Q3 2024 CVRx Inc Earnings Call
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Speaker Change: Welcome to CVRX Q3 2020 for earnings call. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star and the phone keypad.
Speaker Change: As a reminder, this conference has been recorded.
Speaker Change: I would now like to turn the call over to Mike Vallie. Thank you and all to you.
Mike Vallie: Good afternoon. Thank you for joining us today for CVRX's third quarter 2020 Ford earnings conference call.
Mike Vallie: Joining me on today's call are the company's president and chief executive officer Kevin Hykes and chief financial officer Jared Oasheim
Speaker Change: The remarks today will contain forward-looking statements, including statements about financial guidance.
Speaker Change: The statements are based on plans and expectations as of today which may change over time.
Speaker Change: In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified in the Irngel release issued prior to this call, and in the company's SEC filings, including the upcoming form 10Q that will be filed with the SEC soon.
Speaker Change: I would now like to turn the call over to see the RX's President and Chief Executive Officer Kevin Hykes.
Kevin Hykes: Thanks Mike, good afternoon and thank you for joining us. I'm pleased to report another quarter of strong performance driven by solid execution within our US-Fark failure business. We delivered total revenue of $13.4 million in increase of 27 percent over the third quarter of 2023.
Kevin Hykes: I'm excited about the progress from making in the positive impact Beroskin therapies having on patients.
Kevin Hykes: In the third quarter, we continue to build a little momentum that we established earlier this year. Our strengthened leadership team and stabilized sales force have been instrumental in driving on market development priorities and advancing the adoption of various in therapy.
Kevin Hykes: As I will describe in more detail shortly, we secured two significant reimbursement wins during the quarter. First, a significantly higher DRG payment for inpatient procedures in second, the approval of category 150 T codes.
Kevin Hykes: These achievements mark a significant step forward in expanding patient access to Burston.
Kevin Hykes: Before I dive into an operational review, I'd like to welcome Kevin Vallinger and Mitch Hill to our Board of Directors.
Kevin Hykes: Kevin brings over 25 years of experience in the medical device industry with extensive expertise in product development, global commercialization and strategic planning in the cardiovascular space.
Kevin Hykes: Mitch brings more than 30 years of financial and operational experience in the healthcare and technology sectors.
Kevin Hykes: Their combined experience will be invaluable as we continue to grow and expand the adoption of Barristan Therapy.
Kevin Hykes: Our focus remains on addressing key barriers to the adoption of Ferris Dimm, which include improving patient access to the therapy, increasing education awareness among physicians, advanced practice providers and patients, and developing a more robust portfolio of clinical evidence.
Kevin Hykes: Starting with patient access, we've recently secured two significant reimbursement wins. The first, I'm going to start with reminder about OPPS.
Kevin Hykes: The MS released its proposed rule changes for the 2025 Hospital Outpatient Perspective Payment System in July.
Kevin Hykes: We've been actively engaged with CMS physicians and hospital stakeholders during the comet period to advocate for maintaining Berosdam's current placement in the new technology APC, or for the creation of a level 6 nurse simulator APC.
Kevin Hykes: We look forward to the publication of the final rule in the coming days.
Kevin Hykes: On the impatient side, we're pleased that the final impatient prospective payment system rule for fiscal year 2025, which was released in August, confirmed the reassignment of Barris Tim to DRG-276.
Kevin Hykes: This change which results in an increase in the inpatient payment to hospitals, from approximately $23,000 to approximately $43,000, took effect October 1, 2024.
Kevin Hykes: We believe that this significant increase in hospital payment will further support the adoption of Berosum in the Inpatient 7.
Kevin Hykes: Moving to coding developments, the American Medical Association CTT Editorial Panel has accepted new category 1 CPT codes for Darryl's and Therapy, which we expect to be implemented on January 1st of 2026.
Kevin Hykes: This transition from category three to category one codes was led by the Society for Baskiller Surgery with support from the American College of Cardiology.
Kevin Hykes: The category one CPT code approval is particularly significant as it will eliminate automatic prior authorization denials associated with the category three code for the roughly 50% of our patient population that require a prior authorization.
