Q2 2023 Silk Road Medical Inc Earnings Call
Okay.
Good afternoon, and thank you for joining silk Road Medical's second quarter 2023 earnings call.
All lines are muted following prepared remarks, we will host a question and answer session. Please press Star then one wanted to enter the queue.
Now I will turn the call over to Marisa bite.
Gilmartin group for a few introductory comments.
Great and thank you for joining today's call. Joining me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating Officer.
Earlier today Silk Road medical released financial results for the three months ended June 32023.
The press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation, those relating to our operating trends and future financial performance.
<unk> management expectations for hiring and growth in our organization and our business physician training and adoption market opportunity and penetration commercial and international expansion regulatory approval reimbursement competition and product development are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our latest quarterly report on Form 10-Q filed with the Securities and Exchange Commission.
This conference call contains time sensitive information and is accurate only as of the live broadcast today August 1st 2023.
So far in medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And now I will turn the call over to Erica Rogers Chief Executive Officer.
Good afternoon, and thank you all for joining us.
I'm proud to report another strong quarter for Silk road, as we fortify our leadership and stroke prevention.
Cute, our commercial objectives and to innovate next generation solutions.
In the second quarter, we achieved revenue of $45 $3 million, reflecting 37% year over year growth driven.
Driven by over 6450 T car procedures.
The quarter reflects the seventh straight sequential increase in procedures per physician.
Demonstrating broad and deepening demand for CCAR as we increase touch points with physicians.
Based on our first half performance and current trends in our business. We are also updating our 2023 outlook. We now anticipate between 180 and $184 million in revenue for the full year, reflecting 30% to 33%.
<unk> year over year growth.
We are beginning of the third quarter with 80 active sales territories covering roughly 2600 trained physicians.
In over 1200, leading hospitals.
As a reminder, on our last earnings call. We shared that we had accelerated our 20th twenty-three hiring plan to welcome a wave of high quality talent.
Which also yielded an opportunity to optimize our territory design and sales management structure.
Our re alignment work continued early into the second quarter and we are pleased to share that our field team has transitioned smoothly. Following these changes.
The energy of our team is palpable and we are optimistic about our continued commercial progress leading to incremental territory expansions into Q4 and beyond.
Let me take a moment to discuss the exceptional skill and day to day impact of our field team.
Who now covers the majority of high volume carotid centers in the United States.
This team of sales professionals and therapy development specialists.
Along with their colleagues from our reimbursement office of medical Affairs and professional education teams.
Comprehensively support our physician customers along with the entire continuum of carotid artery disease care providers.
They spend each and every day focused solely on carotid artery disease as trusted and clinically adept partners to our customers.
Each person and our field team undergoes an intensive as three months training program, including proprietary didactic training C T MRI and ultrasound imaging assessment.
Principal local and general anesthesia blood pressure management, and pre and post op medication management.
We trained our team with the skills to assist physicians in moving forward with T car and when to discourage the use of CCAR when appropriate.
Skill borne out of our commitment to patient outcomes, our north star.
Well our U S. Commercial engine drives forward. We are also advancing the next generation of T car products to afford a five hour leadership in stroke prevention.
In the second quarter, we initiated the full scale commercial launch of inflate. The first bullet is purpose built for T car and the fifth product in our portfolio.
The launch is tracking to our expectations and we look forward to updating you on our future progress.
In addition, we are very pleased that we received five 10-K clearance for our next generation neuro protection system or N P. S plus in April .
This product supports additional ease of use and further minimize the risk for complications.
We are on track for a limited market release later this year.
Finally, we are also very pleased to share that we received PMA approval for tapered configurations of our own route stent in mid June .
The new configurations will provide greater choice for physicians to address the diversity of patient specific anatomy.
With the cadence of our honestly honestly balloon and on route neuro protection system, plus launches in mind as well as inventory considerations, we anticipate launching our tapered on road sizes in the first half of next year.
With three major product clearances and approvals our R&D pipeline efforts are bearing fruit.
Standing our leadership in the T car category.
And freeing up our R&D teams to work on the next set of next generation solutions.
Internationally, we are making meaningful progress towards unlocking the $2 3 billion dollar global market opportunity for key car.
In China, we are focused on approval of our on route stent following clearance of our on route Neuro protection system earlier in the year in Japan, We continue to investigate distribution partners, while we move towards reimbursement submission in.
In China, we are focused on approval of our on route stent following clearance of our on route Neuro protection system earlier in the year in Japan, We continue to investigate distribution partners, while we move towards reimbursement submission in.
In both geographies, we are conducting regulatory activities to support future clearance of our next generation on route N. P. S. Plus that was just cleared in the U S.
Yeah.
Looking beyond our Q2 progress and commercial momentum.
I'd like to take a moment and address the proposed national coverage determination issued by CMS in July .
As a reminder.
I am S. His proposed decision is to cover T car.
