Q2 2022 CVRx Inc Earnings Call
Yeah.
Good day, and thank you for standing by.
Welcome to the C. D R. <unk> second quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask the question during the session you will need to press star one one on your Touchtone telephone.
I would now like to hand, the conference over to your Speaker My rally you may begin.
Good afternoon. Thank you for joining us today for CVR <unk> second quarter 2022 earnings conference call.
Joining me on today's call are the company's President and Chief Executive Officer, Rob <unk>, and Chief Financial Officer Gerardo shopping.
The 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, including those identified in the earnings release issued prior to this call and in the company's SEC filings, including the upcoming Form 10-Q that will be filed with the SEC.
I would now like to turn the call over to CVR, <unk>, President and Chief Executive Officer Lithium you alright, Thank you, Mike and thanks to everyone for joining us today I'll.
Ill begin todays call by providing an overview of our second quarter performance, followed by an operational update and review of our financial results by our CFO <unk> <unk> and then I will conclude with our thoughts for the rest of 2022 before turning to questions and answers.
Starting with the review of the second quarter. Our total revenue was $5 1 million an increase of 61% over the second quarter of 2021.
These results were driven by the continued execution of our growth strategy, both in the United States and internationally.
In the U S or heart failure business generated $3 8 million, an increase of approximately 89% over the second quarter of 2021, resulting from a record number of revenue units sold in the quarter.
This growth was due to the expansion into new implanting centers and existing implanting centers continuing to increase that average quarterly volume.
Throughout 2022, we have seen the positive impact of our commercial expansion strategy supported by an increase in marketing and awareness campaigns.
Additionally, we have continued to see some encouraging trends stemming from commercial investments made in Europe during the fourth quarter of 2021.
I now want to give you an update on the operational development during the second quarter to support greater adoption and use of batteries Tim.
As a reminder, our focus areas are one <unk>.
The continued expansion of commercial infrastructure to innovation of our product portfolio and three the expansion of the clinical body of evidence.
Let's begin with the continued expansion of our commercial infrastructure, specifically, our U S direct sales organization.
During the quarter, we added three new territories, bringing the total to 20 and we expect to add an average of three new territories per quarter, finishing the year with about 26 territories.
The caliber of the sales organization and that ability to drive the adoption of <unk> continues to exceed our expectations.
We are making positive headway in select geographies, where our direct to consumer pilot program to support patient education is being conducted with our new branding campaign.
Continue to look for ways to optimize the program as we expand further.
Additionally, we continued our pilot to advance patient education and select institutions aimed at patients who are already speaking with physicians about our best in device.
The first phase of this pilot has been successful and we've started expanding the program to additional institutions.
With both our direct to consumer marketing program and expanded patient education program, gaining traction we are happy with the progress made to date for.
For the remainder of 2022, we will continue to invest in their rollout optimization and expansions, including the continued hiring of in house expertise to support the successful growth of these programs.
Our second area of focus is the innovation of our product portfolio in.
In the first half of the year, we will receive clearance on three pre market approval supplement related to our <unk> platform.
The first one is for better stem MRI conditional labeling which allows all heart failure patients who have received or will receive a <unk> device to undergo an MRI exam under certain conditions.
The second was for our new implantable pulse generator, which is smaller in size than prior generation and has 20% longer battery life on average and the third was for a new program, which is a tablet form factor with an even simpler programming software. We are now in the process of launching the new <unk>.
Platform, our third and final focus is the expansion of our clinical body of evidence.
The beat HFF clinical trial is designed to demonstrate the mortality and morbidity benefit of better stim into heart failure patient population with reduced ejection fraction.
The timeline for <unk> remains on track with all of the necessary events expected to occur by the end of this year. Once we have collected all of the required events. We will provide a more detailed review of the blinding process, which we continue to believe will occur during the first half of 2023.
In addition, we remain on track with batch wire, our ultrasound guided implant tweak. It we continue to expect the trial to be fully enrolled in 2023 and expect FDA approval by the end of 2024.
