Acutus Medical Inc. Q1 2023 Earnings Call
Speaker 1: Good afternoon and thank you for standing by. Welcome to the Acutus Medical First Quarter 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone.
Speaker 1: You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Carolyn Corner, Investor Relations. Please go ahead.
Speaker 2: Thank you, operator. Welcome to Acutas' first quarter 2023 earnings call. Joining me on today's call is David Roman, Chief Executive Officer, and Takio Makai, Chief Financial Officer.
Speaker 2: This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call, if they do not relate to matters of historical fact, should be considered forward-looking statements. Factors that may cause results to differ from these forward-looking statements are discussed under the forward-looking statements section in the press release attached as an exhibit to a QDIS Form 8K filed with the SEC Department of Finance.
Speaker 2: ACUTIS undertakes no obligation to update these statements except as required by applicable law. ACUTIS's press release with first quarter 2023 results is also available on the ACUTIS website, www.acutismedical.com, under the investors section and includes additional details about ACUTIS's financial results. The ACUTIS website also has ACUTIS's SEC filings, which you are encouraged to review.
Speaker 2: A recording of today's call will be available on the ACUTIS website by 5 p.m. Pacific time. Now I would like to turn the call over to David.
Speaker 3: Thank you, Caroline, and good afternoon, everyone.
Speaker 3: Our prepared remarks today will include updates on our key strategic imperatives, some perspective on how the business is performing in Q2, and our outlook for the rest of the year.
Speaker 3: starting with our first priority to drive utilization and adoption for ACUMAP.
Speaker 3: Q1 got off to a slow start, but procedure volumes accelerated throughout the quarter, with March commercial procedure volumes increasing over 60% on a month-over-month basis.
Speaker 3: geographic expansion with our partner Biotronic.
Speaker 3: US procedure volumes showed steady progress during Q1 and exited the quarter with growth in March.
Speaker 3: Importantly, we are seeing encouraging trends here in the second quarter and anticipate procedure volumes to ramp sequentially throughout the year and put us back on a strong trajectory for procedures, utilization, and correspondingly acumap disposable product revenue.
Speaker 3: Over the short, medium, and long term, a major driver in achieving our growth objectives is our product development pipeline. Our portfolio investments are geared toward both strengthening our position and expanding our addressable opportunity.
Speaker 3: All of these new product launches keep us focused on the complex treatment segment of the EP market, ranging from the most difficult multiple redo patient to first-time persistent AF patient.
Speaker 3: As we have discussed previously, Accumap is most regularly used today in redo procedures.
Speaker 3: Specifically, about 55% of US and 80% of OUS procedures come from reducases.
Speaker 3: ACUMAP has clear differentiation in these procedures, and our clinical results and sustained utilization in these segments underscore our value proposition.
Speaker 3: At the same time, these procedure categories represent only a portion of the total complex sublations segment.
Speaker 3: Over the next several years, our pipeline is geared for further strengthening our position in the retreatment segment as well as bridging into primary use cases. The innovations required to enter new categories largely center around software including algorithm development and disposable.
Speaker 3: These include our next-generation software platforms like Accumap 9 and Accumap 10, as well as their therapy and ablation systems.
Speaker 3: We expect to launch a steady cadence of new products over the course of 2023 and 2024 that will contribute to higher utilization for seed germ volume growth and increased revenue per case.
Speaker 3: We received FDA clearance for ACU-MF 8.5 software with AccuBlade features last week, which paved the way for an integrated software platform to pair with the revelation system one approved later this year.
Speaker 3: In addition to our new product pipeline, critical to the adoption of vacuum-app will be additional clinical research.
Speaker 3: Over the course of this year, we have plans to release several data presentation and publications that build on the Uncover AF study that showed freedom from AF and persistent patients of 73% at one year.
Speaker 3: As a reminder, most landmark studies for the treatment of persistent AF using incumbent systems show one year's success rates in the 50-60% range for denobo cases and 60-68% in reducases.
Speaker 3: In April , data from the recover AF study were published online in EP Europace.
Speaker 3: This study evaluated an extremely complex patient population and further demonstrated Accumaps clinical impact in the retreatment segment of the market.
Speaker 3: Specifically, results showed patients who had only undergone pulmonary vein isolation or PBI before enrollment achieved 91% freedom from atrial fibrillation at one year, while the entire study population with varying prior procedures reported 76% freedom from AF at one year.
