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spk08: Good day and thank you for standing by. Welcome to the ACUTUS Medical Incorporated Second Quarter 2021 Earnings Conference Call. Access time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Caroline Corner, Investor Relations. Please go ahead.
spk01: Thank you, Operator. Welcome to ACUDA's second quarter 2021 earnings call. Joining me on today's call are Vince Burgess, President and Chief Executive Officer, and David Roman, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. factors that may cause results to differ from these forward-looking statements are discussed under the forward-looking statements section in the press release attached as an exhibit to ACUTUS's Form 8-K filed with the SEC today and are also discussed in more detail under the risk factors section in ACUTUS's most recent filings with the SEC, including the risk factors described in ACUTUS's Form 10-K. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Acutis undertakes no obligation to update these statements except as required by applicable law. Acutis' press release with second quarter 2021 results is also available on the Acutis website, www.acutismedical.com, under the Investors section, and includes additional details about Acutis' financial results. The Acutis website also has Acutis' SEC filings, which you are encouraged to review. A recording of today's call will be available on the Acutis website by 5 p.m. Pacific time. Now I'd like to turn the call over to Vince for his comments and second quarter 2021 business highlights.
spk05: Thank you, Caroline, and good afternoon to everyone joining us today. During today's call, I will provide an update on our key strategic priorities, as well as some recent clinical, commercial, and market developments. I will also comment on our second quarter results and provide some thoughts on external market dynamics. David will follow up, with details on our financial and operational results, as well as our outlook for the rest of the year. Our team remains steadfast in its commitment to reshape the field of electrophysiology. There is nothing more important to us than improving clinical outcomes and changing the treatment paradigm for the patients and healthcare professionals we serve. We recently completed an $83 million capital raise net of fees and expenses And with improved momentum in our business, we are charging forward on all fronts and realizing our strategy to become the partner of choice to electrophysiologists through our broad and differentiated portfolio of access, diagnostic, imaging, and therapy products. We are executing on our commitments, and we are building this company for long-term success. As we look to further bolster our commercial strategy, we are pleased to welcome Niamh Pellegrini to our board of directors. Niamh currently serves as chief commercial officer at Nevro and has over 20 years of experience in the medical device industry. Niamh has held commercial leadership roles at several companies where she has a track record of driving strong growth and consistent performance. We are very excited to benefit from Niamh's guidance as she joins the company's board this month. I also want to thank Shahzad Malik for his extended service as we announced today that he will step down from our board of directors. Shahzad and his team at Advent Life Sciences were among the first to invest in Acutis during our Series A round in 2011. Shahzad has been a trusted advisor and friend over the past decade, and we greatly appreciate his contributions and support. Over the past several months, we have seen ongoing improvements across our three strategic pillars, technology and innovation leadership, commercial execution, and operational excellence. These improvements are reflected in our second quarter financial results, as well as in recent product approvals and clearances R&D program development, and physician engagement. All of these initiatives were clearly on display at the 2021 Heart Rhythm Society meeting that was just wrapped up in Boston in late July. As a reminder, this was the first in-person HRS since 2019, and our first opportunity to be in front of a large group of physicians since our full market launched in February of 2020. In our booth, we showcased our complete and highly differentiated product portfolio, as well as unveiled details of major development programs. We featured our broad offering from access with our AccuCross transeptal line of products to diagnostics and mapping with our AccuMap system to therapy with our AccuBlade force-sensing ablation catheter and system, as well as our pulsed field ablation program. We were thrilled and humbled by the strong attendance at our booth and our relevant scientific sessions, and a large number of walk-in customers eager to learn more about who we are and what we offer. Many of our conversations during the meeting carried a common theme of acknowledgement from the clinical community that ACUTUS is positioned not only as a participant in EP, but poised to be a leader in the field. Our sales team left the meeting with over 150 high potential leads, and we are already capitalizing on these incremental commercial opportunities. Our rhythm theater session at HRS included nine of the industry's most well-known and accomplished EPs. Here, we highlighted the core to boundary individual ablation strategy, that is uniquely enabled by our AccuMap system. In addition, we introduced our development plans for our Pulse Field Ablation, or PFA program, which we believe provides a differentiated paradigm in ablation therapy. We had not previously discussed our PFA program in detail with the broader clinical community, and we were very encouraged by the response from HRS attendees. A full replay of this session is available on our website and YouTube channel. Just to drill a bit deeper here, unlike the vast majority of PFA programs under development, we are using our AccuBlade Force Sensing Ablation Catheter as the therapeutic workhorse delivery device for our PFA program. Physicians will have the opportunity to adopt PFA with a familiar platform as well as have the option to use our catheter for either RF or PFA procedures. In addition, our catheter will enable focal point ablation with PFA, facilitating more targeted delivery of therapy and flexibility to reach any anatomy during treatment. Having a point ablation system will allow us to treat patients suffering from all cardiac arrhythmias including atrial fibrillation and disease in the ventricles and right atrium. Combined with our AccuMap mapping