Q2 2021 Itamar Medical Ltd Earnings Call
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Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Q2.2021 and more medical L. P. D earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should requiring low since please press star zero and.
And now like to turn the conference over to Leigh Salvo Investor Relations. Please go ahead.
Okay.
Good afternoon can you hear me.
Operator can you hear me.
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I think we're on the contracts, but let's give it 1 minute on.
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Okay.
Thank you and thank you all for participating in today's call earlier today and Tomorrow Medical released financial results for the quarter ended June 32021, and a copy.
The press release is available on the Companys website.
Before we begin I would like to remind everyone that during this conference call it and Mark will make certain statements that are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995. These forward looking statements generally relate to the company's plans objectives and expectations for future operations and are based on management's current estimates.
And projections of future results or trends.
Because such statements deal with future events. They are subject to various risks uncertainties assumptions and actual results expressed or implied by such forward looking statements could differ materially from in a Mars current expectation fat.
Factors that could cause or contribute to such differences include risks uncertainties and assumptions discussed from time to time by enema and reports filed with or furnished to the SEC, including the latest annual report on form 20-F <unk>.
Except as otherwise required by law, it and our undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances. After the date hereof or to reflect the occurrence of unanticipated events.
During this call statements May include in addition to financial results prepared in accordance with I F. R. S and issued by the I a S. B also measures as defined by non I F. R. S financial measures for operating loss and net loss, which are adjusted from results based on I F. R. S to exclude.
1 share payments space based payments to depreciation and amortization of property and equipment and intangible assets 3 change and provision for doubtful and bad debt for nonrecurring expenses related to relocating our production facilities to a new location and 5 other nonrecurring.
Expenses.
Management believes that the non I FRS financial measures provided in our press release.
Are you spoke to investors understanding and assessment on the company's performance.
It is both I and <unk> and non <unk> measures when operating and evaluate the companys business internally and therefore decided to make these non I FRS adjustment available to investors.
Presentation of this non <unk> financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with I F. R. F.
For further details of reconciliation of operating loss and net loss on and I FRS basis to a non ifr spaces is provided in our earnings press release issued earlier today and with that I'll turn the call over to the lot Glick CEO.
Thank you Alicia.
Good afternoon, everyone and thank you all for joining us for our second quarter 2021 conference call I'm joined on the call today by <unk> our CFO.
Our second quarter results demonstrated further growth is our watch but technology continued to gain recognition as a safe and effective method for homebase sleep apnea testing.
Core strength and the U S continues to be our largest growth driver to date with nearly every territory in the second half growing nicely with an average growth of 6.2% over prior year we.
We are also starting to see the benefit of a significant change in the HSA T reimbursement landscape with the recent elimination of the G code loophole by Medicare administrative contractors or macs, covering roughly 60% of the Medicare population paving the way.
For further watch, but share gains and materially enhancing our competitive market position.
We expect this to deliver even greater upside in the second half of the year and as more providers become aware of the change.
We also grew our cardiology business and we are delighted to see the American Heart Association issue, a scientific statement about the importance of sleep apnea management to cardiac care.
This is the first time DHA and he's publicly commented on obstructive sleep apnea and the effect. It has on the cardiovascular system further validate the both the economic benefit and opportunity for improved care. The ties. These 2 segments together.
And we're very excited about our longer term growth potential to be a meaningful part of this estimated $2.7 billion dollar market in the U S.
Turning briefly to our financial performance, our second quarter revenue was $12.6 million, representing 41% growth compared to the second quarter of 'twenty, and 'twenty and 5% growth over the first quarter of 2021 in.
In addition, we improved our non <unk> gross margin by 100 basis points to 73 per cent.
And based on the momentum we see heading into the second half of 2021, we have raised our full year revenue guidance to a range of $53 million to $54 million representing growth of 29% to 32% over 2020 revenue.
And.
Commercially we saw strength in both HSC and T market penetration and continued watch with share gains.
In core sleep.
