Q4 2022 Axonics Inc Earnings Call
Speaker 1: of
Speaker 2: Good day, and thank you for standing by. Welcome to Axonix fourth quarter 2022 results conference call. At this time, all participants are in a listen-only mode.
Speaker 2: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
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Speaker 2: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Neil Bullocker.
Speaker 3: Please go ahead. Thank you, Shannon. Good afternoon, and thank you for joining ExxonX's fourth quarter 2022 results conference call. Presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Deren, President and Chief Financial Officer. Before we begin, I'd like to remind listeners that statements made on this conference call make sense.
Speaker 3: are subject to a number of risks, uncertainties, assumptions, and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in Axonix's filings with the Securities and Exchange Commission, all of which are not available on the
Speaker 3: are available online at www.SEC.gov. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, March 1, 2023. Except as required by law, Axonix undertakes no obligation to update
Speaker 3: or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. I would now like to turn the call over to Ray.
Speaker 3: Thanks, Neil. I'd like to welcome everyone joining this afternoon's call.
Speaker 3: So our fourth quarter of 2022 and the financial results were nothing short of outstanding.
Speaker 3: Exonix generated record revenue of $86 million, an increase of 62% compared to the prior year period. This marked the third quarter in a row in which our revenue has grown at least 50% year over year.
Speaker 3: generated record revenue of 86 million dollars, an increase of 62 percent compared to the prior year period. This marked the third quarter in a row in which our revenue has grown at least 50 percent year over year. More specifically,
Speaker 3: SEGL norm modulation revenue was $70.3 million, an increase of 58% compared to the prior year period. This record level of revenue is being driven by a combination of higher utilization of our SNM systems and existing accounts.
Speaker 4: the addition of new accounts.
Speaker 4: BOCA Med revenue was $15.6 million, representing an increase of 79% compared to the prior year period.
Speaker 4: Record results were driven by solid, reorder rates from existing accounts in the onboarding of new customers.
Speaker 4: Our gross margin hit a new high water mark of 73.3% in the fourth quarter.
Speaker 4: We also generated $10 million of adjusted EBIDA in the quarter as we continue to benefit from the operating leverage inherent in our business model.
Speaker 4: Dan will discuss our financial performance and outlook in further detail and his prepared remarks.
Speaker 4: I would now like to provide a few updates on sales, marketing, and product development initiatives.
Speaker 4: In 2022, the launch of our long-lived F15 recharge-free system completed our Seiko No Modulation portfolio. We captured a high share of wallet in existing accounts and activated new competitive accounts.
Speaker 4: From the time of our US commercial launch in late 2019, we have continually enhanced the value proposition Exonex offers to our customers and we now have nearly 1,000 physicians in the United States implanting Exonex S&N systems. In addition, we acquired Bocamed.
Speaker 4: our unique hydrogel for the treatment of female stress urinary incontinence. We're the only company that offers solutions for all forms of bladder and bowel incontinence, be it urgency for urgency, frequency, stress, or fecal incontinence.
Speaker 4: We have grown our US field team and therapy support specialist group to provide best in class service and support to physicians and their patients.
Speaker 4: We have invested in a multi-channel DTC campaign to reduce stigma and increase public awareness that incontinence is not normal.
Speaker 4: and that the symptoms can be treated with advanced therapies.
Speaker 4: We also launched a call center to assist in connecting people who have incontinence to specialists in their local community.
Speaker 4: We have conducted numerous medical education seminars for physicians and their clinical staff on sacral nodulation, implanting, best practices, and how to improve navigating patients through the care pathway.
Speaker 4: We have hosted dozens of physicians at our headquarters in Irvine to meet with senior management, tour our manufacturing facility to see first-hand the care and quality that goes into making our products, and of course to discuss how we can ensure that more of their patients are getting the long-lasting, efficacious symptom relief that they deserve.
Speaker 4: Physicians are seeing exonics act like the market leader.
Speaker 4: We have demonstrated our commitment to this category and it is clear that exonix has been caused in the matter of the US sacral norm modulation market expanding significantly since our entry into the US market just a few years ago.
Speaker 4: More specifically, based on external definitive healthcare claims data and the limited directional information from our S&M competitor that they disclose, we estimate that the U.S. sequinal modulation market compounded at an annual growth rate of 18%.
Speaker 4: from 2019 to 2021 and 14% from 2019 to 2022, consistent with the mid-teens outlook we projected going all the way back to the time of our IPO.
Speaker 4: It's important to note that this level of growth was generated in the midst of a global pandemic and widespread staffing shortages that you have heard many physicians and management teams discuss previously.
Speaker 4: As it pertains to 2022 specifically, we understand that analysts had pegged U.S. market growth at 6% for this year or for that, for last year. I want to provide some important context to that figure.
Speaker 4: First, there was significant disruption and an adverse impact from Omicron, i.e. COVID-19, in the first quarter of 2022. So much so that the overall market is estimated to have contracted by 5% in that period.
Speaker 4: If we exclude the first quarter due to Omicron and just look at the last three quarters of 2022, the U.S. Secreno-Modulation Market grew approximately 10% year on year during that period.
Speaker 4: And perhaps most encouraging is that the market growth has accelerated each quarter of 2022, generating 8% growth in the third quarter and 18% growth in the fourth quarter.
Speaker 4: As we have said many times, the addressable market in the United States remains large and highly under-penetrated.
Speaker 4: According to IQVIA, over 18 million total prescriptions were written for OAB drugs in 2021 alone. It is worth noting that according to Definitive Healthcare, over 3 million Americans received an OAB diagnosis from their physician in 2021.
Speaker 4: Looking at all these factors, we remain confident that the second-order modulation market will expand at a mid-teens annual growth rate for years to come.
Speaker 4: Now, turning to an update on our commercial team, we now have 340 field-based personnel in the United States, of which 165 of them are directly involved in selling or sales management with the balance of our personnel being clinical specialists.
Speaker 4: We are well staffed at this time and expect a modest increase in commercial team headcount in 2023.
Speaker 4: The Exonics Find Real Relief direct to consumer advertising campaign continues to progress well. As many of you know, the advertisements on national television and Facebook encourage adults with incontinence symptoms to visit findrealrelief.com, our patient-facing landing page.
Speaker 4: The website provides information about exonics and continent solutions and directs individuals to complete a short symptom quiz or questionnaire.
Speaker 4: The campaign underscores our commitment to a population, primarily female, that for too long has gone underserved and undertreated due to lack of awareness of advanced therapies.
Speaker 4: Many of our customers continue to tell us that patients come into their practice asking about exonic therapy after seeing our ads on television or on the internet. The campaign continues to generate goodwill with our physician customers as they are grateful that we are helping to ensure that adults with these conditions are being seen by a clinician.
Speaker 4: advancing along the care pathway. In the fourth quarter of 2022 we had over 20,000 unique individuals visit our website to learn more about exonics therapies.
Speaker 4: Since launching their campaign in April of 22, the number of unique web visitors totaled approximately 2.25, excuse me, 1.25 million individuals. We take 2.25 as well, but 1.25 is the right number. Now, this is the important part. Qualified leads.
Speaker 4: as we refer to them, are individuals that complete the symptom questionnaire on our website.
Speaker 4: In the fourth quarter there were 33,000 qualified leads.
Speaker 4: And since launching in April , our campaign has generated 90,000 of these such survey responders or questionnaire responders.
Speaker 4: In fact, in January of this year, the number is accelerating and there were over 11,000 people who filled out a symptom questionnaire in January alone.
Speaker 4: Our call center continues to work diligently to connect qualified leads with a specialist physician in their local community.
Speaker 4: Now, turning to international activities, we recently launched commercial operations in Australia.
Speaker 4: which we kicked off with a well-received physician seminar held in Sydney during the President's Day weekend.
Speaker 4: The company's field team has started with four sales professionals who have years of experience in cycle modulation.
Speaker 4: and strong relationships with implanters in Australia.
Speaker 4: Exonex estimates that Australia is currently a $15 million S&M market with approximately 1,200 S&M procedures performed annually. Our competitor has regulatory approvals for their short-lived InterStim II product and InterStim Micro.
Speaker 4: Now, Exonix currently has regulatory and private reimbursement approvals for our rechargeable vehicle.
Speaker 4: regulatory and private reimbursement approvals for our rechargeable
Speaker 4: system in Australia as well as for Boulcomen.
Speaker 4: Now, the F-15, this is the recharge-free or non-rechargeable system, is currently under regulatory review by the Australian TGA and we expect approval in the coming weeks.
Speaker 4: We also recently submitted our latest rechargeable device called the R20 for regulatory review and expect approval in the second half of 2023. Our competitor already has regulatory approvals for their legacy products in Australia.
Speaker 4: Okay, it's important to note that even after receiving regulatory approval for our F-15, we will have to wait for private reimbursement approval in Australia, which we expect will come by the year end. As such, we are only forecasting...
