Q1 2022 Silk Road Medical Inc Earnings Call

May 4, 2022

Okay.

Good afternoon, and welcome to Silk Road Medical's first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.

We'll be facilitating a question and answer session towards the end of the call. As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to mortgage a bunch from the.

Gilmartin group.

For a few introductory comments. Please go ahead.

Thank you and thank you all for joining today's call.

Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating officer and felt that medical.

Earlier today Silk Road medical released financial results for the three months ended March 31 2022.

A copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1095.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

All forward looking statements, including without limitation, those relating to our operating trends and future financial performance.

Impact of COVID-19 on our business and prospects for recovery expense management expectations for hiring physician training and adoption growth in our organization and reimbursement market opportunity commercial and international expansion regulatory approval and product development are based upon our current estimates and various.

Great.

These statements involve material risks and uncertainties that could cause actual results or events to Macao.

<unk> differ from those anticipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements.

A list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our annual report on Form 10-K filed with the Securities and Exchange Commission on March 12.

<unk> 2022.

This conference call contains time sensitive information and is accurate only as of the live broadcast today may four 2022.

Silk road medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

Now I will turn the call over to Erica Rogers Chief Executive Officer.

Thank you Marisa good afternoon, and thank you all for joining us.

At Silk road, we have set out to compete and win against invasive surgery by establishing minimally invasive T car as the standard of care in stroke prevention.

We achieved clear progress in the first quarter of the year trading over 4000 patients a record quarterly performance for our company and recognizing $28 million in revenue, reflecting year over year growth of 27%.

As we noted on our fourth quarter earnings call, we experienced a challenging operating environment in January which persisted into February . However, we saw a marked improvement in daily D. T car procedures as we progressed into March and beyond.

Alongside T car procedure improvement, we have seen very strong clinician engagement return as pandemic related constraints have eased, including fewer COVID-19 hospitalizations.

While we remain cautious we are optimistic toward a continuously improving commercial environment.

Commensurate with this outlook, we now expect full year 2022 revenue to be in the range of $127 million to $132 million.

Reflecting year over year growth of approximately 28% at the midpoint of the range.

Lucas will provide greater detail on our performance and revenue outlook shortly.

Beyond our first quarter performance, we are tremendously excited to highlight the just in the past few days, we received FDA approval for the expanded indication of are on route Trans carotid stent system to include patients at standard risk for adverse events from Colorado.

Endarterectomy this expansion marks a major milestone for our company, our physician partners and most importantly patients with carotid artery disease.

The Fda's decision was based on compelling real world outcomes data on over 20000 standard surgical risk patients showing the T car had statistically equivalent stroke and death outcomes compared to tpa, while showing a nine fold reduction in cranial nerve injury C&I. These.

<unk> is yet to be published results alongside data on over 18000 T car patience in published peer reviewed journals confirmed the value proposition of our less invasive approach and its associated benefits, including shorter procedure times and length of stay routine use.

<unk> of local anesthesia and other important peri operative outcomes.

Our on routes that was previously approved for use only in patients with anatomic or physiologic criteria is it put them at higher risk for complications from invasive surgery, which is a sizable standalone market.

As a reminder, current data show that there are roughly 170000 annual procedures to treat carotid artery disease in the United States with roughly 110000 or about two thirds of those procedures performed in high surgical risk patients.

Inverting those high risk procedures from CEO to T car has been our core focus since coming to market and we have made strides in treating this large segment of the patient population.

With the expanded indication we now have access to an even greater immediately addressable opportunity of an additional roughly 60000 patients per year within our total conversion opportunity of approximately $1.2 billion in the United States.

Moreover.

We expect label expansion to allow physicians to make clinical decisions in the best interest of all patients truly leveling the playing field between CA and T car and further reducing the barriers to procedural adoption.

That said adoption will also rely on our efforts to educate and build awareness in the referring in treating physician community.

As such we will be investing substantial time and resources and marketing efforts specific to standard surgical risk label expansion. We are already educated our sales team and we have updated our messaging marketing and education tools are direct print and digital communication strategies will highly.

Light physician empowerment to choose what is best for each and every patient.

We also intend to initiate more tools aimed at patient education through stories and testimonies of the benefits of a less invasive approach.

And as an immediate next step we are working to expand Medicare coverage for T car to include standard surgical risk patients through the national coverage determination.

Now turning back to our primary objective for this year continuing to drive U S T car adoption.

We remain laser focused on increasing penetration of the large and still untapped pool of carotid procedure volume.

As a reminder, we finished 2021 with a presence in nearly 1000 hospital accounts that performed the majority of carotid procedures in the United States with a critical mass of over 2000 trained physicians physicians served by 58 active sales territories.

As we stated prior we intend to continue building towards $70 to 75 territories and another 200 to 300 physicians trained in 2022.

As the impacts of the pandemic recede. This critical mass is bearing fruit approaching nearly 10% penetration of the U S carotid procedure volume.

Given the large untapped procedure market opportunity in the U S and our new FDA label expansion, our priority is U S commercial execution relative to certain international efforts.

We continue to pursue regulatory approvals in China, and Japan, However, now intend to reduce the significant resources associated with compliance with the European Union Medical device directive and the European Union medical device regulation, resulting in a likely left of our CE Mark.

As a reminder, we do not currently assume any contribution from sales in Europe in our financial outlook.

And with our enhanced opportunity to drive domestic adoption through standard surgical risk patient access we are confident that efforts toward sustainable double digit U S growth offer the strongest return on investment.

Finally, turning to our development pipeline.

Additional trans carotid technologies hold the potential to solve difficult clinical problems in the treatment of complex neuro vascular and cardiac disorders.

We recently received FDA approval to expand inclusion criteria for our night, one I'd E feasibility trial related to stroke treatment effectively increasing our ability to enroll and learn from this study.

In addition to our neurovascular efforts over the next 12 to 24 months, we expect to add new stent sizes and configurations improvements to our neuro protection system and a dedicated balloon catheter purpose built for T car.

In summary, we are making strides against our 2022 goals while building upon the foundation for strong sustainable growth into the years ahead.

I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.

Thank you Erica revenue for the three months ended March 31, 2022 was 28.0 million.

27% increase from $22 1 million in the same period of the prior year.

Growth was driven primarily by growing <unk> adoption.

The number of <unk> procedures in the quarter was approximately 4025, representing a 35% increase from the same period of the prior year.

Outpacing year over year revenue growth.

As Eric mentioned daily Teacart procedures, and physician engagement levels improved over the course of the first quarter.

In fact physician productivity measured by procedures per trained physician per month increased significantly when comparing March to January .

We are also pleased to share that the regional variability we've experienced in our business over the last two years has diminished measurably.

Our progress signal not only improvement in the operating environment, but that our efforts to drive utilization are working.

