Q1 2022 CVRx Inc Earnings Call
[music].
Thank you for standing by and welcome to the C. V are at Q1 2022 earnings Conference call.
I would now like turn the call 30 House, Mr. Mike Valley from the ICR Westlake, Sir you may begin.
Good afternoon. Thank you for joining us today for <unk> first quarter <unk> earnings Conference call.
Joining me on today's call are the company's President and Chief Executive Officer, Doug E mirrors, and its chief Financial Officer, Jerry Norcia.
Our remarks today will contain forward looking statements, including statements about financial guidance.
The statements are based on plans and expectations as of today, which may change over time.
In addition, actual results could differ materially due to a number of risks and uncertainties.
Those identified in the earnings release issued prior to this call and in the Companys SEC filings.
Regarding 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 of Demir Ed.
Mike and thank you everyone for joining us I'll begin today's call by providing an overview of our first quarter performance followed by an operational update.
A few of our financial results by our CFO , Joe Osha line, and then I will conclude with our thoughts for the rest of FY 'twenty two before turning to Q&A.
Starting with the review of the first quarter. Our total revenue was $4 $1 million slightly exceeding the top of the range of our guidance for Q1.
These results were driven by continued strong growth within our U S heart failure business, which generated $2 $9 million, an increase of approximately 133% over the first quarter of 2021.
I'm very proud of the resilience our business displayed during the first quarter, which was heavily impacted by Covid spikes in both the U S and Europe .
We experienced significant headwinds in January followed by an improvement in February and ending with a very strong March.
Despite the challenges faced earlier in the quarter, we were able to grow our U S heart failure business revenue expand our U S active implanting centers by 22% and delivered the highest number of revenue units in a quarter.
Turning to an update on the operational progress we made during the first quarter aimed at driving the increased adoption and utilization of barristan.
As a reminder, our focused areas are one the continued expansion of our commercial infrastructure to innovation of our product portfolio and three the expansion of the clinical body of evidence.
First let's focus on the continued expansion of our commercial infrastructure, specifically, our U S direct sales Judy.
During the quarter, we added three new territories, bringing the total to 17.
We continue to be very impressed with the quality of the sales organization that we are assembling.
Our employees remain motivated by the buzz generated by our therapy and its visible impact on our patients.
On our last earnings call, we announced two newly launched programs to support physician and patient education.
First a direct to consumer marketing pilot program in conjunction with our new branding campaign.
We continue to see great early traction with the direct to consumer pilot within the select geographic locations, where it is running.
Additionally, we have started a pilot to expand patient education component to few select institutions to alleviate the workload of health care providers.
If successful we plan on rolling out this educational program out a greater number of institutions across the country.
Another area of focus is the innovation of our product portfolio.
Earlier this year, we highlighted three recent PMA supplement submissions made to the FTA and later to our barrister in platform.
We received approval for the new implantable pulse generator during the first quarter.
And subsequent to the end of the quarter, we received approval for the new programmer, which is a tablet form factor with an even simpler programming software.
With the approval of both the new IPG and the new programmer. We are now planning and initial commercial launch of the new platform in 2022.
We are incredibly proud about what we have been able to accomplish in the first quarter. Despite the significant headwinds we continue to experience from Covid.
The performance seen in February and particularly in March is very encouraging as it validates the growing demand for batter stim, even during a challenging macro environment. We remain on track to deliver continued growth in the balance of 2022 and helped to bring relief to patients suffering.
From cardiovascular diseases.
I'll now turn the call over to Jared to review our financials jot it.
Thanks, Nadeem total revenue generated in the first quarter was $4 $1 million, which is an increase of $1.2 million or 43% when compared to the same period last year revenue generated in the U S was $3 $1 million in the current quarter, which is an increase of 90% over the same period last year heart failure revenue in the U S.
<unk> totaled $2 $9 million in the current quarter on a total of 99 revenue units as compared to $1.3 million in the first quarter of last year on 44 revenue units. The increase was primarily driven by the continued growth in the U S heart failure business as a result of the expansion into new sales territories, new accounts and increased physician and patient awareness.
