Q2 2023 CVRx Inc Earnings Call
[music].
Greetings and welcome to the C V. Our ex Q2 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Mike Vallely. Thank you Mike you may begin.
Good afternoon. Thank you for joining us today for <unk> second quarter 2023 earnings Conference call.
Joining me on today's call are the company's President and Chief Executive Officer, Nadeem, you read and Chief Financial Officer Jarrett Osha.
The remarks today will contain forward looking statements, including statements about financial guidance.
These statements are based on plans and expectations as of today, which may change over time.
In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company's SEC filings.
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, Nadeem you Alright.
Thank you, Mike and thanks to everyone for joining us.
Begin today's call by providing an overview of our second quarter performance, followed by an operational update and a review of our financial results by our CFO John adult shape.
Then I will conclude with our thoughts for the rest of the year before turning to Q&A.
We are thrilled to share that we had another excellent quarter.
The nearly 120% year over year growth that we delivered in the U S.
Exceeded our expectations and as highlighted by the strength in volumes the expansion off the new U S active implanting centers and the development of our new customer pipeline.
Importantly, we are continuing to receive very positive feedback from physicians regarding their own experience when using our better sympathetic b on that patients.
Our financial performance continues to demonstrate the quality of the medicine procedure, the robust demand for batteries to them in the market.
And our ability to execute.
Now, let's dive into the details of our performance during the quarter.
Worldwide revenue was $9 $5 million and needing a 9% increase over the second quarter of 2022.
This was primarily due to the continued execution within our U S heart failure business, which grew by 119% over the prior year.
These results came from the ongoing utilization of batterson within our existing customer base.
Our successful expansion into new territories, and the elevated physician and patient awareness.
We are encouraged that following our February announcement of the preliminary results of the beat H F trial.
Adoption and utilization of Pakistan has continued to grow.
In each of the four bond following that announcement the business has been strong and physicians have seen the data at scientific meetings have had positive reactions.
Turning to an update on our operational progress during the second quarter.
As a reminder, our focus areas I think continued expansion of our commercial infrastructure and the expansion of our clinical body of evidence.
Starting with a continued expansion of our commercial infrastructure.
As expected we added three new U S sales territories, bringing the total to 32.
The talent, we have been able to attract and put into the field is impressive and we look forward to continuing to leverage their abilities to educate and train physicians and health care providers.
On batteries step.
Also during the second quarter, we further progressed, our marketing initiatives, including our direct to consumer and patient education programs, which we will continue to optimize to support our commercial strategy.
Moving to our second focus area of expansion of our clinical body of evidence.
As announced in June we submitted the PMA supplement to FDA, which included data collected as part of the post market B H F study is that it.
Mind, you the PMA supplement seeking a potential label expansion for <unk> in line with the recommendation of the executive steering Committee off the beat H F trial.
We fully agree with the committees assessment that the totality of evidence strongly supports the medicine as a safe and effective treatment option for heart failure.
Currently undergoing the normal review process with FDA and expect to receive a response from FDA by the end of the year.
Remain committed to closely monitoring the progress and we'll provide updates when we have significant developments to share.
One last update CMS recently released the proposed outpatient prospective payment system or all P. P. S for short for 'twenty 'twenty four along with the proposed physician fee schedule for the same period.
Off particular note was the absence of Fanny mentioned of our mock submission requesting assignment to one of the new technology APC payment codes as authorization will pass through additional payment expires at the end of 2023.
We anticipate submitting for my comments on the proposed O P. T S package and advocate for inclusion in the final document later this year.
However, please remember that our base case for 'twenty 'twenty four is the status quo, which would lead to a reduction in our expected average selling price across the U S to approximately $26000. This has been the assumption in our model that is guiding us to be able to reach cash flow breakeven without the need to complete an equity financing.
We are very excited about what we have been able to accomplish during the second quarter and throughout the first half of 2023.
