Q3 2021 Axonics Inc Earnings Call
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I'd now like to turn the call over to Mr yield valid car to host over country de <unk> you may begin.
Thank you.
Good afternoon, and thank you for joining <unk> quarterly results and update call presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and Chief Financial Officer, Ray and Dan will provide prepared remarks on financial results commercial progress and a general business update followed by a Q&A session before.
We begin I would like to remind listeners that statements made on this conference call that relate to future plans events prospects or performance are forward looking statements as defined under the private Securities Litigation Reform Act of 1095, while these forward looking statements are based on management's current expectations and belief.
These statements are subject to a number of risks uncertainties assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in Exxon and <unk> filings with the Securities and Exchange Commission all of which are available online at W.
Www SEC Gov.
Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date November four 2021.
Except as required by law Exxon ex undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances or unanticipated events that may arise I'd now like to turn the call over to Ray for his remarks.
Thanks, Neal I would like to welcome everyone joining the conference call. This afternoon.
In the third quarter of 2021, despite significant disruptions to our business from COVID-19, Exxon X generated net revenue of $46 $9 million, representing 33% growth compared to the prior year period.
When we held our second quarter conference call in August. The first we noted that a modest number of cases had been canceled in July and early August and that our 2021 guidance assume no further deterioration in elective procedure environment during the quarter.
Unfortunately, a significant increase in COVID-19, due to the Delta variant led to cancellations and deferrals of numerous SLM procedures in the third quarter.
Some patients were reluctant to undergo a procedure and canceled their external trials and permanent implants more.
More impactful with dozens of hospitals that restricted elective elective procedures due to our relocation of resources to the ICU and more recently the impact of nursing shortages across the country.
These factors became more prevalent in August and continued into September.
Many states would disrupted with a widespread impact in the southeast with major markets, such as Florida, and Texas being particularly impacted.
While the Covid infection rates have gone down the pandemic and staffing shortages continued to impact our procedure volumes in October.
As such we have revised our fiscal year 2021 revenue guidance to $177 million, which Dan will discuss further in his prepared remarks.
So turning back to the third quarter secondary modulation revenue was $40 1 million, which was flat sequentially. We consider this to be a solid and respectable result, considering the delta variant headwinds summer vacation seasonality and the other factors that I previously mentioned.
We continue to add new accounts in the quarter and we estimate that our market share has held steadily or perhaps even grew modestly.
<unk> revenue was $6 8 million of which 57% or $3 9 million was generated in the United States. It's clear that this fast and easy office based procedure is significantly more insulated from the COVID-19 surge as compared to sacral neuromodulation that other facility based outpatient elective.
Seizures.
Physician response to bulk demand has been overwhelmingly positive and as anticipated the expanding offering has elevated Exxon X a statue within the urology in Uruguay oncology community.
While we see only modest growth for Bocom, Ed in international markets going forward, we expect robust growth in the United States to continue for years to come given how highly undertreated stress urinary incontinence is.
Over the last four months, we have expanded our commercial footprint in the United States by adding more field based salespeople and clinical specialists, our U S field team now numbers 260 people.
Over the last few months. We've also hosted over 325 physicians at six regional seminars to introduce Bocom, It and provide proctor wet lab training.
<unk> also provided us with an opportunity to introduce our second new modulation system to physicians, who are not yet our customers and have them hear firsthand from their peers, who have already experienced the difference of working with axon ex the.
The positive feedback from attendees has been exceptional and we fully expect that these efforts will pay dividends for us in the quarters ahead as more physicians begin implanting Exxon X for their patients suffering from bladder and bowel dysfunction.
On the product development front as previously announced in late June we filed a PMA supplement with the FDA for our newly developed long lived recharge free sacral Neuromodulation system.
We're engaged with the agency on an interactive basis and continue to anticipate receiving FDA approval. During the first half of 2022 at which time, we fully expect to begin shipping the new non retards SLM system to customers in the United States.
We're confident that the introduction of a recharge free device will continue to drive market expansion and advance us on our path to sacral neuromodulation market leadership.
With that said I'd like to turn the call over to Dan to review <unk> third quarter 2021 financial results Dan. Thank.
Thank you Ray in the third quarter of 2021, Axon X generated net revenue of $46 $9 million. This represents an increase of 33% compared to $35 $2 million in the prior year period.
Sacral Neuromodulation net revenue was $41 million of which $39 $1 million was generated in the United States and the remainder in Canada and select European markets.
<unk> net revenue was $6 8 million, a sequential increase of 21% compared to the second quarter.
The U S accounted for $3 $9 million with $2 9 million coming from international markets.
Gross profit for the third quarter of 2021 was $31 2 million, representing a gross margin of 66, 5% compared to 61, 9% in the prior year period.
Total operating expenses for the third quarter of 2021 were $47 $7 million.
Included in operating expenses are $6 $7 million of stock based compensation expense and $2 $2 million of intangibles amortization.
Operating expenses totaled $36 million in the prior year period.
Net loss for the third quarter of 2021 was $17 $3 million compared to a net loss of $9 $2 million in the prior year period.
Cash and cash equivalents were $228 $8 million as of September 32021.
Turning to guidance, we are closely monitoring the ongoing impact of the COVID-19, pandemic and staffing shortages or having an elective procedure volumes. Our updated guidance is based on what we're currently seeing in the field and incorporates our expectation that we do not anticipate much of a recovery in elective procedures.
<unk> in the fourth quarter.
We expect fiscal year 2021, total company revenue of $177 million representing growth of approximately 15, 9% compared to fiscal year 2020.
We expect fiscal year 2021 S. N M revenue of $155 2 million, which represents an increase of 39% compared to fiscal year 2020, we expect fiscal year 2021 bulk of med revenue of $21 $8 million.
In the fourth quarter total company revenue is expected to be $49 $8 million, an increase of 43% compared to the prior year period fourth quarter S. M. S. N M revenue is expected to be $42 million, an increase of 21% compared to the.