And the other methods of carotid stenting collectively known as cats in both high and standard surgical risk patients that are either asymptomatic with greater than 70% to nurses or symptomatic with greater than 50% to nurses.
Our second 30 day comment period is underway with a final decision expected on October 9th.
The bottom line of this proposal is access broader access to less invasive options for patients with carotid artery disease, including for underserved and under diagnosed population.
As stated in the proposed decision quote.
CMS believes the expansion of coverage for carotid artery stenting to our beneficiaries will serve to allow greater numbers of individuals to access this procedure for stroke prevention.
CMS is also acknowledging the importance of patient preference and choice of treatment.
To ensure that patients receive the most appropriate treatment and that physicians are held accountable for their outcome.
Underwritten by the deep knowledge of the risks and benefits of differing treatment options and market forces.
CMS has elevated the role of F D a labeling and indications for use.
Society guidelines and clinical practice updates regional and national quality initiatives Hospital, Credentialing committees and multi disciplinary panel.
And importantly.
Physician and patient shared decision making.
These forces served to ensure patients are given the best opportunity for a successful clinical outcome.
As the experts in the treatment of carotid artery disease.
Our assessment of this proposal starts with our deep understanding of this patient population.
And the referring and treating physicians managing their care.
And centers on three principle.
First and most importantly data support key car first for patients patient.
Patients get T car because of the vast clinical evidence in support of the procedure, especially as compared to the alternatives.
[noise] over decades of study.
He has shown a persistently higher rate of serious surgical complications including.
Including myocardial infarction, and cranial nerve injury as compared to Chico.
Well trends femoral cat has shown a persistently higher rate of peri procedural stroke.
Meanwhile, T car were specifically designed to solve the trade off between the excess stroke risks of trends from Royal Kaz and adverse events associated with open surgical procedures by effectively mitigating.
Yes.
As acknowledged by CMS in their review.
Large contemporaneous propensity matched real world evidence.
Has revealed direct comparisons of T car T, both CA and transfer them real cat.
For example in the December 2019 Journal of the American Medical Association.
Sure Mahorn at all compared outcomes of key car and trends femoral Cas and.
And 3286 propensity matched patients.
The authors found a statistically significant decrease in stroke death, and stroke death for patients who underwent CCAR versus trans femoral Cas.
In addition, the authors found a significant decrease in stroke or death at one year N T car patient.
Similarly in the journal of vascular surgery in 2020.
The core of really at all found T car reduced procedural stroke risk by 72% over trend femoral CAD in the elderly.
Therefore also reducing the rate of disabilities from stroke.
Which can include impaired speech restricted physical abilities limb paralysis difficulty gripping items and slowed our ability to communicate.
Broke is a devastating complications.
These data are just a few examples of the recent and now vast literature well in excess of 25000 patients worth of published T car data.
That clearly defines contemporaneous risks and benefits of carotid intervention methodologies.
T cars clinical evidence its safety profile is rooted in our purpose built flow reversal technology.
Which is not only safe, but exquisite as measured by stroke rate and the hidden procedural fingerprint of silent cerebral ischemia.
We firmly believe that patients are at a disservice. If we are to preventing every chance of cell death in the brain from procedure debris.
Our technology is the only carotid stenting approach that divert all sizes of debris.
Unlike just don't filter based approaches which by definition discriminate by Si.
The risk reward in favor of T car extends further when we consider its rapid and safe learning curve well documented in the medical literature, showing that adverse event rates are achievable from procedure one of our physicians T car experience.
And remains reproducible across a broad spectrum of patient presentation.
The transfer of roll Cads learning curve is also well documented with at minimum over 70 cases required to lower the peri procedural stroke and death rate.
When properly informed of the comparative risks and benefits we are confident that patients will overwhelmingly choose T car.
Second he car is redefining the standard of care in an expanding market.
As we have said in the past the prevalence of sheer severe carotid artery disease.
Is estimated at over 4 million people in the United States.
With over 400000 people, receiving a new diagnosis of critical carotid stenosis every year.
And less than 200000, who receive procedural treatment to address the at risk Alicia.
We also know that there are likely more stroke from carotid disease than there are carotid intervention to prevent those strokes.
But given the comparative procedural risk of Cta and transfer a little cat.
Carotid intervention is historically very conservatively applied.
We believe T car is changing this paradigm.
Among patients already treated we have made substantial progress converting C E and trends femoral kaz procedures to T car.
By educating and driving awareness of the safety and efficacy profile of T car across the care continuum.
With its comparatively short learning curve and broad patient applicability.
<unk> is well positioned to reach farther into an underserved and under diagnosed at risk populations, while offering a compelling stroke prevention option for the remaining currently met medically managed population of over 200000 patients.
Sure. The CMS final decision mirror today's proposal, we expect to see tailwind for key car, including increased screening.
Diagnosis and demand for minimally invasive carotid intervention as a whole.