system, our PFA program will have the potential to enable patient-specific ablation therapy, especially among more complex patients. This is a deliberate choice to enable a fast therapy platform on a fast imaging platform, to guide therapy in line with our mission to treat AF with a personalized approach to improve outcomes. In recent months, animal studies have shown increasingly promising results, and we continue to expect first in human for our PFA program later this year, and we'll provide updates accordingly. In addition to PFA, we continue to make progress in our efforts to bring a therapeutic catheter to the U.S., Enrollment in our US IDE trial for right atrial flutter is progressing well, and we continue to expect to complete enrollment toward the end of this year with approval for the catheter and system in late 2022 or early 2023. In May, the FDA approved our IDE application to evaluate the accublate force-sensing ablation catheter and system in both paroxysmal and persistent atrial fibrillation patients. We are in the process of recruiting sites and expect to treat the first patient in this trial during the third quarter. As we continue to advance our clinical development pipeline, we have achieved several important regulatory clearances and approvals that are critical elements of our product portfolio. These include our AccuBlade force sensing ablation catheter and system in Europe, our complete line of AccuCross transeptal devices, and our next generation delivery sheets and access devices. Our transeptal and access product lines are allowing us to increase our revenue for the procedure, enter accounts where we do not currently have an AccuMap system, and generate revenue in both EP and structural heart procedures. Earlier this week, we announced the receipt of CEmark approval and 510 clearance for our AccuMap8 software package. AccuMap8 is a significant update to our mapping software that will continue to set the standard on fast mapping and diagnosis of complex arrhythmias. AccuMap8 will greatly improve physicians' ability to visualize and identify regions of interest for the treatment of complex rhythms, helping our customers further improve patient outcomes through an even more streamlined procedure. We expect this software upgrade to be a key factor supporting increased mapping procedural utilization here in the second half of the year. Over the past year and a half, we have significantly expanded our product portfolios. from about 15 SKUs in January of 2020 to just over 100 SKUs as of the end of July. This equips our commercial teams with the critical foundation of ACUTUS products needed to build scale in EP. We will continue to expand our product offering in the coming months and years with both incremental launches as well as new platforms. Now turning to our results during the second quarter. We generated revenue of $4.7 million compared to $1.1 million in Q2 of 2020 and compared to $3.6 million in Q1 of 2021. Year-over-year growth was driven by higher procedure volumes globally and increased capital equipment revenue, while procedure volumes and disposable revenues accounted for sequential growth in the quarter. We increased the worldwide installed base of second-generation AccuMap consoles to 68 at the end of Q2, up from 57 at the end of Q1, bringing the total installed base of AccuMap consoles to 70 as of June 30, 2021, versus 62 at the end of last quarter. We exited the quarter with a strong funnel and expect to see continued growth in our installed base through the rest of the year. As discussed previously, we continue to focus not only on growing our installed base, but also targeting the right accounts for sustainable utilization. During the second quarter, we saw these efforts take hold with several new customers now performing procedure volumes within the top quartile of utilization. At these same accounts, we saw active reorder rates during both exiting Q2 as well as here early in Q3. Moving to procedures, we registered volume growth on both a year-over-year and sequential basis in our Europe and U.S. direct business. This growth came from both new account openings and associated uptake as well as underlying growth in existing centers. In addition, our expanded product line is driving disposable revenues outside of AccuMap cases, and we expect this to be a key driver on a go-forward basis. In the U.S., we saw general stability in market dynamics during the second quarter with limited restrictions on elective procedure volumes. As you are aware, however, COVID infection rates have been rising across the U.S. This is an extremely fluid situation, And we are actively monitoring hospital and government actions in response to higher COVID cases, COVID-related hospital admissions, and staffing shortages. As any regional COVID restrictions in the U.S. emerge, we are prepared to actively reallocate our field team's resources elsewhere. In the U.K. and Europe, COVID continued to affect our business throughout the second quarter. One of our largest centers in Europe, for example, was shut for nearly two weeks due to a shortage of anesthesiologists and nurses. We continue to see some intermittent COVID-related headwinds in Europe and the UK, but not materially different from what we have seen in the last few months. Through these challenges, our team continued to execute extremely well and drove increased procedural volumes, no account openings, and overall revenue growth. Lastly, our partnership with Biotronic continues to deliver strong results. During the quarter, we were able to fill almost all the back orders for our ablation catheter to support a full launch in Biotronic territories, and we expect to see broader adoption of our products through Biotronic in the coming quarters. Procedure volumes were negatively impacted by hospital closures in Germany, and our ramp in new markets, like Malaysia, has been delayed, both due to COVID. In the face of these external factors, the Biotronic commercial team remains heavily engaged on training and implementation, and we expect this collaboration to be a critical driver over the short, medium, and long term. Overall, I am extremely proud of the progress our teams are making to execute our strategy and bring innovative solutions to this large and growing market. Through the rest of 2021, we expect to have several clinical data regulatory, and product milestones that will further illustrate our long-term value proposition. We look forward to providing those updates throughout the year. With that, I'll now turn it over to David for our financial results. David?