Through the first six months of the year, we have grown our U S heart failure revenue by 124% as compared to 2022.
We look forward to continuing to build on this momentum for the balance of the year and I want to thank our team for their dedication to our mission of improving the lives of patients suffering from heart failure.
I'll now turn the call over to Chad to review our financials.
Got it.
Thanks, Nadeem and the second quarter total revenue generated was $9 $5 million, representing an increase of $4.5 million or 89% compared to the same period last year revenue generated in the U S was $8 $3 million in the current quarter, reflecting growth of 100.
And 11% over the same period last year.
Heart failure revenue in the U S totaled $8 $3 million in the current quarter on a total of 265 revenue units compared to $3.8 million in the second quarter of last year on 128 revenue units. The increases were primarily driven by continued growth in the U S heart failure business as a result of the.
<unk> into new sales territories, new accounts and increased physician and patient awareness of barrels to them.
At the end of the current quarter, we had a total of 140 active implanting centers compared to 71 on June 30th 2022 and 122 on March 31, 2023.
We also had 32 sales territories in the U S. At the end of the current quarter compared to 20 on June 30th 2022, and 29 on March 31, 2023 <unk>.
Revenue generated in Europe was $1.2 million in the current quarter, representing an increase of 10% compared to the same period last year.
Total revenue units in Europe increased from 52 in Q2 of 2022 to 56 in the current quarter.
The number of sales territories in Europe remained consistent at six for the three months ended June 30th 2023.
Gross profit for the three months ended June 30th 2023 was $8.0 million, an increase of $4 $2 million compared to the three months ended June 30th 2022.
Gross margin for the current quarter increased to 84% compared to 76% for the same period last year.
Gross margin for the three months ended June 30th 20, twenty-three improved primarily due to a decrease in the cost per unit driven by increased production volumes.
Research and development expenses for the current quarter were $3 $3 million, reflecting an increase of 39% compared to the same period last year. This change was driven by a zero point $6 million increase in compensation expenses. As a result of increased head count of 0.1 million dollar increase in noncash stock.
Based compensation expense and a 0.1 million dollar increase in consulting fees.
G&A expenses for the current quarter were $16 $5 million, representing an increase of 32% compared to the same period last year.
This change was primarily driven by a 2.5 million dollar increase in compensation expenses, mainly as a result of increased head count.
Arrow point $8 million increase in marketing and advertising expenses associated with the commercialization of barrel stem in the U S. A 0.4 million dollar increase in travel expenses and a zero point $3 million increase in noncash stock based compensation expense interest expense increased <unk>.
Zero point $5 million for the three months ended June 30th 2023 compared to the three months ended June 30th 2022. This increase was driven by the interest expense on our borrowings under the loan agreement entered into on October 31 2022.
Other income net was zero point $6 million in the current quarter compared to other expense net of $34000 for the same period last year.
The income in the second quarter of 2023 was primarily driven by interest income on our interest bearing accounts.
Net loss for the current quarter was $11 $7 million or 56 cents per share compared to a net loss of $11.1 million or 54 cents per share for the same period last year net loss per share was based on 27 million weighted average shares outstanding for the second quarter of 2023, and $20 5 million weighted.
Shares outstanding for the second quarter of 2022 at the end of the second quarter cash and cash equivalents were $98 million net cash used in operating and investing activities was $12 $95 million for the second quarter, which included our annual premium for our directors and officers insurance.
Approximately $2 million. This is compared to net cash used in operating and investing activities of $10 $5 million for the three months ended March 31 2023.
Now turning to guidance for the full year of 2023, we now expect total revenue between 37.0 and $38.5 million up from $35.5 million to $38 million. We now expect full year gross margins between 83% and 84% up from.
80% to 83% and we now expect operating expenses between 78 and $80 million up from $76 million to $80 million for the third quarter of 'twenty 'twenty. Three we expect to report total revenue between $9 5 million and $10 $2 million I would now like to turn the.