Speaker 3: These results further confirm acumap utility and differentiation in the redo market where we expect to drive further penetration into this $700 million category.
Speaker 3: In addition to the Recovery AF study, we look forward to this year's heart rhythm society where investigators will present data on acumen at a late-breaking special science session on Sunday, May 21st.
Speaker 3: This study evaluated acumap to identify non-pulmonary vein triggers in the persistent AF population.
Speaker 3: Utilizing Accumap to identify triggers of AF is an emerging use of the technology that can further support expanded utilization and we expect the study to demonstrate strong clinical outcomes when using Accumap to guide therapy in complex patients.
Speaker 3: Beyond this study presentation, we will have a full-time program at HRS featuring user group meetings, physician-led presentations at our booth during the conference, and several opportunities for customers and business development partners to engage with acumenc users from across the world.
Speaker 3: We will also offer the opportunity to get more insight into some of our recently launched products and future pipeline development. Switching gears to our effort to strengthen our financial performance.
Speaker 3: We continue to make significant progress during Q1 2023 with your-of-your-declines in both non-GAP operating expenses and cash per earn as well as significant improvement in our non-GAP gross margin.
Speaker 3: Chakio will cover these topics in more details during his prepared remarks, but overall we continue to take the necessary steps to strengthen our financial position and extend the cash runway. Putting this all together, we are pleased with our start to the year and are laying the foundation for stronger performance the rest of 2023 and thereafter.
Speaker 3: driven by a dedicated sub-new product launches, clinical data, and commercial execution. When combined with our operational improvement initiatives, this business trajectory will position us well for the future and allow us to maximize value for all stakeholders. With that, I'll now turn the call over to Takio to walk through our financial results. Thank you, David, and good afternoon, everyone.
Speaker 3: During my remarks today, I will review our first quarter 2023 results as well as provide an update to our full year outlook for 2023.
Speaker 3: For the first quarter, net revenue of $4.2 million compared to $3.7 million in the year the first quarter.
Speaker 3: The 13% year-over-year increase was primarily driven by disposable sales and increases in service rent and other revenue.
Speaker 3: We ended the first quarter with an install base of 77 systems globally, up sequentially from 76 last quarter. Through the balance of the year, we continue to expect growth in our global install base, while remaining targeted to ensure new consults are placed into service, where we can drive strong procedure adoption.
Speaker 3: Our priority remains growth in procedure volume utilization and revenue per procedure rather than just growing the install base.
Speaker 3: Disposables revenue in the first quarter of $3.4 million through 7% compared to the year-go first quarter driven by Accumap Disposables growth outside of the United States and growth and less-tard access through our distribution agreement with Metronik. Similar to the year-go comparable period,
Speaker 3: was up from $0.5 million in Q1 2022.
Speaker 3: Q1223 revenue was impacted with back orders by an estimated $250,000, as we continue to remediate the supply chain disruption that emerged earlier in the year.
Speaker 3: We are working diligently to resolve the pie's constraint and continue to expect full resolution by the end of this year.
Speaker 3: Non-Gap gross margin of negative 60% in Q1 2023 improved sequentially from negative 64% in the fourth quarter of 2022, and was favorable compared to the negative 119% registered in the first quarter of 2022.
Speaker 3: We will continue to dedicate significant attention to improving our gross margin and expect to show further improvement for the full year of 2023 and continue to forecast the path to positive gross margin in Q1 2024. In addition to volumes striving to improve trajectory in gross margins, we remain focused on several ongoing work streams to drive efficiency, reduce product costs through improved yields, and bringing select processes and else. Non-Gap offering expenses were approximately $13.9 million in the first quarter of 2023, down 39% from the same period last year.
Speaker 3: and down slightly on a sequential basis. We continue to realize the benefits of our discipline around expense management and expect a full year 2023 non-gap expenses to decline on a year of a year basis as compared to 2022.
Speaker 3: Our total cash and cash equivalence balance, including restricted cash at the end of the first quarter of 2023, with $76.7 million. Our cash for an excluding milestone payments and the employee retention credit, with $18 million in the first quarter, down 39% versus the prior year. The first quarter tends to see higher cash for an as the crude annual bonuses were paid out to employees. Our first quarter also saw higher inventory purchases as we replenished supplies to support higher current and future projected demands.