Despite some difficult challenges from COVID-19 inflation and supply chain disruption in the first half of 2022, we are immensely happy with what we are able to accomplish the performance seen in the second quarter is encouraging as it validates the growing demand for <unk>.
Looking ahead, we remain committed to executing our commercial plan and are on track for continued growth for the balance of 2022.
I'll now turn the call over to Jared to review our financials Jared. Thanks, Nadeem total revenue generated in the second quarter was $5.0 million, which is an increase of $1 9 million or 61% when compared to the same period last year.
Revenue generated in the U S with $3 $9 million in the second quarter, which is an increase of 87% over the same period last year.
Heart failure revenue in the U S totaled $3 $8 million in the second quarter on a total of 128 revenue units as compared to $2 million in the same period last year on 67 revenue units. The increase was primarily driven by continued growth as a result of the expansion into new sales territories new accounts.
And increased physician and patient awareness of barrels Tim at.
At the end of the second quarter, we had a total of 71 active implanting centers as compared to 31 at the end of Q2 2021 and 56 at the end of Q1 2022.
At the end of the second quarter, we had a total of 20 sales territories in the U S compared to eight at the end of Q2 2021 and 17 at the end of Q1 2022.
Revenue generated in Europe was $1 1 million in the second quarter, which is an increase of 7% when compared to the same period last year total revenue units in Europe increased from 47% in Q2 2021 to 52 in Q2 2020 to the.
The increase in revenue was primarily due to the lessening impact of the COVID-19 pandemic in Germany, and our continued investments in the European commercial organization, partially offset by an unfavorable currency impact on revenue.
Gross profit was $3 8 million for the second quarter, an increase of $1 $6 million when compared to the same period last year gross margin increased to 76% for the second quarter compared to 71% for the same period last year gross.
Gross margin 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 Risa.
Research and development expenses were $2 4 million for the second quarter, which is an increase of 4% when compared to the same period last year. This change was primarily driven by increased head count.
SG&A expenses were $12 $5 million for the second quarter, which is an increase of 122% when compared to the same period last year. This was primarily driven by increases in compensation expense due to increased headcount stock compensation and public company costs travel and an increase in marketing and <unk>.
Advertising expenses related to the investments associated with the commercialization of <unk> in the U S. Net loss was $11 1 million or <unk> 54 per share for the second quarter as compared to a net loss of $17 7 million or $48 48.
Per share for the same period last year net loss per share was based on approximately 25 million weighted average shares outstanding for the second quarter and approximately 366000 weighted average shares outstanding for the second quarter of 2021.
At the end of the second quarter cash and cash equivalents were $121 $3 million net.
Net cash used in operating and investing activities was $10 1 million for the second quarter compared to $6 8 million for the same period last year, we continue to prudently monitor our cash usage in support of our growth initiatives as we progress towards profitability.
Now turning to guidance for the full year of 2022, we now expect total revenue between 25 and 23.0 million gross.
Between 75% and 76% and operating expenses between 58 and $61 million for the third quarter of 2022, we expect to report total revenue between $5 5 million and 6.0 or $1 million.
I would now like to turn the call back over to Nadeem.
Thanks Janet.
We are enthusiastic about the momentum we have developed in the second quarter and throughout the first half of 2022.
And we are very well positioned to leverage that momentum and accelerate the adoption of <unk> throughout the rest of 2022.
Before I open the line for questions I wanted to thank everyone at <unk> for the tremendous work they have done to get us where we are today, we have only made it to this point because of the dedication and hard work of our team.
Now I would like to open the line for questions operator.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Please standby, while we compile the Q&A roster.
Again, Thats star one to ask the question.
Our first question comes from the line of Robbie Marcus with Jpmorgan. Your line is open.
Hi, This is allen on for Robbie Congrats on the good quarter.
Just to touch on the macro environment in the U S. On the first quarter you had highlighted that staffing shortages I continue to be a challenge for your volume growth. So I guess like how have those trends continued to develop into the second quarter and what does your guidance assume for the impact in the back half of the year.