Call back over to Nadeem.
Thanks Janet.
I had a fantastic first half of 2023, our strategy for driving the adoption of <unk>, while continuing to deliver improving financial performance is working which has resulted in increased revenue guidance for the second consecutive quarter.
We are particularly pleased that the business has continued to flourish, particularly since the announcement of our beat H F data in February and we remain optimistic about our plans to continue to grow.
We look forward to building on our success during the back half of this year.
And now I would like to open the line for questions.
Operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question comes from Robbie Marcus with JP J P. Morgan. Please proceed with your question.
Yeah.
Hi, This is allen on for Robbie Congrats on the good quarter.
Just starting with some of the momentum that you saw through first quarter and second quarter, we really solid translating into better.
Implanting centers and I think originally contemplated so what are you seeing in the third quarter. So far when it relates to that and how sustainable do you think that level of more mid to high Teen center adds will be third quarter fourth quarter and then beyond.
Hi, Alan this is Jared I can take that one thanks for the question. So we've seen really strong numbers for active implanting center additions over the last few quarters. You know we talked about this back in 2022 as Covid moves to the wayside and hospital staffing shortages, where we're kind of solved.
We started to see more interest from hospitals to get these programs off the ground and that's allowed us to activate these centers, we remind everybody that the contracting process does take time and therefore, we do have some insight into the pipeline of new centers that are on contract through value assessment and Champs.
<unk> identified and then the next step in the process to be identified as an active implanting center is to get that first patient treated and that's where you know some of the hospital staffing shortage issues could come into play in the future, but I think as we look forward into Q3, and Q4 and out into 2024, we're still expecting to see about.
12 to 13, new active implanting centers per quarter, just based on the volume and the current pipeline that we're seeing today, so because of the beat in the second quarter. It doesn't necessarily mean that we're going to see a slowdown in the new center adds in Q3 and Q4.
Got it that's good to hear and then when I look at the guidance.
For 905 to 10 from two kind of an implied 10.0 to $10 8 million in fourth quarter. It seems like you know pretty measured improvement given the increases we've seen so far this year. So why is that the appropriate level of increase we should forecast going forward.
I think the general sense of that staffing those kinds of dynamics have gotten better. So far this year. So why shouldn't we see room for more upside in the back half. Thank you.
Yes, I'm happy to take that one again, yeah, I mean, we're really happy with the results that we've seen to date.
I think as we look to provide guidance for Q3, we take into consideration what the current funnel is looking like what the new active implanting center implant rates are starting to look like and then also what's on the horizon and the other thing that we take into consideration is the results we've seen so far in the quarter and what we have.
Seen in July I think as we March ahead into Q3, historically coming out of Covid, we have seen slowdowns in the month of August right, where people take long vacations now theres been no signals of that for us yet and we did just see our biggest jump ever from one quarter to the next from Q1 to Q2 just.
In a pure dollar amount of revenue and so we didn't want to get ahead of ourselves with increasing the guidance too much and feel pretty comfortable with that range. We gave of 10 nine five to 10.2 for Q3.
Thank you.
Our next question comes from Matthew O'brien with Piper Sandler. Please proceed with your question.
Great. Thanks for taking our questions. So nadeem. This one's for you you've got a lot of experience on the reimbursement side of things and you know.
Just to help us get a sense for your the potential for you to get.
This APC code here in the final rule, because if you don't the 26000 a S. P is the first time I've heard that number specifically and maybe I missed it but you know based on what Youre going to do this year from a ASP perspective, that's a pretty meaningful like 15% headwind just on the pricing side as we go into next year. So.
That's obviously, you're still gonna be able to grow nicely with the on the unit side, but you're going to have to deal with that that headwind potentially on the ASP side of things. So just help us think about that dynamic.
And the impact on the business both on the top line and even gross profit Lanka's gross profits are great but asps.
