely driven by continued strong performance in the U S and heart failure, which generated $2 million.

We are very happy with the early adoption of <unk> and by U S. Physicians during the first half of 2020, 1 we have seen and growth in the U S coming from new centers that are treating the first patients and from existing centers that are treating more patients that they have and the path.

In addition to our strong operational performance, we continue to add talent to the leadership of the organization.

In early July we announced the appointment of Martha shade and to our board of directors.

Martha brings a long track record of success and helping to commercialize med tech innovations for both the startups and large companies and we look forward to leveraging current experience. During this critical growth phase of our business.

Our plan is to utilize our first mover advantage to become the global leader in minimally invasive neuromodulation solutions that improve the health of patients with half of Rep and other cardiovascular diseases.

Our main strategic levers to drive growth out of the following.

1 continue building our commercialization infrastructure with the specialized direct sales force and marketing team in the U S to promote awareness amongst physicians and patients to accelerate the adoption of breast and Neil.

To continue our innovation of Paris, and Neil to enhance our value proposition free.

<unk> expanded upon our significant body of clinical evidence and for over the long term leverage of our platform technology to expand into new indications and strategically pursue new international markets.

Regarding the first lever a key component of our strategy to drive adoption is the expansion of our commercial infrastructure.

In particular, our direct sales force and the U S.

During the second quarter of 2021, we added 2 and U S territories and bringing the total to 8 we expect to have a total of 14 territories by the end of 2021.

The territory managers of supported by group of field clinical engineers, whose role is to provide the clinical and technical expertise to health care providers.

The outpatient medicine and procedures currently mapped to APC $5.4.65 for which the center of Medicare services, CMS, Reimburses and National average of 29000 and $500 approximately.

In addition, CMS granted Cvs ex at transitional pass through add on payment GPT to cover the cost of the device for 3 years, which took effect in January 2021.

We estimate the Medicaid covered have ref patients represents 67% of all patient population.

And for patients covered by private payers, which we estimate to be 19% of our patient population our market access team has implemented the program to support the prior authorization requests.

And our industry's best practices and the initial results from this program are encouraging.

Regarding our second growth lever and continuous innovation of our products. We are developing a new generation of the implantable pulse generator that has 40% longer battery life on average this new IPG is expected to be released and the first half of 2022, but the R&D program that I'm very excited about is the developer.

Sales of our new ultrasound guided implant toolkit that we called batch wire. We believe that's why it could potentially expand our addressable patient population by allowing the inclusion of more frail patients. In addition, as a result of the simplifies implantation of process, we believe more physicians and.

Including the Electrophysiologist would be comfortable and planting barest and Neal and June 2021, the first clinical procedure using backfire was performance here in the U S.

Regarding our first growth lever the expansion of the clinical body of evidence we have the post market study of beat H F. This is the randomized controlled study designed to demonstrate the mortality and morbidity benefit of better stem in the half draft patient population.

And the post market study has been completely enrolled and has entered the follow up phase, which allows for the accrual of mortality and morbidity events, we expect to accrue all of the events needed for the final analysis by the end of 2022 and and blind the data in early 2023.

Finally regarding the long term growth lever expanding into new indications. We have received breakthrough designation by FDA for 2 additional indications the resistant hypertension and heart failure with preserved ejection fraction or half path of.

The focus in the short term is to grow our penetration in the <unk> before we begin our clinical efforts and expanding to new indications such as the resistant hypertension or have path or exploring any potential clinical benefits for the arrhythmia or chronic kidney disease.

We are incredibly excited about what we have been able to accomplish as an organization over the years.

We recognize that our journey has not been a straight line, but the organization and more importantly, our team has shown exceptional resilience to reach this point. It is still early and our U S heart failure of commercialization efforts, but we are encouraged by our progress during the first half of 2021.

We have put a tremendous foundation in place that we believe will allow us to help bring relief to a huge population of heart failure patients who have not had a device based treatment option before.

And now I would like to turn the call over to Jared for a financial review.

Thanks, Nadeem before turning to an update on our performance I wanted to outline the key components of revenue and what information will be disclosed.

