Q1 2023 CVRx Inc Earnings Call
Greetings and welcome to the C V. Our ex Q1, 2023 earnings call.
At this time, all participants are in listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.
As a reminder, this conference is being recorded.
He is now my pleasure to introduce your host Kelly. Thank you. Please go ahead Sir.
Okay.
Good afternoon. Thank you for joining us today for CVR <unk> first quarter 2023 earnings conference call.
Joining me on today's call are the company's President and Chief Executive Officer, Nadeem you already.
And Chief Financial Officer, Gerry <unk>.
The remarks today will contain forward looking statements, including statements about financial guidance.
The statements are based on the plans and expectations as of today, which may change over time.
In addition, actual results could differ materially due to several risks and uncertainties, including those identified in the earnings release issued prior to this call and in the Companys SEC filings, including the upcoming Form 10-Q that will be filed with the SEC.
I would now like to turn the call over to <unk>, President and Chief Executive Officer, That'd be me all right.
Thank you, Mike and thanks to everyone for joining us.
I'll begin today's call by providing an overview of our first quarter performance followed by an operational update and a few of our financial results by our CFO Gerardo time, and then I will conclude with our thoughts for the rest of 2023 before turning to Q&A.
We are thrilled with our first quarter performance, which demonstrated solid execution on multiple fronts.
We were able to share the preliminary data from the beat H F study during the quarter and continued to grow our U S heart failure business.
This is a testament to our team's ability to accelerate adoption of Patterson him through the increased capabilities of our commercial organization and our marketing and awareness efforts.
At a high level or better stem centipede continues to gain traction.
The feedback from physicians at the active implanting centers is extremely positive with many reporting meaningful impact on the quality of life for their patients suffering from heart failure.
Now, let's dive into the details of our performance.
Starting with the review of the first quarter our worldwide revenue for the quarter was $8 million, an increase of 96% over the first quarter of 2022.
The U S heart failure business generated $6.8 million if revenue.
An increase of more than 132% over the first quarter of 2022.
This accelerating topline performance in the U S was highlighted by March which was by far the best single month in the company's history.
While we don't know how much of the revenue performance in Marsh is attributable to the announced on blinding of the beat Hs study in February or so our commercial execution over recent quarters, we can definitely say our strategy is working.
We are also seeing these strong adoption trends continue into April .
Now turning to an update on the operational progress we made during the first quarter.
Starting with the continued expansion of our commercial infrastructure.
During the quarter, we added three new territories, bringing the total to 29.
We remain excited with the quality of sales talent, we have been able to attack and look forward to continuing to build upon that quality in 'twenty two 'twenty three.
During the first quarter, we made significant progress with our marketing initiatives, including our direct to consumer and patient education programs.
We will continue to optimize these campaigns to improve cost effectiveness and evaluate the broader rollout to capitalize on the accelerating momentum in our business.
Moving to our next area of focus the expansion of our clinical body of evidence.
I want to provide an update on our ongoing interaction with FDA regarding a potential label expansion. Following the post market beat H F data, we recently announced.
We have started an interactive discussion with FDA to ensure that our submission is designed in a way that is most effective for their review process.
He's on the data collected so far and guidance from our executive steering Committee, we remain optimistic that we will receive a label expansion.
However.
Please keep in mind that our 'twenty to 'twenty three guidance showing significant growth does not assume any positive impact from a label expansion.
We look forward to reporting our progress over the coming months.
That being up the quarter.
I want to express my gratitude to our team.
And thank everyone for their continued support.
We had a strong first quarter with impressive revenue growth, particularly in the U S.
Where our heart failure business performed exceptionally well.
We remain confident in our business to help bring relief to many patients suffering from heart failure.
I'll now turn the call over to Jared to review our financials.
Got it thanks Nadeem in the first quarter total revenue generated was $8 million, representing an increase of $3 $9 million or 96% compared to the same period last year revenue generated in the U S was $6 $9 million in the current quarter, which is an increase of 127% over the.
Same period last year.
Heart failure revenue in the U S totaled $6 $8 million in the current quarter on a total of 200 and twenty-five revenue units compared to $2 $9 million in the first quarter of last year on 99 revenue units. This increase was primarily driven by the continued expansion of the U S heart failure business into new sales territories, new accounts and <unk>.