Asps are down 15%, that's going to that's going to be impactful to gross margins. So just help us think about the potential to get that extra code or get the color that youre looking for and then the impact of the business if that doesn't happen.
Sure Matthew Thanks for the question by the way I would ask Jarrod to answer the second half of the question that you answered. The first one about the C. M. S N how to think about the process.
We don't have much experience in this but we looked at what happened exactly last year.
With a similar process followed by another small company that is now part of the.
Resolved.
I'm mentioning I speak out yet they followed the same process.
That application the application was not mentioned in the summers proposed ops than they went in front of a panel made the case for it.
We supported them as well as other constituencies and they've got it at the end of the year.
What does it tell us well not much because every case is different and no matter how much we can find similarities and try to find solace in here. That's you know it works for them why wouldn't it work for us that's not how CMS.
CMS necessarily will be looking at things and we don't understand how what are the parameters that they will utilize and he had to define whether they think that had a request like ours into account or not.
That's why you know we have been modeling internally that the ASP will be lower in the future and actually let me try and hit the Janet to walk you through a little bit about how we're thinking about it from a gross margin in the S. P.
Yeah, Matt I mean, this has been on the horizon for several years now right. We knew the exploration of this add on payment was going to be December 31, 2023. So we tend to take the conservative route when building these longer term models and so we wanted to take that into consideration to what our average selling price would be in 'twenty, four and beyond and so as we look out to.
<unk> 24, with our base case, assuming we are in the same a P. C that we are today that average selling price would be between 25 and 26000 now it doesn't drop off a cliff overnight that number probably comes down over time, but.
But I think the nice thing that we've shown here in 2023 with volume we can see that cost per unit drop pretty dramatically. That's allowed us to achieve gross margins of 84% in the current quarter and even with a decrease in the revenue or in the average selling price in 2024, we still believe gross margins of 80.
Per cent in the short term what would be attainable, just based on volume and seeing that cost per unit drop.
Got it okay I appreciate that and then.
BHF came out recently I'm just curious if you did you see any pause from some of your centers as they were digesting that information and anybody that said I don't like that or where essentially negatively impactful to the business. I know you still did well in Q2, but did you see any of that and then just help us think about.
If youre able to get this indication for the treatment of H F. What I know it helps validate the technology some more but what does that do from a selling perspective is it going to make it easier.
For new centers or just to go deeper in existing centers. Thanks.
The accident question. So let me start first with one reminder to everybody.
Where we are right now where the manuscript is not yet published and FDA has not given us the authorization.
To make any claims based on the data.
We as a company not allowed to proactively shared with health care providers or patients.
The result of beat H F. We can only answer questions. When these questions at all so whatever impact we have seen so far has been limited to the physicians or other health care providers, who have seen.
The beat that Jeff data presented at a scientific meeting by another has kept provider periods.
Got it.
How what's the percent of sites that have seen the data and comment on it I don't have that split exactly. Nevertheless, we have not I can I can repeat this over and over we have not seen any slowdown.
Even at the height of the uncertainty between February 21st in March 21st win.
We went out publicly and we mentioned that we did not meet the primary endpoint of the trial without sharing the data until a month later when the data were presented at a late breaker at DHT during that month of uncertainty. Even then we had not seen or observed any slowdown of activities at the site.
That will also kind of.
You know moved us into providing some level of directionality of revenue on a monthly basis in Q2 to alleviate any of this concern and give confidence in here that we are still on the right track now can I say for sure is.
Is that those that have seen the results are.
You know implanting more patients treating more patients or not that's hard to quantify and hard to link our current growth.
With the results per se offbeat that Jeff to your second part of your question what do we expect if we get the labeling.
Well the.
Total addressable market should increase a little bit based on the expansion of labelling. If you recall when we did this and it's it's disclosed actually in some details in our S. One and subsequent filing and you go through the funnel.
<unk>.
Last step in the funnel, we eliminated from the total addressable market many patients who have other comorbid diseases.