We'll be disclosing going forward.

We generate revenue through direct sales of our devices to hospitals and the U S and Germany into a lesser extent to distributors and other European countries. In addition to key revenue metrics. We will also be providing updates on key drivers of revenue which include U S. Active implanting centers, which are customers that have completed at least 1.

Non commercial heart failure implant in the last 12 months. The next metric is U S and European sales territories, which are the number of active commercial sales territories as of the end the quarter and the final metric is revenue units, we will be providing heart failure revenue units sold in the U S and total revenue unit.

So in Europe.

As for the second quarter results total revenue generated in the current quarter was $3.1 million, which is the increase of $1.9 million or 150% when compared to the same period last year.

And we generated and the U S was $2.1 million and the current quarter, which is an increase of $1.9 million or 969% over the same period last year.

Heart failure revenue in the U S totaled $2 million and the current quarter on a total of 67 revenue units as compared to only $65000 and the.

The quarter of last year for 2 revenue and units.

The increase was primarily driven by continued growth following the U S heart failure commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of barrels of them at.

And at the end of the current quarter, we had a total of 31 active implanting centers compared to 19, and Q1 and 2021.

The number of sales territories and the U S increased from 6 in Q1 of this year to 8 during the current quarter.

Revenue generated in Europe was $1 million and the current quarter, which is the decrease of $35000 or 3.3% of at the same period last year.

Total revenue unit and Europe decreased from 49 in Q2 of 2020 to 47 and the current quarter relatively.

The relatively flat performance in Europe is primarily due to the continued impact of the COVID-19 pandemic in Germany and.

Number of sales territories, and Europe remained consistent at 6 during the current quarter.

Gross profit was $2.2 million for the current quarter, which is an increase of $1.3 million or 144% over the same period last year gross margin.

<unk> decreased to 78% for the current quarter compared to 72, 4% per the same period last year gross margin and the current quarter was lower due to a larger percentage of our revenue units coming from treating new patients versus battery replacements for existing patients new patients receive a full system that.

Includes and ITG and the stimulation lead and therefore have a lower gross margin than of Standalone IPG used for our battery replacement. This was partially offset by an increase and our average selling price and we believe that the negative impact to gross margin for treating more and new patients will be offset and the near term by increasing production.

And to meet the increased demand, which will in turn drive down the cost of our devices over time.

R&D expenses were $2.3 million for the current quarter, which is an increase of $1.1 million or 5.8% when compared to the same period last year. This change was primarily due to an increase in stock based compensation expense from approximately $10000 and Q2 of 2020 to 100 and.

$90000 and Q2 of 2021.

SG&A expenses were $5.6 million for the current quarter, which is an increase of $3.8 million or 207% when compared to the same period last year. The primary driver was an increase in compensation, including salaries and commissions.

Mainly as a result of increased head count in addition, and stock based compensation expense increased from approximately $20 and Q2 of 2020 to $430000 and Q2 of 2021 other.

The other expense net was $11.4 million for the current quarter compared to income of $33000 for Q2 of 2020 this change.

And was primarily driven by an $11.4 million increase and of noncash expense related to the increase and the fair value of the convertible preferred stock warrants.

Net loss of $17.7 million or $48.48 per share for the current quarter as compared to a net loss of $3.7 million or $10 and <unk> 18 per share of the same period last year net loss per share was based on approximately 366000 weighted average shares outstanding of.

The current quarter and approximately 360000 weighted average shares outstanding for the second quarter of 2020.

The weighted average shares outstanding were adjusted for the 1 for 39.548 reverse stock split that became effective in June of 2021.

Turning to our balance sheet update at.

And at the end of the current quarter cash and cash equivalents were $47.1 million compared to $54 million as of March 31.2021.

On July <unk> 2021, we closed on our IPO of $8 million and 50000 shares of common stock at a public offering price of $18 per share, which included 1.050 million shares of common stock issued upon the exercise of the underwriters option to purchase additional shares and.

The net proceeds from the offering after deducting the underwriting discounts and other operating expenses was approximately $133.3 million GAAP Youll also triggered the conversion of all outstanding shares of our convertible preferred stock into an aggregate of approximately $11.93.