Creased awareness, among physicians and patients about Barrow stem.
At the end of the current quarter, we had a total of 122 active implanting centers compared to 56 on March 31, 2022 and 106 on December 31, 2022. We also had 29 sales territories in the U S. At the end of the current quarter compared to 17 at the end of Q1, 2022 and 'twenty.
Six on December 31, 2022.
Revenue generated in Europe was $1 million in the current quarter, an increase of 2% compared to the same period last year total revenue units in Europe increased from 50 in Q1 of 2022 to 52 in the current quarter at the end of the current quarter. We had a total of six sales territories in Europe .
Gross profit for the three months ended March 31, 2023 was $6 $7 million, an increase of $3 $5 million compared to the three months ended March 31, 2022 gross margin for the current quarter increased to 83% compared to 77% for the same period last year. This increase was primarily driven by a decrease.
And the cost per unit as a result of the increase in production volumes Reese.
Research and development expenses for the current quarter were $3.4 million, reflecting an increase of 51% compared to the same period last year. This change was primarily due to increased compensation expenses noncash stock based compensation expenses and consulting fees.
SG&A expenses for the current quarter were $15 $4 million, representing an increase of 43% compared to the same period last year. This increase was mainly driven by higher compensation expenses due to increased head count as well as increases in travel expenses noncash stock based compensation expenses in marketing and advertising.
<unk> related to the commercialization of barrel stim.
Other income net was $1 $1 million in the current quarter compared to a net expense total of $57000 in the same period last year. The income in the first quarter of 2023 was primarily driven by interest income on our interest bearing account.
Net loss for the current quarter was $11.4 million or 55 cents per share compared to a net loss of $10 million or 49 cents per share for the same period last year net loss per share was based on 27 million weighted average shares outstanding for the current quarter and $20 4 million weighted average shares outstanding for the first quarter of.
2022.
At the end of the current quarter cash and cash equivalents were $103.3 million net cash used in operating and investing activities was $10 $5 million for the current quarter compared to $10 $9 million for the same period last year.
During the current quarter, we also drew down $7.5 million of debt on our current credit facility to further strengthen our financial position now turning to guidance for the full year of 2023, we now expect total revenue to be between $35 5 million and $38 million gross margin is now expected to be beaten.
The 80% and 83% and we continue to expect operating expenses between 76 and $80 million for the second quarter of 2023, we expect to report total revenue between $8 2 million and $8 $8 million.
I'd now like to turn the call back over to Nadeem.
Thanks Janet.
These are very exciting times at CVR acts.
We continue to see exceptional execution across our business.
Revenues accelerating our margin profile continues to improve and our cash burn is decreasing.
Simply put our model is working as we expected too.
We have continued to see strong performance in the business through April and as a result are raising the low end of our full year revenue guidance and increasing our full year gross margin guidance.
We look forward to continuing to build on the momentum we have created and successfully execute our growth strategy throughout the remainder of 2023.
Now I would like to open the line for questions operator.
Thank you Sir.
Ladies and gentlemen, we will now be conducting a question and answer session.
He would like to ask a question. Please press star and then one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star and then two if you would like to move your question from the queue.
Again, if he would like to ask a question. Please press star and then one now.
The first question is from Bill.
So vantage from Canaccord Genuity. Please go ahead.
Oh, great. Thanks for taking my questions and congrats on the quarter I'm, just really two questions on really on the Eminem data. One is yeah. You discussion of this the interactive discussion with F. D. A can you give us you know.
Your thoughts on the label kind of how we should think about this is like what what are you going for at the high end what are you going to four at the low end and kind of frame that discussion for us if possible and then secondly, your commentary on a very strong March not sure if that's commercial or the M and M data I was just.
You know any anecdotal feedback from the physician community would be great. There. Thanks for taking my questions.
Yeah, Hello, Bill had a nice.
Hearing from you and great questions.
Let me start with the question about the interactions with FDA and us.
As you know there are two ways of fed.
A filing at PMA supplement one is.
Apologies for that the first approaches to prepare the clinical report submit it.
And then wait to hear by a feedback from FDA. The second is due it's more interactively.
We selected the second Bath way and this interaction with allow us to optimize.