Kevin Hykes: It will improve payment predictability and hospital throughput and it will unlock access to important new markets like Trichair Where category 1 codes are required for coverage
Kevin Hykes: This designation represents an important milestone for the company and is a testament to the increased adoption, safety and effectiveness of Barristan, as an important option for patients suffering from debilitating heart failure symptoms.
Kevin Hykes: Our second initiative focuses on increasing education and awareness among refers and patients.
Kevin Hykes: We've expanded our outreach efforts beyond heartfelt failures specialists to include general cardiologists and their advanced practice providers. Our Barrelston Connect program continues to be effective in providing education and prior authorization support for sector patients.
Kevin Hykes: Additionally, shortly after the end of the quarter, we launched a comprehensive educational program for Heart Failure Fellows called a send.
Kevin Hykes: In early October we held the first of a series of three courses with 34 fellows taught by a faculty team from across the United States
Kevin Hykes: This program aims to explore effective management of heart failure patients, review evidence-based treatment strategies and educate heart failure fellows on innovative devices in heart failure treatment, including practical training on the implementation and use of barrel stem.
Kevin Hykes: We believe investing in the education of these future specialists is important to our commitment to the heart failure community and helps advance adoption and broader understanding of how Barrowsson can contribute to the standard of care.
Kevin Hykes: Our third focus area is developing a more consistent, stream of clinical evidence supporting the virus in therapy.
Kevin Hykes: We're making progress in publishing additional scientific evidence that more fully describes Burstim's mechanism of action and the wide range of benefits to patients.
Kevin Hykes: In the quarter there were two important publications, first new data published in the journal of the American College of Cardiology Heart Failure.
Kevin Hykes: So, the significant and sustained improvements in quality of life measures for patients receiving Barrel Stim plus God-Landirected Medical Therapy, as compared to those receiving only God-Landirected Medical Therapy.
Kevin Hykes: Patients in the Barrel Stunt Treatment Arm reported significant improvements in physical activities, psychosocial measures, and reduced heart failure symptoms.
Kevin Hykes: Second, a peer reviewed publication from the European Society of Cardiology Heart Failure.
Kevin Hykes: Provided evidence of Barrows' long-term efficacy, showing sustained reduction in NYHA classification, improved left-and-trickular ejection fraction, and decreased NT Pro B&P levels in heft ref patients.
Kevin Hykes: In addition, consistent with our goal of increasing the cadence and visibility of clinical data, five new abstracts on Beryl Stim were made available online for the Heart Failure Society of America 2020 for meeting.
Kevin Hykes: The single-center observational studies showed favorable results, including improvements in left-end particular ejection fraction or LBEF, reduced cardiac arrhythmias, and decreased diuretic usage.
Kevin Hykes: One example of these abstracts was from the University of Southern California which demonstrated a statistically significant LBEF improvement in patients 12 months after receiving the vaccine therapy.
Kevin Hykes: These publication then research findings continue to build a more comprehensive scientific foundation for barrel stems and press of results and support its integration into the standard of care for treating heart failure.
Kevin Hykes: Importantly, we believe these data resonates strongly with our customers helping them appreciate the real world benefits of various info for their patients.
Kevin Hykes: The other focus on the barriers to adoption, and we are strengthening our commercial execution. Since joining as Chief Revenue Officer in late June, Robert John has been making significant strides, building a world-class sales team, and I continue to be impressed with the quality of the talent he is attracting to our organization.
Kevin Hykes: Under his leadership, we've optimized our go-to-market strategy with the goal of driving deeper penetration within existing accounts and expanding the adoption of Barrow Stim.
Kevin Hykes: We are increasing our focus on targeting accounts where Barrostin is integrated into the treatment continuum and supported by multiple heart failure physician champions and surgical partners. These accounts are demonstrating sustained therapy adoption and are serving as models for expansion efforts.
Kevin Hykes: I want to emphasize our continued optimism about Barrow's tin therapy, our market opportunity and the strength of our organization.
Kevin Hykes: The changes we've implemented are improving both near-term execution and driving long-term adoption in the HF ref market by reducing the barriers to adoption.
Kevin Hykes: As we look ahead, we remain committed to our goal of making various instintherapy the standard of care for heart failure patients.