And shares of common stock.

Pro forma cash and cash equivalents as of June 32021 was $184 million after including the net proceeds from the IPO and we had approximately $20.3 million pro forma shares of common stock outstanding at the end of the current quarter.

This is after adjusting for the conversion of outstanding shares of preferred stock into shares of common stock and the sale of shares of common stock in the IPO.

Net cash used in operating and investing activities were $6.8 million for the 3 months ended June 32021, compared to $2.3 million for the same period last year and <unk>.

Primary driver was an increase in compensation, including salaries and commissions, mainly as a result of increased head count across the entire organization.

Now turning to guidance.

As a matter of practice going forward, we will be providing formal guidance on full year total revenue gross margin and operating expenses.

And next quarter total revenue.

For the full year of 2021, we expect total revenue between $13, 3 and $13.9 million.

Gross margin between 70% to 74% and operating expenses between 34 and $36 million.

For the third quarter of 2021, we expect to report total revenue between 3.3 and $3.6 million.

Now like to turn the call back over to Nadeem.

Thanks Janet.

We are very optimistic about the future of see that ex.

Cardiovascular diseases, and particular heart failure and have a tremendous impact on of patients' quality of life.

These patients cannot do the things they enjoy like playing with their current kits, let alone the basic day to day tasks.

Like walking up and down stairs.

And with better stem, we offer patients of the chance to get their lives back pack.

We are laser focused on driving its widespread adoption to bring the benefits of the therapy to as many patients as possible.

We are and the early stages of our commercialization, but we believe the recent influx of capital.

And will help fuel the acceleration of our growth for years to come.

And now I would like to open the line for questions.

Just curious here.

As a reminder, if you wanted to ask the question. Please press star and the number 1 key on your Touchtone telephone and to your question has been answered or you wish to remove yourself from the queue press the pound key will possibly get the moment to compile the Q&A roster.

Your first question comes from the line yet Robbie Marcus of Jpmorgan. Your line is now open.

Oh, Hey.

Thanks for taking the question and congrats on the first quarter of public.

Really just 2 questions from me first and I'll ask them upfront first.

Really nice.

U S heart failure performance it'd be great to get a sense and out second quarters, and the rear and and.

And you guided for the full year of little above the street would be great to get a sense of what youre seeing out in the field of what the reception is from.

From and planters, how its going training doctors and getting hospitals on board and just any any qualitative or quantitative comments, you could give about what youre seeing and the field.

So far and.

Over the summer.

And then the second 1 I'll just ask.

Price came in really nice in the second quarter and the U S. How should we be thinking about pricing for the balance of the year. Thanks.

Thank you Robbie for the question, let me answer the first 1 and then I'll ask John to answer the question regarding pricing and rigor.

The feedback from customers and the field.

And we had the heart and society meeting.

Last week, although the attendance was lower than usual I would estimate it to be 1 quarter to 1 third of the attendance.

And my 25 years, plus experience and medical devices I have never ever been as busy as last week and the medical conference and from my perspective is that it is the person testimony here to the interest that we're seeing from Electrophysiologist, which I think of an important group of customers we have.

1 of the feedback I would like to really came from a very important key opinion leader and Electrophysiologist.

And I respect the.

And the confidential nature of the Covid.

This key opinion leader treated 3 patients and last quarter.

With better stim.

And his feedback to me was I've seen enough and I pulled him a little bit more and I understand what has he seen enough I mean, the data is the data and we have data from beat the chess that shows the improvement and the quality of life.

And the comment was that the visible impact on the patient goes beyond what the numbers show.

And the Minnesota living with heart failure of question and escape.

And we talk about 11, 12.13 points of improvement, depending on the which drive and we're looking at.

All of the data.

He is seeing and as patients is the visible visible impact at least very impressed with it and he was actually talking to another and electrophysiology about those so it obviously all of my perspective, so far the feedback is overall positive.

And the reception we received at HRS was exceptional and despite the low attendance and I'm very excited the NPS. So I don't know if you have any follow up questions. If I may be sort of to get it you have to answer the question regarding pricing.