spk04: Thank you, Vince, and good afternoon, everyone. During my remarks today, I will provide details on second quarter 2021 operating results, as well as our outlook for the rest of the year. As Vince mentioned, our revenues for the second quarter of 2021 were $4.7 million, up from $1.1 million in Q2 of 2020. The Q2 year-over-year revenue increase was driven by procedural adoption for our broad range of EP products and transeptal access devices, direct capital sales of our Acumap console, and our distribution agreement with Biotronic. Sales in our direct businesses of $3.5 million increased from $900,000 in the second quarter of 2020 to On a sequential basis, sales in our direct business advanced 45%, led by higher procedure volumes and associated disposables, as well as increased contribution from new product launches. Revenue through distribution agreements of approximately $1.2 million compared with $223,000 in the prior year's second quarter, driven by both procedure volume growth, capital sales, and new market access through our partner, Biotronic. Non-GAAP gross margin was negative 54 percent for the second quarter of 2021 compared with negative 130 percent in the second quarter of 2020 and negative 89 percent last quarter. The sequential and year-over-year improvement in our non-GAAP gross margin largely relates to higher production volumes and increased disposables mix. As we have discussed previously, we have made and continue to make significant investments in our manufacturing footprint to support long-term growth. With ongoing growth in our business, we expect to see our gross margin continue to improve as we scale revenue. Non-GAAP R&D expenses were approximately $8.5 million in the second quarter, compared with $8.1 million for the same period of 2020. The increase in R&D expenses was primarily related to investments in the AccuBlade force sensing ablation catheter, our pulse field ablation program, software development, and upgrades to our AccuMap mapping catheter. Non-GAAP SG&A expenses were $12.5 million in the second quarter of 2021 compared with $8 million in the year-ago quarter. The increase was primarily due to the expansion of our commercial team in conjunction with our full global launch and an increase in G&A for public company-related costs. Excluding specified items, our non-GAAP net loss for the second quarter of 2021 was $25 million for 89 cents per share compared to a non-GAAP net loss of $18.8 million for the second quarter of 2020, or $1.08 per share after giving effect to the pro forma conversion of our convertible preferred stock. Our total cash balance at the end of the second quarter of 2021 was $81.2 million. In early July, we completed a secondary equity offering including the green shoe over allotment, which resulted in gross proceeds of $88.6 million and the issuance of 6.325 million shares of common stock. Net of fees and expenses, the offering yielded proceeds of approximately $83 million, which we will utilize to fund commercial expansion, accelerate key R&D programs, and invest in infrastructure to support future growth. Looking to the remainder of 2021, I would like to provide some further detail regarding our outlook for the rest of the year. For the full year, we are maintaining our guidance range and expect revenue to be in a range of $22 to $30 million. We recognize the wide range in this outlook for the second half of the year. This largely relates to the variables in the external environment as well as the extent to which our business is influenced by capital orders and conversions. The lower end of our guidance range requires a similar improvement in the second half of the year as to what we have seen on the year-to-date basis. The Q4 to Q1 and Q1 to Q2 improvements in our business primarily came from new account openings, increased same-store utilization, higher new product contributions, and moderating but still present COVID headwinds. At the mid to high end of our guidance range, we would need to see an acceleration in these key drivers normalization of end market conditions related to COVID, and higher capital equipment conversions. As it relates to the phasing of sales through the back half of the year, we would expect a disproportionate weighting to the fourth quarter. This is largely tied to the potential for short-term COVID disruptions, some enhanced seasonality due to extended vacations and time away from the hospital in several key centers and geographies, and the resulting impact on timing of reorder rates and new system installations. Based on the elective procedure volume patterns observed in 2020, we think it is very reasonable to expect any procedure volume disruption to prove transient. We will provide further updates during investor conferences and our third quarter earnings call in November. I will now turn the call back to Vince for closing remarks and to facilitate the Q&A.