We continue to expand our sales force in order to increase touch points with our concentrated group of trained physicians.

Particularly as our opportunity set expands as a result of label expansion.

Gross margin for the first quarter of 2022 was 69% compared to 75% in the first quarter of the prior year.

Gross margin was primarily impacted by unfavorable variances due to COVID-19 production related issues.

As we mentioned on the Q4 call. We are now also incurring overhead associated with the startup of our manufacturing footprint in Minnesota.

Which should begin producing commercial units in the second half of 2022 upon completion of the manufacturing validation.

Yes.

We continue to expect slightly lower full year 2022 gross margin as compared to 2021, though we expect a sequential improvement into the second quarter.

Total operating expenses for the first quarter of 2022 were $35 4 million or 33% increase from $26 7 million in the first quarter of 2021.

R&D expenses for the first quarter of 2022 were $8 1 million compared.

Compared to $5 5 million in the first quarter of 2021.

The increase in R&D expenses was driven primarily by growth in personnel and investment in new and ongoing R&D programs.

Sales general and administrative expenses for the first quarter of 2022, or $27 3 million compared to $21 2 million in the first quarter of 2021.

The increase in SG&A costs was primarily due to the continued expansion of our sales team and commercial efforts.

We expect operating expenses to increase sequentially by approximately 10% in the second quarter, primarily due to an increase in noncash stock based compensation expectations and as we continue to balanced pipeline and infrastructure investments to drive <unk> adoption with other investments geared towards the international in new disease State.

<unk> opportunities.

We expect more modest sequential increases into Q3 and Q4 with our primary focus remaining on U S commercial execution.

Net loss for the first quarter was $16 7 million or a loss of <unk> 48 per share as compared to a net loss of $10 7 million or a loss of <unk> 31 per share for the same period of the prior year.

We ended the quarter with $93 $6 million of cash and cash equivalents.

Turning to our commercial strategies as Eric discussed earlier, we continue to focus on driving procedural adoption through increased engagement with our trained physician base.

We are on track toward our goal of trading two to 300, new physicians in 2022 and the improvement we have seen in operating conditions is serving as a tailwind to productivity for newly trained physicians.

As well as those trained throughout the pandemic.

We are also on track towards our goal to end the year with 70 to 75 active sales territories.

Our efforts are broadly aimed at driving the U S. T car adoption curve, including laying the foundation for more meaningful penetration into the standard surgical risk population in 2023 and beyond.

As we have indicated in the past, we believe utilization of the standard surgical risk patient population will be gradual once Medicare coverage is in place as we build traction through awareness and education efforts.

Lastly, we are updating our 2022 revenue guidance.

Eric had mentioned, we now anticipate revenue to be in the range of $127 million to $132 million representing year over year growth of 28% at the midpoint of the range.

We are also increasingly confident that our physician base will perform over 17500 procedures. This year.

Which would imply just 10% penetration of <unk> into the total U S. Carotid procedure market using a 169000 U S carotid procedures in 2021 as the denominator.

And just 4% of <unk> into the annual U S carotid artery disease diagnosis pool.

We are excited by our recent label expansion and our significant investments in infrastructure and the commercial engine to date and we see durable growth for many years to come and our wide open untapped market opportunity. Thank.

Thank you Lucas.

Reflecting on our label expansion. We believe the time is now to do what we set out to do from the start established <unk> as the standard of care in the treatment of carotid artery disease.

Particularly as we enter the month of May stroke awareness month, we believe all eligible patients deserve access to the minimally invasive option as highlighted by the story of Donna <unk>.

T car patient.

Donna experienced several transient neurological symptoms and after evaluation it was determined she needed carotid revascularization.

But dana was nervous because yours prior sheet undergone CA on the opposite side of <unk>.

<unk>, which left her with an extended stay in the hospital a week off of work and both visible facial nerve damage and scarring.

This time for her carotid revascularization on the second side Sheehan, our surgeon chose T car.

The procedure was a success and she walked out of the hospital. The next day feeling great ready to return to work no nerve damage and a tiny scar.

As Don as husband put it quote the two procedures, where night and day.

That's why this year more than ever before we are promoting the clear benefits of key car to providers and as importantly to patients from this minimally invasive approach, we know that when given a balanced choice patients choose CCAR oversee nearly every time.

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We will now open the line up to questions operator.

Thank you.

As a reminder, ladies and gentlemen 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.

<unk>.

<unk> Jpmorgan your line is open.

Hi, everyone. This is robin on for Robbie.

Thanks, so much for taking the question and congrats on the approval and a good quarter.

Looking at the guidance I guess you increased the low end of the range slightly.

And would you be able to walk us through the puts and takes behind the new guidance range.

Are you assuming any further COVID-19 headwinds our supply chain issues and could you see some standard risk revenue contribution this year.

Robin.

Yes.

Yeah, Hi, Ryan first of all thanks, so much.

For joining US yes, we're really pleased with the approval as you can imagine.

So on 2020 to look I think it's safe to say that the approval or for standard surgical risk label expansion came.

In line with our expectations and therefore, we'd kind of already thought through the impact for the year first step there is of course to obtain coverage.

So the real marketing and commercial efforts will begin once coverage is in place.

And I'll, let lukas sort of take the rest of that guidance range.

Everyone. Thanks for the question.

You are correct, we've essentially raised the bottom end of the prior guidance range.

We do expect overall conditions to continue to improve we've kind of factored in normal seasonality. There still is ongoing kind of friction related to labor and staffing and hospital resources.

All companies are still working through in all hospitals are still working through some of that is factored in.

And it's early in the year and we are optimistic but all those variables are at play.

Great. Thank you.

Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Hi, Erika Hi, Lucas This is John on for Rick Once again, congrats on the standard risk label expansion.

That's the first thing I'll hit on here I'm, just kind of curious you've talked about integrating all these marketing materials already but Erika just from you have kind of curious how does this change the doctor patient conversation how does this change the salesperson to doctor conversation.

That'd be great. Thanks.

Yes, sure John and thanks for joining us.

We couldnt be more excited about all of the things that you are just talking about I think it changes the conversation substantially first and foremost we spent a lot of time since our launch in late 16, and early 17, educating physicians on what high surgical risk criteria or.

Because as you might remember vascular surgeons don't typically divide their universe into high surgical risk in standard surgical risk every patient is at risk of a stroke and every patient is at risk from a complication from surgery and their view and so these are contracts that are in place around FDA approvals and around reimbursement.

So we've had to do kind of the heavy lifting of talking about each and every one of these criteria. So now the conversation changes substantially John we no longer have to differentiate is simply what is best for this patient standing right in front of you today and Thats really what were reflecting in our mark.

<unk> and messaging is that this puts the power to choose back in the hands of the clinician and the patient as opposed to a decision that is based on.

<unk> and coverage.