Yes sure.

Jump in on the pricing question that Ravi has so yes, Ravi we did come in with about $2 million of U S. Heart failure revenue on the 67 units and that average selling price and works out just shy of $30000 per unit.

That is above what we have been modeling internally and we've seen this now for a couple of quarters, where we've seen a higher average selling price for the U S heart failure business, but we have not shifted our internal plans and expectations for our base selling price for the U S and really the main reason just comes back to the commercial.

Ramp and the number of New center centers that we plan to bring on over the next couple of years, we know that price is going to continue to be and area of focus for the value analysis committees and so at this point, we're still not ready to shift our internal models to a higher price.

Great. Thanks for both the answers.

Got it.

Yes, thanks and have been and again. Thank you for your comments about our first earnings release as a public company, both Jack and I are very excited.

Your next question comes from the line of Matthew O'brien with Piper Sandler. Your line is now all of them.

Afternoon, Thanks for taking the questions and let me reiterate robbie's comment on.

First quarter out of the gate here.

So the deal.

And how busy you were at HRS and.

And just all of the interest level that you're getting is there any thought to.

And that's coming out of the IPO with having more capital available accelerating the sales ramp and kind of on schedule I think youre right.

And Q1 Youre up to 8 now any thoughts now and just given the feedback you've seen recently with debt capital go on ahead and accelerated the number of sales territories and the U S.

Oh excellent question, Matt then.

And that and here you know me.

We are not going to put a cap on our growth right.

Now when we talk about our sales ramp.

First we are very happy with the results that we're seeing in the U S.

Related to the early commercial and Im no question about it and we are continuing to hire at the expected pace actually we are seeing is the new account managers now getting up to speed quickly with our technology and getting great response from physicians and the physicians become aware of better stem Neal no.

Is that tied to things you have to take into accounts number 1 of course, we will be opportunistic and of course, when we see and excellent talent out there that matches the outstanding talent that we have been able to attract the flawed absolutely will go above any plan that <unk> put in place. So the plan that Jed the split in terms of adding to the reps per quarter weekend.

Go above it very easily once we see the talent that we're interested in.

Number 2 the interest level that we saw at HRS was not only from physicians you know that.

The industry participate.

And these meetings and the network among each other and they saw the buzz that we ask the gating and that will help us and has already helped us and yet and our recruitment strategy you have to take into account and that is when the mother of elements. When you talk about the commercialization strategy.

On the street is an extremely important element, but that is 1 element of the puzzle.

We have to make sure that we have the training capacity to absorb the increase in head count, which we're doing we need also to be able to absorb that.

At the same level and marketing and awareness creation and those go hand in hand so.

I can tell you we will not stop we will not GAAP, but at the same time don't assume that we can go from zero to infinity.

With the.

Our vertical line up that has to be at I have been here and we have to be careful and the expectations fluid.

And John do you want to add anything and hear about the talent retention and interaction.

No.

And Nadeem you hit most of it yes.

So far we've been really happy with the level of talent that we've been able to recruit with the.

And the publicity of the IPO of there's obviously a lot of inbound interest.

Others within the industry as well that being said we.

We like to have a pretty steady state as far as the number of reps that we bring on at CVR ex so that we can make sure that we are training them up and the right way and getting them effective as quickly as possible.

That's still going to be the base case for us.

Okay.

Helpful. Appreciate that and then.

Can you just touch ever so briefly on <unk>.

The number which is a little bit light of what some of us for modeling and I really don't think at the end of the world, but just touch on that but but more importantly for me of the <unk>.

67.

Implants that you did and the U S and Q1, where a majority of that was really at the 11 sites that you had when you were exiting.

Q4 of last year, and what I'm really getting at is are you starting to see some of those sites really I think Andy you mentioned 1 of the conditions to 3 implants last quarter alone are you starting to see some of these guys really start to ramp up and that you can.

Net more comfort that some of these sites can do 3.4 or more per quarter. Thanks. So much.

All of that excellent questions plural and here you have so many questions. So if I forget.

And so at any 1 of them right.

So I won't address the question regarding Europe and.