Kevin Hykes: With our innovative technology expanding market presence and strengthened leadership team, we're well positioned to make a meaningful difference in even more patient's lives.
Kevin Hykes: Now I'd like to turn the call over to Jared for a financial review.
Jared Oasheim: Thanks, Kevin. In the third quarter, total revenue generated was $13.4 million. Representing an increase of $2.9 million or $27 per cent compared to the same period last year.
Jared Oasheim: Revenue generated in the US was $12.3 million in the current quarter reflecting growth of 28% over the same period last year.
Jared Oasheim: Hardfell your revenue in the US total $12.2 million in the current quarter on a total of $391 revenue units compared to $9.4 million in the third quarter of last year on $303 revenue units.
Jared Oasheim: The increases were primarily driven by continued growth in the U.S. Heart Failure Business, as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barrowstim.
Jared Oasheim: At the end of the current quarter we had a total of 208 active implying centers compared to 159 on September 30, 2023 and 189 on June 30, 2024.
Jared Oasheim: Active Employing Centers are customers that have completed at least one commercial heart failure implant in the last 12 months. We also had 45 sales territories in the U.S. at the end of the current quarter compared to 35 on September 30th, 2023 and 42 on June 30th, 2024.
Jared Oasheim: Revenue generated in Europe was $1.1 million in the current quarter, representing an increase of 15% compared to the same period last year.
Jared Oasheim: Total revenue units in Europe increased to 56 for the 3 months ended September 30, 2024, up from 47 in the prior year period. The number of sales territories in Europe remain consistent at 6 for the 3 months ended September 30, 2024.
Jared Oasheim: Gross profit for the three months and its September 30th, 2024 was $11.1 million and increase of $2.3 million compared to the three months and its September 30th, 2023.
Jared Oasheim: Crossmargeum was 83% and 84% for the three months ended September 30, 2024 and September 30, 20, 23 respectively.
Jared Oasheim: Research and Development expenses for the current quarter were $2.5 million reflecting a decrease of 7% compared to the same period last year. This change was driven by $0.2 million decreasing consulting expenses.
Jared Oasheim: SG&A expenses increased $6 million or 38% to $21.6 million for the three months and it's September 30, 2024. Compared to the three months and it's September 30, 2023.
Jared Oasheim: This change was primarily driven by a $3.7 million increase in compensation expenses, mainly as a result of increased headcount, a $1.1 million increase in non-cash stock-based compensation expense.
Jared Oasheim: A $0.5 million increase in travel expenses and a $0.4 million increase in advertising expenses.
Jared Oasheim: Interest expense increased $0.5 million for the 3 months and its September 30th, 2024 compared to the 3 months and its September 30th, 2023. This increase was driven by the increased borrowings under the term loan agreement.
Jared Oasheim: Other income net decreased $0.1 million for the 3 months and its September 30th, 2024 compared to the 3 months and its September 30th, 2023. This decrease was primarily driven by less interesting income on our interest bearing accounts.
Jared Oasheim: Net loss was $13.1 million or $57 per share for the three months ended September 30, 2024, compared to a net loss of $9 million or $43 per share for the three months ended September 30, 2023.
Jared Oasheim: Net loss per share was based on 22.8 million weighted average shares outstanding for the three months ended, September 30, 2024 and 20.8 million weighted average shares outstanding for the three months ended, September 30, 2023
Jared Oasheim: As of September 30, 2024 cash and cash equivalents were $100.2 million. Net cash used in operating and investing activities was $10.4 million for the quarter-ended September 30, 2024.
Jared Oasheim: This is compared to NetCash used in operating and investing activities of $10.2 million for the 3-month end of June 30, 2024.
Jared Oasheim: We strengthened our balance sheet during the third quarter through two financing. We drew down the remaining $20 million under the third and final trudge of our innovative loan agreement, bringing our total outstanding principal balance to $50 million.
Jared Oasheim: Additionally, we raised $20.3 million in gross proceeds through our At The Market Equity offering by issuing approximately 2.4 million shares of Common Stock.
Jared Oasheim: Now turning to guidance. For the full year of 2024, we now expect total revenue between $50.5 million and $51.5 million.