Speaker 4: 1 to 1.5 million dollars of revenue contribution from Australia in 2023 with a much more significant contribution coming in 2024. Now turning to product development initiatives, we've received US regulatory approval for the Exonix R20.
Speaker 4: rechargeable simulator in January of this year and previously from Health Canada in December of 2022.
Speaker 4: Now this device utilizes the same small 5cc form factor as our previous rechargeable product, the R15, however requires recharging just once every six to ten months for one hour and has an expected useful life in the body of at least 20 years.
Early feedback from customers that have implanted the device have been overwhelmingly positive.
Now in summary, looking back on 2022, we're proud to have exceeded the commercial and operational objectives that we set forth at the start of last year. More importantly, we recognize the impact that exonics is having on changing the lives of people with bladder and bowel dysfunction.
underserved, undertreated markets in which we participate.
Our mission-driven team remains committed to innovating, supporting our dedicated physician customers and their patients, and raising awareness of our best-in-class therapies.
So with all that said, I'll now turn the call over to Dan for his detailed review of fourth quarter financial results. Dan, thanks Ray. As Ray noted, Exxonics generated net revenue of $85.9 million in the fourth quarter of 2022.
This represented an increase of 62% compared to the prior year period.
The sacred neuromodulation revenue was $70.3 million of which 98% was generated in the United States.
bulk of that revenue was $15.6 million of which 79% was generated in the U.S. Gross profit in the fourth quarter of 22 was $63 million, representing a gross margin of 73.3% compared to 66.6% in the prior year period.
were $66.6 million.
Included in operating expenses is a $2.1 million non-cash charge for the change in fair value of contingent consideration related to the bulk of that acquisition.
Excluding acquisition related charges, adjusted operating expenses were $64.5 million in fourth quarter 2022 and $51.6 million in the prior year period.
Net income in the fourth quarter of 2022 was $700,000 and benefited from $3.8 million of interest and other income.
Net loss in the prior year period was $15.2 million.
In the fourth quarter of 2022, Axonix generated $10.1 million of adjusted EBITDA. We are pleased to note that this marks the third quarter in a row Axonix has generated positive adjusted EBITDA.
The attractive financial profile of the company and the inherent operating leverage in our business model is becoming more evident in our financial results.
to set proper expectations. In the quarters ahead, there will be periods where we will swing back and forth between positive and negative adjusted evita based on the seasonality of top line results and corresponding gross margins.
Based on current trends, we expect exonics to be adjusted EBITDA and cash flow positive on a consistent basis at an annualized revenue level of approximately $350 million.
We also generated positive free cash flow in the fourth quarter. As of December 31st, cash, cash equivalents and short-term investments were $357 million compared to $350 million as of September 30th.
With respect to fiscal year 2023 revenue guidance.
We are reiterating the outlook that was provided in our January 11th pre-announcement.
Overall, company revenue is anticipated to be $342 million based on sacral neuromodulation and bulkamid revenue each growing 25% compared to the fiscal year 2022.
That concludes our prepared remarks and I will now turn the call back to Neil. Thanks Dan. At this time we are ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question. So we request that you please limit yourself to one question and one follow up. Shannon, please begin the Q&A session.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 11 again.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Travis Steed with Bank of America. Your line is now open. Your line is now open.
Thanks for taking the questions. I guess I'll start with the market growth. I appreciate the numbers you gave. I don't know if there's a source that you have for those numbers, if you have your claims database or kind of how you came up with those numbers on the market growth. I think we had pretty similar numbers in our market model as well. Also, if you could just talk about kind of the path on getting to like mid-teens growth for next year.
for the the claims that have been uploaded as of this date. So that's partially the driver of 2022 and then also using the information that Medtronic discloses in their quarterly results. Yeah, so Look in terms of the future. I mean, I think it's it's pretty clear right this market is accelerating
whether it be for stress incontinence or urinary urge incontinence, whatever the case might be. So I think that's happening. I think that it's interesting to note that our competitor, despite as they referred to competitive pressures, also saw increases in their revenue in this category in their last quarter. So we take that as good news and
hard on our DTC initiatives. We're not going to spend that much more in 23 than we did in 22 just because there's so many people inquiring that we want to give justice to the people who fill out these quizzes and get them placed for a consult with a qualified physician in the local area. And I think the last comment I would say.
not MRI compatible and was not easy to use. Okay and here we are now with a whole lineup of products that will last 20 years or longer in a person's body whether they were rechargeable, not rechargeable and think about what we've done now from a rechargeable standpoint where you know you've got a product that you know it's gonna last decades in your body and you maybe have to recharge this thing for one hour every six months.
number of feet on the street that we have and then the whole innovative piece of the puzzle. So hopefully that's not too long-winded, but covers the basis of why we're bullish about this. Now, it's taken a little bit of time to be able to get third-party data and to be able to be very clear about growth rates that we've been seeing.
and partially because of the pandemic. And it's funny how everybody seems to want to forget that we just lived through this for a number of years and things are much better today, but we've only had now, actually, if you think about it, Exonix has operated in a quote unquote normalized environment.
for approximately four months since we started to commercialize in November 2019. Great, thanks Ray. And then maybe one for Dan on the margins. I heard your comments kind of back and forth on EBITDA over the course of 2023. Maybe put a little more color on that. And you gave this weird $50 million number, which seems like it could be there by the end of 2023.
And so as you moved into 2024, what's the pathway for margins once you start to hit sustained profitability? How quickly can you get to 20%, 30% EBITDA margins in this business? We've always basically not, well, we've never put a specific timeframe on it. What we're looking at throughout 2023, as we mentioned, on the gross margin outlook, is we're expecting to see a...
100 basis point increase in 23 over 22 on a gross profit basis and that's driven by a better manufacturing year olds overhead absorption and partially offset by inflation and supply chain costs.
And then as you get out into 2024 and you look at the crossover point into positive cash flow and adjusted EBITDA positive, as time goes on, the operating leverage here, and we've said this numerous times, we expect to significantly increase, and in some cases we've said,
double the revenue we have with roughly the same sales and marketing spend we have with minimal ads. I think when you just look out not that far, you can get to your 20% EBITDA operating margins. I just don't want to put a stake in the ground as to what quarter that's going to happen. Thanks for taking the questions and I'll let others jump in.
I wanted to ask about the guidance. You had about a 33% share of the US S&M market in calendar Q4. The US market is about $780 million. The market grows 15% in 2023 and your shareholders at 33%.
It would imply US sacronomodulation sales of over $290 million, which is above your guidance of 278 worldwide. So, you know, is there, my question is, is there something unusual about your share in in calendar Q4? Do you expect the US market to grow below 15% this year, or is there just some conservatism here?
I think the short answer Larry, we're just trying to be a little conservative, not get over our skis and
You know, I mean, we can't predict perfectly what exact percentage the market is going to grow in 2023. I mean, all we can do is put our heads down and execute the game plan as we've been doing, which is not me or Larry. I mean, we've been talking about this as electronics has been all about execution since when like on that.
took the company public on Halloween in 2018. So look, our objective of course is to give guidance and obviously to overachieve. I mean, that's what everybody's focused on. And so I don't think there's more to it other than that.
Okay, fair enough. Ray, I feel compelled to ask because we keep getting asked about it. On tibial nerve stimulation, you don't seem, maybe I'm just asking if anything has changed, you don't seem interested in having access to this technology internally for axonics, nor do you see it as a threat.
I'd love to hear your updated thoughts on why. Thanks for taking the question. Well, thanks Larry, but personally, I'm boycotting those questions, but Dan has volunteered to answer. Inside joke Larry, you know as well.
Look, our position hasn't changed. We understand, we know these companies well, we've tracked them for the better part of 10 years now. And look, our thinking is, you know, an implant as an implant. Our device has a 90% efficacy in our FDA study. We haven't seen any efficacy from any of the implantable tibial companies that comes close to...
We're watching it, we'll pay attention to this. This is going to unfold over the next three to five years, and we'll see how it plays out. But we're not concerned, and we certainly don't see it as a short-term or intermediate-term competitive threat.
All right, thanks for taking the questions. Thank you. Our next question comes from the line of Chris Pasquale with Nefron Research. The line is now open.
Thank you. Congratulations guys on a great year. Wanted to maybe dig in on the other half of Larry's question about the guidance and the assumptions there and talk about bulk mid, you know, 25% is a nice round number. How are you thinking about the goals for that franchise and 23 and you talked about
Getting more involved with the gynecology call point, is that something that you're planning for this year? Yeah, thanks Chris. I appreciate the question.
more involved with the gynecology call point. Is that something that you're planning for this year? Yeah, thanks, Chris. I appreciate the question. You know, once again, I think that
you know, it's very difficult to, you know, predict, right? Oh, we're going to grow this, you know, this particular product line at 75% again this year. I mean, it's very, very difficult to do that. So we're once again trying to be conservative. We think this product's got a lot of legs, as we have seen so far, and it's very quickly become, you know, first line therapy for women with stress urinary incontinence. Now, having said that, you know, we treated, you know, the number was maybe call it 52,000 or so patients in 2022.