And then in terms of the Doctor go ahead, you shouldn't relationship just just adding one more thing there John .

Same thing on the Doctor patient relationship in fact, I can tell you that I've had surgeons tell me firsthand you I'd love to do this I'd love to duty car in this patient, but I don't have a high surgical risk criteria. So now imagine that physician can simply talk about first and foremost the body of evidence around CCAR the real world.

Evidence that supported the label expansion, that's super important when youre talking to patients.

And the over 18000 patients' worth of published data that supports this decision by the physician and their patients.

Great. That's Super helpful. Eric and then just one more I guess I have to ask about gross margin here.

Honestly, a sharp decline from the prior quarter.

Could you just kind of walk me through what we could be looking at for sequential improvement throughout the year and if integration accretion of this plan will actually help drive meaningful gross margin expansion in the future.

<unk> prior levels, thanks for taking my questions.

Sure sure John No problem. So so short answer to the latter part of your question is yes, right, we're putting capacity in place in anticipation of our future growth and having the risk mitigation of two facilities, but as we increase the units per facility, we will get those gross margin gains.

Over time right now, we're not producing any commercial units, but we're carrying the overhead of the employees. We've hired in the indirect labor in the in the space itself in Minnesota and going through training and ultimately manufacturing validation.

So that will likely come online in the second half of the year. The other factor at play in Q1 was really the <unk>.

<unk> that a large percentage of our production workforce was out sick with COVID-19 in Q1 and that produced some variances that we essentially had to expense versus capitalized I think absent that effect, which hopefully is transient we're not dealing with that in the future.

We probably would've been in the 72% to 73% range.

Without that effect, if that's if that's helpful.

Thank you. Our next question comes from Danielle <unk> with.

<unk> Securities go ahead.

Thank you so much good afternoon, guys. Thanks for taking the question.

Erika if I could since you did just get standard risk approval.

Your brain a little bit about.

What that means for the untreated patient if anything the untreated patient population today, obviously, the low hanging fruit here as the 170000 or so patients severe credit Ah patients that are getting an intervention, but theres a very large number of these patients sitting out there just being managed medically curious now that you have the.

Full slate of approvals here from the from a risk perspective.

This will allow you to go after that untreated patient population in any way shape or form in the near to me even medium term.

Hi, Danielle I'm glad you asked that question. So the first thing that you highlighted was really the main point, which is there were 170000 patients treated to date.

And we are.

Going after those right sitting here at roughly 10% penetrated based on our guidance for the year and so that's really the low low hanging fruit is get after those patients who are already treated but as we've seen in lots of other medically managed disease states as we lower the.

Morbidity and mortality associated with the treatment of that disease, we do see the aperture expand around patients who could be treated and the medically manage patient population. We know it looks roughly the same honestly is the patients who are treated and so I think this is just one more.

Our tailwind to ultimately get at driving expansion into the medically managed patient population, but our focus today is on converting the already treated.

Okay got it and just.

Look as a quick follow up question for you on gross margins and.

Just.

The question around a lot of.

Inflationary pressures here curious if you guys are exposed to there in any way shape or form that could impact your ability to see gross margin improve in Q2, and then as we move through the year. Thanks, so much.

Thanks for the question, Danielle, obviously, a hot topic and.

And the sector and internally here at Silk Road.

Our team has done a fantastic job of working with our vendors and suppliers and we've always been.

Kind of aggressive in buying forward in anticipation of our growth, but more recently in.

In context of the inflationary and supply chain pressures.

So so far so good.

But we're managing it very closely we see more impact near term.

Really around some of our R&D components and materials, where we've had some some pressures there but on the manufacturing side.

We've done a good job managing it but.

Yes.

A core focus of the folks in this.

Supply chain team to continue to manage it.

Thank you.

Thank you. Our next question comes from Adam <unk> with Piper Sandler Your line is open.

Great Hi, Erika Hi, Lucas Thanks for taking my questions and congrats on the approval and start to the year.

Maybe we can just start on reimbursement for standard surgical risk.

I'm not sure if I heard this in the prepared remarks, but how are you guys thinking about Medicare reimbursement timing kind of what's your base case assumption there in terms of when that will be in place.

And then on the post market approval study.

I think you are calling that roadster three my understanding is 400 patients maybe just talk about trial design and any associated costs that we should expect with that study and then I had a couple of follow ups. Thanks.

Sure Adam Thanks for joining us I'll take the part on.

On reimbursement in our work with CMS. So as we've talked about before we brought all the constituents along really from day, one but certainly in this conversation around standard surgical risk and that is the FDA. The society of vascular surgery, and CMS and we have thought all along to make sure that we are answering.

Are there questions and meeting their needs. So the conversation has been ongoing.

As a reminder, in sorted for context high surgical risk cover.

Coverage through the CCAR surveillance project took a few months and so we don't have any reason to think that standard surgical risk, we'll take any longer than that and so we believe Adam it's a matter of months.

The next step here really will be the announcement of that coverage. So we will be working on it behind the scenes.

Now in terms of roadster three it's an important question also in the context of coverage because roadster three will be a covered trial under the current national coverage determination paradigms and that study will be a prospective single arm open label trial post approval studies looking at up to.

400 patients in up to 60 sites.

The primary endpoint is stroke death, and am I at 30 days and we will look at ipsilateral stroke same side stroke.

At one year.

And Adam I'll add some kind of expense detail to that side of your question, but first on reimbursement Erika talked about coverage I just want to make clear that the coding and payment levels already exists. So there is no incremental work to do there it's really all about coverage.

In standard surgical risk patients.

Generally speaking in trials that study that patient population. The average age is 69 to 70 versus high surgical risk trials, where it's 72 to 73, so still squarely in the Medicare age population.

Back to my prepared remarks on Opex, we expect roughly 10% step up in Q2, some of Thats driven by noncash stock comp expense as I explained, but some of it for grants that were made in March the full quarter effect some of it was.

R&D timing and some of it is the full quarter effect of upfront half in one quarter first quarter biased hiring schedule.

But as we get to more modest increases in Q3 Q4 that part of my comments, that's inclusive of our expectations around the cost of executing the roadster three trial and the kind of per patient enrollment costs and we've obviously got.

A team built to execute that trial as well as the vendors involved in that trial.

Okay.

Very clear I appreciate the fulsome response, and I actually have two follow ups. If that's okay. The first is just on the topline and I apologize for kind of the.

The near term question here, you, obviously have full full year guidance in place, but curious.

As we should how we should be thinking about Q2 in our models I show The street at 31 million for Q2, I don't know if you have any reaction to that I think it's 10% to 11% quarter over quarter growth and then just broad strokes, how do we think about kind of quarterly cadence throughout the duration of the year and then I had one quick follow up thanks.

Yes.

Quite simply at the end of the day growth comes from driving penetration of <unk> into the market, right, which which we do kind of.