Yes.
Thank you for joining us.
So if.
If you recall the first quarter had the tail.
Tale of two cities.
The beginning of the quarter was difficult.
We had some remnants of the COVID-19 impact in the United States.
The back half the second half of the quarter was actually very solid and we commented at the time abolished the staffing shortages in the labor shortages being one of the obstacles that we were trying to overcome with our concierge program to shift some of the education burden of patients wherever its possible ethical illegal.
For us to do we are wanting and willing and able to do with this type of fabrication and that has translated into reducing the negative impact of the labor shortage. It's all clients and Thats why were seeing the results. We are seeing as it relates to the guidance for next quarter and maybe Jack that sent to you.
This is Jeremy so as for the guidance for Q3 and for the rest of the year, we are still expecting to see a bit of a headwind from that hospital staffing shortages related to new center activation and so even though we were able to see 15 net new centers. We added in the second quarter, we are still expecting the numbers.
To be in the high single digits for each quarter meeting.
Seven eight or nine in Q3, seven eight or nine added in Q4, the rest of this year.
Got it and then what kind of benefit have you seen from the new product approval is of the new MRI conditional approval that you got earlier in the year and how should we think about the benefit from those approvals as well as the new programmer on the back half. Thank you guys.
Yes. Thank you. Good question, if you recall from our previous communication on this topic, we expected the impact of these new programs to be minimum we did not expect that to generate additional revenue, but rather be a source of a better customer and better patient satisfaction with our products and technology, particularly the conditional MRI compare.
<unk> ability.
Without it.
When patients had to undergo an MRI that could not set a patient that for example, a stroke that is not related to our product is limited.
The ability of physicians to order a prescribed by the variety to diagnose the patient with this new labeling we have right now they can do an MRI.
There are certain conditions that are in our labeling and we're very excited about this so it's more about increasing patient patient satisfaction, but also physicians and nurses satisfaction with our product technology and the same can be said about the size of the device about the battery longevity down the road and about the ease of use and the smaller form factor.
And the portable form factor of the new program, there as well so.
In summary, we don't expect those to generate more revenues, but rather just move us a notch forward than he had in terms of satisfaction.
Thank you.
Please standby for our next question.
Our next question comes from the line of Matthew O'brien with Piper Sandler Your line is open.
Afternoon. Thanks for taking my questions and I think Jared you started to address this a little bit.
But this was your best New center adds quarter that you've had so far is of the company and I think over the last maybe couple of years.
Or are there some some centers that were delayed in Q1 that can get going because of the staffing issues slash like access to.
Facilities. So that's why this quarter was better than we should expect a little bit more moderation later in the year and then.
Can you talk about some of those centers that you did add their higher volume opportunities or do you any kind of feedback there would be helpful. And then I do have one follow up.
Yes.
Good questions. So I was trying to allude to it earlier, we did see a spike in new centers in the second quarter and obviously, we're very happy with the numbers that we did see come through.
It's really hard to say what was holding back some of these centers and treating that first patients will officially be identified as an active implanting center in our metrics.
But we were happy with the results that we saw as far as the new centers that were being added our focus remains on targeting high volume centers and going after those that are treating the most ICD patients on an annual basis. However, when we get an inbound requests from physicians that they want to start.
Our aerospace program, we are obviously going to work with some of those more regional centers to get them onboard and allow them to start treating their patients with this therapy as well. So it still is a mix of those high volume centers that we're going out and targeting and some of those more regional centers that are reaching out to us and asking to start utilizing the device.
Got it and then you have more than doubled the number of active centers here.
In the last year can you talk about I'm, assuming you've got some of these metrics, but 128 units this quarter I believe that the number.
Sold how many of those came from the ones that you are selling into a year ago or before I E. The last.
That have kind of matured into a more active account over the last 12 months.
Yes, so one of the timelines we've been monitoring is when centers reach that one year Mark. It appears that they are starting to step up and treat more patients more.
Sure.