You know, but if we go back to swings in 2015 there were 350,000 swing operations done in 2015. So, and you can imagine, right, it's a difficult...
It's difficult for a woman to agree, yeah, I'd like an operation because I cough or sneeze and leak some urine or exercise. I mean, it's an annoying problem. There's no question about it and it can directly impact people's quality of life. We understand that.
But women don't want an operation for a stress urinary incontinence. That's not what they want. I think it's just going to take some time for us not to persuade the people, the women.
present with these symptoms. That's our challenge.
And as you know, Chris, medicine changes slowly. It's almost like built in, you know? And it's just going to take time for us to continue to create awareness and get the physicians.
to really start talking about this as an option to their patients. Now you mentioned the GYN community, right? So you know, that's a community that, you know, we haven't been aggressive with, but we're starting now to market to that community. But even within our core urology and uroganecology community, I mean, not enough of them are currently offering a bulk event, right?
bulk med. Not talking about well, you know, there's this other option and I've been doing these sling operations and they really work but let me tell you about the adverse event. Oh, but yet there's this, you know, there's this option, you know, that you may want to consider. No, that's not the talk track that they should be using, right? So we got some work to do.
And we're very bullish about it. It's just that we're really trying not to get over our sleeves, our skis on this. So, you know, give us a little more time, but inherent in your question is how bullish are we and it's hard to be more bullish about the potential for bulk med.
to treat stress urinary incontinence as first line therapy for patients. That makes sense. Thanks for walking through that. Switching back to the SNM side, I'm curious what you see as the biggest remaining bottlenecks in terms of growing that market today. You guys fixed the technology problem the market had before you got there.
You're raising awareness. Is the biggest rate limited today, the number of physicians who are doing the procedure or how much of their practice they're devoting to it, or is it something else?
It's really a good question. It really is a good question. As you might imagine, Chris, we spend a lot of time internally talking about this. When I say internally, I mean with our salespeople, our sales managers, and among senior management. So-
Here's the problem that we are facing and I'm going to be careful because I don't want to disparage You know a competitor, but you know they had a product that just wasn't that attractive
And for 20 something years, it was the only option. So what has been implanted in physician's minds is that psychronomodulation is difficult to do. It's fussy. It's not so easy to drop this lead down and the tools may...
time talking to their patients and actually prescribing, once again with that word, prescribing sacral neuromodulation, then this market would double overnight. So what does all that mean? That means that we have to be persistent, we have to be out there, you know, keep beating the drum, making things easier to use, you know, reinforcing the great clinical results that we're actually getting.
I mean, we've instituted a program which our field team has embraced which we call quarterly business reviews where we actually sit down with our customers at the end of each quarter and say, look, here's how many patients that presented that you know you did an external trial on, here's your conversion rate, here's the satisfaction data coming out of your actual patients because you know, we're the ones talking to those folks and making sure that they're good to go in.
I mean, it's turned out to be all the things that we expected, you know, in terms of how underpentantrated it is and how much potential it is. But I think, you know, look, we're going to continue to keep our heads down. We're going to continue to execute. We're going to grow our business at record rates here. We're proud of what we've accomplished, but we honestly feel like we've just scratched the surface. We've got a lot more work to do.
And it's to get, I'm sorry, I spent a lot of time not answering a question, but here's the answer. Same store sales. It's getting the average position instead of doing 12 of these things a year to do 24 of them a year. I mean, that's how we double our business. It's not about going out and finding another 2,000 doctors who want to dabble with taking them a modulation. This is about getting the people that know what they're doing, giving them better products, easier tools, better service.
Great, good afternoon and thanks for taking questions. I want to follow up just on some of your comments on FNM and OUS markets. Realizing Australia and the framework that you put around there could do. One for Australia, just to frame the opportunity for the market is today on a low-tibed basis versus the U.S. how do you think about it?
growth beyond 23 and then for 23 specifically in Europe and other locations where you're benefiting now from both mid-presence, we should think about S&M growth in those regions.
I mean at a high level as Ray, this is Dan, hi Cecilia, nice to hear you. As Ray mentioned in his prepared remarks, the Australian market for S&M we estimated around $15 million per year and we have approvals and we have coverage.
but we don't have it yet on our F-15 recharge-free product, which is why the statement that was made is we expect to do between a million and a million and a half revenue in 2023. Now beyond that, look, we intend, you know, like we do in all markets, to be the market leader. It's just a question of perseverance and time, and we don't want to put...
a specific date on that. But look, as we continue to grow, the market is so heavily skewed towards the United States for all of these products. That even though we will increase our OUS sales in both product categories for SNM and also for bulkimed, the US growth is gonna have to drive it. So this will...
probably forever be a story about the US market, but our goal, intending to be the market leader and as a global player, is we want to take care of patients, physicians and their practices worldwide. And so that's why we continue these efforts, OUS. We of course make revenue and margin off of it, but just as being a good corporate citizen and treating patients.
It's part of the plan. We started in Europe and we worked with a number of these physicians. In our previous company, we were in Australia in a big way. It's kind of natural for us to also move into this market since we have the full product line and we have the approval. I would add two things to your question. The markets outside the United States are all capitated. That's the fundamental issue here. If there was a laissez-faire market, we'd be on it hard, but it's not the case. I've mentioned it many times before. You take a market.
the UK. So hopefully that gives you some context why we're so focused on the US market. And there is a correlation, of course, between having bulk of that available in some of these other markets around the world. But FNM is a completely different animal.
You know, that's a product line that, you know, you need presence to make sure implants go well to program the patient. So it's a much heavier lift for us to really open up a new market. Now, last comment, obviously, we are looking to Asia in the future.
We understand big potential in places like Japan and China, and that's something for the future of the company. But right now, we're going to continue to stick to our knitting and focus mainly here Thank you for the coloring. I think it's full of this all. Just our 20 where you are at this point and are the limited part of the lease and the garages for dress and wet ??? hats. This next question??, that
targeting and also trying to move forward to think about the impact to growth margins. So I think the quet you're a little broken up, but I think your question you're referring to our new rechargeable R20. And here's my comment about that. I'm going to not predict it. Because the last time I was asked to predict the split between rechargeable and
the product in the marketplace. But it's going to be hard to predict. I mean, that F-15, I just think it just blew people's minds honestly about the longevity of the product and how nice and small it is and everything else. So, you know, it's kind of a fun thing where now we have these really amazing products that are actually competing for mind share, you know, with patients and providers. So, we're left word there is we're agnostic.
We've got great margins or good margins, I should say at least on these products. And you know, whatever it is that a physician and their patients decide to do, we're just happy that it's exonix. Thanks for taking the question.
We've got great margins or good margins, I should say at least on these products. And you know, whatever it is that a physician and their patients decide to do, we're just happy that it's exonix. Thank you for taking the question. Thank you.
or good margins, I should say at least on these products. And, you know, whatever it is that a physician and their patients decide to do, we're just happy that it's exonant. Thank you for taking the question. Thank you. Thank you.
Our next question comes from the line of David Ruscott with Truist. Your line is now open. Hey guys, thanks for taking the questions and congrats on a strong, strong end of the year. I guess just first on the guidance, you know, one of you would provide any color maybe around how we should think about the cadence for the year. I think consensus right now has about 34% growth in Q1. I'm sure there's two, we'll see the Q1 seasonality, but you know, you're over your council a little bit easier and then growth kind of stepping down throughout the year. So just wondering first, maybe how we should think about that growth on a quarterly basis.
percent year-ever-year revenue growth for both stakeholder modulation and bulkamid and because of you and that said you know because of the impact of Omicron in Q1 of last year which contracted the market you know we expect growth year-over-year in Q1 to be in the low 30s
this quarter year over year and then for the remainder of 2023 what that drops out is we expect to see growth in the in the low to mid 20s as you as you look forward. So does that answer the question?
Yes, yeah, no that's helpful. I guess just a second one from us, you know, if you could provide any update maybe on ongoing litigation of the upcoming jury trial, maybe any risks associated with that and whether or not we should be thinking about any type of incremental spend in 2023. Thank you. So I guess the hot flash is that
The trial date has been pushed. So we're now, it was originally scheduled for mid-April, it's now scheduled for mid-August. And I really don't think there's much more to say that we haven't said for unless Dan, you want to add something. No, I think the only thing I would add is the standard thing we always say, which is, I mean, going all the way back to 2019 when these claims were filed against us.
We still maintain our position. We haven't infringed on anything.
we haven't infringed on anything. Thank you.