Near year period.
Finally, <unk> revenue is expected to be $7 $8 million in the fourth quarter.
I'll now turn the call back over to Ray for additional remarks alright.
Alright Super Thanks, Dan.
Many of you hit that had been following Exxon X for the last few years know that as of today. We've reached the two year anniversary of the FDA approving our rechargeable sacral neuromodulation system in the company launching commercial operations in the United States. So before we move to Q&A I would like to spend a few minutes discussing the second no modulation mark.
But where we are today and where we see things going in the years ahead.
From the time of <unk> inception, we have consistently said that bladder and bowel dysfunction as underreported under diagnosed and significantly undertreated.
And each physician practice there are hundreds of patients that had been differentially diagnosed with urinary fecal or mixed incontinence.
Many of these patients have taken prescription drugs to treat overactive bladder with limited success in fact clinical literature indicates that over 80% of patients who are prescribed drugs discontinue these meds within six months.
Over the last two decades millions of patients have been suffering in silence or simply decided not to pursue cycling a modulation therapy due to lack of awareness and shortcomings of the legacy offering.
Moreover, for many physicians sacral neuromodulation was viewed as a therapy of last resort given that the need for replacement surgeries every few years and lack of MRI compatibility and less than optimal efficacy and fussiness of the incumbent's product all conspire against growth in the market.
In November 2019, our introduction of a bespoke fuss free long lasting MRI compatible device change the landscape for sacral nerve modulation therapy <unk>.
<unk> made <unk>, an attractive therapy proposition for patients with physicians discussing the long term benefits of sacral neuromodulation more often with their patients we.
We continue to hear from clinicians that more of their patients are saying, yes to sacral neuromodulation therapy than ever before.
Our commercial success. The last two year has the last two years has been grounded and significantly improving the quality of life for patients and providing physicians exceptional support.
On the marketing front to increase awareness of <unk> modulation, we have invested in a combination of activities, including Facebook ads paid Internet search and search engine optimization, we continue to partner with practices to identify patients that had been previously treated with drugs or botox that our Ella.
<unk> for sacral Neuromodulation therapy.
We have worked with our customers to support mailings from those physicians to their own patients.
We've been engaged in doing some local print advertising and some short TV spots are.
Our messaging now includes offering solutions for all types of urinary incontinence, regardless of whether its stress or urge incontinence.
We believe this will increase our response rates lower cost per lead and drive even more patients into practices of the physicians who are loyal to Exxon X.
We're also working on launching a TV marketing campaign in early 2022, and we will continue to invest in these efforts for the foreseeable future.
It's clear that second home modulation is experiencing a renaissance based on new and effective technology in the marketplace. We fully expect equity modulation to become the preferred third line therapy for patients suffering from overactive bladder.
As such we continue to believe the <unk> category is poised to expand into a 1 billion dollar plus business annually in the United States in the next few years.
More specifically, we estimate that the current U S sacral neuromodulation market is around $700 million.
We expect the market to sustain mid teens annual growth for years to come which would result in a U S <unk> market doubling to around $1 5 billion.
In 2026.
With this level of market expansion and <unk>, continuing to add customers and capture more share. We're confident that our SLM business can achieve durable sales growth of at least 25% per annum for years to come and if Covid is defeated perhaps we can grow at even higher rates in the near term.
In closing we remain grateful for the trust physicians patients and shareholders have placed in <unk>, we'd also like to thank our field team and our colleagues in Irvine for their diligent efforts and dedication to fulfilling our mission of improving the lives of patients suffering from incontinence.
So at this time, we're happy to take questions and we'll turn it over to the operator.
As a reminder to ask a question you will need to press star one on your telephone to be doing a question press the pound key.
Please standby, while we compile the Q&A.
Yes.
Our first question comes from the line of Adam Maeder from Piper Sandler.
Yes.
Hey, guys I appreciate you taking the questions here first.
First one for me.
I would just like to I guess better understand Q.
Q3, intra quarter trends and kind of how the business progressed over the course of Q3 I mean, it sounded like.
If I heard correctly, the COVID-19 impact and grew throughout the quarter, but I was hoping you could just give us a little bit more granularity there in terms of how the business progressed throughout Q3, and then into October as well.
So Adam Thanks, Thanks for your question.
Where we haven't been providing monthly statistics to date I would say that.
There wasn't anything unusual.
In terms of the progression of.
Revenue throughout the quarter.
Clearly or maybe that's not obvious but September was obviously better than July and August.
And Ah.
October was slightly better than October.
Excuse me October better than September so that's kind of the trend so things are trending in the right direction.
But yet.
It's not we.
We don't have a clear field at this time and we continue to see problems occurring in different parts of the country and things are moving around now right, whereas before in Q3. It was all about what was happening in the southeast and now we have issues that are occurring in places like Washington, and Oregon, and Colorado and other places in the Midwest. So this is kind of like a rolling black.
Out with this COVID-19 impact.
And we're as anxious as you can possibly imagine to have this kind of dissipate. So that we can get into a situation.
<unk>, where like like in Q2, where things were more normalized from an elective procedure standpoint.
Sure. That's helpful. I appreciate that and then just for the follow up wanted to.
Ask a little bit about potential backlog.
It sounds like there were.
A chunk of cases that were postponed or canceled.
So maybe just talk about kind of the backlog that accumulated in Q3, and how you see that kind of being worked down in subsequent quarters and what what if anything is included in the Q4 outlook. Thanks. So much yes. Thanks, Adam So look we have not included.
Our backlog in terms of the guidance that we articulated here to close out the year, we're trying to be really conservative here, Adam and what we are anticipating in Q4 and if it turns out that some of those patients that canceled their external trials were permanent implants, particularly the permanent implant patients.
Then that could be helpful and we could see that.
Accrue to our benefit in Q4, but we.
We haven't.