<unk> put 1 was once again, our most significant growth driver with 846 customers ordering the product by the end of the second quarter up from 725 and the prior quarter.
Importantly, we continued to see watch, but 1 utilization gaining traction throughout the first half of the year is more patient emerge for diagnosis and treatment as pandemic restrictions were lifted.
In the second quarter, we added 121, new watch, but 1 customers with 84 of those being new to itamar, not just works, but 1 technology.
We had an average of approximately 28, new customers on boarded per month throughout the second quarter and remain very encouraged by the ramp up in market share. We're gaining as we continually continue our push to have our watch per technology and the approximately 2000 and sleep centers in the U S.
In the U S. What spurred demand increased in nearly every U S region with most recognizing double digit growth, averaging approximately 50% growth over the second quarter of 2020, and 19% compared to the first quarter of 'twenty 'twenty 1.
In the short term, we have ample opportunity to expand and within our core and 37 territories and verticals to achieve our growth targets and we believe that a target of 43 territories by year end 2021 is within reach.
Outside the U S. In Europe, we saw some impact from restrictions associated with the Covid Delta variant. However, as we noted last quarter. The U K a return to pre COVID-19 levels and during the second quarter demonstrated increasing strength we.
Back to the U K to be a meaningful growth driver going forward.
Revenue from Japan as expected was $900000 in the second quarter and continuation of the large order of $1.4 million in the first quarter and in line with the target single digit growth anticipated for the full year.
We continue to work with the government towards Laurie D. A H I criteria for home sleep apnea testing in a few patients with confidence that this will enable us to accelerate growth in the region.
I'd like to spend few minutes discussing discussing the reimbursement landscape and.
This will most likely have an important impact on our business, particularly in the second half of this year.
Turning to the G code headwind.
Late me Medicare administrative contractors, including <unk>, and first coast and photos by N G S and H P. S. In early July collectively representing approximately 60% of the Medicare population have effectively eliminated a decade old.
Loophole that undermined the Medicare reimbursement advantage watch, but has as compared to the other leading home sleep apnea testing devices on the market.
And if the background due to our differentiated what's but platforms. Our devices are FDA cleared to measure and or record sleep time, Unlike other devices and the market and therefore, the use of force, but qualifies providers to use the CPT 95.800 code.
And which according to CMS 2021 fee schedule and pays roughly 66% and more than the vast majority of other HSA Ts in the market.
Qualified under CPT 95, 8 and 6 code.
However, due to the temporary J code, which describe defense service a CPT code 90, 586 that was never eliminated by CMS. Despite a recommendation from the HMA in 2019 G zero $3.99 providers and several.
States could use the competitive HSE Ts and use these G code and get paid much higher rates at times more than double the appropriate rates.
Nobody to us as well as the other 3 Max recognize this in their most recent decision that equalize the temporary G.
Zero, 3 and 99 rate to the most updated CPT 95, 8 and 6 practically closing the loophole.
We believe that in those states, where day rate difference is significant such as Pennsylvania, and Massachusetts, Itamar will be able to capture additional market share going forward.
Regarding the CMS calendar year, 2020, 2 Medicare physician fee schedule and proposed ruling impacting HSC and T codes would released early July CMS proposed and approximate <unk> 10 per cent cut 2 code 90.5800 used by watch.
And approximately 5% reduction for the other HSC and T code 95, 8 and 6.
The proposal noted the rationale for the adjustment is due to increase and the pricing for clinical labor and then decrease the value for supplies and equipment.
As a result codes, mostly dependent on supplies and equipment, rather and the labor like 90.5800 were more significantly impacted.
We're disappointed with the draft proposal as we believe it does not adequately reflect the value of our technology.
And remain steadfast in our pursuit of higher and Medicare reimbursement.
We're now working to deliver comments during the open common period. It is important to note. However, under the newly proposed rate reimbursement Undercoat 95, 800 used with watch but would remain at roughly 60% higher that alternative HSA tubes.
Now turning to innovation and our development pipeline.