And I'll turn it to <unk> to take the second question and we can go from there. So the first question is.

Germany, and Europe for US most of our sales and Europe coming from Germany and.

The Q2 Q1, so the first half of this year and we were still.

Struggling with Covid.

We hired a new vice president of the sales and marketing.

Thomas Hanke Siloed and he started on January the <unk> with us.

It wasn't until June.

Is that the Thomas was able to meet with his own team face to face.

And so everything was being done remotely on the phone and there is a limit of how much you can do so from that perspective Europe was slow Q1 Q2, but we are hopeful that now that he is able to meet with the team and with customers face to face things will start going back slowly back to moment and Luckily for us the the U S has been of.

Which is that what area of focus and interest has carried the bag for us and Q2 and cover the Scott got it.

Yes.

And I can cover kind of the breakout of the 67 U S heart failure revenue unit so.

We've been trying to slice and dice the data and I think the simple answer is that we're still early in the commercial ramp and so it's really hard for us to segregate.

Early.

Active implanting centers versus those that were just joining.

Just this last quarter and just a reminder for everyone. Here. So we had 11 active implanting centers, leaving the end of 2020 of.

Of those 7 had done their first implant and just in the fourth quarter as well. So I mean, we're talking 27 of the 31 implanting centers.

And their first case and in the last 9 months. So I think we need a little bit more time before we can start to really segregate. These longer term accounts from the newer accounts and seeing what level of the productivity. We're seeing at each 1 of them that being said we have seen a handful of accounts that have started to exceed our long term goals and just for everyone on the phone are long term.

Expectation for the sites are that they are treating and at least 1 patient per month or 12 patients and here and we have seen a handful of our longer term sites that have started to exceed that long term goal for us already. So there are some positive signs, but I think the data is just a little too early to start breaking out kind of the existing centers versus the new 1.

<unk>.

Got it makes sense. Thank you so much.

Thank you Matt.

Your next question concerned of the line get Megret Margret, Kayser and with William Blair. Your line is now open.

Hey, guys. Good afternoon, and thanks for taking the question and maybe I wanted to start with the act of implanting centers, because that seem to come on and come in above our expectations.

So could you give us a sense of what drove that success, maybe the profile of some of these accounts and as we look forward I guess, both within these and.

Some of your pipeline.

And how does that and planting a clinician base look like as you go deeper with them.

Thank you for the question Margaret So.

Simply.

We are focusing and this phase of the growth of the company and number 1 on growing volume of non existing accounts and number 2 we're targeting the next wave, which we started that actually this year. The 200 accounts that have done the highest number of ICD and plants and John had mentioned and it's early at our long term growth.

And as to get to 1 patient per center per month.

And as an average and there'll be would have some doing more we would have some doing less and that.

With this in mind, we have.

And to consider 1 more element you know that many customers right now before they embarked on a new set up the like better stead. It has to go through a contracting process and part of it is going through the value of assessments Committee, we have seen in some situations where the value of assessments Committee.

Ask the physicians to do a certain number of units than the wait a period of time until they verify the payment is coming back profitable to the institutions and then day resume so when you see and accounts with the vertex doing 345 very quickly.

And then nothing for the next 3 months to 6 months.

It's not.

Almost by design right. So we should not be very excited about it at the same time about the ramp very quickly the 3 to 5 and the first 3 months, but at the same token we should not panic when the sites will slow down for the period of time.

And with the second we thought at the charter then hit the answer the second part of your question.

Yes, and Margaret So we did see those 12, new active implanting centers come on in Q2, I don't think it shifts our plans as far as how quickly you were planning to bring new accurate and planting centers on over the long haul.

Part of this just comes down to timing with a couple of of the sites being able to treat some patients and June versus doing their first implants in early July and so longer term, we're not necessarily changing the rate at which we're expecting new implanting centers to be coming on.

Okay. That's the that's useful and you're touching on it a little bit and and it's more around utilization.

Think about the second half of the year versus the first half.

And obviously utilization is pretty strong this quarter and and I understand the few of them are going to be doing the 3.4 procedures upfronts and.