Jared Oasheim: We continue to expect full-year gross margin between 83% and 85% and now expect operating expenses of approximately $100 million.
Jared Oasheim: For the fourth quarter of 2024 we expect to report total revenue between 14.5 and 15.5 million dollars. I would now like to turn the call back over to Kevin.
Kevin: Thank you, Jared.
Kevin Hykes: Before we open the line for questions, I'd like to reflect on the progress we have made so far in 2024.
Kevin: The positive momentum we've built throughout the year has continued to accelerate. Our interactions with physicians and patients continue to reinforce the transformative potential of various timp therapy and improving the lives of heart failure patients.
Kevin: and particularly proud of how our expanded leadership team has come together to drive our strategic initiatives forward.
Kevin: Their collaborative efforts are yielding tangible results in our three focus areas.
Kevin: Improving Patient Access, Increasing Education and Awareness and Strengthening Our Clinical Evidence Phase.
Kevin: As we move into the final quarter of 2024, we remain focused on executing our growth strategy and further establishing [inaudible]
Kevin: We're encouraged by the progress we've made and excited about the opportunities that lie ahead. Now, I'd like to open the line for questions. A brighter?
Speaker Change: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session.
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Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: The first question is from Margaret Kaiser Andrew with William Blair. Please go ahead.
Speaker Change: Hey everyone, this is Macaulay on for Margaret tonight. Thanks for taking our question. Just to start with with the guidance, so
Speaker Change: Narrowed the guidance by 1 million at the midpoint, despite the relatively in-line quarters.
Speaker Change: just wondering if there's something you saw at the end of the quarter or maybe through the first month of the fourth quarter now that led to that decrease. And as we look forward, what does that mean for utilization and new center ads, especially after you got back to a more normalized cadence with 19 new centers this quarter?
Speaker Change: Hi, Mac. This is Jared. Happy to answer that question. Thanks for joining us. So when we looked at the guidance for the full year, I mean, it really just came down to us looking specifically at Q4 and what we thought we'd be able to go out and deliver.
Speaker Change: The 14.5 to 15.5 guide for Q4 was really based on the strength that we saw already in the month of October.
Speaker Change: and the momentum that we had seen in the third quarter. So we feel like we're continuing to do all of the right things with seeing new account ads, but more importantly, focusing on those accounts.
Speaker Change: And so we narrowed the full year guidance to 50.5 to 51.5. I think it brought the midpoint of the range down by just half a million dollars. But we continue to be extremely bullish on the business based on the results we've seen in the month of October and throughout the third quarter.
Speaker Change: That's helpful. And then maybe just as a follow up, you've obviously gotten several reimbursement wins and hopefully have one more upcoming with the outpatient rule in a few days.
Speaker Change: Kevin, this was obviously a big focus when you brought on some of those new executive hires. So, could you just talk about how the team has been able to be successful there? And to the extent you can, what else additional is being done in the background to drive that access beyond the upcoming outpatient role?
Speaker Change: Thanks for taking the questions.
Kevin Hykes: some of them even in the last three months, but already having a significant impact. In this case, Bonnie Hanke, our new very seasoned leader of reimbursement, led the charge, both on the inpatient prospective payment system development, which increased the payment, as you know, from $17,000 to $23,000, all the way to $43,000. That's a fundamental change, obviously, in payment on the inpatient side.
Kevin Hykes: She led our efforts around Category 1, which is a long process, but a very, very important milestone.
Kevin Hykes: and a significant threshold for this company on a commercial basis. So to have her depth of experience and relationships.
Kevin Hykes: applied to those efforts was a significant contribution, even in the first four months of her time here with the company. You know, more broadly, obviously, we're looking forward to the OPPS news this week.
Kevin Hykes: She and many others on my team led an engagement process over the last four months with key stakeholders, both physician and administrator, but also CMS, obviously, and we are encouraged and optimistic about favorable results on that front as well. So this
Kevin Hykes: These two wins that we've already notched, and hopefully a third here in the next few days, represent a fundamental and significant change.
Kevin Hykes: to our commercial posture going forward and will have significant long-term impact. So very long answer to your question, but we're thrilled with what we're seeing, in this case with our reimbursement and patient access efforts.