The clinical report to ensure that we basically are providing the information in a way that is the most useful to FDA to make that assessment.
The labeling but going after as I've said it previously is at treatment effects, we would love it if FDA agrees with the opinion of our executive steering Committee that is made of five key opinion leaders, where they stated that in their opinion the totality of evidence from <unk>.
H F supports this therapy as a treatment for patients suffering from heart failure.
Whether you know through the interaction with FDA, we could augment that labeling or decrease it it's still a little bit early right now to assess that so we're at the beginning at the early phases of these interactive discussions with FDA.
In regards to your second questions and anecdotal evidence.
We've had.
Few interactions with physicians since we unblinded the data I just want to remind everybody here.
What answering your question Bill is that we as a company and a sponsor of the trial.
We are not allowed to market the data yet.
Yet.
All we can do is answer questions. So if a physician asks a question we can answer it if they don't.
We cannot provide the information.
In our.
The information I have in front of me about half of the physicians that we are either working with or interacting with.
Have not asked any question about the Eminem data they may not be aware of the blinding of the data.
The remaining half those that auto where the range of feedback varies widely.
And what we can say right now is we have not seen.
Any slowdown.
Due to the data or any physicians say well.
I'm disappointed with the stay at all I don't believe any more.
What I've seen in my own patients, therefore, I am going to slow or stop treating.
Treating patients with better step so we have not seen that it's a double negative apologies about this so so far I would say I am very satisfied with the reaction that we have seen in the marketplace.
Two the data for those physicians, who have been exposed to the data.
Thanks for taking my question.
Thank you Bill.
The next question, we have is from Robbie Marcus from JP Morgan. Please go ahead.
Hi, This is lilly on for Robbie Thanks for taking my question, so you'd be taking them out and guided for the second quarter ahead of the street.
Only raised the low end of the guidance by half a million, which implies a slightly softer back half than what we had been thinking.
So can you talk through your thinking there and why is it the full year range, where they got more.
Hi, Lily. This is Jared are happy to take your question. Yeah. We were really happy with what we saw in the first quarter I think Nadeem mentioned it in the first part of the call just talking about how we really saw some nice results in the month of March, allowing us to beat the top end of that range that we that we had put out for the first quarter.
And we saw some of those trends continuing in April to allow us to put out some pretty solid.
Solid guidance here for the second quarter.
We don't necessarily want to move too quickly on our full year guidance. After just one quarter results are just seeing you know really strong margin seem a few positive trends into April .
But if we see the trends continuing after Q2, that's something we'd look at at that point.
Okay.
Got it that's helpful and maybe just a follow up.
Yeah can you talk about how you're thinking about growth in the U S versus internationally.
What does it take to get the international business ramping from here or is the focus for the foreseeable feature really are the laughing and driving adoption there. Thanks so much.
Oh listen Great question, and we've asked ourselves the question almost on a quarterly basis, we have limited resources and limited capability in growing right. So it's not about throwing money and hoping what sticks on the wall.
We need to invest judiciously in here.
As I mentioned in previous calls.
The cone.
Possibilities that will allow us to reach cash flow breakeven without raising additional money is wide, but not too wide. So we don't have too much margins in here of throwing money and hoping for the best outcome and in our opinion right now.
The best return on investment right now.
Is for us to invested in sales and marketing in the United States now with the situation will change in the future as we start increasing our penetration in the United States, but right now with the growth that we're seeing in the United States any data we can spend in the U S. We are spending it in the U S. When you talk about Europe .
Yeah.
You know, it's multiple countries right every country is different that even within a single country like Italy that are 13 regions each habits theirs own reimbursement paradigms and so forth right now our focus in Europe is in Germany, we only increased the headcount in Germany to support.
Steady.
Slower growth that we have because what we have experienced previously about a year ago was that if we maintain our presence or flat in Germany actually decreases and it became an anchored around our award by the growth.
So we hit that sweet spot, where we can grow it enough so that becomes a value added but we don't have it.
The ability right now to invest faster in Germany to grow it as fast in the United States. So for the short term for the foreseeable future and as our penetration is still super low in the United States. Our best return on investment is in the U S will focus on the U S.
Great. Thank you.
Thank you.
Yeah.