Third.
T car is entrenched.
Marked by the deeply rooted and concentrated nature of carotid disease referral and treatment patterns predominantly from internal medicine, and neurology to vascular surgery.
And rather than attempting to shift longstanding entrenched referral relationships our strategy with CCAR from the beginning was to become an effortless part of this network.
And our work to establish key car has resulted in a tenured presence in hospitals performing the vast majority of carotid procedures today.
An important component of patient momentum towards T car is their referral to the vascular lab for definitive ultrasound diagnosis of suspected carotid blockage, which typically result in an immediate refer ultra avascular specialist.
We see significant self referral from vascular surgeons in these vascular labs, who are already screening patients with peripheral artery disease and they proactively screen for carotid disease.
We are also seeing neurology primary care internal medicine and cardiology.
Increasingly encourage patients to choose CCAR as being minimally invasive carotid stenting auction.
Because the last thing they want for their patient not to mention the reputation of their hospitals and programs is the devastating possibility of a stroke during a procedure with prophylactic intent.
In addition, our work to establish CCAR has resulted in diffusion of key car in most major fellowship training programs and an increasingly tenured presence in hospitals performing the vast majority of carotid procedures today.
In addition to T car being entrenched in the continuum of care our field team itself is entrenched as a central partners to our physician base from diagnosis to case planning and post operative care.
The nature of their leadership and relationships across the referring and treating physician communities stems from their thorough understanding.
And our ability to meet the specific patient and physician needs in this market.
We have spent years developing and cementing the strength of this team.
And the hard work of navigating multi specialty dynamics and hospital Credentialing committees to firmly establish minimally invasive T car alongside open surgery is largely behind us.
We are on the ground and running deeply embedded in the carotid continuum from from vascular imaging labs.
Referring physicians and ancillary health providers too.
In hospital nurses anesthesiologists and hospital administrators.
Our track record of pristine patient outcomes is favorably influencing referring physicians.
And T cars hospitals efficiency and favorable economics.
Now well understood by hospital administrators.
After years of battling the inertia of C, yet and rising to the challenge of meeting and exceeding a high bar.
He cars momentum is building and its own inertia is setting in.
In summary, looking across today's market forces. There are many dynamics that continue to work and T cars favor.
We are confident that our team and our business will continue to drive the paradigm shift towards more minimally invasive patient options.
And we are pleased to be the leading force for stroke prevention for patients with severe carotid artery stenosis.
We expect the renewed focus on this topic to act as a rising tide to the diagnosis and screening of carotid artery disease, and ultimately the safe and effective treatment of more patients.
We are excited and motivated by our second quarter progress and we are unwavering in.
Our drive to reach standard of care in treating this patient population.
With that I'll now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Yeah.
Thank you Erica.
Revenue for the three months ended June 32023 was $45 $3 million.
37% decrease from $33 2 million in the same period of the prior year.
The number of CCAR procedures in the quarter was approximately 6450 also with 37% decrease from the same period of the prior year.
And an 11% increase on a sequential basis.
Growth in revenue and procedures was driven by deeply demand for CCAR across our critical mass of trained physicians.
As evidenced by our seventh straight sequential increase two procedures per physician per quarter.
Before turning to gross margin I'd like to quickly touch on two distinct metrics.
Average selling prices for our five distinct CCAR products.
<unk> revenue per procedure trends.
Regarding the former.
Product level Asps remained strong.
Continue to track flat to slightly up versus history.
Regarding the Aladdin revenue per procedure, which represents units sold per period relative to units utilized per period.
Remains within a consistent range versus history.
As demonstrated by Q1, and Q2 2023 revenue per procedure roughly in line with the same periods periods in 2022.
While we do not drive the business with the focus on this metric Rev.
Our revenue per procedure continues to track slightly ahead.
Of the <unk> product portfolio combined asps.
As hospitals reorder units for current and expected procedural demand by their physicians.
Looking into the back half of the year, our focus will remain on procedure growth and ASP discipline.
And we expect revenue per procedure to remain near the 7000 level or slightly higher.
This reflects the increasing contribution of our <unk> balloon as we further penetrate our account base and increased utilization.
Offsetting by the slight moderation in established account inventory power levels the.
New account first time orders given our focus on penetrating deeper into our already established presence of hospital accounts.
Gross margin for the second quarter of 2023 was 71%.
Compared to 73% in the second quarter of 2022.
Driven by higher manufacturing costs associated with labor and materials and supporting two manufacturing facilities.
Total operating expenses for the second quarter of 2023 were $46 6 million.
A 22% increase from $38 4 million in the second quarter of 2022.
R&D expenses for the second quarter of 2023 were $10 8 million compared to $10 7 million in the second quarter of 2022.
Reflecting the largely at scale nature of our current R&D organization and key programs. After a period of rapid hiring over the last few years.