And then maybe slowing down coming back on the same token you should continue to.

Higher or add new centers I should say.

So if we look at your guidance.

Sort of implies over all of the utilization at least and our model coming down a little bit relative to what we saw and the second quarter.

I'm just curious if that math works out for you guys, especially and as maybe some of the sites 6.9 months ago continue to ramp higher.

Yes, Margaret this is Jerry and I can take that 1 so I mean, just back from the Dean's point earlier, we have seen some of these new active implanting centers come on with a bit of a governor.

2 of them, saying that they can go out and treat a couple of patients step back and see what the reimbursement looks like.

<unk> the transitional pass through payment and then be able to restart once they see positive reimbursement coming through at the hospital level and so we're.

Trying not to get ahead of ourselves here as far as utilization at each 1 of these sites and knowing that we have that long term goal of each 1 treating at least 1 patient per month.

<unk> seen some really positive results so far in Q1 and Q2 and.

Just don't necessarily want to make a significant shift in what we expect for productivity and Q3 Q4, just at this moment.

No that's fair enough and just last question for me I guess.

As mentioned in press release, and driving growth by increasing patient at the and planning et cetera, and so.

Wanted to get a little bit more color of how youre doing.

And yes, it wasn't driving the referral network.

The other clinicians selection and getting those patients to some of these and planning sites and yes.

And why shouldn't that that process continue to ramp and and improve as we go on and congrats on the quarter guys. Thanks.

Yeah excellent question again so.

The 3 areas and hit of focus to drive the flow of patients number 1 is the covenants model right and looking at the patients who have already to see the and ICD and are coming back to the device clinic for the 6 month follow up visit the second is the incidence model. So educate the positions of the mining the healthcare providers every time they are talking to the patient.

About a nice deep you mentioned <unk> and the third element of it is the deferral from the outside worth to them and then with experimenting right now with 2 mothers number 1 our sales and that's all going to talk and educate the cardiologist in the community to make sure that once the here or if they hear from the patients about better stim they don't.

Have the.

The ignorance or no awareness about the therapy and at the same token strike to encourage them to send some of the patients who they may have not sent to and electrophysiology of deposits or the vascular surgeons to be treated with <unk>.

That's 1 leg of.

Of the size of the the second leg is with experimenting as well with the direct to consumer education campaign.

Now.

We did some of that back in the days and 2008 and 9 when we were conducting the hypertension thrive and most recently in 2016, and 17 loans, but it all and deep HFF.

We did advertisement on Facebook and other social media, but also sometimes television clips and others.

The whole program. So it's not only getting Nick on the website, it's everything that happened after the split to take of the patient and hand and generated the patient engagement and the patient follow up to convert that lead into and implanted and see thats patients. So we're still in the experimental phase of growth.

Programs, we're looking very closely to what other companies are doing for example of inspire medical.

With the air device and Boston scientific with Watchman and we're learning.

And looking at those 2 good examples with US I don't know if that answers. Your question in here about the the kind of low yes, because once the why shouldnt that continue it will continue and.

At the same time, you've got the dynamic and Thats were talking about debt with adding so many sites that will go through the initial bolus of patients and then nothing for 3 to 6 month waiting for that payment. So you've got all of that dynamic getting into play and we're feeling comfortable and here with the guidance that Jon It is the issue.

Your next question or your last question comes from the lineup of Bill Pavan at the Canaccord Your line channel team.

Hey, great. Thanks, Good evening and thanks for taking my questions.

And at this stage of your commercialization and it's probably more about rep profile, making sure you have the right reps or idea of a handful at this point youre up to 8 and then the activities are doing our repeatable and reproducible and so my question wise and 1 in terms of the profile.

And of the Rep.

Where do you feel you are and that process and kind of dialing down and you have you of a couple of different I'm bored I would assume so you're getting a little better feel for that and then the second is.

When do you think that you have a real repeatable reproducible kind of model that you can really start significantly adding to the sales force does this take 6 months 12 months 18 months I mean, youre essentially 2 quarters into all of the launch so I think any any help would be.

Greatly appreciated on that thanks.

Yeah, absolutely and.