Ernest of barrel stem.
At the end of the current quarter, we had a total of 56 active implanting centers as compared to 19 on March 31, 2021, and 46 on December 31, 2021 at the end of the current quarter. We had a total of 17 sales territories in the U S compared to six on March 31, 2021 and 14 on December 31, 2021 .
<unk> revenue generated in Europe was $1 million in the current quarter, which is a decrease of 18% when compared to the same period last year total.
Total revenue units in Europe decreased from 52 in Q1 of 2021 to 50 in the current quarter. The decrease is due to reduced procedure volumes due to COVID-19 related headwinds in the month of January at the end of the current quarter. We had a total of six sales territories in Europe .
Gross profit was $3 $1 million for the three months ended March 31, 2022, an increase of $1 $1 million over the three months ended March 31, 2021 gross margin increased to 77% for the current quarter compared to 70% for the same period last year gross margin for the current quarter was higher due to a decrease in the cost.
Per unit and an increase in the average selling price. This was partially offset by a larger percentage of our revenue units coming from full systems versus battery replacements, new patients receive a full system that includes in IPG and the stimulation lead and have a lower gross margin than our standalone IPG used for our battery replacement research and.
<unk> expenses were $2.3 million for the current quarter, which is an increase of 29% when compared to the same period last year. This change was primarily driven by an increase in compensation expenses due to increased head count and increasing clinical study expenses and an increase in noncash stock based compensation expense.
SG&A expenses were $10 $8 million for the current quarter, which is an increase of 142% when compared to the same period last year. This was primarily driven by an increase in compensation expenses due to increased head count as well as an increase in marketing and advertising expenses related to the commercialization of barrel stem.
Other expense net was $57000 in the current quarter compared to $3.8 million for the same period last year. The expense in the first quarter of 'twenty 'twenty. One was primarily driven by the increase in the fair value of the convertible preferred stock warrant liability from December 31, 2020 to March 31, 2021 all of the warrants were.
<unk> to common stock warrants as part of the IPO in July of 2020 one.
Net loss was $10 million or 49 cents per share for the current quarter as compared to a net loss of $8 $6 million or $23.92 per share for the same period last year net loss per share was based on 20 million 453341 weighted average shares outstanding for the current quarter and 360600 <unk>.
75 weighted average shares outstanding for the first quarter of 2021.
At the end of the current quarter cash and cash equivalents were $131 $2 million net cash used in operating and investing activities was $10 $9 million for the current quarter compared to $5 $1 million for the same period last year now turning to guidance for the full year of 'twenty 'twenty. Two we continue to expect total revenue in <unk>.
Tween, 'twenty and $23 million gross margin between 74, and 76% and operating expenses between 55 and $61 million for the second quarter of 2022, we expect to report total revenue between $4 5 million and $5 million I would now like to turn the call back over to Nadeem.
Thanks Jared.
Before opening the line for questions I would like to discuss our expectations for the balance of 2022, as we seek to drive increased adoption and utilization of patter step.
First the continued expansion of our commercial infrastructure, especially our direct sales force in the United States.
We expect to continue hiring top talent throughout the year and are targeting a total of approximately 26 U S territories by year end or an average, adding three new territories per quarter.
As we noted previously we rolled out our new branding campaign that simplified and streamlined our direct to consumer messages. The Runoffs will continue in the remainder of 2022 with the addition of new educational storylines.
Our second area of focus is to continue with innovation of our product portfolio.
With the FTA approval of both the new I P. G. M. Programmer, we are planning an initial commercial launch of the new platform in 2022.
Our third focus area is the expansion of the clinical body of evidence the beat H F. Clinical trial is designed to demonstrate the mortality and morbidity benefit of batter stim into heart failure with reduced ejection fraction patient population.
We remain on track to complete this study on our expected timeline.
Looking ahead to the rest of the year. We are excited about the momentum we have built within just the first quarter.
We are positioned to leverage that momentum and accelerate the adoption of Paris Tim.
The opportunity remains large and as always we remain committed to bringing relief to as many patients as possible that are suffering with cardiovascular illnesses.
And now I would like to open the line for questions.