spk05: Thank you, David. As I reflect on the cadence of our performance in the first half of the year, I'm pleased with the trajectory of our business. Our commercial execution globally is strengthening, and I am confident we have the right team in place. In addition, we continue to advance several key products through our pipeline and expect 2021 and 2022 to be very active years for product approvals, regulatory clearances, and clinical milestones. We are rigorously focused on our own execution to maximize performance and drive our business forward. We appreciate your continued interest and support, and we'll now open the call to your questions. Operator?
spk08: As a reminder, if you wish to ask a question, please press star followed by one on your touchtone telephone. If your question has been answered or you wish to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Robbie Marcus from JP Morgan. Your line is open.
spk06: Hey, guys. This is Saranon from Robbie's team. Thanks for taking the question and for the color on the guidance there. So I just kind of want to dig into that a little bit. So if I look at the midpoint, $26 million in sales for the full year, versus just over 8 million in the first half. What are you seeing right now in the quarter that kind of gives you the confidence that either utilization or new placements can kind of get you to the lower end or the midpoint of that guidance? What are you seeing so far that gives you that confidence?
spk04: Sure. So let me just frame that a little bit. So if I look at kind of the year-to-date drivers and the way I think about that is the improvement in our revenue from the fourth quarter to the first quarter and the first quarter to the second quarter, the drivers of that were, as I said, new account placements, new product adoption, and increased utilization. As I look at each of those, let me start with new account openings. We opened a number of accounts very late in the second quarter, what I would describe as really the last week of the second quarter. And those accounts where we opened late, we are seeing very strong uptake in utilization. One of those accounts is already in our top quartile of utilization, as we referenced on the call. I would also say that a couple of the other accounts we opened in the second quarter earlier on also saw significant ramp in utilization during the second quarter. On the new product front, many of those new products were really launched during the second quarter. And that second quarter launch cadence, we saw a very strong uptake in products like our non-stress, our transeptal crossing devices, as well as our Acublate ablation catheter. That trend on new products is continuing here into the third quarter, and we would expect those products to contribute incrementally on a sequential basis. At the same token, those new accounts that we opened at the end of the second quarter really had no contribution to second quarter revenue, and we should see the contribution of those sequentially start to increase in Q3 versus Q2 as well. And then the last piece of the puzzle here, and this is a very important variable both in Q2 and for the rest of the year, is how we execute against capital conversions. And just to remind you and everybody on the call, the increase in our installed base is not necessarily reflective of a capital sale. Remember, we place systems under evaluation and later aim to convert those to a capital sale. So we have a number of systems coming up for evaluation that evaluation has completed where we expect to convert those to capital. We already have seen conversions here in the third quarter.
spk06: Got it. That's really helpful. Thanks for all the detail.
spk05: I mean, I'd also comment that our – Our commercial team is, in the U.S. in particular, and Europe, is really coming together. You know, we added a new chief commercial officer, Dwayne Wilder, if you can make that noise go off, in, I think, March 1st of this year. And the team is really gelling as we sit here today. And if you look at our direct revenues in Q4 of last year, as set against our direct revenues in Q1 of this year and then Q1 as set against Q2, you know, the team is, you know, kind of figuring out the formula here for driving installs, driving utilization, driving engagement with our docs.
spk06: Got it. Thanks. And looking below that top line, I think spend actually came in a little lighter than we were expecting in the quarter. As you have this revenue ramp, and especially weighted to 4Q, where should I think about operating expenses coming in relative to what we saw in the quarter?
spk04: Yeah, so we have spent quite a lot of time the past several months really trying to fine-tune our operating expenses and prioritize our investments in R&D. I know your team specifically is focused a lot on R&D. You'll probably notice that R&D was down sequentially from Q1 to Q2 on a non-GAAP basis, not reflecting our lack of investment in R&D, but more reflecting our effort to very clearly prioritize our investments and to ensure that we are utilizing our precious resources in a way that is most productive. So if you look at our operating expense, it's been flat-ish on a non-GAAP basis from Q4 through Q2, despite the revenue ramp. Our cash burn did moderate significantly from Q1 to Q2 as well. I would not expect a $7 million a quarter improvement in our cash burn going forward. But on the operating expense side, I actually would not expect significant growth in OPEX in the back half of the year, contrasted against an improving gross margin, which we saw here. We will grow operating expenses on a go-forward basis, particularly to support the commercial expansion, but I would expect us to be in this sort of $23 million to $25 million a quarter range on just pure operating expenses. operating expenses and then that being, you know, that should start to get funded a little bit by a turn in the gross profit line because, as we've said previously, to be at a positive gross margin, we need to be at about a $3 million monthly run rate to get to gross margin break even, depending on some mixed factors, obviously. So we are very focused on managing our expenses in a disciplined way, not not foregoing opportunities to invest at this stage in our development, but ensuring that we're prioritizing those investments and effectively managing our cash.