<unk> done a detailed analysis and.
And to try to get in the minds of some of these patients.
Who have deferred their procedures.
And also it's difficult sometimes to make distinctions between patients that have deferred a procedure for their own concerns versus what's happening in the institution that they would be getting that procedure done. So it's really a mixed bag out there.
And we're just doing the best that we can to predict.
What the company can do in an environment, where there is external factors that we absolutely have zero control over.
Sure. Thanks.
I appreciate you taking my questions Alright, Adam Thank you Sir.
Our next question comes from the line of Bob Hopkins from Bank of America.
Oh, Thank you and good afternoon.
I guess two things Hey, how are you.
Okay.
Just jump right in.
Yeah.
Are you really seeing.
You know here in October parts of the U S.
Kind of going in the wrong direction now.
No. Let me let me just be clear about that no question, yes.
And I think we don't want to be the Covid crisis, right or the people that are going to define this.
We've continuously continuously seem to find ourselves in this in this mode.
But when I'm getting E mails from the field.
From our salespeople through our sales management team about the fact that we.
Just last four cases.
In Oregon, because of this hospital shut down or the entire state of Idaho right. Now has put a kibosh on elective procedures. These are the kinds of things that are coming to us and theyre coming regularly. It's just that the names and the places are changing but.
I mean, it just hasnt it just hasnt abated its just moving around one could say that obviously Q4 may not look quite as bad as it did in Q3, just because we're no longer talking about the southeast where things have really settled down quite a bit.
But not out of the woods.
Lot of these locations so once again.
We're really.
Not trying to make any excuses and we think that considering.
What we're able to accomplish in Q2 and the fact that we basically posted the same number for sacral nerve modulation in Q3.
With all these factors, we take that as a win for the company and then obviously bocom. It continues to March along really unabated.
Unaffected by this pandemic.
Okay. That's helpful. Thank you for that.
And I guess the other question is given that were start ending.
2021, and a lower level than you originally thought does that make you a little more conservative or do you think the street should be a little more conservative in how they how they model 2022 growth as a result.
So I think that what we tried to do is late.
Lay some bread crumbs.
With this 25% kind of solid growth.
And we're thinking if the market is growing at around 15. These are just estimates.
And it could be it could grow a lot faster once again, if we get rid of this COVID-19 problem, but we think despite that we will grow faster than that and grow at about 25%. So if you kind of run those numbers I think you see that it's not that far off.
Certainly from what the 2022 consensus was and we kind of catch up over the next couple of years. So look if we can just get these clouds to lift a bit then.
And then we can overachieve, but I think it's at this point prudent.
For us to be conservative.
Not get kind of get over our skis because were dealing in an environment that's difficult to control.
Okay.
25%, that's a total company not a surgical nerve modulation just to be clear.
Just S N M Gist SM the bulk of the bulk of med stuff I mean that just continues to surprise us in a positive way right.
Given that so many of these bulk of it can be done in the office and so you don't have the patient a patient reluctance plus the product is hot and people really excited about that so I think if you noticed that we even increased incrementally the guidance for Q4 on bulk commit.
And if I.
Neal sitting right behind me, but I think the consensus is $32 million for bolt commit in 2022.
That seems like a number that we should be handling.
Excellent. Thanks for the color I really appreciate it.
Thanks, Bob Thanks for joining our call we appreciate that.
We have certainly understood.
Alright. Thanks.
Yeah.
Our next question comes from the line of Michael Pollock from there.
Hi, good evening good afternoon, so I'll follow the.
Lead on 22, and say numbers. So you don't have to.
Two ways to do this.
<unk> reduction this year $10 million in total.
<unk> that for a half year of business.
Annualize that that's $20 million, so streets number should.
Maybe come down by $20 million revenue next year that takes IC $2 55 to 235, the other way to do this is to take the new guidance.
Take bocom into $30 million, and then grow the SSM number 25%.
Consistent with the commentary Tonight and that gets me to $2 25. So my range for next year total company revenue three.
225 to $2 35.
Did I do.
I think you did pretty good I think youre, a little light on the on the Bocom Ed side, you rounded it down to 30 consensus is already 32, and we'll definitely beat that number so.
But.
It is.
It's not.
It's a pretty good range, yes, okay.
The other follow up yes, sorry, Mike, but with the caveat right. This is this is we're guiding now based on the fact that Covid still is present in the market. The elective procedure environment is still restricted that we've got staffing shortages, we've got hospitals shutdowns, we got all.
These factors. So I think the point is we don't want to be the company to say well, we're not as confident about the future about our business in this to be misinterpreted. All we're doing is saying look in the current environment right.
Right, which we have fundamentally lived through with the exception of four months. When we first started and launched our product in November of 2019, our entire business and everything we have done has been under the Covid cloud. So we're just trying to be realistic about.
Whats going on right now and I think the mistake that we made have made earlier is that we assumed that the COVID-19 clouds, we're going to lift.
And Thats why we find ourselves in a situation where now we're having to reduce the guidance and I regret that that we did that but then again world been optimistic and I think surprised that.
For many reasons.
This COVID-19 situation continues to persist.
Very clear.
If I may a follow up a tidbit question curious.
I appreciate all the detail on the seminar attendance for bulk amid.
Quantifying the number of Docs do you would you hazard a number of <unk>.
Docs that did a bulk amid implant in the U S. In the third quarter just be curious for what that number is.
Injection.
Yes no.
It's a good question.
We don't have that level of detail in terms of analytics yet.
We've been focused much more of course on the <unk> stuff because we have many quarters in which we can run these analytics.
But there are.
And benefited from economy of scales and purchase volume discounts that we would see margin improve.
Or target still remains to be in the low to mid seventies at full scale and so we're pleased we're on track with where it came in for Q3 and quite honestly, it's just simply longer production runs better overhead absorption and purchase volume discounts on components.
To answer the part B of your question, because we built up such a nice and stable inventory balance for the business.