Thank you. Our next question comes from the line of Adam Mater with Piper Sandler. Your line is open. Hi Ray. Hi Dan. Good afternoon and thanks for taking the questions and congrats on ISQ4 in 2022 year. May be Dan for you wanted to just kind of flesh out some of the...
the P&L assumptions to the extent you're willing to share, to surround kind of off-expand, how to think about that and in cadence of spending, as well as the level of DTC spend in 2023. Okay, so I mean, just so that we're adding good to hear from you. I'm just over working off the same baseline. You know, adjusted operating expenses and 22, were $240 million. And so that includes stock-based compensation as well as depreciation and compensation. What it would exclude are the non-cash charges related.
to the contingent consideration or milestone payment that we will someday owe to Ventura for the acquisition of bulk emit. Keep in mind, we have a milestone payment of $35 million when we sell a certain amount of bulk emit in the trailing 12 month period. Now, looking at operating expenses with that same platform, in 2023, we expect the total OPEX to be is 15, lymph Presidency.
follow up I wanted to ask about one of the staff I hope I heard it correctly that you guys provided in the prepared remarks but I think you said you have nearly a thousand physician implanters doing SNM in United States. I was wondering if you're able to kind of give a little bit more detail there and also remind us kind of how you kind of view market concentration and how pregnant the volumes are and then I guess the other part of the question is you know how do you think about that number kind of where can it go over time.
Thanks so much for taking the questions. Yeah, thanks Adam. So I'm trying to parse the question a couple of pieces here. So if you take, the math is not that hard to come to. If you take the second modulation revenue that we did in 2000.
SNM implants per customer. And these are not accounts. These are, this is a physician count, right? So you could have four physicians in a given, group urology practice, which may or may not be owned by the hospital, right? So that's kind of how we look at it. So those are the averages. We've kind of avoided this, as you know, Adam. We've avoided this in the early days.
just because it's all over the board when you're first starting. You know, you get some implanters that might be doing 50 a year. That's a great customer, right? And then some that may, you know, they may just getting reinvigorated, and they may only do six. So, you know, that's where you come about that average. I mean, I think it's embarrassingly abysmal, okay? I mean, bottom line. I mean, this is silly.
that the average customer in the United States is doing as few as they are. Now that presents a big opportunity and a big upside for us. And these numbers are better today than they were when we started in 2020. We are seeing incremental increases in same store sales on that side. So, you know, it's all up side trust.
from that standpoint. So hopefully I'm looking at my colleagues now to see if there was any other substantive part of the question. No, I think you did ask how many more could- I think Ray is nailed. Like there are, you know, call it between 2,500 and 3,000 physicians that have implanted SNM. Ray said that I think in the prepared remarks or in one of the earlier questions, which is we don't need to go out and find new physicians to bring them into SNM. And with the innovation that we brought to the table and the sales and marketing team and the fact that we are smothering these accounts with clinical specialists.
very easy for these physicians to double or triple their volume without running into any issues with access to operating suite time or a patient population. You know, and Adam, it's great again. Now, I have one more thing I'd like to add, and it's been really interesting.
with bulkimeds. Because what we have found is that only about half of the customers, and by the way we have more bulkimeds than we have SNM customers right now, and we found about half of them not even doing signal modulation. And of the half that are doing it, not all of them are our customers. Some of them are competitive accounts. So...
This is really interesting and has been a true eye opener for us, right? And that is that, look, if you're doing bulk-a-met, I mean, there is no reason in the world why you're not doing segmental modulation. It's just that you've got maybe a bad attitude about it, you know, given the legacy products that were out there, right? So, but once again, big opportunity for us in terms of that and having bulk-a-met is really helped, right? It's getting us into accounts that we normally wouldn't have been.
and is giving us a lot of opportunities for cross-selling, which we've been taking full advantage of, which I think is showing up in our market share numbers and so on and so forth. So, but really appreciate the questions. A good question, we're happy to chat about that. Good color, thank you. You're back. Thank you. Our next question comes from the line of Michael Polark with Wolf Research. Your line is now open. Good evening. A lot of questions asked. So I'll boycott my second question and just ask,
executing on this core vision. Thanks so much.
It was Mike, right? Yeah, yeah, thanks Mike. You know, when you're asking a question, I just keep thinking about what's going to be the headline in your report that you're going to put out after we finish. In any event.
It's going to have something to do it. Do I answer this question, my show up in this headline about the third leg on the school, right? But you've already used the word boycott, so that's good inspiration. I'm not using the word focus mic. So look, I think that it's not as if there aren't folks who've come to us with all kinds of other opportunities and various different, you know, products that could fit. So that's good, that's good, that's good, that's good.
even within the urology or urogane ecology arena i i just think that we're early as a company we we would just continue to to kind of get that point across it three years since we've been in commercial distribution um... and you know as you know we've got this thing about execution and doing things well uh... with quality and we don't want to lose focus that this is such a greenfield opportunity that i think if all of a sudden we were to bring something new to the game that maybe deals with you know men or or some other kind of urology product
I think that I would be a little circumspect if I was sitting on the outside. I mean, this is such a big opportunity that I think a lot of companies would be quite envious of what we're looking at. So therefore, we're going to stick to our knitting. It's not to say that we won't add additional, let's say, things that could make things easier in the future, et cetera, et cetera. But we're going to focus in this area of incontinence for the foreseeable future. And then we'll reevaluate. But our goal is, as we stated,
Number one, market leadership in sake of no modulation. And we are more than three quarters of the way to that goal right now. So we're going to continue to press that hard. And, you know, we.
We'd like to be a half a billion dollar company and we think that's within you know within our grasp and you know Then maybe things change for us and we you know, we have more levers to push at that point, but You're not going to be surprised by some announcement that all of a sudden we decided, you know to get into You know BPH or something like that. That's not the direction that we're thinking about. So I appreciate the question I just thank you. Thank you Thank you. Our next question comes from the line of Shagan Singh with RBC Capital
anything you can share and I'm sorry I missed the DTC spend for 2023 can you just remind me what the amount was thank you.
So we spent about $20 million in 2022 on DTC. We'll spend approximately the same amount in 2023. Where are the patients coming from? They exist in every physician's practice in urologist and urogonicologist. They've been walking in the door and out the door. They've again a drug prescription and walking out the door and never coming back.
And we have proven this to a lot of our customers by just getting a mailer, a simple letter in the mail to their existing customers saying, hey, we've got new technology. You may want to, you know, you know, you know, specific to your problem. You may want to consider coming back in here. Want you fill out this symptom questionnaire and we'll get you get you scheduled.
It is unbelievable how many new patients get activated. We've talked about Botox numerous times, the fact that about 150,000 women got Botox in 2022. Well, you know, 15 or 20% of all the customers that, all the patients that we treat have previously had Botox. So a big campaign of ours is getting that across to the physicians to say, look,
counterintuitive uh... it's just counterintuitive you think that well you go see a urologist they're gonna spend time or you're gonna call just a good spend time with you they're gonna talk to you about all the treatment options but the reality is you took a stopwatch and you went in and saw what actually happened i mean they're spending minute only minute
with these patients and so that's part of the issue. So you can see why we're doing all these other things. Why do we have story books? Why do we have clinical specialists? Why are we providing a DTC? We're trying to help have the patients identify themselves and wave their hands in front of the office and say, hey, I got this problem, help me. Don't give me another drug prescription that doesn't work. So I think there's nothing really new about this. It's just this is what's going on and I mean there are tens of millions of people that are just sitting out there right now.
and they're not getting the treatment that they deserve. And, you know, we're gonna do our little part to see, you know, that more of these patients get treated. And, I mean, if the DTC numbers don't really get the point across, I don't know what else would. I mean, 11, 12,000 people are filling out a symptom questionnaire and saying, please connect me with a local provider in my community to get evaluated. These are incredible numbers. And, once again, pale in comparison to the number of patients that are already sitting.
And EMR systems are file cabinets of customer locations around the United States. So we really appreciate that question. You've helped us, you know, even further inform about this topic. Thank you. Thank you. Our next question comes from the line of Michael Sarkone with Jeffries. Your line is now open. Thanks. Hi, Ray Dan and Neil. Thanks for squeezing me in here. That's just one follow up on the DTC campaign. It does look like.
You know, you're gaining some steam there. You're talking about over 11,000 qualified leads in January . Could you just give us an update on kind of what the mix of those patients looks like? I know in the past, you've talked about 60% treatment in the AES. So any update there. And then, you know, when do you think you might start being able to mine some of the patients?
in terms of implants that come in through the funnel. So Michael, thanks for the question. It's already happening. We are able to now start to make direct correlation between patient names that have filled out questionnaires and those who are getting treated. The numbers are growing. We're seeing, you know, we've said it's about a six month gestation period before we could
truly expect stuff. We are starting to see it. It is measurable. We're very encouraged by that. Having said that.
Nothing has changed. I mean, it may be even more patients, who are more people who are filling out these questionnaires that are treatment naive. So I think once again, that just underscores how generally speaking the population here in the United States is unaware that there are advanced therapies to treat this problem. So it's all good. So I'm moving in the right direction. But the reason we're not spending more money on DTC is simply because we want to do justice.
to those individuals who have already raised their hand. And it's a process. 11, 12,000 people raised their hand. You've got to reach out to all of those individuals, try to get them on the phone, try to get them an appointment. I mean, if anything, what we were doing differently in 2023 is moving more towards a concierge service so that we can kind of keep people on the line and get them in the appointment book. Because that's where things kind of break down, right? You know, practices are busy and...
and all the rest. So, and everything else, every other management team has said, which we don't need to repeat on this call. But, you know, could we do more? Yes, could we spend more? Yeah, could we generate more interest? Yeah, but once again, it's a big task, right, to be able to do justice to the quote-unquote leads that we're getting to begin with. All right, thank you. Thanks, Michael. Thank you.