Speaker Change: That's great. Thanks again.
Speaker Change: Thank you. The next question is from Robbie Marcus with J.P. Morgan. Please go ahead.
Speaker Change: Hi, this is actually Rohan on for Robbie. Thanks so much for taking our question.
Speaker Change: I had two, and I guess the first one is more kind of longer term and just focused specifically around the CAT I code.
Speaker Change: I'm just trying to better understand kind of what potential financial impacts we could see from this longer term. Is it primarily going to come from higher utilization due to better awareness and obviously potentially moving towards standard of care or could this potentially lead to higher reimbursement? I just want to
Speaker Change: I want to see...
Speaker Change: being granted Category 1 status.
Speaker Change: means that a company or a therapy has developed sufficient evidence
Speaker Change: and Depth of Adoption and Widespread Use.
Speaker Change: and while this relates at its core to the code, the procedure code and physician payment.
Speaker Change: It actually affects virtually every facet of patient access.
Speaker Change: And importantly, as Jared mentioned this
Speaker Change: This reduces the automatic denials that occur with the prior authorization payment process for more than 50% of our patients.
Speaker Change: It also weighs heavily into the MAPS consideration, that's the Traditional Medicare Administrative Contractors, as they consider coverage for this procedure. It effectively is a signal that the procedure is here to stay and credible.
Speaker Change: and decreasing friction in the process for virtually every patient that is considered for this therapy. So it's a big step forward.
Speaker Change: Great, thanks. And then just another quick one on OPEX priorities.
Speaker Change: I think OPEX came in a little higher than expectations in third quarter, and obviously you raised the guidance to $100 million for the year, roughly. How should we think about spending priorities into 2025, and obviously I don't...
Speaker Change: I don't expect you to comment on kind of an actual number, but just relatively, like between R&D and SG&A, what are your expectations? And obviously the consensus is kind of flat year over year, so how should we think about...
Speaker Change: growth directionally, I guess, next year.
Speaker Change: Rowan, I appreciate the question. So just to address the Q3 OPEX number, you know, we've looked at the team and we've continued to really invest in the business by building the bench of our sales reps.
Speaker Change: but also continuing to make investments in our marketing activities like our direct consumer campaigns and then our physician educational events that are being run by our new Chief Medical Officer, Dr. Philip Adamson. Both resulted in slightly higher than expected spend in the third quarter, but we think are going to help to pay off longer term and seeing higher utilization at the account levels in future quarters.
Speaker Change: We did have some one-time spend in the third quarter that we do not expect to be repeated in the fourth quarter and hence the guide for an expectation of lower OPEX in the fourth quarter.
Speaker Change: As we start to think longer term out to 2025, we're not putting out guidance at this point in time, but as we look at what we've expensed in 2024, we know there was some one-time spend, some one-time big dollar items, including, you know, the former CEO retirement and the option modification expense that was recognized in connection with that.
Speaker Change: and then also the one-time cost associated with bringing in a lot of the new team leaders at this point in time. So we know those are one-time expenses that will not be repeated, that will allow us to help manage how much OPEX will grow as we go into 2025 and not expecting it to be too significant at this point.
Speaker Change: Great. That's super helpful.
Speaker Change: Thank you.
Speaker Change: The next question is from Matt O'Brien with Piper Sandler, please go ahead.
Speaker Change: Hi, thank you. This is Samantha on format.
Speaker Change: Sure, I'll take that one. Thank you, Samantha. You know, I think it's a little early.
Speaker Change: We're thrilled at the increase in inpatient payment, almost double.
Speaker Change: We know that this is a setting that has been historically quite underpaid.
Speaker Change: which may have reduced the number of procedures being performed in that setting. Our hope within the next few days is that with a positive OPPS readout, we will effectively equalize hospital payment in both the inpatient and outpatient settings.
Speaker Change: which allows physicians and administrators to focus solely on the clinical issues and treating the patient in the right service setting based solely on that factor. We think there may be some rebalancing over time back towards, you know.
Speaker Change: a higher rate of inpatient procedures, but it's really hard to predict where that will settle out. In either case, we will have no influence or should have no influence on the site of service and will stand by to support physicians and their patients regardless of what they choose.