Assuming that when a therapy is assumed to be only treating symptoms.
It may not be prescribed to a patient who have other comorbidities. So we went a little bit conservative on our assessment of the total addressable market now if we get the treatment labeling from FDA. We believe that some of this market will be addressable and therefore, the total addressable market will increase we're not at the point yet to disclose what the new number.
We'll be F new patients.
<unk> set a new patients eligible for.
Therapy on a yearly basis, yet, Matt, but but but.
At the right time once we have clarity from FDA what is the label that they are allowing US then we will do this exercise and we'll come back to everybody with it. So will we see an increase lucien impact, possibly but that will be next year will it be sufficient to alleviate your previous concerned about the drop in ESP.
I believe so but we're not there yet we're not yet at the point, where we're giving guidance for 2024.
Got it understood. Thanks, so much.
Thank you Mike.
Yeah.
Thank you. Our next question comes from Margaret category with William Blair. Please proceed with your question.
Hey, good afternoon, guys. Thanks for taking the question.
I wanted to see if you guys could provide any additional details in terms of cancer cases throughout the summer months, maybe into July and how that might compare to traditional summer seasonality.
Okay.
Yeah, Hey, Margaret this is Jared so I.
I know we've discussed month to month results here over the last few months. After we came out with the Q1 results we talked about how our momentum was continuing into April .
We also gave the update I know at your conference about how May was continuing to be pretty strong just from a procedural perspective, but now that we've gotten through this you know.
Process of disclosing the clinical data around <unk>, where there was maybe some uncertainty from investors out there about what was going to happen with the business. We're trying to get back into the traditional approach of you know.
<unk>.
Sharing results on a quarterly basis, and then given that guidance for one quarter forward. So this is not in any way to indicate that we have concerns about what we're seeing in July right. This is just us getting back to the normal cadence of.
Deliver a quarter give the guidance and move forward. There. So I think we're going to pass on the question today to give any updates on July .
Now I understand I'll take a second crack at a slightly different question, but I'm just curious as you look at the utilization growth that we've seen you've now got some more tenured accounts they've got some newer accounts online yeah any surprises there or can you.
Talk about the profile of account, that's growing faster or slower than you know things are kind of on track I guess with with your expectation.
Yeah excellent question Margaret This study and by the way listen.
Two things number one we've said previously that accounts that have been treating patients with better stem for more than two years are doing more patients in average per quarter and then those have been treating patients.
From 12 to 24 months ago and these are also doing more patients per quarter than the most recent accounts that started treating patients with data stem in the last 12 months, so that let us at the time and we still stand behind the statement to conclude that the longer a site is treating patients with better stim.
The more they see the positive impact on their patients the more they can spread the word around the institution to build more referral networks to strengthen the default network around them. The more they end up treating patients with better stem per quarter, so that stance.
The second dynamic that is interesting.
You know.
Just like in politics sites everything displayed at the local level.
So it's.
Depends a lot on the local competition between hospitals at a specific geography.
And the more you have accounts in the geography, the more of the competition start ramping up and you know hospitals trying to market the new therapies that they are offering their patients to the community to the general cardiologists that on them. The more we see the buzz augmenting in that geography, and the more we see more sites wanting to.
To come in.
Or the fear of missing out on something bank. So that bandwagon effect is real and it happens at the local level not at the national level.
And that is very exciting for us to see.
Yeah.
Okay.
That's very helpful and then.
One more and since the first one was that it was a little bit of a bust but.
Any kind of that back and forth discussions you're having with the FDA on label expansion rate recently any kind of color maybe on concerns requests and and you know whether you're confident I guess that they wont convene a panel. Thank you.
Ah you're always able to you know get.
Get from me some new things so hit as this one yes, we did have discussions with FDA prior to the submission and.
