Q3 2021 CVRx Inc Earnings Call
Patients as of today, which may change over time.
In addition to actual results could differ materially due to a number of risks and uncertainties.
Including those identified in the earnings release issued prior to this call.
And in the company's SEC filings, including the upcoming Form 10-Q that will be filed with the SEC.
I would now like to turn the call over to <unk>, President and Chief Executive Officer Nadeem <unk>.
Thank you, Mike and thank everyone for joining us this afternoon.
I'll begin by providing an overview of our third quarter performance.
By an operational update.
Our CFO John <unk> will then review our financial results.
And then I will conclude with our thoughts for the balance of 2021 before turning to.
To the question and answers.
Starting with a review of the third quarter.
Our total revenue was $3 4 million, an increase of approximately 240% over the third quarter of 2020.
This growth was driven by continued strong performance in U S heart failure.
Which generated.
$2 5 million.
Like most procedure based companies, we were negatively impacted by the COVID-19 Delta Spike experienced during the quarter.
We have exposure to some of the hardest hit regions of the country, including areas like Florida, Texas, and Georgia and as a result, we saw a meaningful dip in procedures in August.
However that dip was offset by a strong September.
Which we believe benefited from both the traction of our commercial strategy as well as cases being shifted into September.
As the spikes receded.
We're able to get out into the field and interact with both new and existing customers, leading us to deliver our highest number of U S implant patients in a single day in our history.
The strength in our U S heart failure business also offset headwinds seen in our European business, which proved to rebound more slowly than in the U S. Following the summer spikes.
Overall, we are really excited with how the quarter ended and look forward to carrying this momentum forward.
Turning to an operational update now.
Watson in the ways. They think is best for their patients.
The second PMA submission.
As for our new implantable pulse generator or IPG insured, which is smaller in size and has 20% longer battery life on average.
And the first PMA submission.
As for our new programmer, which is a tablet form factor with an even simpler programming software.
Approval for the three PMA supplement submission is expected in the first half of 2022.
Another long term growth driver is the expansion of the clinical body of evidence.
Our post market study of.
<unk> and.
Randomized controlled study designed to demonstrate the mortality and morbidity benefit of better stem in the half ref patient population remains on track we continue to expect to accrue all the events needed for the final analysis by the end of 2022 and unblinded data in early 2000.
'twenty three.
Given some of the macro challenges experienced in the quarter.
We are very pleased with where we ended up.
We have continued the expansion of the commercialization of <unk>.
And are incredibly excited about what we will accomplish as an organization by year end.
While it is still early days, we are optimistic that we will build upon the momentum we saw late in the quarter and are confident in our ability to operate in this continually changing environment.
And now I would like to turn the call over to Jared for a financial review.
Thanks, Nadeem total revenue generated in the third quarter was $3 4 million, which is an increase of $2 $4 million or 241% when compared to the same period last year revenue generated in the U S was $2 $6 million in the current quarter, which is an increase of $2 $3 million or 769%.
Over the same period last year heart failure revenue in the U S totaled $2 $5 million in the current quarter on a total of 84 revenue units as compared to $140000 in the third quarter of last year on four revenue units. The increase was primarily driven by the continued growth following the U S heart failure commercial launch in.
2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of Barrow stim.
Colors for the current quarter, which is an increase of 13% when compared to the same period last year. This change was primarily due to an increase in stock based compensation expense from $11000 in Q3 2020 to $115000 in Q3 2021.
S G and a expenses were $8.1 million for the current quarter, which is an increase of $5.8 million or 249% when compared to the same period last year. The primary driver was an increase in compensation, including salaries and commissions, mainly as a result of increased head count.
Enhancing the business needs in the future. The total cost of extinguishment was $21 $3 million the impact of which will be reflected in our fourth quarter financial statements. Following the repayment. We believe we have more than three years of cash on hand.
Now turning to guidance for the full year of 2021, we continue to expect total revenue between $13, three and $13 $9 million gross margin between 72, and 74% and operating expenses between 34 and $36 million for the fourth quarter of 2021, we expect to report total revenue.
I mean, $3 90, and $4 $5 million before turning the call back to Nadeem I wanted to quickly acknowledge some changes to the reimbursement landscape in the U S.
As is typical this time of year CMS announced this week their final changes for outpatient reimbursement for calendar year 2022. These changes are all positive for barrel stim.
It was ahead.
Determined to leverage the foundation, we have put in place to accelerate the adoption of <unk> and bring relief to as many patients as possible that are suffering with cardiovascular illnesses.
Now I would like to open the line for questions.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.
And our first question comes from Robbie Marcus with JP Morgan Your line is open.
Hi, This is actually Lili on for Robbie Thanks for taking the question.