For the time being we're somewhat insulated from the inflation in certain raw material components that we're seeing generally across the global supply chain, but it's definitely something to watch for Q4, while we message done the last earnings call was we expect gross margins to be in the mid sixties for the second half of this year and that's still remains are.
A view so we're pleased with where it's going we're on track and.
I'll just keep moving forward. Thanks.
Do you have a follow up.
Yes, sorry can you hear me.
Yes, yes.
Sorry about that and just turn on the on European named filing kind of primaries down to fight.
Smiling and hopefully we can kind of overachieve. If you may in terms of timing and then have that product make a nice.
Impact on what is possible for us in terms of growth and market share gains in 2022. So thank you for that question I really appreciate it.
Thank you very helpful.
Yeah.
Our next question comes from the line of Mike that since I need him and company.
Yeah. Thanks for taking my question I guess.
Given I'm curious what's driving your growth.
Roughly 15% growth in ethanol I'm in the U S. How much of that is roughly speaking, it's coming from existing customers kind of increasing their volumes.
Converting neurologist that haven't done at the number four to start doing it and I guess, the third category be converting competitive.
Physicians are losing medtronic, either you're probably not looking to be held numbers, but can you kind of give you some sense of what's happening what's driving the growth.
Sure sure, Mike, but we're we're talking about it.
It's kind of interesting because sometimes I think these numbers just get get missed over.
We're talking about in cyclical modulation.
For 2021, we're talking about an increase of approximately 40% year over year, which is a substantial increase in revenue for any company in any business, especially in the middle of a global pandemic right.
Where a lot of our existing customers are just seeing some incremental growth in there.
In the number of procedures, but they've been stymied of course by Covid.
So a lot of our existing customers I think can do a lot more than they currently doing so it's a combination of incremental increases modest as they may be in the volume of our existing accounts.
It's the same store sales are increasing but not dramatically because of the pandemic, but of course, that's the new account acquisition and it's the movement of all these legacy accounts and once again every single implant or in the United States. Prior to November of 2019 was the Medtronic customer.
We picked up quite a big number of those customers and we continue to bring new customers to the game. So there has been a lot of movement of quote unquote competitive accounts coming to Axonics.
Now we may have handed a couple one handful or so or maybe two handfuls back when medtronic.
Made their legacy product MRI compatible okay.
<unk> dynamic that's going on right now, but I appreciate the question and.
We'll we'll look.
From an analytic standpoint, and maybe in February when we announce for the full year, we give a little more granularity a little more color that can quantify.
A bit better about where some of this increase is going to come from where we would expect it to come from in 2022. So thanks for the question like.
Yeah, no problem and if I could just second quite a bit of $90.
That's not the T V ads, you're talking about so.
Obviously, probably going to be fairly costly, but so how do you ensure that this isn't just going to kind of cause a rising tide that helps your competitor as well as axonics.
Well look it's gonna help it's going to help the category. There's no question about it right.
And that's Ah that's Ah.
Unintended consequence in a way alright.
But what we have seen.
Is that we started heavily promoting on Facebook.
And we've generated tens of thousands.
Leads and website visits and all those other statistics well interestingly enough. Our competitor now is doing exactly the same thing. So I think what's going to happen is you're going to see and I think we are demonstrating this to be the case that now the legacy provider is looking to BFS fall or to Exxon.
Alright, we're going to where we started too heavy Facebook promotion, they're doing it we're talking about a long live nonrechargeable device now they're starting to talk about it I guarantee you that once we start turning heads with television commercials no more pads no more pills just relief I bet, you're going to see similar from.
Our competitors so if they want to stay in the game.
Then they're going to have to spend some money.
To match the activities that Axonics is doing and we think that's a good thing right. This is.
It's America competition, Apple Pie and motherhood right competition is a good thing and we want to be able to get more eyes more people to understand that it is not normal to leak urine, whether it's whether you are coughing sneezing or pick up an object or playing with your kids.
Accounts from Bolcom add that have been pulled through as S. N. M accounts and then you know just a final part to that I mean did you have a pipeline essentially right now where where you can understand what accounts are bolcom add that could potentially be S. N I'm implants as well.
You know the answer is yes, yes, and yes, [laughter] and it wasn't a repetitive question. What's a good question David So I appreciate that the we are we have turned a lot of heads.
Really a rechargeable type market and then having recharge free as as.
Additive to growth or is it something that it's going to essentially be able to augment the growth or accelerate growth further here when the SNF business.
Yeah. So.
I wanted to answer the question in a little bit of a remedial way to start.
I think it's really important for people to two.
Appreciate.
That the number one selling product for sacral Neuromodulation in America today.
Is the interesting too.
A 20 something year old product from Medtronic.
It's less than the body approximately four to five years three years to five years.
And thats the biggest selling product today that is still the biggest selling product today.
Alright, the only thing different amount. It is it is now MRI compatible okay. Great. So you don't have to get it X plant and when you need an MRI, but other than that nothing has changed product just fussy as all hell okay.
And you know what I mean, it hasnt all of a sudden changes at stripes and become <unk>.
Winning product.
But that's.
All the competitive accounts that we don't have yet that's what their implanting theyre not implanting the new rechargeable product.
From our competitor right.
Not the way it's gone. So we believe there are significant benefits to the rechargeable product given its long life and the fact that now you only have to recharge the product that one hour every month. So we still believe that is going to that's the winning product that's going to be the the product line that is going to sell the most.
But.
You use my phrase about cat nip with bulk amid but think about now a non rechargeable device that can last 10 or more years in your body and we are using the word recharge free and a very specific way, we don't mean it to be just a non rechargeable.
We're talking about our patient remote which does not need to be plugged in the wall, which does not use replacement batteries and can also live for quite a long time in the patients <unk> as an example, so when we say recharge free we mean, an IPG that doesn't need to be recharged.