Our next question comes from the line of Mike Madsen with Needham & Company. Your line is so open. Thanks. I'll just ask the one question that's passed the 30-minute mark here. But I guess just wondering about the pipeline and...
We've seen tremendous improvements in lifespan and size of these devices in a fairly short period of time. So, and you've seemed to have been launching kind of a new version annually. So, can you continue that pace and are we nearing sort of the near term limits in terms of battery life and size and things like that for these devices? So, you know, it's another interesting question. You know, Mike, I think the fair answer is that our engineering team has really overachieved. I don't think anybody expected, you know, this kind of longevity with these, you know, really very small, very small, very thin devices.
We feel very confident that we've kind of rung out a lot of what can be had on the implantable pulse generator side. So I think we're kind of pencils down there for IPGs for the moment. Our tension now is focusing on reimagining our external trial system so that that's more comfortable for people. That's something that's an initiative inside the company and other things related to just streamlining the whole process of getting patients through the care pathway and interfacing with our people and external trials and all these kinds of things. So you're going to see more innovation from exonics. No question.
It's just not going to be in the near term being defined as the next year or two. It's not going to be on the IPG side. It's going to be other accoutrements, if you may, for the system. Okay, got it. Thank you. Sure. Thank you. I would now like to hand the conference back over to Raymond Cohen for closing remarks. All right. Well, thank you. That was a really good, robust Q&A session. We really appreciate the questions coming from the analyst community. So just in closing, I'd like to just say that we remain grateful for the trust that physicians, and, of course, shareholders have placed in Exonix.
As always, I'd like to thank my colleagues in Irvine and our team in the field for their diligent efforts and dedication to fulfilling the the exonix mission of improving the lives of adults with incontinence. And so I thank you all for joining us on today's call and we'll look forward to speaking with you more as the year unfold. You all have a good evening. This concludes today's conference call. Thank you for participating. You may now disconnect. Connect.
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Good day and thank you for standing by. Welcome to axonix 4th quarter 2022 results conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Please be advised that today's conference is in recorded. I would now like to hand the conference over to your host today, Neil Bullocker. Please go ahead. Thank you, Shannon. Good afternoon, and thank you for joining Exxonix's fourth quarter 2022 results conference call. Presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Deerin, President and Chief Financial Officer. Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events, prospects.
or performance, or forwarded statements defined under the private securities litigation reform act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in exonics's filings with the Securities and Exchange Commission, all of which...
are available online at www.sec.gov. Listeners are caution not to place undue reliance on these forward-looking statements, which speak only as of today's date, March 1, 2023. Accept is required by law, axonics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. I would now like to turn the call over to Ray. Thanks, Neil. I'd like to welcome everyone joining this afternoon's call. So our fourth quarter of 2022 and the financial results were nothing short of outstanding.
results were driven by solid reorder rates from existing accounts in the onboarding of new customers.
Our gross margin hit a new high watermark of 73.3% in the fourth quarter. Now we also generated $10 million of adjusted EBITDA in the quarter as we continue to benefit from the operating leverage inherent in our business model. Dan will discuss our financial performance and outlook in further detail.
in his prepared remarks. I would now like to provide a few updates on sales, marketing, and product development initiatives. In 2022, the launch of our long-lived F15 recharge-free system completed our Seiko No Modulation portfolio. We captured a high share of wallet in existing accounts and activated new competitive accounts. From the time of our U.S. commercial launch in late 2019, we have continually...
for urgency, frequency, stress, or fecal incontinence. We have grown our US field team in therapy support specialist group to provide best-in-class service and support to physicians and their patients.
We have invested in a multi-channel DTC campaign to reduce stigma and increase public awareness that incontinence is not normal, and that the symptoms can be treated with advanced therapies.
We also launched a call center to assist in connecting people who have incontinence to specialists in their local community. We have conducted numerous medical education seminars for physicians and their clinical staff on sequential modulation and planting best practices and how to improve navigating patients through the care pathway.
We have hosted dozens of physicians that are headquarters in Irvine to meet with senior management, tour our manufacturing facility to see first-hand the care and quality that goes into making our products, and of course to discuss how we can ensure that more of their patients are getting the long-lasting, efficacious symptom relief that they deserve.
Physicians are seeing exonics act like the market leader. We have demonstrated our commitment to this category and it is clear that exonics has been causing the matter of the U.S. sacral nomadulation market expanding significantly since our entry into the U.S. market just a few years ago. More specifically based on external definitive healthcare claims data and the limited directional information from our FNM competitor that they disclose, we estimate that the U.S. sacral nomadulation market compound.
previously. As it pertains to 2022 specifically, we understand that analysts had pegged US market growth at 6% for this year or for that last year. I want to provide some important context to that figure. First, there was significant disruption and adverse impact from Omicron.
IECOVID-19 in the first quarter of 2022. So much so that the overall market is estimated to have contracted by 5% in that period. If we exclude the first quarter due to Omicron and just look at the last three quarters of 2022, the U.S. Sekuno Modulation Market grew approximately 10% year on year during that period.
And perhaps most encouraging is that the market growth has accelerated each quarter of 2022, generating 8% growth in the third quarter and 18% growth in the fourth quarter. As we have said many times, the addressable market in the United States remains large and highly underpenetrated.
According to IQVIA, over 18 million total prescriptions were written for OAB drugs in 2021 alone. It is worth noting that according to Definitive Health Care, over 3 million Americans received an OAB diagnosis from their physician in 2021. Looking at all these factors, we remain confident that the second home modulation market will expand.
at a mid-teamed annual growth rate for years to come. Now, turning to an update on our commercial team, we now have 340 field-based personnel in the United States of which 165 of them are directly involved in selling or sales management with the balance of our personnel being clinical specialists. We are well staffed at this time and expect a modest increase in commercial team headcount and we are well staffed at this time and expect a modest increase in commercial team headcount.
in 2023. The Exonix Find Real Relief direct to consumer advertising campaign continues to progress well. As many of you know, the advertisements on national television and Facebook encourage adults with incontinence symptoms to visit findrealrelief.com, our patient-facing landing page. The website provides information about Exonix incontinence solutions and directs individuals to complete a short symptom quiz or questionnaire.
The campaign underscores our commitments to a population primarily female that for too long has gone underserved and under-treated due to lack of awareness of advanced therapies. Many of our customers continue to tell us that patients come into their practice asking about exonix therapy after seeing our ads on television or on the internet. The campaign continues to generate goodwill with our physician customers as they are grateful that we are helping to ensure that adults with these conditions are being seen by a clinician and advancing along the care pathway.
them are individuals that complete the symptom questionnaire on our website.
In the fourth quarter there were 33,000 qualified leads and since launching in April our campaign has generated 90,000 of these such survey responders or questionnaire responders.
In fact, in January of this year, the number is accelerating and there were over 11,000 people who filled out a symptom questionnaire in January alone. Our call center continues to work diligently to connect qualified leads with a specialist physician in their local community. Now turning to international activities, we recently launched commercial operations in Australia. Who will work to bridge this crisis for the Earth- the world, and also be part of the American people with a realised honoured matter? Weugs and the myself
which we kicked off with a well-received physician seminar held in Sydney during the President's Day weekend. The company's field team has started with four sales professionals who have years of experience in psychone modulation and strong relationships with implanters in Australia. Exonics estimates that Australia is currently a $15 million SNM market with approximately 1200 SNM procedures performed annually. Our competitor has regulatory approvals for their short-lived InterStim 2 product and InterStim Micro. Now Exonics currently has a regulatory and private...
of 2023.
Our competitor already has regulatory approvals for their products in legacy products in Australia. Okay, it's important to note that even after receiving regulatory approval for our F-15, we will have to wait for private reimbursement approval in Australia, which we expect will come by the year end. As such, we are only forecasting $1.5 million of revenue contribution from Australia in 2023 with a much more significant contribution coming in 2024. Now, turning to product development initiatives, we've received
Regulatory U.S. regulatory approval for the exonics are 20 rechargeable simulator in January of this year and previously from health Canada in December of 2022. Now this device utilizes the same small 5CC form factor as our previous rechargeable product, the R15. However, requires recharging just once every 6 to 10 months for one hour and has an expected useful life in the body of at least 20 years. Early feedback from customers that have implanted device have been overwhelmingly positive. Now in summary,
Looking back on 2022, we're proud to have exceeded the commercial and operational objectives that we set forth at the start of last year. More importantly, we recognize the impact that exonics is having on changing the lives of people with bladder and bowel dysfunction. In fact, in 2022 alone, our sacral nomadulation systems and bulkamad were used to treat over 65,000 patients worldwide. And yet, we are still scratching the surface of what is possible in the large, underserved, under-treated markets in which we participate.