Thank you, ladies and gentlemen, if you like to ask a question. Please press Star then one on your Touchstone telephone again, if he would like to ask a question. Please press Star then one.
One moment for your first question.
Our first question comes from Robbie Marcus with JP Morgan Your line is open.
Great.
Congrats on a nice quarter and thanks for taking the question.
Maybe to start the second quarter guidance, it's in line with where the street is but I imagine it looks a bit conservative if we take the first quarter exit rate given the comments that January was the softest and just what we heard from other competitors on.
The fact that March was such a large component of sales for first quarter. So I'd love to hear just how you left the quarter and what you've seen so far.
In April that gives you.
That informs the second quarter guidance. Thanks.
Yeah, Hey, Ravi. Thank you again for listening in and asking the first question.
Listen Yes, you are correct January was weak driven by the Covid, both the impacts of Covid in the United States and in Germany at the same time actually by the end of January we were concerned that we started seeing the light at the end of the tunnel. So when we had this conversation.
In the earnings release in early February we felt encouraged by the early leading indicator side and let me remind you of one element we have a high average selling price device with relatively smaller number of units.
I E smaller number of patients per center per month so.
So we have some a billety of rescheduling within the quarter and what we have seen in the past two quarters is when we had a COVID-19 impact at the beginning of the quarter was able to recover by the end, but what do we have not seen it.
Is that a push from one quarter to the other and that's why I don't label it as being conservative maintaining the guidance for next quarter, but rather just playing the average yet are not the result of more than the month of March what I, what I'm I think it's a little bit premature here.
Is take the month of March and extrapolate based on that single.
When we know that some of the implants and procedures from January and early February were pushed into March does it makes sense.
Yes.
Yeah, Yeah, I mean, if I guess also I don't know if youre willing, but what are you seeing so far in April .
Yeah.
Got it.
Yeah.
I know you will ask me. This question about the about April and where.
April is up over yet so anything could happen, but what we are seeing in April and first no impact of Covid in the United States, Northern Germany, or let me put it this way very limited impact if any even in Germany. This week that there is the German Congress of Cardiology D. G. K that is happening like for the first time in a couple of years.
Although the attendance is still low, but finally and medical meeting in Germany happening life with our team able to meet cardiologist face to face and have meaningful conversations and that was the opportunity to showcase our new brand in Germany. Similarly in the United States.
End of March we had the American College of Cardiology attendance was low base last face to face we had really substantive discussions.
With a with a cardiologist onsite and we're expecting to continue that trend with HRS.
Hopefully at the end of the sweep Thursday Friday at the start of HRS and <unk> eight.
April seems to be solid and in line with our expectations for a regular month that does not have a COVID-19 impact.
That's really helpful and maybe.
Maybe just last question for me.
I would love to see if you have any data points you could give us from the DTC outreach and the limited markets I know its still on a small scale in early but it's a great way to help gauge future Patriot patient interest. So just wondering if you have anything to share.
Yes, absolutely and thank you for asking about my pet projects. He is the direct to consumer education campaign and the way we see this it is an educational campaign and the more we can educate patients the more we simplify the job of the health care providers and you know very well and you probably are hearing this from hospitals and from medical Technology Company.
The device companies that the tightly but it's affecting us.
Hospitals, and health care providers across the country. So any education that we can provide to the patient directly is a simplification of the process and a reduction of the time constraint on the health care provider. So far we are very happy with the results of our limited campaign in and we are continuing to increase our investment in this space.
And expand the geography and of course, we're not talking about states by states or get a lot of country by country, which we're talking about here is in the United States we.
Ah.
Actually advertise on social media.
About better stead to ask patients basically to click and good more about off therapy in ZIP codes at Els few centers that we have trained to be ready to receive those patients. If they were sent to them. So that is the process we call. It a pilot early on and we keep increasing the number of ZIP code here.
He is or geographical areas at all of the sites that are that have been trained.
Not yet.
Fully deployed in the entire country far from it but the early results on our side by side basis are extremely encouraging and we will continue ramping up our investment in this field then again. Thank you for asking this question.
Thanks, a lot.