Single rapid single Doctor adoption curve level that all rolls up obviously, we're all hopeful that Q2 is not.

Impacted as much as January and February were in Q4 of last year.

So that's that's great and.

So we're looking forward to two leveraging that critical mass we have built and obviously we continue to have.

New territories, new trained physicians come online spread spread over the year.

Okay, Great and maybe just one last one for me and it's it's on international.

It's a two parter.

It's not that brief so apologies but.

Just any update on your progress in China, and Japan, and then the second part of the question is really.

<unk>.

On the decision to let the CE Mark labs.

Maybe just give us kind of a.

Little bit more insight into that decision a snapshot of the market opportunity or Tam for Europe , and then I just think that'd be helpful to kind of frame that against.

Youre deciding to push yet, Japan, and China, Florida. Thanks, so much for taking the questions.

Sure Adam So on Japan, and China, we continue to make steady progress on those regulatory approvals and of course, there is a regulatory and reimbursement.

And both of those countries, but we are making steady progress we feel good about where we stand there on Europe , we have put substantial time and thought.

Hi, and this decision to let.

The MTR sort of lapse as you've probably heard from others the law.

Lift is heavy.

And we prefer to put our focus and our energy and our efforts into things that drive.

Our bias towards Asia Pacific and certainly toward U S T car adoption.

On the Tam question the reason for the bias.

Around China and other Asia Pacific regions is really just that I mean, it's a much more substantial opportunity for us not only in the way that patients are treated.

The importance on the prevention of stroke, but also in the pricing paradigm and so these markets are just substantially more important across the board.

Just quickly add Adam that the countries in Europe and other parts of the world.

We'll definitely get to overtime right. This is this is.

Something that is kind of a near to intermediate term decision, but when were at scale. We will have we will have the capability to go after some of those other markets.

And a much better fashion, yes.

Okay, great. Thanks, again for taking the questions.

Thanks, Adam.

Yeah.

Thank you. Our next question comes from Michael <unk> with Wolfe Research. Your line is open.

Hi, Good afternoon. Thank you for taking my question.

I understand you don't have 23 guidance and I'm not asking for it.

But I'd love a little help on is how to how to dream. The dream here of how the standard.

Risk approval layers into utilization.

Nation say next year is it all comes together reimbursement gets established you're stepping on the accelerator on marketing Youre expanding the sales force.

It really does sound like there could be a hockey stick like movement in utilization say sometime in calendar 'twenty, three I'm not going to hold feet to the fire, but how would you frame mathematically for for us in our seed.

That potential is there.

Another product in Med Tech <unk> study that said Hey look this development in CCAR it looks like that and we could go study that and watch how it kind of evolved over time or is there some.

On the ground tidbits from.

Physicians on feedback like Hey, I could be doing so much more.

Had this label and how that might look.

Quantitatively I, just I'd love, a little a little bit of help in thinking about what could happen to revenue in 'twenty three 'twenty four.

<unk>.

Sure Mike Thanks for joining us I'll give you a few qualitative observations really which is first of all I've been out talking to our customers a lot lately. Thank goodness right.

Restrictions have lifted and ive been out facing our customers quite regularly and I can tell you that the excitement is palpable.

The physician community, it's been ready and waiting for standard surgical risk. So that they can do the things we talked about which is what is right for each of these patients.

So there is great enthusiasm the other thing the other observation is we've looked at our own data and what we know is that physicians gain their comfort with T car over time. So there are kind of two things that work in our favor one is youth young.

Younger physicians lean in earlier and faster because they come out of their fellowships key.

T car trained in Endovascular trained and the other thing is experience and we know from our own data that experience leads to greater adoption. We've talked about this a lot right. There is that early part of the learning curve. Those first 10 to 15 cases, where physicians are frankly, gaining their comfort level and gaining their ability to.

Predict how T car performs in their hands versus CEO , and we know that the ability to predict an outcome is really important to these physicians. So this is sort of a long winded way of saying, Mike that time is our friend and as as our big cohorts of physicians the ones trained in.

In the back half of 2019 throughout the pandemic 2000, 22021, where their hands were tied behind their back because of the pandemic all of these physicians coming into their own on T car.

Over time and as we approach 2023.

Good color.

Maybe one or two follow ups, perhaps for Lucas at least this next one.

Just as I do the revenue in the quarter and the volume, which you disclosed is just over 4025 cases, and then I can impute revenue per which isn't necessarily your ASP, but.

A number that I can back into it looks like that revenue per steps down sequentially year on year and I was hopeful hoping just for a bit of commentary as to why that might be why I'm seeing what I am seeing if im running the math wrong then.

Happy to receive that comment as well.

No. Thank you Mike its a very insightful question and we did see a dip let me assure you first that asps continue to be very strong. So the dip was not in asps that was in revenue in the period divided by procedures in the period and I think it's a couple of things kind of on the margin.

Obviously.

Finishing the year strong and making sure our hospitals were at their par levels heading into Q1, where it was still significantly omicron affected in January and February that means they are probably not utilizing as many units on the shelf that they otherwise could have been and we've seen in the past kind of slightly more conservative.

<unk> ordering patterns and then we get into March which was a strong utilization months and some of Thats just a timing effect those replenishment orders will come in Q2. So at the end of the day, it's probably mostly timing related and I would expect it to kind of normalize.

In Q2 and beyond.

If I can do one last one.

Financing and balance sheet and during a period of kind of.

Again pedal to the metal on growth and executing against the standard risk expansion do you feel comfortable with the $95 million on the balance sheet that you have plenty of flexibility to operate the next year or two or three here.

Yes look I mean, obviously, we're very focused on creating shareholder value, which which starts first and foremost by by driving top line growth.

We are well funded to drive that growth and we're committed to maintaining our well funded.

Position there is no immediate financing needs, we've got again, a critical mass of.

<unk> docs and hospitals and reps to really drive operating leverage tier forward.

But we're always keeping an eye open for <unk>.

Options to bolster our balance sheet, so that we're prepared if and when the opportunity is right.

Thanks for taking the questions.

Thank you and our last question comes from Javier <unk> with Spartan capital. Your line is open.

Hello, everyone and a higher <unk> and hi, Lucas Thanks for having me on.

Yes.

The good news this week with an ROE expansion, so standard risk patients.

Does this affect our SG&A going forward.

Should investors expect the higher expenditure to reach.

<unk> portion of our patients.

Patients or.

Is it better to understand this.

The commercial build out.

How is already considered the possibility of addressing a larger market.

Hi, Javier Thanks for the question, Yes, very good question. So we've been planning for success, all along and the high surgical risk patient population.

As significant as Erica talked about right and so building our coverage model for that patient population pencils out really nicely and then essentially we've layered on the last one third of the market.