If you recall at your conference I mentioned publicly that we submitted the PMA supplement to FDA after having few discussions or interaction with FDA prior to that we became comfortable with where we stood with them. We prepared the dossier with all of the evidence the totality of evidence and we submitted now the process.
Is fort F D. A to take 100 days and then come back with questions and we are in this period right now where we're waiting for them to do all of the analysis they need.
And come back to us with questions that does not mean.
That we are not having other conversations with FDA in parallel but not specific.
The labeling of the PMA supplement.
Got it.
Sure.
Congrats guys.
Thank you Margaret.
Thank you. Our next question comes from Bill <unk> with Canaccord Genuity. Please proceed with your question.
Hey, great. Thanks, good evening.
A couple of questions for you here just want to I want understand the reimbursement.
When we read through the apps I guess, we saw a T code zero to six six T that was reimbursing 30400, and you're referencing 26000, and I think on reimbursement.
What code are you referencing on that.
I'm just trying to figure that one out.
We Miss.
Yeah Bill this is 19 by the way and that they pronounce your name correctly robotic.
Listen Great question. So yes. It is the zero to 660 <unk>.
That is the reimbursement for the device and the procedure and what <unk> is mentioning is the ESP. If the device net of the procedure now when you say a 30400, that's a national average.
So sites at major cities.
On what expensive and reimbursement could go up all the way to $40000.
And smaller hospitals in rural areas in states, where the cost of living is lower might go lower than $30000. So is that drives company companies to be.
Let's say strategic and the account targeting and here and that's why you see often novel therapies are targeting the big major metropolitan areas because that reimbursement is higher there. So when we're quoting 30000 dollar when you look at the average in the sites we had better stem is currently utilized its.
Probably higher than 30 southern 400.
I'm sorry, it will be next year talking about 'twenty 'twenty four.
Perfect.
And remind us what's the reimbursement today.
Yeah today is slightly below 30000, but we have on top of it the transitional pass through payment that adds another 10 15000 dollar on top of it and this is the TPG the transitional pass through that expires by the end of this year. We've been granted this for three years and that helps novel therapies to be added.
<unk>, that's the process in the United States now.
Now if I compare and contrast.
<unk> another product similar to ours, let me take the example of inspire medical right.
They did not have a transitional pass through when they started that product and they.
Learn to live within that $30000 envelope that we're talking about today in our case, we got Lucky we will receive that transitional pass through payment, but it's only for three years.
And now it's arriving towards the end of it by the end of this year.
Yeah.
Okay.
And then.
I was wondering if you could talk about.
The bat wire now that you've had the submission and you're in the 100 days.
Your year.
Regulatory team I would assume you had a whole weekend off and then Oh are you kind of re energize the bat wire or how should we think about that program.
As a company yeah, yes, we're super energized, but the reality on the ground is more nuanced and more difficult than this you know the enrollment rate for batch wire has been more challenging that we have anticipated.
I think post COVID-19.
Patients are a little bit wary regarding experimental approaches and when they have a choice for a given indication between an FDA approved product like better stem wood that is already minimally evasive Ed.
And enrolling in a clinical trial with an uncertain outcome because not FDA approved for Bath Wyatt. It seems that the majority of the patients right now are preferring to go the safer route and selecting better stem and we've seen this in the numbers. We've seen this in our growth and better stem, but the price we're paying right now with a slower slower enrollment.
In batch Wyatt that said, while we remain blinded to the efficacy of that why would we see the safety on a daily basis, and we report on the safety of patients every five or 10 patients to FDA and so far we're super Super happy with how safe that approaches for patients.
But again, let me remind everybody were still blinded to the efficacy of this end.
You know as we proceed forward with the trial, we'll provide more updates when we have something more to say bill about this.
Yes.
That topic do you have any kind of updated thoughts on when you might complete enrollment or how far through enrollment you are just to give us an idea and thanks for taking my questions.
Yeah, No no no let me punt on this we will provide a long enough data is I believe that probably the next quarter when we'll learn a little bit more about the trend in the study in terms of enrollment.