Speaker Change: Great, thank you. And then just one more, could you talk a little bit about the early feedback you've gotten so far from physicians on.
Speaker Change: going deeper with their accounts? You know, are there are there multiple champions in all the centers so far? And yeah, just what are you hearing from, from physicians on this new strategy?
Speaker Change: Yeah, so thank you for that as well. You know, I'm not sure that physicians themselves, certainly in the highest performing
Speaker Change: deeply adopted centers. There are indeed multiple champions supporting the therapy, multiple referrers in the community, often multiple surgeons. So there are networks of physicians that allow the therapy to become part of how they treat heart failure on a day in and day out basis.
Speaker Change: in the accounts where that is not yet the case.
Speaker Change: I'm not sure the physicians themselves know that we're working in their community and in their systems to bring more and more physician support around the therapy. They certainly appreciate the referrals that we can help initiate and generate from their community partners.
Speaker Change: But overall, I think they see that as the natural adoption of the therapy in their center, and they appreciate the support we're providing, whether it's patient access or additional evidence or therapy awareness amongst nurses and referrers and administrators.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Bill Plowanic with Canaccord Genuity. Please go ahead.
Speaker Change: Unknown Speaker 00-00-00.
Speaker Change: Sure, thanks, John. It's Kevin. I'll take that as well. So the short answer is yes. There's certainly been a much more deliberate and intentional approach to the types of accounts.
Speaker Change: that we're engaging. And that comes from the lessons we've learned over these last three years of commercialization about where this therapy plays the biggest role and where it can be most deeply adopted.
Speaker Change: and as we engage new accounts with our new sales teams, really trying to identify the accounts that have the best chance of deep adoption going forward.
Speaker Change: So there's a number of different ways we do that,
Speaker Change: Targeting principles that the sales team is now following and a set of best practices that they call a blueprint
Speaker Change: that they use to engage these accounts and make sure that we give them every possible chance of long-term success in deep adoption.
Mike Vallie: All right. Thanks, Kevin. And then, Jared, just one for you. With the debt drawdown and the ATM, just the comfort of getting cash flow break-even with the new cash on hand and just timelines around that. Thanks.
Jared Oasheim: Yeah, appreciate the question on that topic, John. So, like I mentioned earlier, we really are bullish about this business and the financings that we talked about for the third quarter, it was really about creating more flexibility for us and that's flexibility to make additional investments.
Jared Oasheim: that could help us grow at a faster rate as we move into 2025 and beyond. Again, we just want that optionality and we felt like this was a good opportunity to go do that. So the debt draw at this point shouldn't be a surprise. It's something that we've talked about as wanting to draw down as soon as the window opened for that third tranche.
Jared Oasheim: So we pulled that down in the month of September and the activity on the ATM was really just us being opportunistic to bolster the balance sheet to create more flexibility.
Jared Oasheim: At the end of the day, we still believe we have the cash needed to reach breakeven. But we're really looking at this business as all opportunities available to help more and more patients and grow at a faster rate. And so that's something we're going to continue to spend a lot of time on.
Jared Oasheim: Thanks so much.
Jared Oasheim: Thank you.
Speaker Change: The next question is from Frank Tuckian with Lake Street Capital Market. Please go ahead.
Frank Tuckian: Thanks for taking the questions. I just wanted to maybe try my hand at 2025. I'm sure there's going to be some reluctance to comment too much, but clearly a few moving pieces going into the year. We've got a maturing sales force, maturing new hires that Kevin's brought on board.
Frank Tuckian: You've got reimbursement noise out there. How should we be thinking about where expectations are at about 30% and whether or not that feels like it's factoring in some of these pluses and minuses as we look at 2025?
Speaker Change: Impact in ASPs on January 1st, positive or negative.
Speaker Change: In the likely outcome, from our perspective, where we land in a level 6 NeuroSTEM code or stay in the NewTek APC 1580, we see reimbursement being fairly consistent as you go into 2025, and in that case, ASPs look pretty similar.
Speaker Change: In the other scenario, maybe the 10% likelihood of landing in a Level 5 Neurostim code.