But we don't need it's the same referral channel. It's the same physicians. It's the same rep coverage and so there's a lot of leverage there of investments we've already made and plan to make this year and beyond we just have a larger addressable market opportunity to go after.

Excellent.

Another just another question I know you said it earlier, but as far as now with the standard risk patients being eligible for T. Core how does that use the total just mark as far as the market size.

Yes. So great question. So there are roughly 170000 carotid procedures that pencils out to a $1 $2 billion market.

It's really split roughly two thirds, one third two thirds high surgical risk one third standard surgical risk.

That's kind of a black and white answer, but but patient sitting in front of physicians thats really a spectrum of risk right as Eric had mentioned they don't really delineate that clearly, but but quite simply we now have access to the full $1 $2 billion opportunity. If we zoom back we know that the practice.

A medicine is conservative because for 70 years.

Gold standard treatment has been an invasive surgery that carries a complication rate, including stroke death, and MRI and permanent nerve injury and all the rest so it's conservatively applied.

But the full market opportunity as measured by the diagnoses annually of critical carotid artery stenosis is.

$3 1 billion, so $1 2 billion of that is treated and $1 9 billion.

Represents patients that look similarly to the patients that are treated or could be treated in the years ahead and we've now got.

Lessons saltine lower complication minimally invasive procedure, where we think we can we can tap into some portion of that market over time, and then I'll just finish by saying that.

The demographics are also.

In our favor here just the this is a disease of the elderly.

The U S population.

Has a pipeline of more and more elderly patients coming into their Medicare age.

And sadly the drivers of cardiovascular disease are still there and certainly COVID-19 has brought that to light and there are a lot of <unk>.

Increased efforts around screening and diagnosis of all sorts of cardiovascular problems.

Okay.

So taking my question and congrats again on the great quarter.

Thanks, Javier Thank you Javier.

Thank you at this time I would like to turn the call back to Erica Rogers Chief Executive Officer for any closing comments.

Thank you all for joining us for this very exciting quarter.

This concludes today's conference. Thank you for participating you may now disconnect.

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Good afternoon, and welcome to Silk Road Medical's first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.

We will be facilitating a question and answer session towards the end of the call. As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to <unk> from <unk>.

Gilmartin group.

For a few introductory comments. Please go ahead.

Thank you and thank you all for joining today's call. Joining me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating officer on South broad medical.

Earlier today Silk Road medical released financial results for the three months ended March 31 2022.

A copy of the press release is available on the company's website.

Any statements contained in this call that relate to expectations or predictions of future events.

Or performance are forward looking statements.

All forward looking statements, including without limitation, those relating to our operating trends and future financial performance.

The impact of COVID-19 on our business and prospects for recovery expense management expectations for hiring physician training and adoption growth in our organization and reimbursement market opportunity commercial and international expansion regulatory approval and product development are based upon our current estimates and various.

Option.

These statements involve material risks and uncertainties that could cause actual results or events.

<unk> differ from those anticipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties.

Okay and with our business. Please refer to the risk factors section of our annual report on Form 10-K filed with the Securities and Exchange Commission on March <unk>.

2022.

This conference call contains time sensitive information and is accurate only as of the live broadcast today may four 2022.

<unk> medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or.

Or otherwise.

Now I will turn the call over to Erica Rogers Chief Executive Officer.

Thank you Marisa good afternoon, and thank you all for joining us.

At Silk road, we have set out to compete and win against invasive surgery by establishing minimally invasive T car as the standard of care in stroke prevention.

We achieved clear progress in the first quarter of the year treating over 4000 patients a record quarterly performance for our company and recognizing $28 million in revenue, reflecting year over year growth of 27% as.

Alongside key car procedure improvement, we have seen very strong clinician engagement return as pandemic related constraints have eased, including fewer COVID-19 hospitalizations.

While we remain cautious we are optimistic toward a continuously improving commercial environment.

Commensurate with this outlook, we now expect full year 2022 revenue to be in the range of $127 million to $132 million, reflecting year over year growth of approximately 28% at the midpoint of the range Lucas will provide greater detail on our performance and revenue outlook shortly.

Erotic endarterectomy.

This expansion marked a major milestone for our company, our physician partners and most importantly patients with carotid artery disease.

The Fda's decision was based on compelling real world outcomes data on over 20000 standard surgical risk patients showing the key car had statistically equivalent stroke and death outcomes compared to tpa, while showing a nine fold reduction in cranial nerve injury C&I.

Is yet to be published results alongside data on over 18000 T car patients.

In published peer reviewed journals confirmed the value proposition of our less invasive approach and its associated benefits, including shorter procedure times and length of stay routine use of local anesthesia and other important peri operative outcomes.

Our onwards that was previously approved for use only in patients with anatomic or physiologic criteria that put them at higher risk for complications from invasive surgery, which is a sizable standalone market. As a reminder, current data show that there are roughly 170000 annual procedures to treat carotid.

<unk> disease in the United States with roughly 110000 or about two thirds of those procedures performed in high surgical risk patients.

Converting those high risk procedures from CEO to T car has been our core focus since coming to market and we have made strides in treating this large segment of the patient population.

Moreover.

We expect label expansion to allow physicians to make clinical decisions in the best interests of all patients truly leveling the playing field between CA and T car and further reducing the barriers to procedural adoption.

That said adoption will also rely on our efforts to educate and build awareness in the referring in treating physician community.

As such we will be investing substantial time and resources and marketing efforts specific to standard surgical risk label expansion. We have already educated our sales team and we have updated our messaging marketing and education tools.

Our direct print and digital communication strategies will highlight physician empowerment to choose what is best for each and every patient.

We also intend to initiate more tools aimed at patient education through stories and testimonies of the benefits of a less invasive approach.

And as an immediate next step we are working to expand Medicare coverage for key car to include standard surgical risk patients through the national coverage determination.

Now turning back to our primary objective for this year continuing to drive U S T car adoption.

We remain laser focused on increasing penetration of the large and still untapped pool of carotid procedure volume.

As we've stated prior we intend to continue building towards $70 to 75 territories and another 200 to 300 physicians trained in 2022.

As the impacts of the pandemic recede. This critical mass is bearing fruit approaching nearly 10% penetration of the U S carotid procedure volume.

Given the large untapped procedure market opportunity in the U S and our new FDA label expansion, our priority is U S commercial execution relative to certain international efforts.

As a reminder, we do not currently assume any contribution from sales in Europe , and our financial outlook.

Finally, turning to our development pipeline.

Additional trans carotid technologies hold the potential to solve difficult clinical problems in the treatment of complex neurovascular and cardiac disorders. We recently received FDA approval to expand inclusion criteria for our night one season.

Feasibility trial related to stroke treatment effectively increasing our ability to enroll and learn from this study.