Our focus is on identifying opportunities to increase the funnel of patients in the digital care pathway and ultimately, reaching the 80 per cent undiagnosed and untreated patients.
Recently, it slipped 2021 we introduced our sleep pass dashboard that will enable subjective data collected from the patient through a smartphone app before enough for and after the home sleep test.
The objective is to improve the experience between health professionals and their patients and facilitate more personalized sleep diagnostics.
The new product empowers sleep, and cardiology clinics with customizable and management tools to enable accurate fast and comprehensive sleep evaluations, reducing paperwork, increasing direct patient interaction and streamlined diagnosis.
What's but with sleep as is the digital solution for sleep physician to enable accurate automated subjective patient data collection and analysis integrated to the sleep report that are critical to the interpretation will sleep study results.
This solution is offered via the watch, but smartphone app and manage via the cloud platform we expect.
<unk> commercial rollout late August.
While in the early stages, we are hearing tremendous excitement in the market for this breakthrough technology.
Lastly, we continue to make great progress on the integration of our watch per technology and strive loop technology, we look forward to providing additional updates.
Turning to our outlook for the rest of the year, we did experience some pandemic related headwinds in certain geographic regions in Europe and Asia. However, this impact diminished in recent months.
Encouragingly, we've increased our inventory of both raw materials and finished goods to act as a buffer to longer supply chain and shipment times in the market.
Based on the momentum we continue to see and are closely business and the market expansion opportunity from G code loophole reductions combined with increasing awareness and 1 cardiologist gave us the confidence to raise our full year 2021revenue guidance.
In summary, we're making great progress towards our goal of owning the sleep patient pathway and are singularly focused on advancing host on sleep medicine to benefit the 80% population of on diagnosed and untreated or sub patients.
And with that I'd like to turn the call over to shape us on our CFO for a more detailed review of our first quarter 2021 financial results and guidance.
Right.
Thank you for your allowed.
Revenue for the 3 months ended June 30th 'twenty, 'twenty, 1 was $12.6 million and 41% increase from $8.9 million and the same period of the prior year.
<unk> revenue was 12 million and increase of 52% over the second quarter of 2020 and 10%.
Over the first quarter with the sales growth occurring mainly in the U S.
U S watch, but revenue was $10.1 million and.
And 53% increase over the second quarter of 'twenty, and 'twenty and 20% increase from the prior quarter driven mainly by watch put 1 as well as what's per direct sales.
Sales from disposables and renewable products, including and watch put 1 comprised approximately 77% of force put revenues and the U S compared to approximately 78 per cent and the second quarter of 2020.
Turning our attention to the rest of the P&L for the second quarter of 2021 I have raised gross margin was 71 per cent compared to 68 per cent and the second quarter of 2000 and twin.
In addition, our non as far as gross margin was 73% and 1.
100 basis points sequential improvement over the first quarter and inline with our expectation reach our target of 75 per cent by year end.
And then in 'twenty 1.
Our continued gross margin improvement.
It was once again largely due to the implementation of further cost reduction in design and production mainly on watch but 1.
And for Us.
Operating loss for the second quarter was $4.6 million compared to $3.2 million in the same quarter of the prior year.
No and I for us operating loss for the second quarter of 'twenty 'twenty 1.
And $3.1 million compared to $2.4 million in the same quarter on the priority on.
The increase in non <unk> operating expenses was primarily attributed to the following factors.
Selling and marketing expenses due to the expansion on field force related expenses.
Resuming of travel and increase of consulting fees relating to reimbursement in the U S Australia China.
And Japan.
And increase of approximately <unk>.
Zero point $7 million in R&D expenses associated with surprised technology development and.
And and increasing personnel to support product development, mainly related to our digital health platform.
And.
General and administrative expenses, mainly associated with an increase in payroll and related expenses due to the increase in personnel increase in directors' and officers' insurance premiums as well as an increase and legal expenses, including a commercial dispute in defense.
And our intellectual property.
Initiated by Us.