I was hoping you could just dive a little bit deeper into what you've been seeing on near term COVID-19 trends.
How things turned it into the fourth quarter and what's assumed in guidance in terms of the recovery.
Yeah, Hi, Rick So first thank you for joining us today.
This isn't anything yet.
You mentioned that in Q3, we were surprised by how fast the rise in the Covid.
Cases happened in some states like Florida, Georgia, Texas, among others, we have we are.
The only penetrated and depth.
We expected at the time that this will be a <unk> and a fast decrease.
Discuss that variant and.
With.
Indeed national average.
Payments for the Covid itself for the APC 5465 code. This is excluding <unk>.
T urn it up.
In our case, we have had GPT and depth now.
In calendar year 2021, so we're not expecting a major change in the ASP be moving forward.
That said, we continue to be cautious here about the level of an average selling price points that we are seeing.
And as we look forward to the future we.
We tend to be a little bit more careful.
Simply because as we go and we go into.
Brother geographies.
We ended up selling our set up be in states or Zip codes.
Yeah.
The average.
The reimbursement is below the national average as you can say now the T. P T and they end up clearly help in those situations.
But that's why we are being very careful about projecting our 29000 U S ASP into the future.
Yeah.
Got it thank you.
Thank you our.
Our next question comes from Matthew O'brien with Piper Sandler Your line is open.
Good afternoon, thanks for taking the question so.
The D.
Excuse me you're on track as far as number of reps added number of centers that you're you're adding as well.
Look into the ramp that we're expecting in 'twenty two I'm sure you've got some COVID-19 related headwinds in terms of getting into centers.
Being able to train clinicians to really ramp things with this this expanding footprint that you have so I'm. Just wondering are you seeing a lot of a lot of gating factors to getting into facilities and really trying to train them and get them up and going and how can you kind of work around that as we head to head into the end of the year and then most importantly into next year, where you have a bigger ramp.
In terms of what to expect on the revenue side of things.
Yeah, great questions and again, thank you for inviting me to serve I went to sleep on our finance at a diner.
Meeting the Heartland summit.
It gets us really a good conversation.
In regard to Covid and.
The implication for next year and site activation.
Have to go back to.
Maybe any hosting Elizabeth here, how the dynamic of opening an account and training of physician happens.
For the better stem therapy.
The gating item is not training.
Others.
That is overall in the entire scheme of things one of the simplest aspects of the deployment of our therapy clearly all procedure.
Stuff like a basic cut off the industrial ought to me and it's like a pacemaker procedure to medical ox steady well understood.
However, the.
The activation of the center.
Wyatt is having a centers' attention.
You have to create a coalition and take this.
Our products basically through the value assessment committee, the contracting process and everything around that and early in Q3, we saw a little bit of a slowdown.
But the speed picked up in September and we believe that what has happened and here is the excess or extra activities that we've seen in September in terms of site activation was mostly a shift from August to September.
That said you know.
As I mentioned previously I think in our last call.
Because we have a smaller number of sites overall in a smaller number of procedures because of the elevated average selling price point of our device.
We ended up being able to shift things set out when we have short lived spikes in COVID-19. So as long as future Covid spikes are similar to the desktop audience, so fast size fast.
D. K I think we will be able to whether it's in the future.
Okay. That's helpful and then pivoting over to Europe.
So far the U S has outperformed nicely even with all the COVID-19 headwinds.
Little bit surprised to know most companies in the space right now are talking about Europe, it's kind of been.
A little less.
By Covid and I understand you guys are really focused in Germany, but.
Why is that youre seeing a little bit more headwind.
And you're a U S business and then.
How should we think about some of those pressures abating here in Q4 and into next year.
Yeah, Yeah, great question, so in Europe.
Think the pressure is mostly specific to <unk>, we have hired Thomas hakes alert at the beginning of the year and he's building a very solid team in <unk>.
Germany.
Are adding as we speak in here.
Account managers in Germany.
That said it takes time for an account manager to become effective and owning the territory basically that's number one number two.
It's a decision within CVR acts and.
I'm not going to ask to your own opinion, but if I do I'm sure you'll agree with me on this one if I have $1 to spend in marketing right now what I spend it in the United States or.
Or in Germany.
The stage of our company right now invested in the United States, If I've got it got it and that's why what we're seeing right now you've got <unk> big opportunistic in Germany, but investing heavily in the United States now with things change.
Of course, as we start seeing some traction in Germany post COVID-19 and with the new team. We have in place that comes at a time when a dollar invested in Germany starts becoming interesting in terms of marketing and we will do so.
Got it very helpful. Thank you so much.