But what you hear from me here is the concern about the fact that the enrollment has been more challenging than we anticipated and it's going slower.
Okay, Great. We look forward to seeing at our conference in two weeks I look forward to it and thank you for the invite.
Thank you. Our next question comes from Alex Nowak with Craig Hallum. Please proceed with your question.
Okay, great. Good afternoon, everyone I wanted to follow up a couple of questions on the proposed or PPS that was out there we talked about on pricing, but I actually want to pay for just a little bit just trying to understand how is Medicare thinking about Burroughs. There were you just surprised that there was no helane no mention of barrels them anywhere within the documents and I'm trying to understand is that an outright.
Kyle of getting barrels to meet new APC code or is it simply that the proposal for the new APC code just didn't make it into the proposed documents yet.
Alex.
It's a great question by the way I wish I know the answer would I prefer to have.
And I get this comment explicit which often what they do is they will say yep, we received the sequester and up would not give it to you.
Or.
Have them stay silent on it I don't know, which one is better seriously I think silent is better it's.
Leaves the door open to have the dialogue.
With the panels.
In August .
It's hard to know it is really hard to know Alex.
Well getting a new indication or an upgrade label expansion at F. D. A will that have any influence at all on the APC code that Medicare will ultimately choosing the final documents.
You know the way Medicare a structured they have to think about it as three different pillars that are.
Independent of the coding the payments and the coverage.
Is the labeling expansion will impact coverage discussions it.
It would not impact payment.
And it's a lot of impact coding.
Payment.
Under the CMS regulations is driven almost entirely by the cost of charges that hospitals reports back to CMS that CMS analyses.
So CMS tries to put therapies into buckets, so that they don't have to price each one each device or each flavor of a device different they put them in bands or a bucket and buckets and they tried to price. These buckets based on the genetic average of the claim data the data see from hospitals and it's not linked.
So an efficacy data or label or or or labeling or anything like that unfortunately.
Okay that makes sense and then obviously we've seen some really strong sales results this year last year as well.
<unk> been adding sales territories three on average per quarter. What is the right number what is the sales leadership team asking for and then this might be a little bit of a follow up question for you.
Webster cast for cash flow breakeven.
Just provide some more insight in how we get there with the capital and the resources.
And when do we start to see the Opex growth start to slow I think it sounds like 'twenty 'twenty, four, but just try and thoughts there.
Excellent two questions, Alex let me take the easy one and I'll leave the difficult one to Janet so yeah.
We believe the right number is three per quarter.
As we looked into our path to getting to cash flow breakeven without needing to raise dilutive capital.
It is a cone of possibilities, but if we go too slow and the growth rates, we will never get there and.
And if we go too fast will burn the cash we too soon before getting there why does why is that it's because when you hire a rep. It takes six 912 months for the rep to be trained to start creating the relationships in the field and to take the accounts through the contracting process.
Assessed that we know take many months until they can treat their first patients. So during that period youre carrying the cost.
Of the of the rap the territory manager without getting the real benefit from additional sales in that first year. So if you load it up too much upfront.
You burn through the cash sooner without.
Being able to get to the Gaslog breakeven.
If we were having you and I had this conversation five years ago, where the market's was rewarding growth irrespective of the need to raising capital.
Maybe that would have been our strategy, but today in this current environment, where investors are focusing on is it.
The ability of companies to generate.
Cash flow.
It's it did not this does not appear to be the right strategy for us to grow faster than this but let me turn to Jared to walk you through the.
So that's the thinking process.
Yeah, Alex it's something we've been talking about for a while it was 2023 was the flatlining year from a cash burn perspective. So the number that we burned in 22 of the expectation was that we'd be burning a number that was very similar to that in 2023 based on the guidance that we had put out at the beginning of the year as we March into 2024.