The patient remote that the patient gets doesn't need to be plugged in the wall to be recharged doesn't need batteries or anything.
So our definition of a recharge free system is very different than the non rechargeable IPG and rechargeable patient remote system from our competitor so we're going to.
That's a nuance that I don't think many people have caught on to <unk>.
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Ladies and gentlemen, thank you for standing by and welcome to the Exxon <unk> quarter, three 2021 results conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to turn the call over to Mr. Neil valid car.
To host over conference day, you may begin.
Thank you and good afternoon, and thank you for joining <unk> quarterly results and update call presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and Chief Financial Officer ran Dan will provide prepared remarks on financial results commercial progress and a general business update followed by a Q&A.
Session before we begin I would like to remind listeners that statements made on this conference call that relate to future plans events prospects or performance are forward looking statements as defined under the private Securities Litigation Reform Act of 1095, while these forward looking statements are based on management's current.
Spectation and beliefs. These statements are subject to a number of risks uncertainties assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in <unk> filings with the Securities and Exchange Commission all of which are available.
Online at Www SEC Gov.
It would disrupted with a widespread impact in the southeast with major markets, such as Florida, and Texas being particularly impacted.
While the Covid infection rates have gone down the pandemic and staffing shortages continued to impact our procedure volumes in October.
As such we have revised our fiscal year 2021 revenue guidance to $177 million, which Dan will discuss further in his prepared remarks.
So turning back to the third quarter second Neuromodulation revenue was $40.1 million, which was flat sequentially. We consider this to be a solid and respectable result, considering the delta various headwinds summer vacation seasonality and the other factors that I previously mentioned.
We continue to add new accounts in the quarter and we estimate that our market share had held steadily or and perhaps even grew modestly.
Both of them at revenue was 6.8 million of which 57% or three 9 million was generated in the United States. It's clear that this fast and easy office space procedure is significantly more insulated from the COVID-19 surge as compared to cyclical modulation at other facility based outpatient elective.
Seizures.
Physician response to bulk amend has been overwhelmingly positive and as anticipated the expanding offering has elevated axonics his stature within the urology and you're gone ecology community.
While we see only modest growth for bulk amid in international markets going forward, we expect robust growth in the United States to continue for years to come given how highly undertreated stress urinary incontinence is.
Over the last four months, we have expanded our commercial footprint in the United States by adding more field based salespeople in clinical specialist R. U S field team now numbers 260 people.
Over the last few months. We've also hosted over 325 physicians at six regional seminars to introduce bulk amid and provide proctor wet lab training the.
The seminars also provided us with an opportunity to introduce our second no modulation system to physicians, who are not yet our customers and have them here first hand from their peers, who have already experienced the difference of working with Axonics.
<unk> margin of 66, 5% compared to 61, 9% in the prior year period.
Total operating expenses for the third quarter of 2021 were $47 $7 million.
Included in operating expenses are $6 7 million of stock based compensation expense and $2 $2 million of intangibles amortization.
Operating expenses totaled $36 million in the prior year period.
Net loss for the third quarter of 2021 was $17 $3 million.
Impaired to a net loss of $9 $2 million in the prior year period.
Cash and cash equivalents were $228 $8 million as of September 32021.
Turning to guidance, we are closely monitoring the ongoing impact of the COVID-19, pandemic and staffing shortages or having an elective procedure volumes. Our updated guidance is based on what we're currently seeing in the field and incorporates our expectation that we do not anticipate much of a recovery in electric.
<unk> in the fourth quarter we.
We expect fiscal year 2021, total company revenue of $177 million, representing growth of approximately 59% compared to fiscal year 2020.
We expect fiscal year 2021, SNF revenue of $155 2 million, which represents an increase of 39% compared to fiscal year 2020, we expect fiscal year 2021 bulk committed revenue of $21 8 million.
<unk>.
In the fourth quarter total company revenue is expected to be $49 $8 million, an increase of 43% compared to the prior year period fourth quarter <unk> revenue is expected to be $42 million, an increase of 21% compared to the prior year peer.
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Finally, <unk> revenue is expected to be $7 $8 million in the fourth quarter.
Surgeries every few years and lack of MRI compatibility in less than optimal efficacy and fussiness of the incumbents product all conspire against growth in the market.
In November 2019, or introduction of a bespoke fuss free long lasting MRI compatible device changed the landscape for second a modulation therapy.
Axonics made fnm and attractive therapy proposition for patients with physicians discussing the long term benefits of seconal modulation more often with their patients.
We remain grateful for the trust physicians patients and shareholders have placed in exon ex we'd also like to thank our field team and our colleagues in Irvine for their diligent efforts and dedication to fulfilling our mission of improving the lives of patients suffering from incontinence.
So at this time, we're happy to take questions and we'll turn it over to the operator.
As a reminder to ask a question you will need to press star one on your telephone to be doing a question press the pound key.
Ladies sand all over to compile the Q&A.
Yes.
Our first question comes from the line of Adam <unk> from Piper Sandler.
Hey, guys I appreciate you taking the questions here.
First one for me.
I would just like to I guess better understand Q.
Q3, intra quarter trends and kind of how the business progressed over the course of Q3 I mean, it sounded like.
Kind of the backlog that accumulated in Q3.
How you see that kind of being worked down in subsequent quarters and what if anything is included in the Q4 outlook. Thanks. So much yes. Thanks, Adam So look we have not included.
Our backlog in terms of the guidance that we articulated adhere to close out the year, we're trying to be really conservative here Adam.
What we are anticipating in Q4, and if it turns out that some of those patients that cancel their external trials or permanent implants, particularly the permanent implant patients.
And then that could be helpful and we could see that.
Accrue to our benefit in Q4, but we but we haven't.
Done a detailed analysis and.
To try to get in the minds of some of these patients.
Who have deferred their procedures.
And also it's difficult sometimes to make distinctions between patients that have deferred a procedure for their own concerns versus what's happening in the institution that they would be getting that procedure done. So it's really a mixed bag out there.