Speaker Change: Even in that scenario, we don't view it as an immediate need for a price change on January 1, especially as we've seen these other wins related to inpatients and the Category 1 code.
Speaker Change: So we would look at it at the regional level, at the hospital level, to determine if longer-term prices need to change. So, taking ASPs off the table as we look into 2025,
Speaker Change: Our expectations are that we've seen other companies doing around $50 million a year in revenue start to see some seasonality as they move from Q4 to Q1.
Speaker Change: But longer term, we're making the investments in the business, in sales and marketing, in our leadership team, because we think this is a high growth company. And that's something that, you know, we really define as.
Speaker Change: in the mid to high 20% range. And we think we have the ability to achieve that type of growth for years to come.
Speaker Change: Okay, that's helpful. And then maybe just a clarifier for my second one. I think in a few questions back you talked about some of the one-time spend items that occurred throughout 2024. Can you quantify that for us just to be able to make sure we have a really good feel so that I agree with our models for Office Access 2025?
Speaker Change: Yeah, I think I caught the
Speaker Change: idea of that question, Frank. So the biggest one that comes to mind is the option modification number. I think that ended up being between the eight and nine million dollars and was recognized all in the first quarter of 2023. That's a one-time event that we do not expect to be repeated as we go into 2025.
Speaker Change: The other one-time spend is associated with bringing on new leaders and, you know, having new higher grants issued to some of them, and then also placement fees associated with them that I don't have quantified in front of me at this point, but we don't expect those types of expenses to be repeated as we go into 25 either.
Speaker Change: Great, thank you.
Speaker Change: Thank you. The next question is from the line of Chase Knickerbocker with Craig Hallam Capital Group. Please go ahead.
Chase Knickerbocker: Good afternoon. Thanks for taking the questions. Maybe just first for me, Kevin, just kind of clarification on the pipeline. These new pipeline ads in the quarter, do they, you know, obviously a much stronger number than we had kind of even thought last quarter, I think. Do they reflect that new targeting priority where you kind of expect these to be the, you know, the account profile that you're really targeting BarrelSTEM with?
Chase Knickerbocker: and kind of as you ramp up these new accounts, can you talk about how your new sales leadership has kind of changed the blueprint for building up these programs to kind of make it look like your high-end adopters rather than low adopters? Thanks.
Kevin Hykes: Sure. Thanks, Chase.
Kevin Hykes: Yeah, so I would say the 19 new accounts this quarter.
Speaker Change: does not yet fully reflect the new targeting approach. It was a little higher than we anticipated. In some cases, it's hard to predict when a new center will do their first implant. And in a couple cases here, these were centers we thought that would start further into the quarter, but actually surprised us in Q3 with an early treatment. So, now overall, we are kind of working through that. It's a bit of a organic process that'll play out over the next few quarters, I presume.
Speaker Change: What I can say is most of the growth that we saw was from accounts that were added earlier in the year, which is typically the case.
Speaker Change: Often accounts will treat a handful of patients.
Speaker Change: Wait and see what happens and then engage more fully. So we really see a higher contribution from the earlier 2024 accounts. You know, in that process...
Speaker Change: You know, what I can tell you is the degree of intentionality and best practice sharing that Robert John has brought to bear is a departure from some of the prior efforts we've had. We now have the luxury of learning from those early efforts and understanding what works and what doesn't. And the goal here is to really ensure that physicians and their teams and the referrers that are sending patients to these centers.
Speaker Change: have the best possible early outcomes.
Speaker Change: to feed those new centers with patients, working with their administrators and even with their nurse practitioners to ensure that everyone in that network that is exposed to our therapy understands where it fits and how patients can benefit.
Speaker Change: Got it. And maybe just on the Salesforce, a lot of new ads, obviously, earlier this year. How has retention been there? And then second, are you kind of happy with their productivity as far as how quickly they've been able to ramp? Were they productive as you would have expected them to be in Q3? And then what are your kind of expectations from a sales rep productivity standpoint in Q4? Thanks.
Speaker Change: Sure, so I would say we are, we're...
Speaker Change: We're pleased. I'm particularly pleased with the talent.