Next question, we have is from Matthew O'brien from Piper Sandler. Please go ahead.
Hi, This is Sam on for Matt Congrats on a great quarter.
One question, we had is about arris and utilization.
None of the P. H F trial are you seeing anything changed or is that.
It's mostly the same and then also what kind of questions are you getting from physicians on the straight out. Thank you.
Yes, great question.
So in terms of utilization I'm, assuming that's a we mean here is a treatment of new patients with a device. So we're not talking here about the programming more or replacement of batteries for patients so to see the setup be five years ago.
So.
In terms of de Novo patients, receiving a therapies, which correlates with the revenue we've seen a super strong box and we are very happy with it and that trend.
Continues in April .
What we don't know yet is how much of that.
Can be attributed to the data that was basically we issued a press release in middle to late February at around the 21st of February .
Or it's just execution, we know we have a great team a we've done fantastically well and we've been growing our business in the United States, approximately 100% year over year.
Maybe that's only the result of just superb execution and maybe its both.
So all we can say at this stage is that we have not seen a slowdown it's a double negative.
And the acceleration that we've seen is a bit too early to say it is due to the data that was unblinded.
Great. Thank you and then just the last part on and at what.
What questions are getting.
Oh, Yes, Oh, thanks for reminding me about the second question, so our physicians our questions.
I'm, assuming it is based on the data.
The largest question that we received at DHT was about one component.
The primary endpoint I don't know if you've seen the data, but we had that chart that the doctor Zile presented and I actually summarize it that same evening.
In our.
Press the best Conference.
That chart had all of the points all of the dots on the right side favoring the device.
With the exception of one dot which was.
Close to the center with a wide error bars.
But on the other side of that segment and that was the heart failure morbidity. So those out of the hospitalization due to heart failure.
What doctors I presented at the symposium at T. H D was that in his analysis.
'twenty 'twenty was a very different year.
The rate of heart failure hospitalizations in the control arm.
We're about one fourth of the same rate of hospitalizations in the same arm in the other years.
And the P value is off the chart how different 2021 for this specific group.
As compared to any other year.
And that led us to consider and ask the question what would the data looked like if twenty-twenty.
Was not there if 20 studies not exist if we do not have a pandemic in 2020, but.
Set of filling twenty-twenty with fake numbers, we said alright, what FY 'twenty did not exists we went from 2019 decades of 2021.
So he doctors I presented additional data at.
To the German Congress of cardiology, known as D. G K at Manheim.
Where he did that analysis and it shows concordance of the data. So all of those dots on that chart now are on the right side.
Favoring barrister.
That was a direct answer to the biggest question. We kept hearing is and the question is how can you explain that you have such a dramatic effect on reducing mortality.
But yet you're not reducing morbidity and that analysis, ignoring the data from Twenty-twenty answered that question.
So some that's I would say what was the if there was one single feedback I would summarize it as such.
Thank you so much.
Thank you.
Okay.
Next question, we have is from Margaret Taxol from William Blair. Please go ahead.
Hi, This is mccoy on for Margaret Thanks for taking our questions and congrats on the strong quarter.
I guess, one on the DTC campaigns, we bought them.
I'm sure you're monitoring and testing a variety of different channels. So just wondering what you've seen.
From those and it kind of just any notable increases and awareness following those results and following the readout.
Yeah, No excellent question Mccullough nice hearing from you again, it was great to see in your last month's listen.
In our opinion based on the data that we're looking at our direct to consumer efforts.
<unk> appears to be paying off.
And we started expanding to new geographies.
But only to the areas, where we have active implanting centers.
And we're very happy with the results that we saw in the first quarter, we're Super happy with the results. We saw in April in regards to the effect of DTC to drive utilization.
In terms of different channels, we will keep testing new channels. You know right now we are present on Facebook, we are present on Google Adwords, where presence on some TV channels I'm not going to go through this in detail, but many a few if you happen to be in these area. If you happen to be.
All of a certain age and possibly suffering from symptoms similar to heart failure or if you have somebody in your family or your friends having.
Having those symptoms.
Base book is probably you know showed you one of those ads.
Awesome. Thanks, and then just a quick follow up Hum about wire wire trial is there any more color you could give there on adding more sites and patients just wondering.