And we're just doing the best that we can to predict what the company can do in an environment, where there is external factors that we absolutely have zero control over.
Sure. Thanks Ram I appreciate you taking my questions Alright, Adam Thank you Sir.
Our next question comes from the line of Bob Hopkins from Bank of America.
Okay.
You know considering.
What we were able to accomplish in Q2 and the fact that we basically posted the same number for cycling a modulation in Q3 with all these factors we take that as a win for the company and then obviously bulk omit continues to March along really unabated and unaffected by this pandemic.
Okay. That's helpful. Thank you for that.
And I guess the other question is given that were start ending are gonna end 2021 at a lower level than you. Originally thought does that make it a little more conservative or do you think the streets you'd be a little more conservative and how they how they model of 2022 growth as as a result.
So I think that's what we tried to do is.
Laythan breadcrumbs.
With this 25% kind of solid growth and we're thinking if the market's growing at around 15. These are just estimates.
And it could be it could grow a lot faster once again, if we get rid of this COVID-19 problem, but we think despite that we will grow faster than that and grow at about 25%. So if you kind of run those numbers I think you see that it's not that far off certainly from what the 2022 consensus was and we kind of catch up.
Over the next couple of years. So look if we can just get these clouds to lift a bit.
Then we can over achieve but I think at this point prudent.
For us to be conservative.
Not get kind of get over our skis, because we're dealing in an environment that's difficult to control.
Okay, and it was that 25% of the total company not a circle nerve adulation just to be clear.
Just fnm just SNF the bulk of ultimate stuff I mean, that's continues to surprise us in a positive way right.
Given that so many of these proceedings Vulcan that can be done in the office and so you don't have the patience Ain't patient reluctance plus the product is hot and People's real excited about that so so I think if you noticed that we even increased incrementally the guidance for Q4 in bulk them at.
And if I.
Neil sitting right by me, but I think the consensus is $32 million for bowl commit in 2022 and.
That seems like a number that we should be handling.
Excellent and thanks for the caller I really appreciate it thanks.
Thanks, Bob Thanks for joining our call. We appreciate that yeah. We have currently on our story.
[laughter].
Yeah.
Our next question comes from the line of Michael Pollak from that.
Hi, good evening good afternoon, so I'll follow the.
Lead on 22, and say numbers. So you don't have to.
Two ways to do this the.
The guidance reduction this year $10 million in total consider that for a half year of business if I.
Annualize that that's 20 million so streets number should.
Maybe come down by $20 million revenue next year that takes I see 255 to 235, the other way to do this is to take the new guidance and.
Take bolcom into 30 million and then grow the essay Numb number 25%.
Consistent with the commentary Tonight and that gets me to 225. So in my range for next year total company revenue.
225 to $2 35.
How did I do.
I think he did pretty good I think you're a little light on the on the bulkhead side.
<unk> rounded it down to 30 consensus is already 32 and.
We will definitely beat that number so.
But it's.
It is.
It's not a it's a pretty could range yep okay.
The other the follow up yes, sorry, Mike, but with the caveat right. This is this is where guiding now based on the fact that Covid still is present in the market. The elective procedure environment is still restricted that we've got staffing shortages, we've got hospital shutdowns.
You got all these factors. So I think the point is we don't we don't want to be the company to say well, we're not as confident about the future about our business and this to be misinterpreted. All we're doing is saying look in the current environment.
Alright, which we have fundamentally lived through with the exception of four months. When we first started launched our product in November of 2019, our entire business and everything we have done has been under the Covid cloud. So we're just trying to be realistic about.
What's going on right now and I think the mistake that we made a made earlier is that we assumed that the COVID-19 clouds were going to lift.
And that's why we find ourselves in a situation where now.
We're having to reduce the guidance and I regret that that we did that but then again world than optimistic and I think surprised that.
For many reasons.
This COVID-19 situation continues to persist.
Very clear if I may a follow up a tidbit question curious I appreciate all the detail on the seminar attendance for bulk amid.
Quantifying the number of dark wood.
Would you hazard a number of of docks that did a bulk amid implant in the U S and the third quarter just be curious for what that number is.
Injection.
Yeah, No. That's that's a good question.
We don't have that level of detail in terms of analytics yet.
We've been focused much more of course on the fnm stuff because we have many quarters in which we can run these analytics.
But there are.
Off the top of my head I would say that it's probably at least 400 physicians may be more.
That are currently using bulk of it.
Thank you so much thanks, Mike appreciate your questions.
Our next question comes from the line of <unk>. Thanks, I'm lost my account.
Hi, can I play, calling ancillary and thanks for taking my question.
First one online close margin is that.
The only strong in history, and while but what we saw in first half.
Any color I want 12 that strength and how do we think about that in queue for any even into next year. Ashley asked me here about inflation fake tough headwind.
Let Dan handle the question, but I. Thank you for noticing that the margin increase sequentially quite a bit.
Since we've been working very diligently on a number of initiatives and tried to move that GP in the right direction. So Dan no. Thanks for the question I mean, we've been consistent really since the early days talking about how as as time went on and we scale that manufacturing and benefited from economy of scales and purchase volume discounts.
We would see margin improve.
Or target still remains to be in the low to mid seventies at full scale and so we're pleased we're on track with where I came in for Q3 and quite honestly, it's just simply lager production runs better overhead absorption and purchase volume discounts on components.
To answer the part B of your question, because we built up such a nice and stable inventory balance for the business.
For the time being we're somewhat insulated from the inflation in certain raw material components that we're seeing generally across the global supply chain, but it's definitely something to watch for Q4, while we message done the last earnings call was we expect gross margins to be in the mid sixties for the second half of this year and that's still remains our point.
A view so we're pleased with where it's going we're on track and I.
I'll just keep moving forward. Thanks.
Do you have a follow up.