And then again, we're seeing another inflection point around that 18 month, Mark where they are starting to reach that long term goal of almost treating.
One patient per month per <unk>.
Center, and so that continues to be the trends that we saw here in the second quarter of this year is that.
The newer centers the ones that are under 12 months are trying the device, they're seeing how it works on their patients. They are testing what reimbursement is going to come back after they get that they start treating a patient every other month or every third month and then once they cross the one year Mark they start feeling comfortable doing a little bit more.
But once they reach 18 months is where we're seeing that trend of patients starting to be treated about one per month.
It's still a small volume right. We don't we don't have dozens and dozens of accounts that have reached that 18 month, mark but still in the early dataset.
And we are seeing.
Excellent. Thank you.
Okay.
Thank you.
Please standby for our next question.
Our next question comes from the line of Margaret <unk> with William Blair. Your line is open.
Hey, good afternoon, guys. Thanks for taking my questions.
I wanted to follow up a little bit.
The new commercial activities you guys have launched maybe just to start out with the strategic account managers.
And their impact on larger national accounts. So one have you seen an impact at this point and then two when should we hear more about this and is it going to be a series of updates or.
Just update us over time, and we'll see and then it would be fine.
Yeah.
Yes, Hello, Hi, guys glad to hear your voice listen in regards to the addition of the strategic account directors Kevin Denton.
The goal for us is to ensure that those multi site institutions <unk> or others.
Hand over multiple geographies multiple territories, but yet have one single contract that can have a single person following on the contracting process and that has started paying us now what do we do not.
The report are the centers that are under.
And active contract for that exact reason.
Kevin and his team is today signed up an agreement with a larger group that has 100 sites.
Particularly we could sell at 100 side, but really no because we need to develop this program at every single site with a champion and the clinical team about all of this program and therefore, we don't report the sites that have an active agreements with us really for the site that has an active implanting.
Experience. So they have done at least one implant in the previous 12 months. So bottom line. This is a well needed activity you have seen this also in the <unk>.
And play with other similar companies at our stage, we added those contracting at these high levels are imported and we're starting to see the impact.
It still requires a lot of work with the clinical team to develop a program, but it is that's part of the contracting when it cited the high level at the umbrella level. It simplifies a lot the product.
Okay great.
And then just to follow up.
My other colleagues have.
The new accounts, obviously it was great to see larger do certain number does sound like according to Jarrett.
<unk> target kind of that high single digit increase in new centers through the rest of the year, it's pretty similar maybe to what we've talked before.
Going into going into year end, So correct me, if I'm wrong about that but ultimately to the extent that these SKU ramp and do reach productivity, a little bit faster relative to our prior expectations. It seems like that shouldn't be shouldn't be a good thing.
So any details around that would be useful.
Yes, especially as it relates over the next 12 to 18 months. Thanks guys.
Yes, Margaret the only thing I'll add to it is like we said before we're going to continue to be opportunistic if the sites are coming on board and starting to treat patients at a faster pace or the utilization on a monthly basis is going up and we need staff to support the implants or be able to go and open some of these new centers that could be associated with national contracts will.
Make those investments.
The goal here is to grow at a fast pace to help as many patients as quickly as possible, but at the same point, we don't want to put resources in places that aren't going to be helping to drive top line and be able to help patients.
Early on.
Fair enough thanks, guys.
Thank you.
As a reminder, ladies and gentlemen that star one one to ask a question. Please.
Please standby for our next question.
Our next question comes from the line of Alex Nowak with Craig Hallum. Your line is open.
Greg Good afternoon, everyone, just hoping to expand upon matts question looking at the pipeline of sites out there could you maybe frame up how many accounts or size of the sales organization is actively speaking with are currently trades today.
How many are down the path of looking at barrels than let's say seriously.
Where can those implanting account numbers are a site numbers, where could this trend throughout the remainder of the year.
Yeah, Alex Hey, great to see you here listen.
We have not disclosed this number again, it's the complexity of disclosing a number that could misguide.