Speaker 3: Overall, we are pleased with the improvements we have made in reducing our quarterly cash burn and will continue to drive intense focus on optimizing our financial position. For the full year 2023, we now expect revenue to be in a range of $19 to $21 million driven by growth in Accumaf procedure volumes and associated disposable sales globally.
Speaker 3: Targeted expansion in our install base and a second half 2023 approval of Accubase in the United States.
Speaker 3: We appreciate your continued interest and support, and I will now turn the call back to the operator to facilitate our Q&A session. Operator.
Speaker 1: Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. Please stand by while we compile the Q&A roster.
Speaker 1: We'll hold for that. We'll move on. Our next question, please stand by.
Speaker 1: Our next question comes from William Planovic at Concordia, Gen.
Speaker 4: William, your line is open. Hey, it's John . I'm for Bill tonight. Thanks for taking our questions, and congrats on the quarter. If I could just start just on the updates of timing for AccuBlade. I know you called up second half, but any specific timing for the approval? How should we think about the launch? And then plans for a limited market release, how long could that be? Thanks.
Speaker 3: Thanks for the question, John . So as we said in our last call, our guidance for the full-year contemplated acutely approval in the second half of the year. So that expectation is unchanged when we had shared in March. As a reminder, obviously, the acutely is already approved and used outside the United States and has been on the market in Europe since March of 2021.
Speaker 3: The way we would approach a limited market release is probably a little bit different than if this were a completely new to market product. So we will start with obviously our highest utilization accounts as it relates to primary targets for AccuBlade and those.
Speaker 3: accounts that have given us feedback with the integration of an ablation catheter is critical to growing their acumen procedures from where we sit today or toward adoption in additional categories. But we would obviously as you know there will be a process by which we have to go through that committee approval very consistent with one you launch any other new product.
Speaker 3: review time at the FDA is running right now between 330 and 350 calendar days. So if you use that as sort of a benchmark, that's also probably a good place to kind of land and expect it approval. Obviously we have worked diligently through the FDA deficiency responses that you receive at the...
Speaker 4: 90 day mark and are working through remediation and remain very confident in an approval and launched in the second half of the year. Great thanks. And then just on Q2, the streets currently at 4.8 million. Can you talk about the comfort level around that number?
Speaker 3: Those supply chain dynamics related to our acumap basket catheter, there was a period of time earlier this year when we were receiving no raw materials. Those raw materials have since resumed here probably right around the time of our call in late March and we are continuing to rebuild inventory to support future demand. We will not fully resolve supply chain shortages here in the second quarter but are very confident that they will be resolved through the balance of the year. So the only other thing I would point out is you think about Q2 is Q1 we did a little bit better than...
Speaker 3: been expected. We are raising our outlook a little bit here for the year. Given some of those supply chain dynamics, you may see more of a waiting of Revenue in the second half of the year. We had commented on our call on the fourth quarter that we thought we'd be at about a 45% 55% waiting first half second half.
Speaker 3: that number may look more like the first half being in a range of 40 to 45 percent in the first half and the balance in the back half. The last thing I just want to mention on supply chain dynamics is the
Speaker 3: back orders or inability to supply certain customers at the end of the first quarter has not impacted at all demand for the product. We have not seen lost procedure volumes. Where we do see that is transient. We are not losing the business.
Speaker 4: Request. Our next question comes from Margaret Caxer from William Blair. Margaret, your line is open. Hi everyone, this is McCollion from Margaret. Thanks for taking the questions. So in terms of the trajectory of the install base at sitting 433 after the quarter, thank you talked about pushing the accelerator and kind of making the install base more of a focus now. So.
Speaker 4: could you just walk us through your approach with some of those high volume centers or users and then your expectation with the ramp throughout the rest of the year with the first quarter number coming in a bit lower than expected.
Speaker 3: Nationalized Aaron Stald base and focus on a count where you can drive Procedure volume growth growth and utilization per console and higher revenue per procedure One of the things that we did not talk about on the call that was a really big stand-up for us this quarter Was significant growth in our revenue per case in the first quarter?
Speaker 3: really not an indicator of the performance or the health of the business. We do envision to grow the install base here in 2023. We expect that we will exit 2023 and each quarter through 2023 with progressive growth in the install base. Our focus, however, has to be on driving procedure volume growth, driving greater penetration into the categories where Accumap has clear differentiation.