Our mission-driven team remains committed to innovating, supporting our dedicated physician customers and their patients and raising awareness of our best in-class therapies. So with all that said, I'll now turn the call over to Dan for his detailed review of fourth quarter financial results. Dan? Thanks, Ray. As Ray noted, exonics generated net revenue of $85.9 million in the fourth quarter of 2022. This represented an increase of 62% compared to the prior year period. Sakeral Neuromodulation Revenue was $70.3 million of which 98% was generated in the-
Operating expenses in the fourth quarter of 2022 were $66.6 million, included in operating expenses as a $2.1 million non-cash charge for the change in fair value of contingent consideration related to the bulk of med acquisition. Excluding acquisition related charges, adjusted operating expenses were $64.5 million and $1.2 million.
In the fourth quarter of 2022, AXONX generated $10.1 million of adjusted EBITDA. We are pleased to note that this marks the third quarter in a row. AXONX has generated positive adjusted EBITDA. The attractive financial profile of the company and the inherent operating leverage in our business model is becoming more evident in ourIR Gesar
tax onyx to be adjusted EBITDA and cash flow positive on a consistent basis at an annualized revenue level of approximately $350 million. We also generated positive free cash flow in the fourth quarter. As of December 31st, cash equivalents and short term investments were $357 million compared to $350 million as of September 30th.
With respect to fiscal year 2023 revenue guidance, we are reiterating the outlook that was provided in our January 11th pre-announcement. Overall company revenue is anticipated to be $342 million based on sacred neuromodulation and bulkamid revenue each growing 25% compared to the fiscal year 2022. That concludes our prepared remarks and I will now turn the call back to Neil. Thanks Dan.
At this time, we are ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question. So we request that you please limit yourself to one question and one follow-up. Shannon, please begin the Q&A session. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by when we compiled the Q&A roster. ?
Our first question comes from the line of Travis Steed with Bank of America. Your line is now open. Hi, everybody. Thanks for taking the questions. I guess I'll start with the market growth. I appreciate the numbers you gave. I don't know if there's a source that you had for those numbers, if you had your claims database or kind of how you came up with those numbers on the market growth. I think we had pretty similar numbers in our market model as well. But also, if you could just talk about the path on getting to mid-teens growth for next year, any green shoots you're seeing, momentum from the DTC, just some other color around what you're seeing in the marketplace.
to help provide confidence in that sustained between market growth from here. Let me take the first part of that. So Travis, this is Neil on the question about the sources for the market growth. It's partially definitive healthcare claims data for the claims that have been uploaded as of this date. So that's partially the driver of 2022 and then also using the information that metronic discloses in their quarterly results. I'll turn it over to the next question. Yeah, so look in terms of the future. I mean, I think it's pretty clear, right? This market is accelerating. It's happening in real time and we've seen it. Certainly in the three quarters of 2022. And I think the DTC campaign is what is creating a lot of these green shoots as you refer to them.
I mean, think about the magnitude of the number of people that are visiting our website inquiring about advanced therapies, whether it be for stressing continents or uriner urgent continents, whatever the case might be. So I think that's happening. I think that it's interesting to note that our competitor, despite as they referred to competitive pressures, also saw increases in their revenue and this category in their last quarter. So we take that as good news and we're thrilled to see that. We've said all along since the beginning that it's about raising the tide here and it'll float everybody's boat in this current duopoly that we're involved in. So we're going to continue to press hard on our DTC.
and was not easy to use. And here we are now with a whole line up of products that will last 20 years or longer in a person's body, whether they be rechargeable, not rechargeable. And think about what we've done now from a rechargeable standpoint, where you need to get a product that's going to last decades in your body, and you maybe have to recharge this thing for one hour every six months, or maybe in some cases, as long as 10 or even 12 months at a time. So I think it's a combination of many.
why we're bullish about this. Now, it's taken a little bit of time to be able to get third-party data and to be able to be very clear about growth rates that we've been seeing, and partially because of the pandemic. And it's funny how everybody seems to want to forget. That we just lived through this for a number of years. And things are much better today. But we've only had now, I-
maybe put a little more color on that. And you gave this $350 million number, which seems like it could be there by the end of 2023. And so as you moved into 2024, what's the pathway for margins? Once you start to hit the same profitability, how quickly can you get to 20, 30% even on margins in this business? And we've always...
Basically not well, we've never put a specific timeframe on it. What we're looking at throughout 2023, as we mentioned, you know, on the gross margin outlook, is we're expecting to see a 100 basis point increase in 23 over 22 on the gross profit basis. And that's driven by a better manufacturing year old overhead absorption, you know, impartially offset by inflation and supply chain costs. And then as you get out into 2024 and you look at the crossover point into positive cashflow and adjusted EBITDA positive, you know, as time goes on, the operating leverage here. And we've said this numerous times. We expect to significantly increase, you know, in some cases we've said, double the revenue we have with roughly the same sales and market we have with minimal ads. So I think when you just look at it.
$80 million. If the market grows 15% in 2023 and your share holds at 33%, it would imply US sacronormal relation sales of over $290 million, which is above your guidance of 278 worldwide. So my question is, is there something unusual about your share in calendar Q4?
Do you expect the US market to grow below 15% this year or is there just some conservatism here? I think the short answer Larry, we're just trying to be a little conservative, not get over our skis. We can't predict perfectly what exact percentage the market is going to grow in 2023. All we can do is put our heads down and execute the game plan as we've been doing, which is not me, Larry. I mean, we've been talking about this as electronics has been all about execution since we.
you know took the company public in uh... you know on holloween and two thousand eighteen so uh... you know uh... look our objective of course is is is to give guidance and and obviously to over chief i mean that's what everybody's focused on and so i don't think there's more to it than other than that
Okay, fair enough. Ray, I feel compelled to ask, because we keep getting asked about it. On tibial nerve stimulation, you know, you don't seem, you know, maybe I'm just, you know, asking, I guess if anything has changed, you don't seem interested in having access to this technology, you know, internally for, you know, for axonics, nor do you see it as a threat. You know, I'd love to hear your updated thoughts on why. Thanks for taking the question. Well, thanks Larry, but personally, I'm boycotting, boycotting those questions, but then.
complex procedure and a part of the anatomy that these doctors aren't trained to do. And there are obviously a lot of questions about how you do market roll out and then ultimately what reimbursement looks like coming from the CPT editorial panel. So I would just leave it at that look. We're watching it. We'll pay attention to this. This is going to unfold over the next.
three to five years, and we'll see how it plays out. But we're not concerned, and we certainly don't see it as a short-term or intermediate-term competitive threat. All right, thanks for taking the questions. Thank you. Our next question comes from the line of Chris Pesquale with Neffron Research. You'll let us know open. Thank you. Congratulations, guys, on a great year. Wanted to maybe dig in on the other half of Larry's question about the guidance and the assumptions there and talk about bulk amidst, you know, 25% is a nice round number. How are you thinking about the goals for that franchise? And you've been 23 and you talked about...
getting more involved with the gyro ecology, call point, is that something that you're planning for this year? Yeah, thanks, Chris. I appreciate the question. Once again, I think that it's very difficult to predict. We're going to grow this particular product line at 75% again this year. I mean, it's very, very difficult to do that. So, we're once again trying to be conservative. We think this product's got a lot of legs as we have seen so far and is very quickly become...
you know, first-line therapy for women with stress urinary incontinence. Now, having said that, you know, we treated, you know, the number was maybe call it 52,000 or so patients in 2022. You know, but if we go back to slings in 2015, there were 350,000 sling operations done in 2015. So, and you can imagine, right, it's a difficult, it's difficult for a woman to agree, yeah, I'd like an operation because I cough or sneeze and leak some urine or exercise. I mean, it's an annoying problem. There's no question about it. And, you know, and it can directly impact people's quality of life. We understand that, but women don't want an operation.
for a stress-earnering continent. That's not what they want. And so I think it's just going to take some time for us not to persuade the people, the women.
But to persuade the physician community that that bulgamed is the right solution for the vast majority of patients who present with these symptoms. That's our challenge. And you know, as you know, Chris, medicine changes slowly. It's almost like built in, you know, and it's just going to take time for us to continue to create awareness and get the physicians to really start talking about this as an option to their patients.
Now, you mentioned the GYN community, right? So, you know, that's a community that, you know, we haven't been aggressive with, but we're starting now to market to that community. But even within our core urology and uroganecology community, I mean, not enough of them are currently offering a bulk event, right? Now, we've just started to scratch the surface. So, if you're asking me, what do I think the potential is? The potential is for hundreds of millions of dollars of sales of bulk event on an annual basis. But it's just going to take us some time for us to be able to get there and to get these positions in, in fact, prescribing bulk event.