Net loss for the quarter was $4.7 million compared to $3.2 million and the same period on the priory and 99 per inch net loss was $3.2 million compared to $2.4 million and the same quarter of the priority on.
Non I referenced loss per 8 years for the quarter was 20 cents compared to 17 cents in the second quarter of 2000 and twin.
As of June 30 of 2021 we had cash and cash equivalents and short term bank deposits of $73 million.
Plus we are raising our full year revenue guidance to a range of $53 million to $54 million representing growth of 29% to 32% over 2020 revenues.
The itamar team remains focused on and excited about the opportunities, we have and Gilad and I share the greatest confidence in our future.
With that we will now open the line and 2 questions on.
Operator.
As a reminder, task of question you wanted to press Star 1 on your telephone.
Jay Your question press, the pound game play and standby, while we compile the Q&A roster.
Our first question comes from the line and Jeffrey Cohen from Ladenburg Thalmann. Your line is now open.
And I heard you loud and Sean how are you.
Very good Jeff Good morning, Hey, Jeff how are you. Thank you for joining but just a couple from air and first you could you talk a little bit about our current composition of our 300 and the war and out about 1 quarter and.
3 quarters, and how that and maybe play out and through the balance of this year and 'twenty to 'twenty 2.
Yeah. Thank you Geoff this is shai.
Do you watch, but 1 comprised today approximately 35% so far U S revenues.
It ranges between 35 to 40 per cent and it's taking a dominant part of our U S revenues were seeing do you watch but 1.
Revenues and growing every quarter as we've done.
Disclose we've added 121, new customers on the watch but 1.
In Q2 of 2021.
And there was about $300 is taking place.
And in several places.
The multi use.
And on the wash, but a Rev share visits we are providing which by direct you. There is a growing segment.
And so fast and we said it all alone today, we are serving and give out.
3500 test and months.
Via our watch by the average service second.
We still face some capital sales and as we disclosed our disposable sales are about 78%. So you could do the math and and get the capital sales that we are facing so we are seeing a.
Demand on the watch for 300 as well as we move forward to Q3 and Q4, we do believe the torch, but 1 will continue to gain the dominant share of approximately.
35 to <unk> 40 per cent of our U S revenues.
And the rest will be watched by direct disposables and capital.
Jeff I would just add 1.
The forward looking statements that are in anticipation of the G codes being important portion of our growth prospect and the next few quarters.
And given that the drive for those clients in the past world, where reimbursement rate it might be that we will see a higher mix of Portugal 300, given the price point is somewhat lower.
Got it and that's very helpful. And then secondly for us there.
And just give out could you kind of walk us through how you're thinking about current and future terms I know you talked about the other 2.
2000, and cardiologists and the U S, but could you give us a little more flavor as far as revenue per segment, what you're seeing and I guess in particular and wanted to know more about our cardiology.
Okay, and Tim just to make sure I'm getting the question right and you talk about total available market right, yes, Sir.
Okay.
You know the core sleep market has been historically defined in the U S by roughly and you can find it on our investor presentation, roughly 5.2 to $5.3 million tests per year, that's including both in lab test and home sleep test and I think that's the best day, finishing up the market. So if you take these 5 point and to do.
Millions of tests at the Asp's fits potentially you know $75 you reach kind of the Tam market okay.
I don't know $400 million roughly right. So that's defined the course keep opportunity and it's limited by the number of sleep doctors available in the U S of course adjacent to it there is outside U S opportunities, which we're working on so you can make assumptions about that market size as well.
Upwards.
From a cardiology perspective of course and those are different numbers and that is our main strategy, we're pursuing into bigger Tam in our point of view each cardiology patient needs to be evaluated for what we and the signs describe as independent respecter sleep apnea and need to be tested the new H a guidelines are.
Callie explicitly for evaluation of each cardiovascular patients.
And for sleep apnea, and even as he saying in their abstract.
And a portion to reconfirm therapy is effective.
And so with this kind of the opportunity with 54 million patients just in the U S needs to be evaluated for sleep apnea annually can yield the $2.7 and hire a billion dollar type opportunity.