spk06: Thanks for taking the questions.
spk08: Next question comes from the line of Bob Hopkins from Bank of America. Your line is open.
spk02: Hi there. You've got hours on for Bob today. Thanks for taking our questions. So, you know, we understand, you know, the cardiac procedures this year have kind of held on better than some of the others. But, you know, with COVID cases rising, I was just wondering if you're, you know, sort of nervous or if you're seeing any signs that your access to the hospitals might be going down again, or if you've kind of worked out some new arrangements and, you know, what your confidence is that you're going to be able to get your sales force in to talk to EPs going forward.
spk05: Yeah. I mean, I'll take that. I, I think, The large majority of our hospital customers we've talked with have invested a lot of time and energy to figure out how to discharge patients following ablation on a same-day basis so that they can get patients in and out of the hospital, not have to spend an overnight, not have family away from the patient overnight, all that sort of thing. Having said that, there's only so much so much you can do, and certainly we are seeing regional hotspots crop up and impact the hospital business, the EP business, and our business. You know, I pointed during the prepared comments to some hospitals in Central Europe this last quarter where they didn't have enough anesthesiologists or nurses to staff. because of some of the influx of patients they were seeing, and they shut down typically for two to three weeks, and then they gradually find a way to come back up. The U.S. right now, you know, as I commented earlier, is very fluid and very regional, and we're watching it like a hawk. Now, if you remember, our U.S. installations are highly concentrated, very very much so in the southwest and in the southeast. The southwest, we're not seeing much impact, if any impact. As we sit here today, I was on the phone with one of our top customers just before this call, and he said that their inpatient COVID population is something like a tenth that it was at the peak last spring. and they are unaffected by COVID at this time. Talked to our regional business director in the southwest, heard the same thing. Also spoke with one of our top salespeople in Florida today, and it's a different story over there. We've got some historically very productive installs in Florida, and the majority of those, as we sit here today, have curtailed or stopped elective procedures over the last 10 to 14 days. We're hearing that they hope to, a couple of them hope to come back online here within a week or so. But I'll tell you, it's a little bit of a white knuckle situation out there. And, you know, we don't have a crystal ball on this. We're moving resources around. If hospitals shut down and we repurpose the and they're off selling our septal crossing devices into other accounts that are still up and running, or we have our mappers fly and cover cases elsewhere where we can. But it's a very fluid situation in the United States right now, to be perfectly candid with you.
spk02: Got it. Totally understand the fluidity and difficulty. So appreciate the color that you were able to give us. So thank you for that. And then if I can, just on one follow-up here, just wanted to understand the amount of runway that the recent capital raise gives you and how much revenue growth versus cost cutting would kind of help out on the cash burn there going forward. So appreciate you taking our questions.
spk04: Yeah, so we think this would get us to kind of mid-2023, assuming no drastic actions on expenses or sort of abnormal cost management initiatives that we'd have to undertake. So that contemplates continued hiring within our sales force, continued investment in R&D programs, advancing our clinical programs. It's interesting. et cetera. So we think this does provide us with good runway to that time point. So as we think about the cash management or kind of the model here, I want to be really clear on the cost side. We're not necessarily looking to cut expenses. We're looking to put our resources in the most productive places possible. and each dollar we have we know is a dollar that could be spent elsewhere. So we're going to continue to invest very actively in our business, but make sure we do that prudently. As you well know, revenue growth and gross profit pays a lot of bills. So as we look forward, turning that gross margin positive should have a pretty pronounced impact on cash burn, and we're not necessarily looking to not necessarily looking to increase expenses on the heels of a turn in our gross profit. That would simply improve our overall financial position.
spk02: Understood. Thank you.
spk08: Next question comes from the line of Margaret Capser from William Blair. Your line is open.
spk07: Good afternoon, guys. Thanks for taking the questions. And maybe to start off with, just wanted to follow up on HRS. Sounds like you had some strong feedback there, the 150 high potential leads, which seemed like a pretty nice number versus the 70 installed days you have now. So I was just curious, you know, how do you qualify a high potential lead? You know, how have they historically trend in the past in terms of closure rates and over what time period should we potentially look for something like that?