It shows as well here to go to the high.

A hybrid of experience being on the investment side, but also on the industry side.

Listen the profiles that we are hiring no surprise and here they come from other med tech companies with the vast majority I'm talking here.

I do lots of call hiring anybody who might not have had previous experience and relevant and recent wins and med tech companies, particularly the large cardiovascular companies, we're not limiting this to companies of out of operating in the CRM or of the electrophysiology space you would see us as 1 of hiring some of other companies.

Is that how the similar deferral.

Or a coalition building paradigm that we're like what we have with our therapy.

Let me, let me explain this a little bit more.

You know if youre selling of therapy that is the substitute for an existing therapy.

And versus a few of our developing immunotherapies that required of the <expletive> coalition and the as the hospital growth sometimes 2 different concepts. So we look at other companies who have done more of the lack of rock.

Creating of those coalition right and building them up and we look at sales reps, who have had demonstrated success doing these but other than those things that sort of have been very good at farming and existing clients by just shifting from a setup of the age of therapy.

Or for example from ascent to tend to be debt.

Ted you mentioned.

8 sales reps.

Those are the 8-K.

Territories.

And I will let <unk> explain the difference between what of Tenneco is and what of that is and then I'll answer your question regarding debt and.

Got it.

Yes, I can chime in on that the deal and so just for everybody's education here on the territory discussion. So these are account managers that have been and seat for at least 6 months and gone through the full training process and kind of gotten the ramped up and we've gotten to a point now where we can carve out of territory for them.

And so the number that we're presenting here of the territories are those account managers that have been and seek for at least 6 months and have had the territory assigned to them.

So anytime of quoting a number.

It's the the 6 months lag for the trading plus this is a net number of net net so the.

After taking this into account as well.

Otherwise our plan is to hire the.

Per quarter.

And we feel comfortable with the strength.

Very comfortably.

I don't know debt is going to add any detail and any color and here.

Yeah, and the only other thing I'll point back to us and.

And of the prepared remarks that Nadeem mentioned debt our expectation is to end the year with 14 and territories and the U S.

And then thank you and then my final question is.

That was an impressive presentation at HRS that room was pretty the theater was well attended I'm just curious in terms of.

For the reps or the folks and the attendance.

Were you able to pull out of leads off of this and does this change kind of the thinking because I think this is really the first time, you've really got the profile of this product and why that of medical meeting.

Given the timing of approval and launch so just.

Yes.

You kind of look at the lead pipeline does this kind of change your thoughts and any way shape or form.

Yes.

And by the way thank you for stopping by the hospitals and theater.

We felt very excited about the tenders and if you recall that was the third presenter who the slides were loaded of the system, but the operator would not be able to load them and the fantastic job going over the story without even slight to support them.

Anyway the.

It's hard sometimes to coordinate the excitement to the results.

So whatever I come back and tell chatted about the excitement I see.

He's got the CFO hat on and he said well we need to see the numbers and the early indicators and your excitement the deal may not translate the different early indicators.

That said, we do have a secret weapon and I wish I could use it to him we hired a chief marketing officer, Paul of the restaurant at the beginning of this year.

And.

He knows everybody and everybody knows him.

He asked us to do 1 more investment, which is book hotels for our leadership team.

Hotel rooms at the hotel debt was adjacent to the conference and we had so many sides of discussion sometimes going way after the midnight with some of the key opinion leaders. He had in data of this agenda as you feel so.

I left the meeting very very excited I don't have the number of fleets, but at the same time, the Jared would look at this as well and we would excite and this doesn't mean anything we need to see the early indicators before we commit to you at the higher numbers.

And that dynamic.

Yes, thank you very much.

That concludes our question and answer session for today I will now turn the call and back to Mr. <unk> for closing remarks.

Thank you operator, we appreciate here.

Everybody was able to join us for our first earnings call as a public company.

You heard from the tone of my voice I am very excited to be of CEO of a public company.

But at the same time and he and we're learning as we go and thank you for your patience with US we do appreciate your ongoing support and we look forward to updating you on our progress on our next quarterly earnings call. Thank you have a good night.

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