And the latest H E and scientific statement is very encouraging and that's why we highlighted in the call.
That's perfect and then nursery if I could 1 more I'm sure you mentioned, reaching 74 per share gross margin per the AR at the end of this years are coming out of the engineered chairman and funds and you think that's a maintainable going forward.
Yes. The answer is that's our goal and we've presented and improvement on on a life basis in Q2 to 73% and we have the past will probably be and 74 and then by the end of the or 75.
I'll give 1 disclaimer on the COVID-19, and obviously, if COVID-19, and the Delta virus will continue and there will be a closure.
And our production facility or or generally and Israel and we will have to move to 2 shifts like we did a year ago that may increase our production cost and maybe smooth and beat the gross margin. This is not the case at this point of time, but the delta is spreading.
Very fast so you know I hope, we don't get into closures and established we've been a last year, but at this point of time as we stated on the script 75 percentage the target and we are on target for Q4.
Perfect. Thank you very much for taking my questions.
Jeff.
Yeah.
Thank you. Our next question comes from the line of Matthew O'brien from Piper Sandler. Your line is now open.
Thanks for taking my questions Gilad or side can you talk about the new customer additions I know, there's an acceleration coming out of Q1, especially on the new customer side to edmar. Those folks is it a function of the G code is it really more just getting access to watch that 1.
What are you seeing there as far as those new customers are they larger facilities just any color on that would be helpful and what that might mean for.
For the back half and even into 'twenty 2.
Right No great question, Matt Good morning, and.
So we practically we see that growth that we reported driven to a large extent by new customers.
And it's a mix of core sleep customers that we penetrating into and I would say that's the biggest portion.
And that's you know historically preferred or get used to the airflow, they're trained and the University or day Medical school or day fellowships and really had low and you know it took it take effort to study and learn and new signals and D O and though the situation with Covid, but later on I would.
J D. What I defined it is crossing the chasm with watch, but being what we believe is the number 1 market share position in the U S from a unit perspective.
You know get got attention, we get attention at those customers and they asking to be educated and then they get them on board and it's a process. It takes time and what we see is the gradual and onboarding of all of those customers that no COVID-19 driven to expect expressed and experienced.
The second big portion and cardiology in July we've seen at all time High records for the number of tests came from cardiology offices and throughout the day rate Cardiology sales force, we see a very very good progress in the dental market as well.
Recovery in the dental market. So it's really all over the place. It's the recognition of the technology is the fact that we have number 1 position and the market right now.
Got it thanks for that and then on the reimbursement side, you've mentioned that they changed the G code is starting to get.
And get the attention of clinicians can you try to characterize that I don't know if you can quantify it and anyway, but just what youre seeing as far as maybe new interest and and watch that and watch that 1 as a result of that J code change and then I just want to make sure I'm clear on the proposed cut that you're seeing right now, which again is not final it.
Still a 60% premium versus all other sleep tests that are out there. So yes, it's down a little bit, but it's still a meaningful premium versus our other sleep test. Thanks, so much.
Yeah, Great question, So I'll start with the with the G codes, yet we see a really increased interest from states that the gap between the loophole G code right.
And D M watch, but right where big for example, you know in Pennsylvania.
We're talking about a pre adjustment G code rate of $270.
Roughly versus a <unk> and <unk>.
Watch, but right on watch but service rate of 182, that's that's very significant and now the debt that is gone and we see for example in those states you know in Pennsylvania, and Massachusetts, and Missouri, Louisiana, New Jersey, and Washington D C, Florida, Illinois, we just see customers realizing that you know.
And that 60.70 dollar and.
Vantage for the J code is gone and now they're going to get not only the watch but right because it didn't use watch but until now they're going to get the airflow base rates, which are much Laurie to Wanda and 9.117, $98. So they're starting to ramp up it takes time, because they need to integrate watch but to their system they need.
To be educated on the signals, but we see the results already in our numbers and it's not material yet, but the interest is very material.