Yes, sorry can you hear me.
Yes, yes, sorry about that and just.
And your P&A filing for that primary style device.
Thorn track equivalent in the price happening next year.
Colleague provided the client in terms of how to think about the contribution.
Retail.
Yes, what we've said.
All along is how that will impact revenue in 2022 depends on how quickly. He gets approved which is sorry for such a silly comment but.
And we are optimistic.
In terms of getting getting the product, we don't see any showstoppers whatsoever I can confirm that we did receive the 90 days subsequent to review letter.
We have prepared responses, we have a call coming up with the FDA in the next week or so.
And we expect to provide the additional responses to the questions that they had and so that puts us on track if everything goes according to plan to actually get the approval in Q1.
What we're trying to be once again conservative by saying, sometimes first half of 2022.
We are very.
Bullish about the impact that this product will have and I think it's important for me to say that this is not a product that our existing customers are clamoring for but this is the product that the customers who haven't come our way yet are clamoring for so this is really where we see this just like bulk <unk> is helping us bring.
New physicians to Axonics.
Because we have an expanded offering and more reasons to do business with them. We think that this nonrechargeable a recharge free system will give us a strong offering to go and pick up a bunch of these other customers that have not come our way yet so.
That's upside and I think that it is clearly upside to the numbers in 2022 as well so.
Once that product is approved and we get this thing launched then we will provide good color around it and I can assure you that we are already working on the launch plan.
For getting that product into the marketplace and will likely put together a whole bunch of seminars again, they've been very successful for us to introduce new things to the market. So we're really excited about that product.
Things are looking really a very positive in terms of the FDA filing and hopefully we can kind of overachieve. If you may in terms of timing and then have that product make an.
Impact on what is possible for us in terms of growth and market share gains in 2022. So thank you for that question I really appreciate it.
Thank you very helpful.
Our next question comes from the line of my pets anything you can accompany.
Yeah. Thanks for taking my question I guess.
Given I'm curious what's driving your growth.
Roughly 15% growth in ethanol in the U S. How much of that is roughly speaking is coming from existing customers kind of increasing their volume.
Converting neurologist that haven't done that the number four to start doing it and I guess, the third category converting competitive.
Physicians are Medtronic, I mean, either you're probably not looking to be held numbers, but can you kind of give you some sense of what's happening and what's happened to growth.
Sure sure, Mike, but we're we're talking about it.
It's kind of interesting cause sometimes I think these numbers just get get.
Missed over.
We're talking about in cyclical modulation.
For 2021, we're talking about an increase of approximately 40% year over year, which is a substantial increase in revenue for any company in any business.
Especially in the middle of a global pandemic right.
Where a lot of our existing customers are just seeing some incremental growth in there.
And the number of procedures, but they've been stymied of course by Covid right. So a lot of our existing customers I think can do a lot more than they currently doing so it's a combination of incremental increases modest as they may be in the volume of our existing accounts.
Alright, so same store sales are increasing but not dramatically because of the pandemic, but of course, that's the new account acquisition and it's the movement of all these legacy accounts and once again every single implant or in the United States. Prior to November of 2019 was the Medtronic customer.
And we've picked up quite a big number of those customers and we continue to bring new customers to the game. So there has been a lot of movement of quote unquote competitive accounts coming to Axonics.
Now we may have handed a couple one handful or so or maybe two handfuls back when medtronic.
Made their legacy product MRI compatible okay.
That's an old news, that's a year ago already.
That is not happening, we don't see accounts going back to the legacy provider. It's all the movement is in our direction now what's also knew what's new is.
We've got a lot of folks now that are coming into the game because they want to use bulk them at.
Alright, and these are.
Combination of people, who are also implanting second modulation with our competitor, but also doctors that have been doing botox because they got tired of implanting the medtronic product an older fussiness associated with that product right. So we're seeing people coming to our seminars that are.
Just doing botox and now starting to do bulk amid and botox and clearly we want to get those folks doing cycling modulation. So now there's a focus.
We've got strong data, which is now in the hands of all of our salespeople with respect to who's doing botox, how much botox is being done and those are really phenomenal opportunities for us to get those are physicians in the boat doing seconal modulation, maybe for the first time or maybe for the first time in a number of years and we've got.
Quite a number of anecdotal.
Examples of that so Mike.
All the above right I mean, it's not if there was one major trend.
Then we would speak to it but it's a combination of all these factors that are that are positively conspiring to help us increase these numbers is different I'll make one comparison to inspire when inspires is talking about their results. It's all same store sales, it's all adding new customers, but mainly increasing volume because they have no competition.
Titian and it's a brand new thing in the market, we have a different dynamic that's going on right now, but I appreciate the question and.
We'll we'll look.
From an analytic standpoint, and maybe in February when we announced for the full year, we give a little more granularity a little more color.
Can quantify.
A bit better about where some of this increase is going to come from where we would expect it to come from in 2022. So thanks for the question like.
Yeah, no problem and if I could just.
Second quite a bit of like.
Like that about the television ads you're talking about.
<unk>, probably going to be fairly costly, but so how do you ensure that this isn't just going to cause a rising tide that helps your competitor as well as axonics.
Well look it is going to help it's going to help the category. There's no question about it right.
And that's Ah that's Ah.
Unintended consequence in a way alright.
But what we have seen.
Is that we started heavily promoting on Facebook.
And we've generated tens of thousands.
Leads and website visits and all those other statistics well interestingly enough. Our competitor now is doing exactly the same thing. So I think what's going to happen is you're going to see and I think we are demonstrating this to be the case that now the legacy provider is looking to BFS fall or to Exxon.
Alright, we're going to where we started do heavy Facebook promotion, they're doing it we're talking about a long live nonrechargeable device now they're starting to talk about it I guarantee you that once we start turning heads with television commercials.
No more pads no more pills, just relief I bet, you're going to see similar from our competitors. So if they want to stay in the game.