spk05: Yeah, great question. And I'll tell you, we spent a lot of time pre-gaming for HRS this year, we were on the phone with the organizers of HRS on a, almost a weekly basis trying to figure out, you know, who the heck was coming. Um, you know, were people coming from overseas? Were people coming at all? Were fellows coming and whatnot? And kind of titrated our, our, and then our staffing, uh, up to the very last moment. So, um, you know, we felt like there was a, there was a pretty good group of folks that were going to go ahead and come to Boston and, and we staffed, you know, kind of, kind of mid range and, went pretty all out in terms of physician engagement and some after exhibit hours, social events, and that sort of thing. I'll just tell you, it really paid off. The attendance, I don't have the actual numbers, but what was interesting was we were able to generate interest and booth traffic and true high-quality leads that you know, I would have been happy with that lead number in a normal year. This year, I only talked to two or three physicians from OUS, the whole show. It was virtually no one came from Europe and very few physicians from Asia. And I would also point out that the attendance from the West, as we looked at our leads, the vast majority of our leads were from mid-country to the east and And the leads from the West were actually down significantly and disproportionately lower, which I think reflected some of the hesitancy to travel, either due to COVID or just fatigue and wanting to spend time with family. But in spite of all of that, generated over 150 high-quality leads. We did something I've never done before in my career. On the Monday following COVID, We had 24 of our booth participants sit and go line by line, look at lead by lead, and connect the dots with each and every lead, assess the quality of each lead, and assign those 24 hours after getting home, assign those to our camp managers and mappers and VPs. And we had really, really good engagement, not just with our mapping system leads, but with our septal crossings. leads and our left heart sheath that we just launched a couple of months ago. By the way, every single left heart procedure needs a left heart sheath. It is just a rock star new product. I think we're going to really do some great things with. So great leads there. And those are also kind of door openers for mapping systems as well. So super excited about how it went as usual. I think you might have been. at our HRS in San Francisco a couple years ago. We always come with a little bit of a different look, a little bit of a swagger. We don't wear suits and ties. I think people appreciate the way we come at our rather unconventional approach and the way we passionately come at this business.
spk07: Okay. So just to follow up, so that 150 could be physicians of all sorts that are going for various types of products and ultimately may start as a, you know, transeptal crossing, you know, account, but ultimately hopefully can grow that pie. So maybe correct me if I'm wrong on that. And then second of all, if you look at kind of the procedure ASP or kind of your revenue per account. I'm just trying to figure out a good way of trying to bring in some of those other products that you guys have. How is that trending, and is that a good number for us to take a look at as we go towards future quarters? Thanks.
spk04: Yeah, so I think on the first part of that question, Margaret, that's a fair assessment. Each physician coming to the booth may have had a different interest. Clearly, we're trying to steer people to the AccuMap system as kind of the anchor tenant of our portfolio. But certainly, as physicians look to get to know our company, some of the access devices, which are universally available for their existing procedures, is a good way to introduce us to the account. And we have seen in one account in Arizona, for example, was actually having the transeptal product that got us the system into Banner Health in Scottsdale late in the second quarter. On the second part of how to model the impact of some of these new products, I think the ASP is probably the most efficient way to talk about it. We did see the ASP's in our direct businesses rise modestly Q1 to Q2. That should rise probably, you know, more, you know, it should continue to rise on a sequential basis because remember the timing of some of these product launches was really within the second quarter and won't really, you know, it takes some process to get through that committee and get on contracts and other things like that. But we we would expect to see a progressive improvement in our revenue per procedure on a go-forward basis. And obviously in the U.S. specifically, we would expect a step function of that once we have an ablation catheter available. Because in that area, we're leaving to the tune of $2,000 of the total procedure opportunity on the table right now.
spk08: Got it. Thanks, guys. Again, as a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Your next question comes from the line of Bill Plavany from Canaccord. Your line is open.
spk03: Great, thanks. Good evening, and thanks for taking my questions. I'd like to focus on the system placement pipeline. First, just, you know, with the new COO coming on and kind of getting the CRM going, and you've made some commentary regarding focusing on the right counts. Yeah, I want to make sure that we don't get lost and concerned if maybe the install base numbers are different in the next couple quarters because you're shifting systems around in the field. And I wanted to ask that question. And how should we think about that? And then from unproductive accounts to potentially productive accounts. And then secondly, you know, as you talk about that new install pipeline, you know, you have a lot of systems out there that are getting ready or kind of hitting that six, 12-month timeframe where there's some decisions to be made. And how should we really think about the kind of capital as we exit this year and into next year, especially when you think about kind of the lease versus the sale programs. Thanks.