Not talking about well, you know, there's this other option and I've been doing these sling operations and they really work But let me tell you about the adverse and oh, but yet there's this you know, there's this option You know that you may want to consider no, that's not the talk track that they should be using right so so we got some work to do and We're very bullish about it. It's just that we're really trying not to get over our sleeves a sleeve our skis on on this So you know give us a little more time, but but I I inherent in your question is how bullish are we and it hard to be more bullish about the potential for bulk of Ed To treat stress urinary continents as as first line therapy for patients That makes sense. Thanks. Thanks for walking through that Solution back to the SNM side curious, which you see is the biggest remaining bottlenecks
in terms of growing that market today. You guys fixed the technology problem the market had before you got there. You're raising awareness. Is the biggest rate limited today the number of physicians who are doing the procedure or how much of their practice they're devoting to it or is it something else? It's really a good question. I mean, it really is a good question. And as you might imagine, Chris, we spend a lot of time internally talking about this. And when I say internal amoeba, with our sales people, our sales managers.
You know, it's not so easy to drop this lead down and the tools maybe weren't as easy to use. And then my patients would need to come back for reprogramming and all this other noise. And it just takes time to kind of erase that legacy mindset. And I would tell you if physicians spent more time talking to their patients and actually...
the great clinical results that we're actually getting. I mean, we've instituted a program which our field team has embraced, which we call quarterly business reviews, where we actually sit down with our customers at the end of each quarter and say, look, here's so many patients that presented that, you know, you did an external trial on, here's your conversion rate, here's the satisfaction data.
coming out of the your actual patients because you know we're the ones talking to those folks and making sure they're good to go and they're tucked in. So I think it's just going to take some time and it's almost as if we've kind of created a new category called sacral lower modulation.
and it ain't your grandfather's product, right? So, you know, I think that's the story. So, you can tell Chris, I mean, we're really enthusiastic about what's going on about this business. I mean, it's turned out to be all the things that we expected, you know, in terms of how underpenetrated it is and how much potential it is. But I think, you know, look, we're gonna continue to keep our heads down, we're gonna continue to execute, we're gonna grow our business at record rates here. We're proud of what we've accomplished, but we honestly feel like we've just scratched the surface.
We've got a lot more work to do and it's to get, I've spent a lot of time not answering a question, but here's the answer. Same store sales. It's getting the average physician instead of doing 12 of these things a year to do 24 of them a year. I mean, that's how we double our business. It's not about going out and finding another 2,000 doctors who want to dabble with sacro no modulation. This is about getting the people that know what they're doing, giving them better products, easier tools, better support, and just getting them to talk more about it.
I think Australia and the framework they put around there could you one for Australia and frame the opportunity for the market is today on a low-to-base basis versus the US. How do you think about growth beyond 23? And then for 23 specifically in other locations where you're benefiting now from both mid-present, I wish you think about SNM growth in those regions.
I mean, at a high level is Ray, this is Dan, high facility, and nice to hear you. As Ray mentioned in his prepared remarks, the Australian market for SNM, we estimated around $15 million per year, and we have approvals and we have coverage, but we don't have it yet on our F-15 Recharge Free product, which is why the statement that was made is we expect to do between a million and a million and a half revenue in 2023.
Now, beyond that, look, we intend, you know, like we do in all markets to be the market leader. It's just the question of perseverance and time, and we don't want to put a specific date on that. But look, as we continue to grow, the market is so heavily skewed towards the United States for all of these products.
Even though we will increase our OUS sales in both product categories for SNM and also for bulkimmed, the U.S. growth is going to out drive it. This will probably forever be a story about the U.S. market, but our goal, you know, in thinking to be the market leader and as a global player, is we want to take care of patients, physicians in their practices worldwide. That's why we continue these efforts, OUS. You know, we, of course, make revenue and margin off of it, but just as being a good corporate citizen and treating patients, you know, it's part of the plan. And we started in Europe and we've worked with a number of these physicians.
In our previous company we were in Australia in a big way and so it's kind of natural for us to also move into this market since we have the full product line and we have the approvals. I would add two things to your question and that is that the markets outside the United States are all capitated and that's the fundamental issue here. If there was a laissez-faire market we'd be on it hard but it's not the case.
And I've mentioned that many times before if you take a market like the UK as an example which is probably one of the largest markets, if not the largest market, interrupt. The government is going to pay for 800 implants. So right now you've got two companies fighting each other to get the lion's share of that business and how much energy do you really want to spend in trying to grow that business when in fact the state of Mississippi outsells the country of the United Kingdom. So you can imagine.
It's a lot easier for us to expand our efforts in Mississippi than it is throughout the UK. Hopefully, that gives you some context why we're so focused on the US market. There is a correlation, of course, between having bulk of that available in some of these other markets around the world. But SNM is a completely different animal. That's a product line that you need presence.
to make sure implants go well, to program the patient. So it's a much heavier lift for us to really open up a new market. Now, last comment. Obviously, we are looking to Asia in the future. We understand big potential in places like Japan and China. And that's something for the future of the company. But right now, we're going to continue to stick to our knitting and focus mainly here in the United States. Great. Thank you for the call. And if I could follow up as well. Just ask me where you are at this point.
in the limited market release and then if you think about 23-2, just as the R20 roll out at top targeting and also tied in with that, how we should think about the impact to gross margins. So I think the question, you were a little broken up, but I think your question, you were referring to our new rechargeable R20 and you know here's my comment about that. I'm gonna not predict it because the last time I was asked to predict the split between
I just think it just blew people's minds, honestly, about the longevity of the product and how nice and small it is and everything else. So, you know, it's kind of a fun thing where now we have these really amazing products that are actually competing for mind share, you know, with patients and providers. So, we're left word there.
Thank you.
Thank you. Our next question comes from the line of David Ruscott with Truist. Your line is now open. Hey guys, thanks for taking the questions and congrats on that strong fourth quarter and strong end of the year. I guess just first on the guidance, you know, one of you would provide any color maybe around how we should think about the cadence for the year. I think the consensus right now has about 34% growth in Q1. Absolutely there's a Q1, which is now only, but you know, you're a bird.
year count, a little bit easier, and then growth kind of stepping down throughout the year. So just wondering first, maybe how we should think about that growth on a quarterly basis through the year. I think you've already hit on it, David, which is we're all aware of the impact of first quarter drop-off to the seasonality, people not having met their deductibles. These are elective procedures, both for SNM and bulkamet. And so we're in this particular therapy category, we're particularly sensitive to the seasonality.
And the load amid 20s is you look forward. So does that answer the question? Yes, yeah, now that's helpful. I guess just the second one from us, you know, if you could provide any update maybe on ongoing litigation of the upcoming jury trial, maybe any risks associated with that and whether or not we should be thinking about any type of incremental spend in 2023. Thank you. Thank you.
So, I guess the hot slash is that the trial date has been pushed. So we're now, it was originally scheduled for mid-April, it's now scheduled for mid-August. And I really don't think there's much more to say that we haven't set before unless Dan, you want to add something. No, I think the only thing I would add is the standard thing we always say, which is, I mean, going all the way back to 2019 when these claims were filed against us, as we've always said that we don't believe we're infringing on any kind of claim to take this very seriously.
Your line is now open.
Hi Ray, hi Dan, good afternoon and thanks for taking the questions and congrats on ice Q4 and 2022 year. Maybe Dan for you wanted to just kind of flesh out some of the, you know, the PNL assumptions to the extent you're willing to share, just around kind of off-expend how to think about that and in cadence of spending.
as well as the level of DTC spending in 2023. Thanks. Okay, so I mean, just so that we're, Adam, good to hear from you. Just so we're working off the same baseline, adjusted operating expenses in 22 were $240 million.
And so that includes stock-based compensation as well as depreciation and amortization. What it would exclude are the non-cash charges related to the contingent consideration or milestone payment that Hyundai Oda on Tura for the acquisition of bulk. Keep in mind we have a milestone payment of $35 million when we sell.
a certain amount of bulk of met in the trailing 12 months period. Now, looking at operating expenses with that same platform, in 2023, we expect the total OpEx to be $280 million. It's a mid-teens increase above 22.
And when you backed out up against the 25% year-over-year increase in revenue for SNM and Bokomed, it just reiterates the operating leverage that we expect to see. Really helpful, Dan. Thank you for the color there. And you know, for the follow-up, I wanted to ask about one of the staff. I hope I heard it correctly that you guys provided in the prepared remarks. Thank you.
But I think you said you have nearly a thousand physician Implanters doing S&M in the United States. I was wondering if you're able to kind of give a little bit more detail there and also remind us kind of how you kind of view market concentration and how fragmented the volumes are and Then I guess the other part of the question is, you know, how do you think about that number? Kind of where can it go over time? Thanks so much for taking the questions Yeah, thanks Adam
So I'm trying to parse the question a couple of pieces here. So if you take, the math is not that hard to come to. If you take the Secreno Modulation Revenue that we did in 2022 and divide it by the average selling price of, call it, $15,000, you know, divided by the number of customers, then you know, there it is, right? It comes out to about 14.