In addition to our neurovascular efforts over the next 12 to 24 months, we expect to add new <unk> sizes and configurations improvements to our neuro protection system and a dedicated balloon catheter purpose built for key car.

In summary, we are making strides against our 2022 goals while building upon the foundation for strong sustainable growth into the years ahead.

I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.

Thank you Erica revenue for the three months ended March 31, 2022 was 28 zero million, a 27% increase from $22 1 million in the same period of the prior year.

Growth was driven primarily by growing <unk> adoption.

The number of <unk> procedures in the quarter was approximately 4025, representing a 35% increase from the same period of the prior year and outpacing year over year revenue growth.

As Eric mentioned daily Teacart procedures, and physician engagement levels improved over the course of the first quarter.

Fact physician productivity measured by procedures per trained physician per month.

Increased significantly when comparing March to January .

We are also pleased to share that the regional variability we've experienced in our business over the last two years has diminished measurably.

Our progress signals not only improvement in the operating environment, but that our efforts to drive utilization are working we continue to expand our sales force in order to increase touch points with our concentrated group of trained physicians.

Particularly as our opportunity set expands as a result of label expansion.

Yeah.

Gross margin for the first quarter of 2022 was 69% compared to 75% in the first quarter of the prior year.

Gross margin was primarily impacted by unfavorable variances due to COVID-19 production related issues.

As we mentioned on the Q4 call. We are now also incurring overhead associated with the startup of our manufacturing footprint in Minnesota.

Which should begin producing commercial units in the second half of 2022 upon completion of the manufacturing validation.

We continue to expect slightly lower full year 2022 gross margin as compared to 2021, though we expect a sequential improvement into the second quarter.

Total operating expenses for the first quarter of 2022 were $35 4 million or 33% increase from $26 7 million in the first quarter of 2021.

R&D expenses for the first quarter of 2022 were $8 1 million compared to $5 5 million in the first quarter of 2021.

The increase in R&D expenses was driven primarily by growth in personnel and investment in new and ongoing R&D programs.

Sales general and administrative expenses for the first quarter of 2022, or $27 3 million compared to $21 2 million in the first quarter of 2021.

The increase in SG&A costs was primarily due to the continued expansion of our sales team and commercial efforts.

<unk> market opportunities.

We expect more modest sequential increases into Q3 and Q4 with our primary focus remaining on U S commercial execution.

Net loss for the first quarter was $16 $7 million or a loss of <unk> 48 per share as compared to a net loss of $10 7 million or a loss of <unk> 31 per share for the same period of the prior year.

We ended the quarter with $93 $6 million of cash and cash equivalents.

Turning to our commercial strategies as Eric discussed earlier, we continue to focus on driving procedural adoption through increased engagement with our trained physician base.

We are on track toward our goal of trading two to 300, new physicians in 2022 and the improvement we have seen in operating conditions are serving as a tailwind to productivity for newly trained physicians as.

As well as those trained throughout the pandemic.

We are also on track towards our goal to end the year with 70 to 75 active sales territories.

Our efforts are broadly aimed at driving the U S. T car adoption curve, including laying the foundation for more meaningful penetration into the standard surgical risk population in 2023 and beyond.

Lastly, we are updating our 2022 revenue guidance as Eric mentioned, we now anticipate revenue to be in the range of $127 million to $132 million.

Representing year over year growth of 28% at the midpoint of the range.

Are also increasingly confident that our physician base will perform over 17500 procedures. This year.

Which would imply just 10% penetration of <unk> into the total U S. Carotid procedure market using a 169000 U S carotid procedures in 2021 as the denominator.

And just 4% of <unk> into the annual U S carotid artery disease diagnosis pool.

Lucas.

Reflecting on our label expansion. We believe the time is now to do what we set out to do from the start established <unk> as the standard of care in the treatment of carotid artery disease, particularly as we entered the month of May stroke awareness month.

We believe all eligible patients deserve access to the minimally invasive option as highlighted by the story of Donna our recent CCAR patient.

Donna experienced several transient neurological symptoms and after evaluation it was determined she needed carotid revascularization.

But dana was nervous because yours prior she had undergone a CA on the opposite side of surgery, which left her with an extended stay in the hospital a week off of work and both visible facial nerve damage and scarring.

This time for her carotid revascularization on the second side Sheehan, our surgeon chose T car the.

Procedure with a success and she walked out of the hospital. The next day feeling great ready to return to work no nerve damage and a tiny scar.

As Don as husband put it quote the two procedures, where night and day.

Time.

We will now open the line up to questions operator.

Thank you.

And our first question comes from Robbie Marcus with.

<unk> Jpmorgan your line is open.

Hi, everyone. This is robin on for Robbie Thanks.

Thanks, so much for taking the question and congrats on the approval and a good quarter.

Looking at the guidance I guess you increased the low end of the range slightly.

Would you be able to walk us through the puts and takes behind the new guidance range.

Are you assuming any further COVID-19 headwinds our supply chain issues and could you see some standard risk revenue contribution this year.

Thanks.

Yeah, Hi, Ryan first of all thanks, so much for.

For joining US yes, we're really pleased with the approval as you can imagine.

So on 2020 to look I think it's safe to say that the approval for standard surgical risk label expansion came.

In line with our expectations and therefore, we'd kind of already thought through the impact for the year first step there is of course to obtain coverage.

So the real marketing and commercial efforts will begin once coverage is in place.

I'll, let lukas sort of take the rest of that guidance range.

Everyone. Thanks for the question you are correct, we've essentially raised the bottom end of the prior guidance range.

We do expect overall conditions to continue to improve we've kind of factored in normal seasonality. There still is ongoing kind of friction related to labor and staffing and hospital resources that all companies are still working through in all hospitals are still working through some of that is factored in.

<unk>.

And it's early in the year and we're optimistic but all those variables are at play.

Great. Thank you.

Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Hi, Erika Lucas this is John on for Rick Once again, congrats on the standard risk label expansion I guess, that's the first thing I'll hit on here I'm, just kind of curious you've talked about integrating all these marketing materials already but Erika just from you have kind of curious how does this change the doctor patient conversation.

How does this change the salesperson to Doctor conversation.

That'd be great. Thanks.

Yes, sure John and thanks for joining us.

Look we couldnt be more excited about all of the things that you are just talking about I think it changes the conversation substantially first and foremost we spent a lot of times since our launch in late 16, and early 17 educating physicians on what high surgical risk criteria are.

So these are contracts that are in place around FDA approvals and around reimbursement. So we've had to do kind of the heavy lifting of talking about each and every one of these criteria.

So now the conversation changes substantially John we no longer have to differentiate is simply what is best for this patient standing right in front of you today and Thats really what were reflecting in our marketing and messaging is that this puts the power to choose back in the hands of the clinician and the payer.

As opposed to a decision that is based on our label and coverage.