spk04: Sure. So I'll take the second part of the question, and Vince maybe can expand on the strategy with respect to our account placements. The capital contribution to our business bill will become more significant here in the second half of the year and on a go-forward basis. And that is true – both across all three of our operating segments, Europe, U.S., and our distribution partners. And the reason for that is exactly what you pointed out, which is we have a number of evaluations that are coming to expiration, and we will be in a position to convert those to catheter commitment deals or cash sales. The benefit of the catheter commitment deals for us is it gives us a nice stream of long-term predictable revenue. It does results in slightly lower upfront revenue that we're able to recognize. But as we started to come to completion on evaluations, we are having pretty good success actually on the capital conversion side and would expect that percentage of revenue to rise here. I think we referenced in the script that capital sales were roughly flattish Q1 to Q2. As we also have systems out there for greater than a year on permanent commitments or capital purchases, we will start to recognize services associated with that, which is about $25,000 a year of service and $5,000 in software that as a standard is included in the first year of the installation. On your first question about the pace of installs and the strategy around identifying productive accounts and moving systems around, we are actively doing that. there is very little value to us and actually anyone in the ecosystem, physician, patient, or us, having a system in a site that doesn't make sense. And that can be the result of the physician champion has left. It can be the result of the fact that we, quite frankly, in our early commercial launch, did not tick the right accounts into which to install these systems. Or there can be a variety of other factors at play. So we will look to move systems around, bring them back here, upgrade them, and redeploy them into the field. In the second quarter, as I said, we added eight net installations to the install base. We will probably have some removals here in the back half of the year, so that could impact the pace of the increase in the install base. I would certainly expect to see the install base higher on December 31st than where it was on June 30th. But our focus is really on finding the absolute right accounts. And without, I don't want to go into the revenue numbers that one account in particular has ordered here in July, but it is really a reflection of getting accounts to the point where they're doing multiple procedures a week and that driving consistent utilization and reorder rates. We opened a center in April in the Czech Republic that was doing five procedures a week some months and to the tune of 10 to 15 a month very consistently. And that was not a multi-month ramp up. That was almost immediately subsequent to installation and We have a couple, we probably now have three or four of those accounts as an example that we've been able to open here recently in the U.S. So the install base will continue to grow. I think there has, I know there's a tremendous set of focus on the growth in the install base. Our focus is on trying to both grow the install base, but at a pace that allows us to meaningfully ramp utilization and disposable revenue and reorder rates.
spk05: Yeah, the other thing I'd add is resting in terms of refinements that we can and need to make to our console and software to increase and improve the hit rate and uptake rate at every install we do. I can't even fathom the thousands of man hours our software algorithm and marketing team spent figuring out the workflow and figuring out the additional tools that we needed to add to that console to address situations where we didn't have that snap uptake. And that resulted, that effort and that focus resulted in the launch of AccuMap 8, which we just got approval on and announced, whatever it was, yesterday. This is a major... release for us. This suite of software products not only integrates ablation now fully into our system in Europe and CE Mark countries, fully integrates with our RF generator, our pump, our cubic force unit, our mapping system in a way that puts us absolutely in a position where we're going toe-to-toe with the competition with a complete mapping and ablation system. But I think even more importantly, we have now added and we have CE and FDA clearance on a whole suite of algorithms which automatically interpret our maps for our mapper and for the physician and zero their eyes in on a whole chamber view of the left or right atrium, and we automatically highlight and show regions of interest that those mappers and physicians should focus their eyes in on. And I will tell you that was probably the biggest single impediment to rapid uptake for our physicians really around the world that for the folks that got the system, it was the maps, you know, AFib and other complex arrhythmias are just that. They're complex. They're somewhat chaotic. And to the human eye to look at a whole chamber to try and visualize and do your therapy planning around a fairly chaotic rhythm, we now have algorithms that will actually crank through and churn through all that data and call people's attention to specific areas. I think that has the potential to dramatically increase our uptake rates and our utilization rates as we go forward. We're launching that across our entire fleet over the next couple of weeks. We don't hold up the process by trying to sell software upgrades and monetize those software upgrades for any significant revenue because we want the best possible product in front of every single customer every day.
spk03: Great. And if I could follow up with a question. Vince, we've talked about this. When you're launching a new product, it's getting that reproducibility, repeatability of the process. You've talked in the past about onboarding an account and kind of the things you've learned over time. I'm curious, how much has that changed over the past 90 to 100 days since you last kind of revisited that, at least with the investment community? And how should we think about that in terms of the repeat?