Because of those idea in the large accounts groups itself. For example, let's say hypothetically speaking if we sign an agreement with Dennis do we count in all of their hospitals. They have about the clinics, how 'bout distended centers or the OBL that they elevate.
It is so complicated thats why we don't venture into disclosing exact numbers I don't know how else I can help you with this one.
Hey, Janet and then maybe maybe I'll just chime in here too Alice in one of our standard responses.
We're always at least a quarter ahead for contracts.
And so we see the pipeline of what's coming through contracts that are signed coalitions that are being worked from a planning perspective, so that they can start identifying patients to actually start treating those patients and so we have some visibility into this but it's been dairy between.
<unk> centres as far as how quickly they move from a contract signs of treating that first patient.
We wish we had more informative data that we can get it to all.
All of you folks at this point related to those contracts signed but.
There's just too much variability as to the timeline from contract signing to becoming an active implanting center.
Yeah understood that makes sense and going back to the cadence discussion that we had on the Q1 call, but looking at Q2 here would you say there was a big bifurcation versus beginning of the quarter versus end of the quarter for a number of barrels of implants per site or would you say kind of trended generally stable.
Throughout the quarter for our procedure volumes.
Yes, thanks for bringing that up Alex you mentioned that earlier Q1.
Almost silence in the month of January and then starting to see some recovery in February and really a big March four procedures to be able to.
If the numbers that we did in Q1 as we moved into Q2. It really has moved into a stable setting we haven't really seen an impact from COVID-19.
Hospital staffing shortages actually perform procedures so months over months, just seeing steady growth as we marched all the way through Q2.
Okay understood and then just lastly, maybe just an update on reimbursement speak to the process.
<unk> upgrades.
<unk>, one CPT code the potential to make that typically pass through payment permanent and then just any feedback on reimbursement you are hearing from the field.
Absolutely I can address this Alex so and it got to the category one pill. So the CPT one coding.
This process usually takes three years from the moment physician Society.
Takes ownership and shut down the process and of course, we are in discussions with multiple physician societies and here, we have not yet disclosed if.
We selected one of them to champion the process.
The process is public as soon as this will go on the docket, we'll disclose it to the market and to all of you and we'll talk about what it means in the next step coming but don't expect from either not expect from my perspective, a category one code before 2025 and it might be shocking to you, but even if they started today.
Elliot they will get to it would be late 2020 for early 2025 now is this hurting us right now.
I would say.
Yes of course, because it gives the perception that the setup as experimental and Thats why the category needs, but are are the hospitals getting yes of course, because it gives the perception that the setup as experimental and Thats why the category three needs, but are are the hospitals getting paid today, yes, our physicians getting paid today in general gas without able to.
Get them the payment they deserve by cost walking the procedure to similar procedures and we have a very solid.
Our reimbursement team and headquarter and also in the field to support those endeavors.
The billing processes and after the billing when they get the payments.
That is the need.
To negotiate with payers and so forth without doing that so that's the situation with category one code in regards to the transitional pass through so this is the hospital payment system.
Currently we have a transition that pass through was that removed.
The price of the device from the existing code, which faced as the National average $30000. This year in 2099, hundreds also almost $30000 next year.
And substitute insert update the price of our device, which is as you know $35000. So that is giving hospitals a decent reimbursement that is that seems to be economically viable for hospitals to continue adopting better step for Medicare patients for private patients that payment is.
Negotiated usually between the hospital and the payer and in general It is known that private payers do reimburse hospitals, a little bit more than what Medicare does so from that perspective, we believe also that as private payers. When they are authorized the payment to the hospital is also economically viable.
So.
The question for the GPT is about the duration right now R&D, Sonora fact, actually our CPD expires at the end of 2020.
So we still have a year and a half to go with this process. We started down the path of asking CMS to consider creation of a higher paying code for therapies like ours that are a couple of other companies that have also joined this effort.
In this most recent public filing by CMS, which is their proposal for the outpatient payment systems.
They mentioned our request.