And then in terms of the Doctor go ahead, you shouldn't.

Shift just just adding one more thing there John .

Same thing on the Doctor patient relationship in fact, I can tell you that I've had surgeons tell me firsthand G. I would love to do this I'd love to duty car in this patient, but I don't have a high surgical risk criteria. So now imagine that physician can simply talk about first and foremost the body of evidence around T car the real <unk>.

World evidence that supported the label expansion, that's super important when youre talking to patients.

And the over 18000 patients' worth of published data that supports this decision by the physician and their patients.

Great. That's Super helpful. Eric and then just one more I guess I'll have to ask about gross margin here.

Honestly, a sharp decline from the prior quarter.

Could you just kind of walk me through what we could be looking at for sequential improvement throughout the year and if integration and creation of this plan will actually helped drive meaningful gross margin expansion in the future.

<unk> prior levels, thanks for taking the questions.

Sure sure John No problem. So so short answer to the latter part of your question is yes, we're putting capacity in place in anticipation of our future growth and having the risk mitigation of two facilities, but as we increase the units per facility, we will get those gross margin gains.

So that will likely come online in the second half of the year. The other factor at play in Q1 was really.

Fact that a large percentage of our production workforce was out sick with COVID-19 in Q1 and that produced some variances that we essentially had to expense versus capitalized.

Absent that effect.

Which hopefully is transient we're not dealing with that in the future.

We probably would've been in the 72% to 73% range.

Without that effect, if that's if that's helpful.

Thank you. Our next question comes from Danielle <unk> with.

<unk> Securities go ahead.

Thank you so much good afternoon, guys. Thanks for taking the question.

Erika if I could since you did just get standard risk approval can I pick your brain a little bit about what that means for the untreated patient if anything the untreated patient population today, obviously, the low hanging fruit here as the 170000 or so.

Severe credit Ah patients that are getting an intervention, but theres a very large number of these patients sitting out there just being managed medically curious now that you have the full slate of approvals here from a from a risk perspective.

This will allow you to go after that untreated patient population in any way shape or form in the near to me even medium term.

Hi, Danielle I am glad you asked that question. So the first thing that you highlighted was really the main point, which is there are 170000 patients treated today.

And we are going after those right is sitting here at roughly 10% penetrated based on our guidance for the year and so that's really the low low hanging fruit is get after those patients who are already treated but as we've seen in lots of other medically manage disease dates as we.

We lower the morbidity and mortality associated with the treatment of that disease, we do see the aperture expand around patients who could be treated and the medically managed patient population, we know it looks roughly the same.

Honestly, it's the patients who are treated.

I think this is just one more tailwind to ultimately get at driving expansion into the medically managed patient population, but our focus today is on converting the already treated.

Okay got it.

Just a.

A quick follow up question for you on gross margins and.

Just.

Western around a lot of.

Thanks for the question, Danielle, obviously, a hot topic and.

In the sector and internally here at Silk Road.

Our team has done a fantastic job of working with our vendors and suppliers and we've always been.

Kind of aggressive in buying forward in anticipation of our growth, but more recently in.

In context of the inflationary and supply chain pressures. So so far so good.

But we're managing it very closely we see more impact near term.

Really around some of our R&D components and materials, where we've had some some pressures there but on the manufacturing side.

We've done a good job managing it but.

It's a core focus of the folks in the supply chain team to continue to manage it.

Thank you.

Thank you. Our next question comes from Adam <unk> with Piper Sandler Your line is open.

Great Hi, Erika Hi, Lucas Thanks for taking the questions and congrats on the approval and start to the year.

Maybe we can just start on reimbursement for standard surgical risk.

And then on the post market approval study.

Sure Adam Thanks for joining us I'll take the part on.

There are questions and meeting their needs. So the conversation has been ongoing.

As a reminder, in sorted for context high surgical risk cover.

And the next step here really will be the announcement of that coverage. So we will be working on it behind the scenes.

Now in terms of roadster three it's an important question also in the context of coverage because roadster three will be a covered trial under the current national coverage determination paradigms.

And that study will be a prospective single arm open label trial post approval study looking at up to 400 patients in up to 60 sites.

The primary endpoint is stroke death, and am I at 30 days and we will look at ipsilateral stroke same side stroke.

At one year.

And Adam I'll add some kind of expense details to that side of your question, but first on reimbursement Eric talked about coverage I just want to make clear that the coding in the payment levels already exists. So there is no incremental work to do there it's really all about coverage.

And standard surgical risk patients.

Generally speaking in trials that study that patient population. The average age is 69 to 70 <unk>.

Versus high surgical risk trials, where it's 72 to 73, so still squarely in the Medicare age population.

R&D timing and some of it is the full quarter effect of our upfront half in one quarter first quarter biased hiring schedule.

But as we get to more modest increases in Q3 Q4 that part of my comments, that's inclusive of our expectations around <unk>.

Cost of executing the roadster three trial and the kind of per patient enrollment costs and we've obviously got a.

A team built to execute that trial as well as the vendors involved in that trial.

Okay.

Very clear I appreciate the fulsome response, and I actually have two follow ups. If that's okay. The first is just on the topline and I apologize for kind of the.

The near term question here, you're obviously helpful full year guidance in place, but curious as we should.

How we should be thinking about Q2 in our models I show the street at 31 million for Q2, I don't know if you have any reaction to that I think it's 10% to 11% quarter over quarter growth and then just broad strokes, how do we think about kind of quarterly cadence throughout the duration of the year and then I had one quick follow up thanks.

Yes.

Quite simply at the end of the day growth comes from driving penetration of <unk> into the market, right, which which we do kind of.

Single rapid single Doctor adoption curve level that all rolls up obviously, we're all hopeful that Q2 is not impacted as much as January and February were in Q4 of last year.

So that's that's great and.

So we're looking forward to two leveraging that critical mass we have built and obviously, we continue to have new territories, new trained physicians come online spread spread over the year.

Okay, Great and maybe just one last one for me and it's on international.

So it's a two parter.

So I guess, it's not that brief so apologies but.

Just any update on your progress in China and in <unk>.

Japan and then the second part of the question is really on.

On the decision to let the CE Mark labs.

Maybe just give us kind of a little bit more insight into that decision a snapshot of the market opportunity or Tam for Europe , and then I just think that'd be helpful to kind of frame that against why you're deciding to push jet, Japan, and China, Florida. Thanks, So much for taking the questions.

Sure Adam So on Japan, and China, we continue to make steady progress on those regulatory approvals and of course, there is regulatory and reimbursement.

Both of those countries, but we are making steady progress we feel good about where we stand there on Europe , we have put substantial time and thought.

Behind this decision to let.

The MTR sort of lapse as you probably heard from others. The lift is heavy.

And we prefer to put our focus and our energy and our efforts into things that drive.