Sales general and administrative expenses for the second quarter of 2023 were $35 8 million compared to $27 7 million in the second quarter of 2022.
The increase was largely driven by growth in personnel and personnel related expenses.
<unk> commercial expansion.
Despite our accelerated sales hiring in Q1 and Q2.
Our overall infrastructure continues to yield operating leverage as we further scale the commercial organization and grow our share of the carotid market.
As evidenced by a sequential decline.
Total operating expenses as a percentage of revenue.
Net loss for the second quarter was $13 5 million or a loss of <unk> 35 per share.
As compared to a net loss of $15 4 million.
The loss of <unk> 44 per share for the same period of the prior year.
We ended the quarter with over $202 million in cash cash equivalents and investments.
We are confident that we can accomplish our current growth and organizational objectives.
Including executing on our pathway to profitability with our current capital.
Turning to our 2023 outlook as Eric mentioned, we now expect full year revenue to be in the range of $180 million to $184 million, reflecting growth of 30% to 33% over 2022.
Based on over 25000 and CCAR procedures.
And as always our guidance range reflects the pace and progress of hiring and training in our commercial organization.
Trends in adoption and our trained physician base.
And a modest tailwind from the rollout of the in place to live.
For guidance also implies roughly 15% penetration of our core market opportunity by year end.
Just on approximately 170000 U S patients treated for carotid artery disease in 2022.
Yeah.
As is typical we expect some seasonality in our business in the third quarter of the year in.
<unk> forecast flat to very modest sequential revenue growth off of our second quarter.
In sum, we made meaningful progress this quarter towards our 2023 financial goals.
Are well capitalized to continue executing on our vision to become the standard of care.
At this point I will turn the call back to Erica for closing comments.
Thank you Lucas.
We began our journey at Silk road with the goal of improving on the critical shortcoming of CA and trends femoral cat.
That were well established over many decades.
And we have always prioritized patient outcomes with a deep respect for the absolutely on forgiving nature of the brain as the and Oregon.
While making carotid intervention safe easier and more broadly accessible to providers and patients alike. We are leading the way and minimally invasive carotid artery disease treatment on these principles with T car established as the gold standard.
<unk> for patients.
At the start of the year, we set three strategic objectives to grow.
<unk> and diversify our business.
We are pleased to have made measurable progress on each of these fronts in the second quarter and are excited about our trajectory into the back half of the year.
As we look ahead. We are also looking forward to hosting an analyst and Investor event. This fall to walk through key car history clinical evidence and practice patterns.
As well as open up the dialogue for questions and conversation regarding NCD 27, and the CMS proposed decision memo.
In advance of this event, we have made a resource library available on our investor site to help the public's better understand our leadership and position in the carotid market.
We welcome you to view this library of history, and evidence and to stay tuned for a formal invite to a fall analyst and investor event.
The future of key car has never been brighter.
At this point I would like to turn it over to the operator for Q&A.
Operator.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
One moment for our first question.
Okay.
Oh.
Our first question comes from Chris Pasquale of Nephron Research. Please go ahead.
Thanks, and congrats on the quarter Eric.
Good.
<unk> comprehensive overview of where you guys stand right now on the reimbursement front and one follow up there and then one for Luka on the numbers I'm curious, whether you have a breakdown of referrals by especially what path. These patients are walking to get to a treating physician and how much of that.
Is in sort of a T car friendly can't plug a vascular surgeon versus.
Neurologists that might be more open to a variety of different techniques or have an interventional is partner within their practice that they could conceivably want us to send patients too.
Hi, Chris Thanks, so much for the question and for being here on the call I can give you some broad brush strokes on that this is something that we've been studying from day. One really is understanding these referral patterns within carotid artery disease. So this is not a new topic to us by any means.
And our sales and marketing and clinical specialists organizations have been focused on these referring physicians for a very long time.
It can take you through the breakdown, but predominantly the referring specialties fall in the category of internal medicine, and Lucas I'll, let you take it from there.
Sure. Thanks for the question, Chris I mean, if we just up level for a second.
70% to 75% to 80% of the procedure volume is carotid endarterectomy.
So the dominant referral pattern for many source has led to a vascular surgeon for surgery for decades.
And then if we add <unk> into the mix over many years really greater than 90% of referrals are to those same physicians.
Who have been doing carotid endarterectomy and also transferable paths to a lesser extent, but are doing CCAR broadly at us in a very entrenched fashion as Erica mentioned.
And if you think about who is the real customer here is for patients and the referring physician.
So.
Those two customers, obviously want to avoid complications, especially a stroke, but certainly any complications.
If a procedure with prophylactic intent.
But to get into the detail of your question.
Generally 30% to 40% of patients are symptomatic.
And depending on where they are diagnosed in the ER or otherwise are generally under the care of a neurologist for.
For the 60% to 70% of patients that are asymptomatic as Eric conventions, they come through primary care often.
Our internal medicine.