With regards to the proposed CMS reimbursement rates, yes, unfortunate and you know, but still I don't think anything materially changed or changed at all and as you know has described the GAAP with 60% in favor of watch but is are providing more than the price differences and therefore.
For it should not change behavior or decision, making are in any way shape or form we can see right now.
Got it thanks, so much.
Thank you Sir thank you.
Yes.
Our next question comes on the line of Josh Jennings from Cowen. Your line is now and.
Good morning.
Keith.
Yes.
Question on reimbursement and just with the decision by the local masses and Bruce.
And I care population.
Now with it.
Core growth.
Investors and developers.
Moving on mass and 40% on Medicare population.
And.
On the local medical pharma consumer is still and you go to the national level and about 20.
And 22.
<unk>.
Expecting 100% of Medicare population.
And he who people who quote and crews.
And your population.
Yeah, Good morning, Josh.
Great question, and I Hope I heard you well it was a little bit weak, but I'll just repeat the question. So you're asking about the remaining 40% or 42 per cent of the Medicare population under the remaining Mac with the J code is that accurate.
Secondly on your problems and so yes it could.
And as consumers to eliminate and equally with a national level, 1 and 'twenty 2.
Okay perfect.
You know, while we cannot of course determine or predict when they will make the move to correct. The J code and loophole.
He is very common and likely that the remaining macs follow the leading Max in adjusting their policies.
Especially when savings are readily available and they don't have to be the first to make the move so we anticipate the remaining macs to adjusted G codes. Furthermore, if CMS when they get and you know when they get organized Doctor and the New administration and of course change and will fall.
All of the a M a recommendation to actually eliminate digital not only to equalize the payment rate to the right rate, but to actually make them remove there the G codes and option, which we we know what day may recommend it to do then of course, it will be a national decision and G codes will not be available both for Medicare and <unk>.
<unk> and parents as well so we have very high confidence that in the next few months, we will see that the equalization and later on the elimination of the G code happening.
And just a follow up.
Let's talk about the sales forces strategy and he can.
And the team on Google has been closed and health.
The rest of it doesn't go on its own.
Taxes on it.
And our success so far.
Yes, absolutely. So we've we've and of course, we had and in some of those territories we had.
I would say first coverage some of them even no coverage and for again for example in Massachusetts. We had pulled few states together because the lack of opportunity there due to do code now force, we're making sure that we onboard being full time reps in each of those states the opportunities ample.
We've converted few tens of accounts already so we believe that we see early result, the message resonating.
Both with the economic stakeholder of the Cfos of the accounts as well as well as doctors.
Especially the early adapters R&D private practice, because it's your money today, but also the larger facilities and nobody likes to lose money. So.
We were moving with the sales force aggressively and those 6 or 7 states that we've identified having the largest GAAP.
And 1 last 1 just on.
And the international business and thinking about 2022.
I think there's some potential positive reimbursement decisions, where they can open up plants in Germany, and the only talked about Japan.
Our prepared remarks.
And just help us think about and set up for 2022, and a potential positive decisions and and.
And could occur.
And up a couple of regions next year.
And what that means.
Thanks for taking the questions.
No great. Thank you so from a market extras perspective, the way I prioritize and you know the new countries outside the U S that we have.
And as soon we will have access to the.
The earliest priority East, France, France is the largest home sleep test market in Europe with roughly 600000 homes keep tests conducted in 2019, we have no market share zero market share in France, right now outside of some research and the reason is that differential.
Reimbursement guidelines will require and airflow and technical airflow and channel.
2 qualified for reimbursement and and you know as you know watch, but does not have air flow channel.
We anticipate and early October to launch a watch, but with and air flow channel in France, and the participating and the market. We we see a very big interest from providers there to have access to our technology because of its advantages and.
And the fact that we will have a technical air flow channel you know they as far as day concerned they can just ignore it but but at least it will qualify for reimbursements that low hanging fruit and it should have impact if we're going to get a CE clearance in time.
In the fourth quarter.