If we could get a bit more detail on how that's progressing and potentially how many of the estimated 400 patients have been enrolled thanks for taking my question.
Yeah, I will not comment on the sites that we're adding at this stage.
All I can say is Mack Cali, we are a very small team at CVR acts in.
And.
Particularly all clinical deep.
Right now at this stage at this moment our focus is the analysis of beat H F data the mortality morbidity data and the discussions with FDA and the filing of the PMA supplement and that is taking precedence over anything else now, but why it is continuing in the back of that.
But that has not been our focus in the past couple of months.
If we have any update to provide.
We'll do our best to included in the next.
Portola entities.
Great. Thanks again.
Thank you Michael I have a good day.
The next question is from Alex Nowak from Craig Hallum Capital Group. Please.
Please go ahead.
Okay, great. Good afternoon, everyone. I wanted to continue off that last question, there and you know that would be a cap being read out you have to ask you to want to do it we'll do whatever it wants to do there.
But obviously your team is going to be focusing on getting better Jeff.
Good to go and submit to the FDA, but I guess, what other studies are small or big do you want to go ahead and green light here in the upcoming quarters, What's next.
Hey, Alex how are you a great question.
It is what we have disclosed in the past.
We do have.
The post market study that just completed with beat H F freight now.
Less if FDA asked us to do yet another post market study it will be our own initiative and we have currently a large registry that is currently enrolling in the United States, It's called the rebalance and our objective here is to try to collect as much data as possible within reason, obviously, we don't want.
To create additional burden on hospitals, where we know they have still staffing shortage. That's number one and number two we don't want the cost to serve yet acts to be over and overburden. So that's rebalance our registry.
It's ongoing as we speak.
The second element is we have opened up the door to academic investigators.
Institutions, who have an experience with better stem.
To submit a request for a study to CVR acts we have an independent adjudication committee that looks at the scientific merits of the study and if its positive then we help with some of the funding of these types of things we call. This program the B I I R better stem investigated investigative.
<unk> initiated a research.
So those are the ongoing elements and of course.
We've got that's why I just answered a question previously on this topic and then.
Finally.
We have been accepted.
In a new program.
Ed.
F D. A he would shift which is called tap the total lifecycle.
Programmers had advisory program.
This program is.
Is in a pilot phase at the F D a.
They would accept up to 15 projects this year only in cardiovascular.
I'm happy to say that our project proposal was accepted by FDA on January six.
So I believe we are the first.
Pilot project with and that we are looking at.
Our expansion off the market that we're going after this obviously with the required.
New trials.
It's a bit early in the analysis phase we are working with FDA. The essence of that is very intriguing and exciting.
It is only for programs that have a breakthrough designation.
And if you recall, we have a breakthrough designations for hypertension and the other side of heart failure, which is the preserved ejection fraction.
And.
The essence or the promise of the tap program.
As for F D a to work with the sponsor.
And include other stakeholders such as payers.
Patients or patient advocacy groups.
Physician groups visitors societies, and so forth to.
To ensure that the future trial that will be conducted answers all of the requirements of all of our stakeholders now it's a little bit early it is still a project we don't have a plan yet to start.
Trials it would take months of working here with all of these stakeholders to design a trial and then we'll have to make a decision when is the appropriate time foresee that acts to invest and destroyed. So it it is a little bit premature right now to discuss the details of this wireless because we don't know yet the details of the trial.
But I'm very happy to disclose to you and everybody else. That's you've got X has been selected.
As part of this pilot project with FDA and we are Super excited with the weekly interaction, we are having with FDA and with other stakeholders on this topic.
Okay very exciting it's exciting to hear.
What what comes of that with them with regards to BHF being submitted to the FDA I know the discussions are underway now as part of the breakthrough designation what is the latest timing internally for submitting that package for label expansion.
It will depend usually one would say if its the classical road that we're following are usually takes company about three months to assemble the PMA submission.
Submission and submitted to FDA I've seen companies, taking one year or 15 months to do in our case since it is a PMA supplement the product is already approved so its more focused on the clinical report of the post market phase of it.
The three month seems to be a good approximation. If we're following the traditional way and then FDA would have six months.
To provide their feedback on it so.