Specialties and those referrals generally.
Especially in a carotid blockage that gets sent to the vascular lab for that definitive ultrasound as Eric had mentioned.
A lot of vascular surgeons.
Our controls are involved in those post vascular labs.
And there is a fair amount of self referral there as well as our convention to foreseeing a lot of patients with a lot of different vascular problems longitudinally.
And so and so we again understand these referral patterns.
In depth, we've got we've got a lot of data that we use to help influence that referral pattern and influenced the treating.
Physician, and whether youre talking about cardiology or neurology or internal medicine primary care. Most most referrals result to the Cta and an increasingly CCAR.
Thanks, that's helpful.
And then just on the revenue per procedure question, our checks suggest that insulate us being adopted pretty quickly here post the launch why shouldn't that be more of a tailwind to revenue per procedure in the back half of the year could you just walk through what you see offsetting that there should be a few hundred dollars extra that youre collecting per case.
Yes, the potential is in that range, Chris, but but we launched this product.
In Q2, and we've taken a premium pricing strategy, so where we sit today is this product is in the minority of our accounts that is being used in the minority of our procedures and we're doing the work to get to get the product through.
Vac committees and start to get a trial the leach accounts. So we've got a lot of work to do to fully penetrate that product into our accounts and physician base.
Like we have with the four other products certainly each quarter that goes by.
Those that penetration and utilization will go up but.
That product and our expectations for its contribution to our revenue and kind of our revenue per procedure.
Patrick is obviously within our updated guidance.
Yes.
Thanks.
Thank you one moment for our next question.
And our next question comes from Rick Wise of Stifel. Please go ahead.
Hi, good afternoon to you both.
Let me start off with guidance.
Sure.
You obviously.
Superb quarter.
Excellent in so many ways.
And you raised by the amount of the beat could you talk about it.
<unk> for the second half.
I sort of reflect you've train more doctors.
The three new project, you talked about are present, and possibly affecting the whole process and our sales force has been expanded the territories increased why wouldn't we see.
Sure.
Hi.
Sort of more dramatic sequential improvement and impact from all these positive factors I guess.
Sure I'm happy to take that.
Obviously, we've.
Essentially cut of our range and half here halfway through the year, we talked we touched on the seasonality in which usually takes the form of vacations in Q3.
Essentially signaled obviously increased confidence in our overall procedure number for the year.
Slight tightening on revenue per procedure.
And as you mentioned raised by the size of the beat and so.
We feel confident about all of those pieces of the puzzle you mentioned to continue driving this business.
Last year, we saw a bigger sequential step up <unk> versus <unk>.
And the same seasonality why would we see.
See that.
Same sequential uplift this year.
Yes, I think each year is a different set of puts and takes.
Again, I think we will see.
A sequential step up in procedure volume and we're shifting slightly conservative on.
On the kind of inventory in the channel, which is really revenue per procedure.
We will push the business as we always do too.
To overachieve.
Sounds good to me.
And just on <unk>.
Your comment about the new family of tapered stents.
It seems exciting.
You know, maybe 15, 20% depending on the Dr <unk> to speak to.
Patients who are viewed as.
Not optimal candidates for one reason or another for Tiqueur something about their anatomy et cetera does this expand.
The use of CCAR into maybe populations that have.
Not been.
Available for CCAR in some way.
What impact does this have on growth procedure penetration ASB help us think through the implications of these new products.
Rick I'll take that one which is this on route tapered stent configuration is really in response to listening to our customers and what they want and need to continue to drive adoption there adoption of T car and this really comes out of just some very specific.
Vic patient Anatomies and configurations of lesions and things like that where a tapered configuration is is more suitable for the job and we will get into more of that detail I think when we're when we're launching the product I'll I'll spare you the gory details for the moment.
Got.
In general the way to think about it is this just increases the satisfaction of physicians around CCAR and in so doing absolutely drives physicians up the adoption curve.
Great. Thank you.
Thank you one moment for our next question.
And our next question comes from Neil Chatterji of B Riley. Please go ahead.
I guess just.
First off for me just on the sales territories are I believe in the prepared remarks, you said that youre up to 80.
I'm just curious.
If you could just elaborate on that the benefit you saw from that sales force.
I guess infrastructure repositioning you had in the first quarter and then kind of your expectations here for the back half in terms of incremental.
Additions.
Sure Neal I'll take that one thanks, so much for being on the call today.
So as we've said before.
Our goal here is to really increase the touch points of our sales professionals with physicians, because we know from our own data that when we do that we drive physicians more effectively up the adoption curve and so we ended 2021 with 58 territories, we took 2022 to seven.
We said that we would grow the territories or expand territories roughly similar to that in 2023.
Our goal had been to kind of spread that out over the year as we said in our Q1 remarks.
We responded to some incredible talent that became available to us in Q1.