Speaker Change: that we had on the team to begin with and the new team members that Robert John is bringing into our organization. Not surprisingly, we're refining some of the profile of who we look for for these roles. And one of the key components of building deep adoption and sustainable programs is hiring sales,
Speaker Change: and we are getting better and better at onboarding these new sales reps, especially those that understand the program growth component.
Speaker Change: onboarding them more effectively and more rapidly than we've seen in the past. So I think we'll continue to track their contributions going forward. I wouldn't expect a dramatic change in Q4 necessarily in their productivity, but we're pleased at what we're seeing and that's what's leading to our sense of confidence here as we go into the quarter.
Speaker Change: Got it, and I'll leave it here, but you know it's clear you guys are you know very confident
Speaker Change: when it comes to a potential favorable ruling in a final OPPS rule.
Speaker Change: You know, just think kind of how we've kind of spoken on this call here. Can you kind of speak to that confidence in a little bit more detail as far as kind of any incremental color on kind of the feedback you've heard either from stakeholders in the field, you know, your customers or, you know, from, you know, the relevant parties at CMS to kind of inform that confidence. Thank you.
Speaker Change: We used that data when we shared information with CMS during our one-on-one meeting in early August.
Speaker Change: We also use that data when we presented to the panel on August 27 where they unanimously supported the move to a level six code and as a fallback.
Speaker Change: If they weren't ready to create a level six code that they should create or keep us in the new tech APC.
Speaker Change: And then beyond those two activities on our part, there was also a lot of support that we received in the comment period from physicians, from administrators, even from patients.
Speaker Change: I think there were more than 100 comments this year.
Speaker Change: Supporting the move for barostim therapy to a level 6 neurostim code.
Speaker Change: But as a fallback, moving or staying in the new tech APC to be able to continue to collect additional data and then again look at this in 2025.
Speaker Change: I think it's all of those activities and the data that really support the confidence that we have that we believe we will land either in a Level 6 Neuro-STEM code or in APC 1580 for 2025.
Speaker Change: helpful color, Jared. Thanks again, guys.
Speaker Change: Yep.
Speaker Change: Thank you.
Speaker Change: The final question comes from the line of Ross Osmond with Cantor Fitzgerald. Please go ahead.
Speaker Change: Sure, I'll take that one. Thank you, Ross.
Speaker Change: In the inpatient setting, in some cases, these are patients, and again, our population are patients who are being hospitalized.
Speaker Change: periodically for heart failure decompensation.
Speaker Change: was diuresed, or their fluids were offloaded. So before that patient is discharged, they're sufficiently stable to then be implanted with our therapy.
Speaker Change: So it's a bit more of a sort of real-time process than a typical outpatient procedure, which involves a little more consideration and scheduling.
Speaker Change: Got it. That's helpful. Thank you. And then a bit of a longer-term question, and not sure if this is quantifiable, but how should we think about your runway and diving deeper within existing accounts before needing to really shift your focus to new account growth?
Speaker Change: Sure, well, I think, you know, our sense right now, we've discussed this in the past on a on an extremely conservative basis.
Speaker Change: On average, we're less than 2% penetrated.
Speaker Change: into the annual incident population of these average centers. And I would say even at the largest of those centers in the U.S., we're still in the low single-digit penetration level. So, we have significant opportunity in the accounts we're already calling on to significantly deepen our adoption.
Speaker Change: So I think, you know, we will certainly continue to add new accounts. We'll do so, I think, with more intention than perhaps we've been able to in the past and more insight.
Speaker Change: But we have a lot of upside in the very places we're calling on today. So as we look at our current account mix
Speaker Change: It's really about understanding where we want to spend our time and which of those accounts can get much, much deeper and have the patient populations and the community support and the payer mix to allow us to penetrate more rapidly and more deeply. And then going out and finding more accounts that look like those.
Speaker Change: So hopefully that answers your question.
Speaker Change: Yes, thank you. Appreciate you taking our questions.
Speaker Change: Thank you. That was the last question. I would now like to hand the conference over to Kevin Hykes for closing remarks.
Kevin Hykes: Thank you, Operator. Thanks again to everyone for joining us for our third quarter earnings call. We appreciate your ongoing support, and we look forward to updating you on our progress at our next update. Thank you.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.