Think of think of it Alex as being you know end of the year situation now in our case, we may take more time upfront as.
As we are working with this interactively with F D. A.
With the hope that the review process by FDA will be faster and more predictable.
Okay understood that makes sense and then just one more clarification just for Jan the step up in inventory did you mention what that was for it looks like you did maybe you're worried about supply chain issues or are you getting ready for some pretty big demand. So just the step up in inventory.
Pause there.
Yeah, Hey, Alex Thanks for the question. So we did see that jump up in inventory from the end of the year part of this was US building up some finished goods towards the end of 2022 and getting that finished up here in early 2023.
Part of that was trying to get some more inventory over into Europe .
A lot of question marks around M. D. R. We obviously were able to kick the can on that M. D. R.
<unk> deadline with some of the updates that came through in the industry over the last couple of months couple of weeks. So.
So it's less of a concern there and then also part of it is just supply chain right. We had a lot of supply on the shelf, we were able to build out that finished goods. So it doesn't hurt to have some more goods available. So that we're able to sell the units. If there is the demand there.
Yeah that makes sense. Thanks for the update I appreciate it.
Yep.
Thanks, Alex.
Thank you. The final question, we have is from Greg <unk> from Lake Street Capital markets. Please go ahead.
Hey, Thanks for taking the questions I wanted to follow up with one more on the utilization of <unk>.
And in the past you guys have spoke to in the first couple of months a facility may treat one or two patients and they may wait three to six months before re initiating treatment for additional patients beyond there did that dynamic play play out at all and in the strong March and April months that you called out.
Maybe where you have a bolus of clinics going from that are post that three to six month evaluation period getting comfort with the technology and then accelerating use within their patient pools.
Hi, Frank This is Jared I'll take that one yeah I think what we've seen is a lot more of the same from those.
Same types of groups. We just have more centers that are now reaching that point have been with us for our be inactive for more than 24 months and so as they cross that threshold, we're seeing them treating almost one patient a month on average and that's that long term goal that we were pushing all of these sites to reach so the growth that we saw in March.
And continuing into April I think is C. New sites being activated treating those first few patients. But then also seen all of those other sites continuing to treat more and more of the longer they're with us.
Okay. That's helpful. And then maybe just for my second one.
As it relates to the beat H F data my assumption is it's going to go in the process of FDA communications submission hopefully label expansion.
At the same time is there anything you can be doing with the guidelines to start having any conversations about how you could be positioned within the guidelines.
But once we get through the F D a communications and hopefully label expansion.
Yes, Frank this is an excellent question in my understanding.
Companies have very little influence, where the guideline committees.
The guideline committee.
And in general they are proud to be Super independent without any conflict of interest is therefore, the only thing that.
The sponsors of trials can do is provide the.
Peer reviewed manuscript with the data.
And ensure that the guideline committee has seen them.
So there is no.
Lobbying that has allowed before that and with limited here to just sending them an email with the medicine when the manuscript is published.
Now I want to.
Brian to answer your question in here and give a little bit more color I just want to make sure.
Is that.
I reiterate one point and I don't think I've made that enough.
Our models there.
It has this path to getting us to profitability without raising additional gas cash.
Is based on the current labeling we have.
This is by no means a lack of confidence in us getting additional labor.
But it's more about us being super confident without model based on what we have to date in our hand and not needing anything else.
To get to to get to the cash flow breakeven point and the same can be said about the payment levels and reimbursement so.
Based on what we have today on our hands, we have a clear path to get to profitability anything above this and in our opinion, we will get a label expansion will.
It will be an upside I E getting us to that cash flow breakeven earlier or allowing us more flexibility in terms of investment in our future.
It makes sense Frank.
Yep, that's perfect. Good context I appreciate you taking the questions.
Fantastic. Thank you so much.
Thank you welcome.
That concludes the question and answer session.
I would like to turn the floor back over to Mindy yard who closing comments. Please go ahead Sir.
Thank you operator, and thanks, everyone for joining us for our first quarter earnings call.
We appreciate your ongoing support and we look forward to updating you on our progress on our next updates Goodnight.
Thank you, Sir ladies and gentlemen.
This concludes today's conference. Thank you for joining US you may now disconnect your lines.
Okay.
[music].
Yeah.
[music].