And reacted to that wave of talent and brought more people in sooner and also reorganized as a result of that right. You are promoting people internally, you're creating leadership positions things of that nature.
And so it feels to us like the.
The commercial team is now fully enforced and executing that said.
We also said we'd add roughly a similar number so theres, probably a little bit of work to do here in the back half and beyond.
We will continue to respond to the business.
But we feel like we're in a really great place starting Q3 here with 80 territories.
Great Thanks for that color.
Maybe just flipping back to the NCD proposal.
Just curious on that in terms of its.
Some of the language that's in there for the formal shared decision, making tool and kind of be embedded Euro assessment, just curious what are your expectations.
Spectation for that and all of that.
Right.
To ensure an optimal patient procedure choice and outcomes.
Right well just to just to reemphasize our read of this CMS proposed memo here is really about access providing patients access to care and mainly access to minimally invasive options and we continue to believe <unk> cards in the best possible position and given its short learning.
Curves in other real physician benefits to provide better access to patients and so shared decision making.
And some of the other sort of boundaries around this national covers proposed memo.
Are really shifting that responsibility back to <unk>.
We expect that physicians will.
We will adhere to the shared decision, making we may or may not see more color or more granularity.
So what that means in the final memo.
Yes.
Thank you one moment for our next question.
Okay.
And our next question comes from Felipe Lamar of Citi. Please go ahead.
Hi, it's actually Joanna Lynch I'm on for Joanne Lynch anyway.
I'm being silly, it's a long day and night.
I've got a bunch of questions.
So this is the thing can.
Can you think you can still grow CCAR revenue as fast as you have been growing under the NCD not in 2023, because that's when it starts impacting procedures until sometime probably in the first half of next year, but maybe next year.
Yeah, So hi, Joanne good to have you on the call I'm glad to see you authentically for you on this call.
Okay.
Yeah. So.
The answer of course is we are not here to give long range guidance and long range predictions with any granularity of course, we're not going to do that but what we can say emphatically is this.
Proposed decision is around providing access to minimally invasive options key car is now the gold standard in minimally invasive options for the treatment of carotid artery disease.
So we emphatically believe.
This is a tailwind for CCAR.
When you think about the entrenched nature of where <unk> is today across the care continuum from referring physicians all the way to treating physicians from nurses and vascular labs and everything in between that I talked about in my prepared remarks.
Booking against that entrenchment, there's going to be difficult for anyone else, but let's be very clear that the real competitor and the real thing we're going after every day is carotid endarterectomy.
Which is still the majority of procedures today, and the bar against which everything else would be measured and when that is the bar T car wins.
Okay. Let me ask a different question, let's just talk some of these out.
Do you think youre going to have to lower your ASP, comparing a T kearney ISP versus cash.
No.
And then my final question.
Do you think youll be generating international revenue next year.
You know Joanne we haven't really sort of guided yet on where international revenue is going to come in when it's going to come in.
I'll just reiterate that we're making really good progress on all fronts in both Japan, and China, and we're very pleased with that progress, but I think we'll hold the cards a little longer I know thats not very satisfactory on on revenue from international markets until we flip a couple more cards.
Oh thank.
Thank you very much for taking the questions have a good night. Thank you.
Thank you one moment for our next question.
Okay.
And our next question comes from Robbie Marcus of Jpmorgan. Please go ahead.
Hi, This is actually Ryan on for Robbie Thanks for taking the question and thanks for providing the background.
Perspective on the NCD just to follow up a bit on that as well as Joanne question.
What you expect from Cas adoption, if the Itv's finalized and do you have a plan in place to maintain share whether that's through price further innovation or more evidence generation.
And then outside of follow up.
Yeah, well thanks for joining the call I'll take the first part of that which is that I'll reiterate that the competitor here for everyone is carotid endarterectomy.
And carotid endarterectomy has 70 years of history.
Have a very low exceedingly low peri procedural stroke rate.
Competition is at the procedural level so.
So it's key car trying to unseat that inertia of CEO , that's been in place for 70 years, and we've been doing that and we've been winning.
So anyone else who wants to come into this market are reenter. This market I should say is going to have the same fight right against those outcomes.
Now we know a lot about transfer them roll cads, because it's in fact 30 years old.
It is twice that of carotid endarterectomy.
So it starts there in terms of whether or not we think T transform roll cads who's going to make significant headway.
We know from learning curve transfer roll Cads is very hard to learn and get good at it takes 70 at least procedures before you can get over a stroke and death hurdle.
So I think the question everyone needs to ask is how many cardiologists are going to go over that hurdle against.
All of the other exciting and interesting and we'll paying things that cardiologists do all day every day.
How many are going to take that risk well the ones who are already doing it who are successfully the handful of interventional list who are good at who've been doing it for the last 2030 years.
Those physicians that we believe we will continue to do transfer more cash as they always have.
Okay.
Thanks that was really.