Our bias towards Asia Pacific and certainly toward U S T car adoption.

On the Tam question the reason for the bias.

Around China and other Asia Pacific reasons is really just that I mean, it's a much more substantial opportunity for us not only in the way that patients are treated.

The importance on the prevention of stroke, but also in the pricing paradigm and so these markets are just substantially more important across the board.

Just quickly add Adam that the countries in Europe and other parts of the world.

We'll definitely get to overtime right. This is this is.

Something that is kind of a near to intermediate term decision, but when were at scale. We will have we will have the capability to go after some of those other markets.

And a much better fashion, yes.

Okay, great. Thanks, again for taking the questions.

Thanks, Adam.

Yeah.

Thank you. Our next question comes from Michael <unk> with Wolfe Research. Your line is open.

Hi, good afternoon. Thank you for taking the question.

I understand you don't have 23 guidance and I'm not asking for it.

But I'd love a little help on is how to how to dream. The dream here of how the standard.

Risk approval layers into utilization.

Nation say next year is it all comes together reimbursement gets established you're stepping on the accelerator on marketing Youre expanding the sales force.

That potential is there.

Another product in Med Tech you've studied that said Hey look this development in CCAR it looks like that and we could go study that and watch how it kind of evolved over time or is there some.

On the ground tidbits from.

Physicians feedback like Hey, I could be doing so much more.

Had this label and how that might look.

Quantitatively I, just I'd love, a little a little bit.

<unk> been thinking about what could happen to revenue in 'twenty three 'twenty four.

Sure Mike Thanks for joining us I'll give you a few qualitative observations really which is first of all I've been out talking to our customers a lot lately. Thank goodness right.

Restrictions have lifted and ive been out facing our customers are quite regularly and I can tell you that the excitement is palpable.

The physician community, it's been ready and waiting for standard surgical risk. So that they can do the things we talked about which is what is right for each of these patients.

So there is great enthusiasm the other thing the other observation as we've looked at our own data and what we know is that physicians gain their comfort with T car over time. So there are kind of two things that work in our favor wanting to use.

Yogurt physicians lean in earlier and faster because they come out of their fellowships T.

Key car trained in Endovascular trained and the other thing is experience and we know from our own data that experience leads to greater adoption. We've talked about this a lot right. There is that early part of the learning curve. Those first 10 to 15 cases, where physicians are frankly, gaining their comfort level and gaining their ability to.

Predict how key car performs in their hands versus CEO , and we know that the ability to predict an outcome is really important to these physicians. So this is sort of a long winded way of saying, Mike that time is our friend and as Ed are big cohorts of physicians the ones trained in.

In the back half of 2019 throughout the pandemic 2000, 22021, where their hands were tied behind their back because of the pandemic all of these physicians coming into their own on CCAR overtime and as we approach 2023.

Good color, if I may one or two follow ups, perhaps for Luca So at least this next one.

Just as I do the revenue in the quarter and the volume that you disclosed is just over 4025 cases, and then I can impute revenue per which isn't necessarily your asps, but.

Yeah.

No. Thank you Mike its a very insightful question and we did see a dip let me assure you first that asps continue to be very strong. So the dip was not an ASP that was in revenue in the period divided by procedures in the period and I think it's a couple of things kind of on the margin.

Obviously.

Ordering patterns and then we get into March which was a strong utilization months and some of that is just a timing effect those replenishment orders will come in Q2. So at the end of the day, it's probably mostly timing related and I would expect it to kind of normalize.

Q2 and beyond.

If I can do one last one.

Financing and balance sheet and during a period of kind of.

Again pedal to the metal on growth and executing against this standard risk expansion do you feel comfortable with the $95 million on the balance sheet that you have plenty of flexibility to operate the next year or two or three here.

Yes look I mean, obviously, we're very focused on creating shareholder value, which which starts first and foremost by by driving topline growth.

We are well funded to drive that growth and we're committed to maintaining our well funded.

Our position there is no immediate financing needs. We've got again, a critical mass of docs and hospitals reps to really drive operating leverage here forward.

But we're always keeping an eye open for <unk>.

Options to bolster our balance sheet, so that we're prepared if and when the opportunity is right.

Thanks for taking the questions.

Thank you and our last question comes from Javier <unk> with Spartan capital. Your line is open.

Hello, everyone and a higher <unk> and hi, Lucas Thanks for having me on.

In light of the good news this week with an ROE expansion, so standard risk patients.

How does this affect our SG&A going forward.

What should investors expect the higher expenditure to reach.

Greater portion of <unk>.

Patients or.

Is it fair to understand that this has.

The commercial build out.

How is already considered the possibility of addressing a larger market.

Hi, Javier Thanks for the question, Yes, very good question. So we've been planning for success, all along and the high surgical risk patient population.

But we don't need the same referral channel. It's the same physicians. It's the same rep coverage and so there's a lot of leverage there of investments we've already made and plan to make this year and beyond we just have a larger addressable market opportunity to go after.

Excellent.

Another just another question.

You said earlier, but as far as now with the standard risk patients being.

For T core how does that use the total just mark as far as the market size.

Yes. So great question. So there are roughly 170000 carotid procedures that pencils out to a $1 $2 billion market.

And it's really split roughly two thirds, one third two thirds high surgical risk one third standard surgical risk.

That's kind of a black and white answer, but but patient sitting in front of physicians thats really a spectrum of risk right as Eric mentioned, they don't really delineate that clearly, but but quite simply we now have access to the full $1 $2 billion opportunity. If we zoom back we know that the practice.

A medicine is conservative because for 70 years. The gold standard treatment has been an invasive surgery that carries a complication rate, including stroke death, and MRI and permanent nerve injury and all the rest so it's conservatively applied.

But the full market opportunity as measured by the diagnoses annually of critical carotid artery stenosis, there's about $3 1 billion. So $1 2 billion of that is treated and $1 9 billion.

Represents patients that.

Look similarly to the patients that are treated or could be treated in the years ahead and we've now got.

Lessons <unk> lower complication minimally invasive procedure, where we think we can we can tap into some portion of that market over time, and then I'll just finish by saying.

The demographics are also.

In our favor here just the this is a disease of the elderly we know the U S population.

Has the pipeline of more and more elderly patients coming into their Medicare age.

And sadly the drivers of cardiovascular disease are still there and certainly COVID-19 has brought that to life and there are a lot of.

Increased efforts around screening and diagnosis of all sorts of cardiovascular problems.

Okay.

Thanks for taking my question and congrats again on the great quarter.

Thanks, Javier Thank you Javier.

Thank you at this time I would like to turn the call back to Erica Rogers Chief Executive Officer for any closing comments.

Thank you all for joining us for this very exciting quarter.

This concludes today's conference. Thank you for participating you may now disconnect.

Q1 2022 Silk Road Medical Inc Earnings Call

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