Thank you. Thank you. Thank you. Our next question comes from Margaret Kaczor with William Blair. Your line is open.
Hey, good afternoon, everyone and thanks for taking my question.
I wanted to follow up maybe a little bit on the implantation commentary that you have particularly on the U S. At one.
One point you had said it was the highest number you have some competition in a single day in history now I understand some of that's probably a little bit of catch up but what can you maybe comment on in terms of what you're seeing it in October and then anything you can comment on as well in terms of that patient lead.
Pipeline.
May or may not have been impacted by the delta there.
Yeah, Hey, guys. Thank you and thank you again for joining us today I know how busy you are.
As I mentioned earlier the.
Increased activity in September can be traced back to two components. One component is us as a company growing and we have done a phenomenal job in here.
Building a very solid.
Our U S sales force and our marketing organization and.
You know our VP of sales in United States is extremely kind of sporadic correct. Paul that has been able to attract really top notch talent in this space.
This is one component of our growth in September the second component.
We believe is a shift of some of the delayed procedures from August into September.
Now as we project forward to Q4 do we expect that type of strong month to continue and Dan said is no in our.
Our estimates for Q4, we're going back to the audit General plan, what we have seen in October is well aligned with our estimate of this plan.
But if if.
If I may here I, probably should turn to John to give you a little bit more guidance on that.
Q4 as well.
Got it.
Yes, Margaret I think I'll, just reiterate a little bit of what Dean said here in that.
What we're seeing so far in Q4 is a little bit back to steady state we saw a little bit of that funnel buildup. After procedures were delayed from August into September seeing that backlog get worked through in September and then getting back to steady state. So when we look to the Q4 guidance that we provided a three 9%.
$4 $5 million, it's not continuing at the same rates that we saw in September individually, but obviously continuing to grow the business quarter over quarter and as we move forward.
Okay.
That makes sense and then I.
I guess I wanted to follow also up on the PMA supplement and then kind of a subsequent approvals in the first half of 'twenty two.
We're looking forward, a little bit and I'm not asking for guidance, but just kind of big picture. It for me, yeah, how quickly or how material some of those approvals. These for you.
As you launched it.
Yeah. Thank you Margaret.
Mexico reality in terms of.
Increased sales due to those three PMA supplement we do not believe it won't be material.
We believe those three PMA supplement are crucial to the patients and the clinicians, but not major drivers for our growth the major drivers for our growth for 2022, we'll continue the buildup of territories.
And Activations of accounts now why are these three PMA supplement in the quarter and 12.
The simplified programming is crucial for the ability of health care providers to do the programming of patients without us being there that's particularly important after month six where we believe some of the patients will transition from having two needs.
Steve you had actually representative to be on site to support the program aims to allow the health care providers to do the programming without us they increase longevity of 20% the smaller size factor of the new IPG and.
The MRI conditional compatibility are very important for the patients now do we see any patients today, saying no. Thank you I don't want a better stand because I do not have those now.
So that's why.
I would not expect those PMA supplements to have a material impact on our growth, but its more of a material impact on the satisfaction of patients after getting the device.
Okay, Great and then just last question for me.
You touched on a little bit right. So what matters for 'twenty, two it's kind of that utilization when planning how do you.
We're bringing on.
I guess, it's difficult to say, let's call that to the best of your abilities have you been able to ramp some of the new accounts as fast as you would've liked.
And then you know as you look at some of the more historical accounts that you've had for a while.
Utilization trends there.
Definitely can adjusting for COVID-19.
Yes.
So.
We have a handful of accounts is.
Does that have achieved what we believe is our long term goals.
In terms of number of implants, if you recall, we always thought that.
We would like to see every account doing at least one better stent procedure per month and would like one territory to have five accounts doing that type of volume and we already have a handful of accounts at this level.
That said of the 34 territories, we have four active implanting accounts I'm sorry, we have.
31 of them or three of them have been activated in the last 12 months. So we don't have enough.
He is.
Java data.
To say.
For all sense of purpose, we can think of all of this active implanting accounts to date to be fresh.
Fresh and young because the vast majority of them.
Have been activated for less than 12 months.
Does this make sense.
Yeah, I'm, sorry, I need to correct itself.
34.
No I appreciate that that's right. Thanks again guys.
Thank you.
Thank you and our last question comes from the line of Bill Lu.
Bonnie with Canaccord Your line is open.
Great. Thanks, Good evening and thanks for taking my questions.
First off I, just like to start out is.
A big picture question.
<unk> now been commercial for a couple of years, you kind of you keep getting hit by Covid and all these different things, but I'm just.
As you continue to expand the number of territories.
Have you what are the learnings are what things have you had to change or <unk>.
<unk> implemented and adjust.