We also submitted reimbursement coverage request in Australia. There is no home sleep test it'll coverage in Australia, but from reimbursement, we're working with the agencies and the government agencies there to progress the the proposal and they of course, while we cannot determine when and what the decision would be we're very active.
There and that's the next opportunity.
The third opportunity in Japan and.
I think we described in the past the biggest problem and Japan is that keep up reimbursement require hei very high HIV 40, or higher from home sleep test to qualify placebo reimbursements and.
<unk> H is less and 44 home sleep test and.
Which is very minor amount of patients they should need to go to inlet PSG and then if the H, a 20 or higher they qualify and placebo that's of course make home sleep testing very unattractive.
Option for providers, because most patient needs to go through in lab anyway.
And we work with the heart Rhythm Society, and the cardiovascular Society in Japan to ask the government to make exception for cardiovascular patient on that and on that limitation and.
And we got the Hart with him to endorse their request and the cardiology cardiovascular society to endorse the request.
So we anticipate somewhere and Q2 next year.
The rule to get and taste and of course for the full disclaimer, we cannot guarantee or anticipated the government, but it looks positive right now.
Yeah.
Thank you very much.
Thank you. Our next question comes from the line of Richard and New Winter from SVP Leerink. Your line is now open.
Hi, This is Jamie on for rich. Thanks for taking my question and a couple from me and I'll start off with just the cardiology segment I'm curious what do you view as the most needle moving factor and really driving and an inflection and the segment is it still more data to be published or D. E and you wait a day guidelines and Sunday.
And that could be a tipping point.
Hey, Jamie good morning, a J guidelines are very important because as you know are you know its a formal document a scientific statement with very detailed evidence listed and strong recommendation.
It's obviously very important for the providers and it's also very important for us is that as a reference for sales efforts.
And so that should materially help and we made the point of view and are in our call. Today. We also believe that continuously improving our watch, but turnkey offering which is truly a digital care pathway solution effort less for the cardiologist the awareness around that.
And offering is it's critical for our success most cardiologists we call on.
They they understand the clinical benefits they worry about the works and that.
And managing the patient of course keep up and yeah, we'll impose on them on their and their practice and once we educate them about what turnkey. The fact that the 3 are referring program to a digital care pathway there.
They're opening 4 debt opportunities and at the heart Rhythm Society meeting a few weeks ago that was our main message and it was very well received so those are the 2 factor I think awareness of the offerings and the.
The backup of the scientific societies and the and.
Physician Association.
Thank you and that's helpful. On on just you talked about continuing momentum and.
And so I guess, the second half and Im curious if theres anything you can call out on in terms of a quarterly cadence and how we should be thinking about the back half ramp or is it just kind of hang on your sequential growth.
That's 1 question and then and and additional follow on business and.
On the sale of 3 CPAP recall, just any thought that you guys might have on how that might be impacting your business would be helpful.
Yes.
Hey, Jamie.
I'll take the first question and get out of them and take the second question. So from a cadence perspective, and the second half obviously, if you look traditionally 2 or 3 years ago.
Or 2 or 3 years back our second half is stronger than our first half Q3 is T and of our budgeted VA and other facilities and we're seeing a lot of pluses over there and definitely into Q4.
And we'll also copay is coming into fruition towards the end of the year and we're seeing much more HST is being conducted in the second part of the year. So from a cadence perspective, and we do believe that day.
Q3 will will face a growth and.
And also in Q4 Q4 will be stronger than Q3.
But if you if you fluctuate the growth that we've seen so far which is about a 40% and the guidance that we gave.
And of between 53, and 54 million, which represented approximately 30% growth and it will be a bit slower growth and we faced in Q2 and Q1 compared to 2020, just because of Q3 and Q4 of 2020 were very strong quarters post COVID-19.
And so that's how you should think about cadence of growth going forward.
And with regards to the Philips recall of course, it's a very material event in our space.
From comments publicly made both by Philips and resume we know it will take them between 6 and 12 months to catch up with demand and both on the.