SNM implants per customer. And these are not accounts. These are, this is a physician count, right? So you could have four physicians in a given, you know, group urology practice, which may or may not be owned by the hospital, right? So that's kind of how we look at it. So those are the averages. We've kind of avoided this, as you know, Adam. We've avoided this in the early days, just because it's all over the board when you're starting. You know, you got some implantors that might be doing 50 a year.
That's a great customer, right? And then some that may, you know, they may just getting reinvigorated and they may only do six. So, you know, that's where you come about that average. I mean, I think it's embarrassing, we abysmal, okay? I mean, bottom line. I mean, it's a silly that the average customer in the United States is doing as few as they are. Now, that presents a big opportunity and a big upside for us, right? I mean, and these numbers are better today than they were when we started in 2020, right? I mean,
need to go out and find new physicians to bring them into S&M. And with the innovation that we've brought to the table, and the sales and marketing team, and the fact that we are smothering these accounts with clinical specialists to make sure that everything goes perfectly well for their patient population, it's just time.
It's perseverance and time for same-source sales increase. We track this internally. We know exactly how many more units each customer did in 2022 over 2021 and it's really solid growth. We believe over the next five years we're going to see a big increase in utilization and the great news is, Ray just mentioned, is since the average, not all at that level, but it's very easy for these physicians to double or triple their volume without running into any issues with actual-
competitive accounts. So this is really interesting and it's been a true eye opener for us, right? And that is that look if you're doing bulk event, I mean there is no reason in the world why you're not doing cyclone modulation. It's just that you've got maybe a bad attitude about it, you know, given the legacy products that were out there, right? So but once again, big opportunity for us in terms of that and having bulk event is really helped, right? It's getting us to, you know, into it.
Your line is now open. Good evening. A lot of questions asked. So I'll boycott my second question and just ask one. I'm curious, you know, the expansion into being a tooth therapy company with Bulkamid has grouped to be highly successful. You built the real platform on that focus call point. I've asked this question before. I'm just curious for your.
updated views, is there interest in adding a third leg to the stool? What does that opportunity that look like today or is the focus in 23 executing on this provision? Thanks so much. It was Mike, right? Yeah, yeah, thanks Mike.
You know, when you're asking a question, I just keep thinking about what's going to be the headline in your report that you're going to put out after we finish. In any event, it's going to have something to do. If I do, I answer this question, my show up in this headline about the third leg on the stool, right? But you've already used the word boycott, so that's good inspiration. I'm not using the word focus mic. So, look, I think that it's not as if...
There are folks who've come to us with all kinds of other opportunities and various different products that could fit even within the urology or uroganicology arena. I just think that we're early as a company. We would just continue to kind of get that point across. It's three years since we've been in commercial distribution.
And, you know, as you know, we've got this thing about execution and doing things well with quality. And we don't want to lose focus. This is such a greenfield opportunity that I think if all of a sudden we were to bring something new to the game that maybe deals with men or some other kind of, you know, urology product, I think that, you know, I would be a little circumspect if I was sitting on the outside. I mean, this is such a big opportunity that I think a lot of companies would, you know, would be quite envious of what we're looking at.
So, therefore, we're going to stick to our knitting. It's not to say that we won't add additional, let's say, things that could make things easier in the future, et cetera, et cetera, but we're going to kind of focus in this area of incontinence for the foreseeable future. And then we'll reevaluate. But our goal is, as we've stated, number one, market leadership in sacred oil modulation. And we are more than three quarters of the way to that goal right now. So, we're going to continue to...
press that hard. And, you know, we like to be a half a billion-dollar company, and we think that's within our grasp. And, you know, then maybe things change for us. And, you know, we have more levers to push at that point. But you're not going to be surprised by some announcement that all of a sudden we decided, you know, to get into BPH or something like that. That's not the direction that we're thinking about. So, I appreciate the question. Understood. Thank you. Thank you. Our next question comes from the line of Shagun Singh with RBC Capital Market. She'll line us up.
Thank you. So we spent about $20 million in 2022 on DTC. We'll spend approximately the same amount in 2023. Where are the patients coming from?
They exist in every physician's practice in urologists and your gynecologist. They've been walking in the door and out the door. They've been getting a drug prescription and walking out the door never coming back. And we have proven this to a lot of our customers by just getting a mail or a simple letter in the mail to the existing customers saying, hey, we've got new technology. You may want to, you know, you know, you may want to, you know, you may want to, you know,
specific to your problem, you may want to consider coming back in here, want you fill out this symptom questionnaire, and we'll get you scheduled. It is unbelievable how many new patients get activated. We've talked about Botox numerous times, the fact that about 150,000 women got Botox in 2022. Well, 15 or 20% of all the customers that all the patients that we treat have previously had Botox. So a big campaign of ours is getting that across to the physicians to say, look.
You're just temporizing these patients. You're giving them a temporary solution for a chronic problem. Let's get them back in here. Let's talk to them about, you know, a long-term, multi-decade solution that will solve their problems. So, we don't need to find the patients already there. And this is a point that I think...
is maybe counterintuitive. It's just counterintuitive. You think that, well, you go see a urologist, they're gonna spend time or you're gonna consciously gonna spend time with you, they're gonna talk to you about all the treatment options. But the reality is, if you took a stopwatch and you went in and saw what actually happened, I mean, they're spending minutes, only minutes with these patients. And so that's part of the issue. So you can see why we're doing all these other things. Why do we have story books? Why do we have clinical specialists? Why are we providing a DTC? We're trying to help have the patients identify themselves and wave their hands in front of the office and say,
I don't know what else would I mean eleven twelve thousand people are filling out a symptom questionnaire and saying please Connect me with a local Provider in my community to get evaluated these are incredible numbers and and once again pale in comparison to the number of patients that are already sitting in EMR systems or file cabinets of
of customer locations around the United States. So we really appreciate that question. You've helped us even further inform about this topic. Thank you. Thank you. Our next question comes from the line of Michael Sarcone with Jeffries. Joanne is now open. Again.
Thanks hi, Ray Dan and Neil. Thanks for choosing me in here. That's just 1 1 follow up on the DTC campaign. It doesn't like. You know, you're getting some steam there. You talked about over 11,000 qualified leads. In January , could you just give us an update on kind of. What the mix of those patients looks like, I know in the past, you've talked about 60% treatment.
between patient names that have filled out questionnaires and those who are getting treated. The numbers are growing. We've said it's about a six month gestation period before we could truly expect stuff. We are starting to see it. It is measurable. We're very encouraged by that. Having said that...
nothing has changed. I mean it may be even more patients who are more people who are filling out these questionnaires that are treatment naive. So I think once again that just underscores how generally speaking the population here in the United States is unaware that there are advanced therapies to treat this problem. So you know it's all good, it's all moving in the right direction, but the reason we're not spending more money on DTC is simply because we want to do justice to those individuals who've already raised their hand and it's a process you know.
11, 12,000 people raised their hand. You've got to reach out to all of those individuals, try to get them on the phone, try to get them an appointment. I mean, if anything, what we were doing differently in 2023 is moving more towards a concierge service so that we can kind of keep people on the line and get them in the appointment book. Because that's where things kind of break down, right? Practices are busy and all the rest. So, and everything else, every other management team has said, which we don't need to repeat on this call. So, but, you know, could we do more? Yes, could we spend more? Yeah, could we generate more interest? Yeah, but...
Once again, it's a big task, right, to be able to do justice to the quote unquote leads that we're getting to begin with. All right, thank you. Thanks, Michael. Thank you. Our next question comes from the line of Mike Madsen with Needham & Company. Your line is now open. Thanks, I'll just ask one question since we're past the 30 minute mark here, but so I guess just wondering about kind of the pipeline and
You know, we've seen tremendous improvements in lifespan and size of these devices in a fairly short period of time. So, and you've seemed to have been launching kind of a new version annually. So, can you continue that pace and, you know, are we nearing sort of the near term limits in terms of our life and size and things like that for these devices?
So, you know, it's another interesting question. You know, Mike, I think the fair answer is that our engineering team has really overachieved. I don't think anybody expected, you know, this kind of longevity with these, you know, really small, very small, very thin devices. We feel very confident that we've kind of run out a lot of what can be had on the implantable pulse generator side. So, I think we're kind of pencils down there for IPGs for the moment.
Our attention now is focusing on reimagining our external trial system so that that's more comfortable for people. That's something that's an initiative inside the company and other things related to just streamlining the whole process of getting patients through the care pathway and interfacing with our people and external trials and all these kinds of things. So you're going to see more innovation from exonics, no question. It's just not going to be in the near term being defined as the next year or two.
have placed in exonics. As always I'd like to thank my colleagues and Irvine and our team in the field for their diligent efforts and dedication to fulfilling the the exonics mission of improving the lives of adults with incontinence. And so I thank you all for for joining us on today's call and we'll look forward to speaking with you more as the year unfolds.
You all have a good evening. This concludes today's conference call. Thank you for participating. You may now disconnect.