They still don't support it but they are opening this for public comment. It's a huge first step of course, we will comment on it and we'll be waiting.
I would say eagerly for the final.
A decision from CMS, which will be late November early December and we'll see if we have a permanent codes are not nevertheless, we still have a year with TPG right now in an absolute worst case scenario for us where we do not receive a new code.
We will have to revert back to selling our device at around $25000. That's why you would see a jotted and sometimes me.
Beating to you in your estimate in your forecast for the future of our setup.
Sure.
And he had an ASP of 2500 $26000 that will still make it economically viable to hospitals, even without a CPT at the worst case scenario.
And a good case scenario, we get a new code.
And we maintain the pricing DSP stays into 'twenty eight 'twenty nine.
I don't know if.
And I think that I've been here.
Alex does that answer your question about it's a complicated topic, sorry about going long yes.
That was perfect I really appreciate all the info here. Thanks.
Fantastic.
Thank you ladies.
Please standby for our next question.
Our next question comes from the line of William <unk> with Canaccord. Your line is open.
Great Good evening. Thanks.
Just.
The main question I have is we saw the acceleration of new account additions in the quarter and Youre doing that with your current staff and you've been pretty methodical on the build out thus far I was wondering do you plan on either a accelerating new.
Account onboarding with the existing commercial org or expanding the commercial org faster kind of like it seems like youre getting to that.
As you know I always ask the question is it reproducible repeatable and it seems like Youre starting to get to that point at least with account onboarding.
That's correct.
Thank you thank you for joining us.
So, yes as business situation, if that incentive fees and it seems to be so it seems to be a repeatable that seem to be scalable and.
Are we planning to accelerate no are we being opportunistic in some situations yes.
The mother's seems to hold too and our plan is to continue adding territories every quarter.
But we'll be opportunistic when the when we see a chance to grow.
Okay and then.
I don't know if this was covered or not just did you did you provide.
We're going to see when we're going to see the Eminem data.
Yes. This was not covered in the Q&A.
We still are expecting to accrue all of the events that we need and as a reminder, these 320 mortality morbidity events before the end of this year as currency in 2022, and blinding will happen very likely in the first half and possibly end of first quarter of 2023 now.
As we get closer to that date.
Cone of uncertainty regarding the date is not a week.
<unk> a moment when we will feel comfortable about the schedule of the unwinding.
And we will do.
Public communication about the exact sequence of the unblinded.
<unk> whenever you are talking about mortality and morbidity, it's a complicated matter why.
If a patient is hospitalized.
And it's a long hospitalization, so think about it medical management patients who did not receive a better stem is admitted for heart failure events and that event takes months.
You have to read that full months, even the data for good has happened you have to wait until the patient is discharged and all of the data has been collected and all of the data has been educated in a blinded fashion by our primary events committee before the data becomes data.
And that is what creates some of the uncertainty built between the time when we will get the event until the time that we know alright. This is the data let's look at it.
And as I mentioned earlier towards possibly before the end of the year I Hope, we will be in a position to communicate the exact timeline of the underlining process.
Great. Thanks for taking my question.
Thank you.
Thank you.
That concludes our question and answer session for today I would now like to turn the call back over to Debbie Reed for closing remarks.
Alright, Thank you operator, and thanks again, everyone for joining us for our second quarter earnings call.
We can imagine we do appreciate your ongoing support and we look forward to updating you on our progress on our next update.
Have a great evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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Okay.
[music].
Okay.
Yes.
[music].
Sure.
Okay.
Good morning.
Sure.
Yes.
Yes.
[music].
Yes.
Yes.
Thank you.
Yes.
Yes.
[music].
Yes.
Okay.
Yes.
Okay.
Yes.
Yes.
Yes.
Yes.
Yes.
Sure.
Yes.
Yes.
Okay.
[music].
Sure.
At this point.
Okay.
Yes.
Yes.
Yes.
Okay.
Yes.
Yes.
Okay.
Yes.
Sure.
Yes.
Yes.
Yes.
[music].