The replacement and new fulfillment.
We of course and <unk>.
No we haven't seen any impact to our business, but we are if you asked me what could be the risk the risk would be that if the shortage and will persist and the <unk>.
<unk> will not get sufficient supply and they might.
Slow down there.
Testing rates are just because of course, the deal and I would say.
Fifth psychology of patients being tested and that no not having excess what we do in parallel which I think is very powerful we create a lot of dialogues around alternative therapies and providers are very interested and alternative therapies in particular and mandibular devices and.
And there is a lot of interest and how those devices can provide they still got opportunity and Tennessee pulp supply is back and running so we hope that that will be sufficient to and.
And.
Low providers to continue their business as usual as we've seen so far.
Yeah.
That's helpful. Thanks, guys for taking my question.
Thank you. Our next question comes from the line of Ram How virus you from H C. Wainwright. Your line is now open.
Hi, This is Bob on the dialing in for Ron Silver audio and thanks for taking.
And my question so firstly.
And I couldn't hear your thoughts on on enhancements to the launch pad product time, so what are some of the.
Back on the suggestion that you received from customers.
Yes.
Hey, good morning, and and thank you for a good question, yes, and we indicated the most exciting product we are rolling out as we speak is the watch, but a slip us which is an app based application on the existing watch, but 1 app that allows physicians.
To determine questionnaires subjective questionnaires before the test is taken.
Bring to test and after that takes these completed today they either don't do it at all or doing it in a paperwork, which of course and the Covid era is difficult. So both increasing the comprehensiveness of the test like for instance, administering a question here for the patient and they have been sold yet which is very critical.
For understanding the results.
And then if they had and you know at 2.
2 servings of alcohol before the tests or the exercise or smoked or 2 particular medication. Those are things that until today. There was no certainty for the physicians if they're going to get this information of course with Gimme Fides graphic user interface on an app and that's increasing the likelihood of patient to participate and those questionnaires.
And more importantly, it's all integrated seamlessly to the clinical reports so he chose in context, and then part of their reports for the Doctor. So a lot of a lot of interest around this.
Offering is a multi test multi night and test with and rolled.
We rolled out with watch, but 1 it's a leach not because of the reimbursement challenges of course, not a lot of payers are paying for second and third night, but technically it's available mostly for research and some special cases, so a lot of excitement around those.
Okay.
And so on a color on that so the Bentley and subscribing, but on the same time. The COVID-19 restrictions are beginning to ease. So I was just curious what kind of impact will this have on Oh, Oh home sleep apnea testing moving forward and say for 'twenty 'twenty, 2 I mean and.
Tilda this area and so that's sort.
2000 and title.
Yeah, we've not quantified the impact of the new innovation on our business, but we believe it will continue to drive both a.
Stickiness for watch, but wanted because each require and act to operate and watch, but 1 of the product that have and app. So that should be very important for stickiness as well as the adoption of and the watch but 1 by providers that may be more cost sensitive, but in the particular cases that that kind of solution will help they will administer.
Higher ASB and higher selling price product, which is the watch but 1.
Thanks, 1 final from me so how do you expect the R&D cost to evolve for the rest of the year and for 2020.2 thank you.
Yes.
And we believe that the R&D costs that you've.
You've seen in Q2 will continue into Q3 and Q4, we don't anticipate any material growth on the R&D bear in mind that Q2 was the first quarter debt.
Try and said that we've purchased and the entire team was part of R&D cost and we also disclosed as part of the script that the cost was 7.
700, K a quarter.
Excluding the depreciation on the intangible assets that we have.
Purchase so if you take the Q2 R&D costs and there will be maybe a slight increase in Q3 and Q4, but generally that should be D read them until the end of the year.
Yes.
That's it from me thanks for your time.
Thank you very much.
Thank you at this time I'm showing no further questions I would like to turn the call back over to Gilad Glick for closing remarks.
Thank you very much operator, I would like to thank everybody for participating this morning, and wish everybody a healthy and safe a continuation of the year. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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