Thank you our.
Next question comes from Matthew O'brien of Piper Sandler Your line is open.
Great. Thanks for taking my question, so just to be clear it sounds like there were some delayed procedures in January but you were able to make all those up in February and March and none of that none of the March cases got pushed a little bit.
For all because.
There's just enough capacity right now at these centers to get these cases done.
Fairly quickly because theres not theres not as many at fair.
That's exactly right yeah. Thank you I guess I'll ask a question is the sporadic business I keep talking about which is a high asp's smaller volume currently.
In our procedure pays when it's done outpatient very well so we don't expect yet but that it will be de prioritized in an existing site that is already doing procedure and that's why we have not seen procedures pushed from March to April .
Okay got it and then.
As far as.
The implant centers.
You've tripled the number of active implanting centers in last year and it doubled in the last nine months can you talk about.
Some of the recent additions on the.
Active center side are they larger academic centers with a lot of patient or kind of how has the mix been going between the various centers.
Starting to open up something account.
Yeah, Yeah excellent question, so, it's a mix and let.
Let me first by Ed.
Based on our experience in clinical trials in the past both in hypertension 10 years ago, and most recently with beat there Jeff.
The academic centers do not necessarily equate to high volume centers, sometimes some of the community centers in a geography that we are committed to hospital has a broad outreach end up collecting.
Higher volume of patients that you can see in that database as a case in point and he had his what what goes on for example in Orlando and heart failure.
The.
Area, where we have the highest number of heart failure hospitalizations in the country.
That said, we have a good mix Matthew a good mix of academic centers and smaller community centers. The smaller community centers are very practical because the navigation of the process. My patience is simplified so it's not as.
Impressive to the patient or Don thing to the patients to navigate different departments and different.
Our buildings and our big academic institution that said, we need that got Emmick institutions that was most of the interesting research is happening and you know.
A better stem users can apply for a better stem investigator initiated research.
Efforts with TD IDEXX to conduct that own both market research on this therapy, but also academic institutions are basically the fog holders in many geographies and the way. They go as often the way the smaller community centers to follow so that's why we tend to have a good mix between academic institution.
<unk> and smaller community centers.
Got it and then just last one for me is on access to hospitals did you did you have challenges in January even part of February and getting access to potential new centers and is that something that's that.
That pressure is kind of lifted at this point.
Yes, we did.
Definitely in Germany, but also in some areas in the United States.
I do not recall, but I don't think we had any called black.
In January in the United States, but access was tricky and what was more tricky was the fear.
<unk> patients to go to hospitals when you know.
All of the Docs wrote about one micron and the impact or the relative weakness of vaccines to fend off or micron. If you remember.
That was the talk back in December .
Also the staffing shortages at hospitals limited out impact Wayne.
Hospital is overloaded with Covid cases, and they have to do their usual cases on top of a television you don't have time to meet with our team, particularly when they are already in a shortage situation themselves.
Got it got it very helpful. We have not lucky.
Luckily we have not seen this much in March and we're able to deliver a very solid month.
For sure. Thanks.
Thanks Jerry.
Thank you Matthew Thank you have a great day.
Thank you.
Question comes from Margaret Kaczor of William Blair. Your line is open.
For Margaret Thanks for taking my question.
First can we just talk a little bit about I was curious if you could talk a little bit about the mix of where growth is coming from in terms of new and existing accounts I know in the past we've talked about how some of these ramping accounts, maybe nine to 12 months out.
They start to kind of reach this exit velocity of doing meaningfully more cases. So is that still kind of a case you guys are seeing and maybe try to give a little bit of color about what kind of growth youre seeing from the new accounts.
Yeah, that's a brandon that by the way very nice seeing you very briefly at ACC I Hope that you had a good meeting there and good discussions listen.
Great question and as we analyze the data we always try to look backward to forecast, what's going on to happen for a forward looking right and looking back here. That's what we have accomplished so far we see.
Still a dichotomy between centers, who have been activated with US 12 months or more versus those that were activated in the last 12 months almost doubled.
The number of revenue units.
Month.