Speaker 3: pick up in procedure volumes over the course of Q2. And if you dig into that a little bit further, our primary levers to drive growth within high volume users is driving increased utilization of acumen for more procedure types. So second redo, first redo, to NOVO persistent.
Speaker 3: The second is bringing on new users per account. So now we have a number of accounts where we have multiple users. And then the third is growing, the third actually is re-engaging former Accumap users. This is something that has been a really positive contributor here in the second quarter. People who had once used Accumap and had slowed down utilization for a variety of reasons.
Speaker 4: And then just a quick follow up and I know it's only been a few weeks since the recover results. But I guess what did you hear following the release? Was there any excitement amongst users in the US specifically? Or is that something you know you're trying to spread more awareness during your conversations at HRS next weekend? And thanks, Scott, for taking the questions.
Speaker 3: Yeah, no, I'm a McIpeh. Thank you for that question because Recovery App is one of those studies that we've been waiting to get published for a while. And the publication of that...
Speaker 3: That data was important for us for a couple reasons first. It's the only significant clinical publication we've had in a couple years, which as you know in this space, having continuous flow of clinical data is critical to adoption and sustaining physician engagement. The second is it really aligned
Speaker 3: well with kind of a refocus strategy that we've been bringing to market over the past year or so, which has been to uniquely focus our target on complex patients, namely redo cases. So the data from Recover does dovetail very well with how we've been going to market and how we've been engaging the physician community over the past year.
Speaker 3: In the U.S. specifically, we will have quite a bit of attention on recover at HRS at our booth, but even in the interim, since we did, since we did have the results get published in April , we have hosted a number of physician meetings in its definitely driving.
Speaker 3: a significant amount of engagement and a significant amount of attention from the position community and where it's really health is in accounts where I would say they're medium medium level users to newer users and actually even former users it's been a great tool!
Speaker 3: to re-engage some of those types of accounts. And I would expect to see some positions here in the U.S. potentially look to replicate the recovery results in a U.S. setting, and that's something that we're exploring as a company as well. So those four, I've been very happy with the response. I think HRS will be a great opportunity.
Speaker 3: for us to go into the data in a little bit more detail with some of our key users and prospective users. And then I think this is going to drive some additional interest in evaluating the Accumap in this very specific use case in 23 and beyond. That's great to hear. Thanks again.
Speaker 5: Our next question comes from the line of Marie Thiebaud from BTIG. Marie, your line is open. Hi, I'm back. I hope you can hear me. We can. Yes, Marie. Good afternoon. Okay. I'm so sorry. I have tons of technical issues. I probably missed some of your commentary, but sorry about that. I wanted to ask here about the early qualitative kind of feedback that you hear on the Medtronic sales of the Left Heart Access products. Is it fair to assume that some of this is showing up in any of the service revenue or anything at this point? How should we think about kind of the very early days of the Medtronic launch? Sure. Thanks for that, Marie. So, Medtronic took over commercial distribution very, very late in …
Speaker 3: in Q4. And over the past several months, we have been very pleased with how our partnership with Medtronic is progressing. From a commercial perspective, we have been very impressed with the pace at which Medtronic has picked up this product and unsurprisingly, given their breadth and depth of distribution, has done a fantastic job getting this product into many more hands.
Speaker 3: sure that we can continue to support Medtronic's growth. But overall, as I reflect on the growth and development of the agreement and partnership over the past year, we are very pleased with how things are going. Just from a reporting perspective,
Speaker 3: The impact shows up in a couple different places. One is in disposable revenue, and the other is a little bit in the other line, and then also on the asset, on the other line in the income statement on the asset sale gain, and that's where we start to accrue the net sales earn out that gets paid out on an annual basis in March. Okay, very helpful and great to hear. Ask my follow-up here, maybe one for Takeo. You mentioned gross margins. They came in a bit better than we expected this quarter, and you still are holding to that goal of positive gross margin first quarter.
Speaker 3: volumes that we have across all of our products in our portfolio. And then the second is we are seeing the efficiencies and optimizing our manufacturing support and our footprint. So definitely we're getting to the production volumes that more closely aligns with our manufacturing footprint. So we do expect to see progressive
Speaker 3: improvement here throughout the quarters. And as we stated, I'm passed to a positive growth margin in first quarter. That hasn't changed. All right. Thank you so much for taking the questions.
Speaker 1: At this time, we conclude the program. You may now disconnect.
Speaker 6: I.