Then they're going to have to spend some money.
To match the activities that Axonics is doing and we think that's a good thing right. This is.
It's America competition, Apple Pie and motherhood right competition is a good thing and we want to be able to get more eyes.
For people to understand that it is not normal to leak urine, whether it's whether you're coughing sneezing or pick up an object or playing with your kids.
Or you can't get to the bathroom in time, that's not normal and the fact of the matter is Mike women don't notice. They don't know it because there's never been a campaign to educate the public that there are solutions.
For this problem, which really does.
Significantly impacted quality of life.
People and so forth so.
Look this is.
But the fact is second modulation has been around for a long time, but it wasn't an attractive solution.
It is now it's long live December I compatible the Efficacies very high in the 90% range. I mean these are great fun. These are great facts now to go out and promote this therapy and we think that this is absolutely the right thing to do and we would hope that our shareholders would support the investment.
Of dollars to create more awareness and to grow this business.
Okay, great. Thanks, a lot.
Thank you Mike appreciate it.
Our last question comes from the line see if I can make to catch from China.
Hey, Hey, Ray Thanks for taking my questions and I'm Gonna apologize upfront fees are repetitive hyphen happen around calls.
But I guess I wanted to start on bulk him at first I know you've talked about the product in the past being sort of catnip for the for the physician and the ability to pull across different nothing and implants and have previously indicating that around maybe 50% or so of the of the training sessions for bolcom, Edward New accounts to Axonics until I guess.
Was that still the case for the first of the kind of final training sessions, you had with the product.
Have you had any or have you been able to quantify any type of accounts from all come at that have been pulled through as fnm accounts and then just as a final part to that I mean do you have a pipeline Nancy right now where where you can understand what accounts are bolcom add that could potentially be S.
Mm implants as well.
The answer is yes, yes, and yes.
And it wasn't a repetitive questions. It's a good question David I appreciate that.
Look the we are we have turned a lot of heads.
And the fact is we have quite a good number of attendees at the seminars that not only have started.
With bolcom add that they are starting to inject into patients but also.
R.
A number of them have started with us as a result of having the bulk of <unk> of doing the seminars and so forth and they're starting but when people start they start with a couple of procedures. You know you get a couple of patients for external trials and then some time goes by and then you got the the permit implant. So we don't.
We don't have.
We don't have quantification right that we could speak to right now that says Oh definitive we generated X new accounts and we've generated this much volume because.
It takes a little time, there is a bit of a delay right between the time somebody comes and tends to seminar and all the rest before you can get back out there and get some procedures on the calendar, but we do expect that the benefit of the.
Bolcom at the benefit of the seminars will certainly accrue to two two.
To us to Axonics in 2022.
Okay. That's that's helpful I guess.
Recharge free.
Would that product kind of coming up next year I mean, do you see this product as being more market expensive I mean, I know nowadays that the that there are some other martin at the market itself for us on a minute.
Is primarily desk or primarily was the recharge screen device in the past and so you've launched out this rechargeable device. It's been taking Sharon. So I guess do you see over the future of the market being primarily a rechargeable tight market and then having to recharge free as as.
Out of the of the growth or is it something that it's going to essentially be able to augment the growth to accelerate growth further here with me.
Yeah. So.
I want to.
Answer the question in a little bit of a remedial way to start.
I think it's really important for people to to.
Appreciate.
That the number one selling product for cyclical modulation in America today.
Is the interest them too.
A 20 something year old product from Medtronic.
It lasts in the body approximately four to five years three to five years.
And that's the biggest selling product today that is still the biggest selling product today.
The only thing different amount it as it is now MRI compatible okay. Great. So you don't have to get it X plant in when you need an MRI, but other than that nothing's changed product as fussy as all hell okay.
And you know what I mean, it hasn't all of a sudden changes in stripes and become this great winning product.
That's.
All the competitive accounts that we don't have yet that's what they are implanting, they're not implanting the new rechargeable product.
From our competitor right.
That's not the way it's gone. So we believe there are significant benefits to the rechargeable product given it's long life and the fact that now you only have to recharge the product that one hour every month. So we still believe that is going to that's the winning product that's going to be the the product line, that's going to sell the most.
But.
You use my phrase about catnip with bulk amid but think about now a nonrechargeable device that can last 10 or more years in your body and we are using the word recharge free in a very specific way, we don't mean it to be just a nonrechargeable.
Gee, we're talking about our patient remote which does not need to be plugged in the wall, which does not use replacement batteries and can also live for quite a long time and the patience purse as an example, so when we say recharge free we mean and IPG that doesn't need to be recharged and.
The patient remote that the patient gets doesn't need to be plugged into the wall to be recharged doesn't need batteries or anything or like.
Like so our definition of a recharge free system is very different than the nonrechargeable IPG and rechargeable patient remote system from our competitor. So we're gonna that's a that's a nuance that I don't think many people have caught onto but when we are using those words.
Using them very specifically and we're going to make sure that the marketplace. These physicians understand the distinction between what we're offering and what they currently have because this is an absolute fuss free no houses product for people and for those doctors, who believe that their patients are.
Are not going to be suitable for a rechargeable device and that is.
Where the propaganda has been that's where the brainwashing has gone. So this this is why this is such an important product for us because that's going to get us that extra 25% of the customers out there that we need to be the market leader and so that's why we're gift up an extremely.
Bullish about how this product is going to be able to help get us to ultimately where we want to go which is to be the market leader in cyclical modulation.
Okay. That's helpful. Thanks, Thanks for taking my question.
Pleasure. Thank you.
There are no if I get questions at this time, please continue to remain calm.
Two per okay. Thank you. Thanks for everybody. We look we really appreciate you listening into the call today.
I appreciate the questions from the analyst community and we'll look forward to speaking with you all in the new year, you take care and stay safe.
Ladies and gentlemen that concludes today's conference call. Thank you everyone for participating you may know Thanksgiving.