I don't know Jared you chime in whenever you want to fill it if you want if you're ready to disclose those numbers, but.
This is very telling Brendan and the beauty about this is that we know that when a site is starting they do a couple of patients they wait to see the impact they wait for those patients to come for the two months six month visits and once they see the impact of of patients they feel more comfortable than doing patient 3456, and the longer the site is doing the procedure.
The more they want to do it and that's a great sign about the visible efficacy after the procedure and its impact on the patients and the patient's lives.
I don't know if you're on a chime in and add more colors.
Yeah, and I think we talked a little bit last quarter, Brandon about those centers that had been with us for at least 12 months starting to approach that long term goal of having one revenue unit per month, and we are continuing to see that trend here, where all of those centers that have been with us for more than 12 months are starting to approach that one revenue unit per month.
And it looks like the long term goal of hitting one per month is starting to happen right around that 18 month, mark or for a lot of those longer term centers. So it feels like like Nadeem had said before in the past you know the longer that centers are with us the more experience they get with patients the results, they're seeing both on the reimbursement side and the efficacy.
C side are just showing them more reasons to go out and treat additional patients and so the longer they're with us the more revenue units and in more patients that are being treated.
Got it and then.
That kind of brings up another interesting thought and in terms of you guys have obviously, a strong balance sheet here.
At what point do you kind of or how do you balance maybe using some of this cash to potentially expedite.
If possible that that 18 months 12 to 18 month timeframe and ramp accounts more quickly.
Or is it something that just needs time or there's no ROI. There for you guys. So how do you kind of balance the cash spend in that versus.
The opportunities ahead of you.
Brendon excellent question listen, it's a tricky one because think about it this way if we go too slow.
We will never reach cash flow breakeven.
If we go too fast.
Risk of burning the cash before we achieve to gaslog breakeven so that is a.
A window, where we felt when we did all of that analysis early on when we raise the money from the IPO proceeds we felt that this window is the and again there is a code of certainty around this window, but that window is the line that will take us towards cash flow breakeven so we'd been very progressive.
And steady in our investment the growth of and investments we are adding three territories every quarter and we plan to continue adding three territories of the quarter and listen.
I understand what you're saying and I like to believe that.
If we could do it we would have done it that means go ahead and hire 20 5100 territories territory managers, all at once and train them.
But the fact is we don't believe that this is the right track forwards and we prefer that steady slow progress that allow us to put T. At a foot one step at a time on solid foundations that.
Does it make sense, what I'm trying to express in here.
Yes.
Is helpful and that makes sense. Thank you.
Thank you Brendan and send our regards to Margaret by the way.
Well thanks.
Thank you. Our next question comes from Bill <unk> of Canaccord. Your line is open.
Great. Thanks, Good evening and thanks for taking my questions.
I'm going to start off with innovation, if I could just you mentioned the rollout of the <unk>.
New programmer and the new IPG.
How should we think about timing for that pricing for that.
And then are you going to wait for the MRI indication a label for that or is that just not necessary given that it'll just kind of be an add on.
Bill Hey, how are you first excellent question listen the MRI.
PMA supplement that we submitted to FDA covers not only future product, but also past products. So basically every single barrel to Neil that was implanted in a heart failure subject.
In the United States will be cupboards.
By this MRI conditional compatibility if or when the FDA approves it.
Therefore, knowing this.
It's disconnected from the launch of the new IPG glottal pulse generator and the new programmer does makes sense. The way that it is collected one is looking for it for the new product. This is the new IPG in the new programmer and secondly, MRI compatibility is not only for the new products, but any patient that received it.
Even in our trials starting from 2012 in the United States.
We'll now be if not now will if FDA approves the MRI compatibility will be able to undergo an MRI scan in the future.
Right and then how should we think about timing of that and then Jared you know how do we think about the inventory of the the original product and do you end up taking charges for that are having an impact in their their startup cost to manufacture the new IPG in programmer and that's why you're guiding gross margins a little lower.
<unk>.
Yeah Bill Thanks for the question. So just on the first part about when will the release come out so the expectation here as we're building out the inventory for the new programmer for the new IPG. So we're expecting the launch here in the back half of 2022 as far as the inventory levels for the existing IPG and programmers there or not.