Outside of Covid.
You continue to expand to a bigger footprint if any.
Yeah.
Hey, Ben Good afternoon, and thank you again for joining us I know how busy.
Today is for you.
Listen.
Kevin mentioned.
Earlier Tonight, we asked.
Young organization now you mentioned two years.
Of commercialization.
Don't want to be rude and Kodak to you, but it's really one year to the first year of those two years were mostly us trying to get ready and then COVID-19 hit and shut down the entire country.
But over this year and what have we learned in change well I would say it has confirmed.
Our initial hypothesis.
The important thing here.
Number one having solid clinical data.
Well crafted message at all this data and drive with it at the end of the day.
Adoption is driven by a simple formula.
Is the procedure, creating.
More value.
To the different stakeholders.
Then the friction is creating to the different stakeholders and by stakeholders, who have the patients do you have the health care providers payers and so forth right and.
Everything that we initially did all of the planning so far.
It's working alright, so knock on wood all of those hypothesis about what type of physicians what type of conditions what type of centers.
Account targeting that we've done it.
It is working so we learned something dramatically that would make us change or shift direction right now I would say no we have not.
But have we confirmed what we thought would be the hypothesis I don't say, yes. So far these 12 months have been very.
Very good in terms of confirmation that you.
The system works by system I don't mean, the burst and we knew that barristan works, but the entire setup, it's working and we're able to grow as expected.
Okay and then the good so that means basically as you think about it you have the playbook and it just kind of methodically, adding territories and continuing to execute on the plan.
It's kind of the way I would think about it is that a fair way to think about it.
Exactly this is all about execution right now I mentioned, Greg Palmer Poker Austrian with how much think so we have a very solid sales and marketing leadership team and it's all right now for the foreseeable future about the execution. That's why you don't hear us talk about future indications or future R&D program. This is all about this.
Exactly this is all about execution right now I mentioned, Greg Palmer Poker Austrian with how much think so we have a very solid sales and marketing leadership team and it's all right now for the foreseeable future about the execution. That's why you don't hear us talk about future indications or future R&D program. This is all about this.
Playbook.
And repeating it and developing more and more territories and keep repeating it.
Okay, Great and then for Gary.
What are the drivers for the Q4 guidance revenue in terms of high end versus low end.
Hey, Bill Yeah happy to answer that question. So from a high end perspective, I mean, what we're really hoping to see in the fourth quarter is to see a little bit more of a return to normalcy from the European team a little bit faster traction than what we saw here in the third quarter, but then also continuing to see the number of active implanting centers.
N number of territories come online as expected.
With the lower end of the range for the revenue guidance I mean really it set up there so that if we do see another one of these spikes like we saw with Delta in the month of August in some high volume regions like in Florida, Georgia, Texas that a handful of procedures getting delayed from December into January it could push us tour.
The lower end of that number.
That's helpful. Thank you and then last question for me is just on R&D I mean that was a.
Pretty low number coming back to where we were.
First quarter of this year and maybe even back even below 2020, how should we think about kind of the R&D spend it, especially by the way with three P. M. A S filings that's pretty amazing.
How should we think about that spend considering.
I don't think you have any other PMA filings in the books.
Why would it tick up and what would drive a tick up in R&D as we go into fourth quarter and next year and that's all I had thanks.
Hey, Bill this is Jared I'll I'll address the first part of that maybe Nadeem can chime in at the end if he needs to anything but.
From an R&D perspective, it was lower in the third quarter with those three PMA supplement getting filed here in the last couple of months. Some of the work was being done in the month of October but a lot of that just turns into paperwork a lot of the actual development work and research that went into those filings was taking place in previous quarters and then it was just about getting the files.
Submit to FDA and then the other piece is really related to that wire and what we're seeing for enrollment and bad wire is that physicians are being cautious with the first patients that are being selected.
For the the implants in that.
Trial.
However, we are we are expecting the rest of the implants to start to pick up here in the fourth quarter and into 2022. So we will see some condensing of the spend that we had expected from the bat wire trial over the next four to five quarters.
Okay and is it fair to say you expect enrollment to be completed in that way or by the end of 2022.
We expect to collect all the data that's necessary by the end of 2023, which was the guidance that was expected or communicated previously related to that wire. So that we could submit for an approval in early 2024.
Great. That's all I had thank you very much.
Thanks, Bill Thank you.
At this time I'd like to hand, the conference back over to Nathan Yeah Ray for closing comments.
Yes. Thank you operator, and thank you Lillian Matthew Margaret and then for your questions today.
Thanks again, everyone for joining us for our third quarter earnings call.
We appreciate your ongoing support and we look forward to updating you on our progress on our next update.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
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