Really helpful and I guess one more for me is you mentioned the priority moving forward will be leverage down the P&L. So.
How are you thinking about sales growth versus opex growth moving forward and when do you think investors can see the company breakeven.
Yes, so again in my prepared remarks, we talked about the sequential decline in total opex as a percentage of sales even as we continue to expand the sales team.
And so the incremental investments right now are truly in the sales team. We are we are at scale and our R&D function and our G&A functions in our commercial support functions.
So as we grow the top line, we'll see continue to see that leverage and we'll continue to see opex grow at much lower rates relative to revenue growth.
And that will drive our pathway to cash flow positive and profitability.
And as I said, we're well capitalized.
To achieve that journey.
Great. Thanks.
Thank you one moment for our next question.
And our next question comes from Travis Steed of Bank of America Securities. Please go ahead.
Hey, everybody. Thanks for taking the question I guess going back to the things that impacted your revenue procedure in Q1, maybe talk about what happened to those issues over the quarter and curious why there wasn't a catch up on more of a catch up in revenue procedure. If there was some destocking in Q1.
That's a good thing on the revenue procedure.
And the issues that happened in Q1.
Yeah, Hey drove it makes so much for joining the call.
I can say is that the very minor disruptions, we had at the tail end of Q1 are well behind us.
Okay.
But but no catch up and the reason that with the catch up in revenue procedure this quarter or should we see that Travis sure Yes Travis.
Revenue per procedure in Q2 was roughly $7020 by the math, which was a step up off of Q1 as I said in my prepared remarks.
Q1, and Q2, where with it well within the normal variation of history.
So I want to really emphasize to not over index right. We are.
This business is meeting our expectations, it's increasingly mature.
Everything's normal.
Had that revenue per procedure will start to approach the combined asps, but never made it remember we've gone from sales Rep. One to 80, and we've gone from hospital, 1% to 200, and we've gone from treating physician one to 2600 <unk>.
Which over many years is putting.
CCAR products into the channel to get hospitals started to get each individual physician started but but here in 2023 and beyond it's really about driving deeper and so it's really kind of normalizing that that reorder rates.
So the business is performing.
As we expected.
And.
We recognize revenue when a hospital orders of product and we utilized a unit when a physician doesn't procedure and so quarter to quarter variation is not something to overly focus on if you look at.
Our last our trailing 12 months right revenue per <unk>.
Procedure is roughly 7050, if you look at our last eight quarters, it's 7100.
Quarterly variation, it's always a little bit lighter in Q1, and then it steps up in Q2, and Q3 and sometimes it's a little bit higher in Q4.
And the cycle repeats itself, but there is also.
Mix in hospital financial pressures in our own sales territories that increasingly cover with <unk>.
<unk> number of physicians that account so that they can go deeper and therefore, there's just.
More focus and energy on unhealthy hospitals manage their inventory.
We'd like to get beyond talking about this and talk about procedure growth and our strong asps metrics.
Alright Thats helpful. Thanks Lucas.
Okay.
The NCD stop up again, but maybe Eric I'd just add on.
Our view on the hospital economics here same reimbursement CCAR higher device cost how.
How much do you think economics might impact decision, making here ethanol and there was some comments about that.
Lack of a randomized controlled trial for tea cart deal do you feel like you'd need that at some point here.
Year to really develop CCAR longer term.
Yes, I will take the last part of that Travis.
And Lucas can help me out on the on the first fit.
On on randomized controlled trial look we've been in partnership with CMS for very long time on the collection of real world evidence and as Youll recall that the whole reimbursement paradigm for silk road for CCAR went into being at the behest of the society of vascular surgery and in combination with.
FDA and CMS and so this was well thought out from the beginning that real world evidence was really what they wanted to see here the paradigm of stenting, the carotid artery and stent themselves has been well studied for many decades. So therefore, the new question was really how does T car due in.
The real world and that is satisfying the CMS goal of access into the real world and extending this into broader patient population and in the hands of more physicians and so keep in mind that CMS is not the customer here the customer are patients and physicians.
And physicians and referring physicians are deeply satisfied.
With the comparisons that have been made in these highly rigorous propensity matched studies that have been published in very high impact factor journal such as Jama.
Yes, I'll take the.
The economics question Travis So so we've done deep work here and a lot of that work is in our investor deck.
Relative to carotid endarterectomy, but obviously, we've been competing with transferable Cas.
All this time as well.
If we up level for one second generally the economic argument comes into play when Theres true clinical equipoise right, but for all the reasons we stated.
There are many referring to treating physicians.
I don't believe Theres clinical equipoise here. So the economic argument is less relevant right. We're talking about major complications of major.
On patients' lives.
But if we just held if we assumed clinical equipoise.
CCAR and Cas cost about the same there are elements of each procedure that are more expensive and less expensive.
But this this assumption that the transfer of railcars is cheaper and more profitable for hospitals is simply not borne out by the data we work very closely with a very well known Stanford professor and consultant.