We are not expecting.
Significant charges associated with that inventory it can still be used for other.
Purposes, whether it be for a clinical trial or for other customers.
As far as the gross margin piece of it. So we did hit 77% gross margin in the first quarter and the full year guide is 74% to 76% the real reason for that staying at 74% to 76% just comes down to expectations for the rest of the year, we did exceed expectations on the average selling price in the first quarter. So if that comes back down as we.
Had more new centers and continue to see pricing pressure, we could see gross margins come down a little bit and then also the sales mix piece of it so as we sell more and more systems are a higher percentage of our revenue units coming from systems to treat new patients that will have a negative impact on gross margin. So it could come down slightly there as well and that's the main reason for.
We're keeping that guide at 74% to 76% for the year.
And with the new IPG in program or have a higher ASP or do we just keep the same ASP at this point yet we're keeping the same E. S. P. At this point.
Okay and then on the last on the innovation topic is just the you know the.
Bat wire I I don't think we had any update on that just love to get just an update on where we are with the trial and.
Kind of expectations on timing for that.
Yeah, Hey, Ed.
You know the.
The batch wire trial is ongoing and therefore, we do not have access to the efficacy data. However.
We have access to the safety data of the procedure and so far it's looking pretty good I'm very excited with a safety profile that we're seeing after the procedure of implanting the current IPG and the currents.
Lead, particularly with the batch wire toolkit.
However, that said and you have seen it possibly with other cardiovascular or heart failure trials Enrolments are going very slow. This past couple of years as compared to previously that has surprised us like it's surprising other company that's what we keep.
Very open I, yet about the enrollment rate and we know that enrolment in the trial is not a linear progression, it's often follow a geometric or exponential progression and if you go back to other trials you would see that more than two thirds of the patients on enrolled in the last one third of the time on <unk>.
Many many clinical trials not only in cardiovascular been outside.
That said.
When we map all of this taking this into account we still believe that we have the time to enroll the trial and get approval in 2024.
But it's not going per plan right now theyre at all but it is slower than planned.
Okay. Thanks for thanks for that and then.
Just two things for me I mean, you my understanding you have a prior off backlog there that you're working off of just any commentary on that how that looks versus prior quarters or what have you just any scale on that it would be helpful. And then just any upcoming medical meetings of note we should.
Gov for you and that's it thanks for taking my questions.
Yeah no. Thank you Melissa the medical meetings next this coming weekend H O us in San Francisco will be they will have a smaller presence at a I S. H L T, but a stronger presence with a new brand will be at HRS in San Francisco in regards to the prior to US we have not played to discuss metrics at this day.
Age.
Quantitatively, we're still very excited about the results that we are accomplishing in here. Our prioritization team is doing a fantastic job. They do a lot of the work behind the scenes again to alleviate the workload of health care providers. So they don't have to do this work we try to do it from that'd behalf now that said.
What is maybe if you are comparing.
Our private off program with other companies for example, inspired medical the difference could be that we have a higher percent of patients covered by Medicare.
Just the age profile of heart failure.
About two thirds of heart failure patients are covered by Medicare and Medicaid patients, we usually do not need.
Hi, it off Medicaid advantage, we need a proud off and the approval comes very very fast.
So we are not building a long pipeline in here for a lot of the patients on the private payer patients who are not covered by Medicare advantage, where the approval process could take a month.
Month, rather than days and that volume is relatively smaller to our business. So for us the private off program is not a good proxy for how the next quarter is going to shape kind of unfortunately, I wish I have more visibility on the next quarter.
I'm just like you hear when I look at it as a result of the last month and the current month and try to project forward.
Great Okay, well, thanks for taking my questions.
Thank you Bill.
Thank you.
I'm showing no further questions at this time, let's turn the call back over to the company for any closing remarks.
Oh excellent. Thank you operator and.
Thanks, everyone for joining us for our first quarter earnings call.
Appreciate your ongoing support and we look forward to updating you on our progress during our next update thank you.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.
Okay.
Okay.
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Okay.