And beyond that's where we see that cash burn number coming down and seen the leverage in the model start to play out where the growth in Opex is a smaller dollar amount than the growth in revenue and that's how we get to that cash flow breakeven number.
I appreciate the update thank you.
Thank you Alex.
Thank you. Our next question comes from Frank <unk> with Lake Street Capital Markets. Please proceed with your question.
Great. Thanks for taking my questions wanted to ask slightly differently related to the beat H F data I know it came up that was there any negative impact from that data and fully understanding it's not on label right now so it can't be marketed.
And it's off label technically but was there on the flip side any positive impact that you potentially saw from active implanting centers that were familiar with the data I know as a patient if you can find your way to 34% reduction that delta in transplant.
Probably something you ask your physician about despite or whether or not it is or is not an on label. So maybe any tailwind as it relates to that that you may have seen at some of your active implanting centers.
Hey, Frank accident question, so when we unblinded the data.
And the data was presented at a late breaker it's.
It's a common practice to have the steering committee present, the data as well to the investigators who participated in the trial as a courtesy and many of those investigators are current customers.
And our current <unk> customers and the feedback we got at that time was very positive Super encouraging yes. There were questions about okay. What does it mean not to have met the primary endpoint, but the focus on the long term safety the durability of the symptomatic improvement and you know when you are.
Look at the totality of evidence, particularly ask compounded with the win ratio analysis that was positive and the trends in the mortality data people felt very good about the fact and we spoke about it publically back then, but I think probably you know.
It might have appeared to be a bit defensive when we were trying to convey a positive message and.
You know that there was some negative sentiments around around the messaging that we did in any way.
That's positive messaging, we believe has help carry the day for US and is the reason why we're seeing that.
Factory change slightly this year versus last year in terms of growth. So with this in mind, yes, we believe it had a positive impact on our growth now we're.
We're talking here about the same pace.
Patient population would not talking outside of the current labeling listen we estimated even with our conservative.
Methods back when we did the IPO two years ago that there were 55000, new patients every year.
Is that could be eligible star centipede those are new patients every year. So if you don't read them. This year there'll be another 55000 in the next year and so forth.
And right now what are we talking about less than a thousand or 2000 patients with eating every year, that's still a single digit percentage point off this population. So the key here is to give more ammunition.
Two of the sites, who are treating patients with better stem Wednesday in turn breach.
Breach.
To the referring physicians about the virtues of.
Uh huh.
Got it.
Patterson.
That's the key element in here is.
How can a three thing a better student reading center.
I can start.
Spreading the word to their referral network about the benefit of.
Patterson and that's what the data allows for those who have been able to see it.
At side.
Scientific meetings.
I answer your question Frank.
Yeah, that's perfect and then maybe just one other one on utilization I was hoping you could maybe approximate what percentage of your 140 or so are running at.
12, or more implants per year, just trying to get a sense for how that averages computed.
How many of your centers are really contributing to bring that average up.
Yes, Hey, Frank I'll take that one so one thing I'd like to call out for everybody. So we have 140 active implanting centers just based on the additions we've done over the last.
Four quarters or so half of them were added in the last year. So that means only 70 of the centers have been with us more than 12 months as of the end of June . This year. So we don't have a lot of centers that have reached that two plus year marker.
But we are seeing really good signs for the centers that have been with US two plus years to see that average in planning ratio reached that long term average of one per month or 12 per year that you are asking about it. So we're not going to go into the details on the exact number but you know we've talked about in the past it's more than a couple of handfuls of centers that have started.
Breaching that average in the more recent quarters.
Great. That's helpful. I'll stop there thanks for taking the questions.
Thank you so much thanks Frank.
Thank you there are no further questions at this time I would like.
To turn the floor back over to Nadeem for closing comments.
Oh, yes, thank you operator, and thanks, everyone for joining us for our second quarter earnings call. We appreciate your ongoing support and we look forward to updating you on our progress on our next update.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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