Reza consulting FERC for Med Tech companies very well known Jan Peach from Stanford is consultancy is called <unk>.
And there is very marginal differences in the cost of care for T car to transfer milk has.
But but but shortly strokes are very expensive they add five days on average to the length of stay including three in the very expensive.
<unk> environment, so they're expensive.
<unk> level, but they're also extremely expensive at our reputation will level. So our sales team is equipped to go in and have these economic arguments again, typically why would I do more CCAR relative to what I'm, mostly Dewey, which is CBA and we've been winning that battle.
With data and we're well prepared.
To continue to win that battle for accounts that want to talk about it relative to transferable caps.
Great. Thanks, a lot.
Thank you one moment for our next question.
Our next question comes from Kristen Stewart of C. L. King. Please proceed.
Hi, Thanks for taking my question.
Sorry to beat a dead horse here, but just to go back to the revenues per procedure.
Just struggling a little bit to understand why it shouldn't be more than 7000 for the next two quarters.
In light of all your progress with them fleet and just kind of.
Thinking about things rebounding off of the first quarter.
Kristen Thanks for the question I mean, you are right the primary tailwind is.
On a flight right. So it's a very small impact, but it will be a larger and larger one over time.
The headwind is just.
What is the par level inventory, but that hospitals are Terry this more mature.
For purposes.
So historically we've had.
The overall trend.
Quarter to quarter.
You wanted steadily work on repeat.
Repeat yourself.
No.
With our guidance.
Some level of the store.
69%.
Lynn.
Okay.
First time.
Yes tore.
Okay.
Okay.
Slowly drawn or commercial.
Yes.
Thank you.
Hey, Jason.
Yes.
Yes.
Okay.
Yes.
Yeah, and Chris and I would just add I mean, one way to think about this is.
We've raised our guidance at $182 million at the midpoint, which represents 31, 5% year over year growth and we did that in the context of a kind of steady as you go proceed revenue per procedures and so what that tells you by inference is that.
The strength of the business is solid the procedural growth is strong and the adoption of this technology is strong.
Okay. Thank you very much.
Thank you one moment for our next question.
Okay.
Okay.
Our next question comes from Adam Nature of Piper Sandler. Please go ahead.
Hi, Eric Hi, Lucas. Thank you for taking the questions and congrats on the solid quarter.
A couple of innovation focused questions from me.
Just ask them both upfront.
The first is is there any update on the acute ischemic stroke program.
The night, one study and the second is regarding.
Wanted to ask.
Who manufacturers those are these open cell stent still.
And what is your view on covered stent technology, thanks for taking the questions.
Yeah.
Sure Adam Thanks for joining the call on <unk>, one we continue to make progress there.
I want to remind everybody that this is a first in human feasibility trials.
And.
We're making good progress I'll just leave it at that.
On tapered stent configurations that is an extension of the on route stent.
Family of products in the <unk> family of products.
We have a manufacturing relationship as you all know with cordis and so they are making the tapered configurations as well.
Matt says.
Look I think we should reserve comment a couple of years from now when those products get approved if they get approved.
Thank you.
Thank you one moment for our next question.
And our next question comes from Michael <unk> of Wolfe Research. Please proceed.
Hi, Good afternoon. Thank you for taking the question I just have one topic and I'll provide you an opportunity to comment on our research.
We dug into a bunch of government and other data sources.
Tried to re triangulate.
Market.
A procedure volume in the U S. Each year for carotid Revascularization and as you guys know our conclusion was.
35% to 40% below the company's estimate of 170000, so I heard that the.
The affirmation of the 170000 estimate again on this call.
Yes.
Did you an opportunity to comment on what gives you confidence.
Firming that number this evening and feel free to throw us under the bus what what was wrong.
With our research and I. Thank you for taking the question.
Thank you Michael I'll take that one so so yes throughout history and.
For a long time, we've routinely routinely vetted and we remain highly confident in our Tam estimate it's really not the company's estimate it's a validated.
Right based methodology by a market sizing expert.
Lotus health.
County.
Billing records with that are fraught with billing incentives and errors and trade weighted gross them up.
Cool.
Yeah.
We've added this different ways.
That would imply.
Yes.
Yes.
Okay.
CCAR volumes, we got checked this with our field team. We're in 200 hospitals. We trained 2600 physicians, we ask them all the time what is your practice look like.
How many people are you treating.
And again in the end, we may we remain really confident.
And all of the various methodologies and got checks we've used and we also see.
This an NCD decision if finalized as really a rising tide effect will accelerate Tam expansion.
Alright, thank you.
Yeah.
Thank you at this time I would like to turn the conference back to Erica Rogers for closing remarks.
Thanks, very much everyone for joining us we couldnt feel better about the business in the future has never been brighter for CCAR.
This concludes today's conference call. Thank you for participating and you may now disconnect.
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