spk05: Yeah, I think over the last three, three and a half, four months, we've gotten a lot better at onboarding accounts and Not to get too into the weeds here, but I think one of the things that we've learned is that when you have a brand new physician user looking at the mapping system and the results and the images that come out of the mapping system, there's a temptation to go right into the most complex, nastiest, multiple redo case possible so that we can show the clinical utility of our product out of the gates. That Kind of makes sense, but it's also pretty risky because if the doctor doesn't, has a hard time interpreting what he's looking at and planning his therapy strategy and maybe even, you know, believing what he's looking at, that can be an uphill battle. What we do now, typically, is we actually, as close as we can to mandate our physicians use our mapping system in simple cases in the first couple of cases where we we know what that rhythm is going to look like, sinus rhythm or typical flutter or something like that, and the doctor has it in his or her mind what that map should show, if it has the fidelity and the reproducibility you want, and the visceral effect that we have when we actually go in there with our catheter and show the physician exactly what he expected to see or see, that builds credibility and confidence much more quickly. And it sounds like kind of a nuance, but that approach has had a very significant effect on the uptake on a physician-by-physician basis.
spk03: Excellent. Thanks for taking my questions.
spk05: Thanks for coming to our room. rhythm theater as well, Bill. We hope you enjoyed that session.
spk03: I did. Thank you.
spk08: Next question comes from the line of Mariti Bell from BDIG. Your line is open.
spk09: Hi. Good evening. Thank you for taking the questions. I want to start here with maybe a two-part question on utilization. You referred to some users in the top quartile and a new user who's really kind of hit the ground running and is already in that top quartile for utilization. So I wonder if you'd be able to give us any metrics on what top quartile means. Is that one or two procedures per week? What's kind of a metric we could use to think about that? And then also in utilization, curious to hear how AccuBlate users over in Europe and perhaps the AccuBlate trial participants in the U.S., how their utilization perhaps differs, if at all, and any trends you've seen along those lines, the impact of having that force sensing catheter?
spk04: Sure. Thanks, Maria. I'll start with the first question on the top quartile of utilization. That is between one and a half and two a week in that top quartile of utilization. It's still a pretty wide range. As I said, we still have some that are in the two to four to five a week range, but that's a rough average for you to use. The second question, I don't have that breakout in front of me, but we do have, our utilization rates in Europe are not fully correlated with AccuBlade. And remember that we really just launched AccuBlade exiting the first quarter. Our revenue for AccuBlade in the first quarter, for example, is like $3,500 a year. So basically one catheter, probably three catheters in Europe. And then we've got that number of 94,000 in the second quarter. But it's still at a concentrated number of accounts. And the example I gave you on the account in Europe doing 10 a week that we opened in April, they were doing that level without AccuBlade. They have added AccuBlade to that account, and actually that will happen here in in the third quarter. So it is definitely helpful, and it does speed workflow a little bit. We're not yet at a point right now where the AccuBlade to AccuMap ratio is one-to-one in Europe, though.
spk05: Okay, that's very helpful. I don't think there's a single account over there yet that has AccuMap 8, which integrates the cat, the ablation catheter with the mapping system on the screen in a, you know, seamless way that is, you know, every bit as if not, you know, sort of, uh, more seamless than our competitors at J and J and Abbott, we will start installing those software modules in those accounts in Europe over the next couple of weeks. And the, I think the experience that the physicians are going to have is, is, going to be absolutely next level when you have that mapping system tied to that ablation catheter, you know, seamlessly with that software integration.
spk09: Okay, that makes sense. All very helpful, and certainly the AccuMap 8 did look very usable, very user-friendly, and helpful in finding those flow conduction zones and regions of interest. I guess a follow-up here on PFA, certainly a hot topic at HRS in Boston last month is I spoke with a number of companies there. Everyone seems to have something they're working on. Maybe you could go in a little more detail about why you think focal point catheter, the ability to have PFA and RF on the same catheter, why these things matter, and if anything, why you think your technology could have an advantage over the rest of the field. Thanks.
spk05: Yeah, so if you think about the total number of ablations done in any chamber of the heart globally, it's about a million procedures a year today. Seventy-five-ish percent of those are done with a focal point ablation catheter, not with a cryoballoon, not with a lasso catheter that's enabled with PFA that's purpose-built to ablate a circle around a pulmonary vein. Virtually everybody else in PFA right now is focused on that circular lesion to quickly take out the pulmonary vein. Big market, attractive. I get it. But as we really went deep with Dr. Michelson, who's driving our program here, and understood how large a lesion we could make with a focal point ablation catheter. As we understood that pulmonary vein stenosis does not appear to be an issue with PFA, we came to the conclusion that, yes, those 75% of ablation cases where you pretty much have to have a focal point ablation catheter, that's where we should go. But we think we can also go after those circular pulmonary vein isolation cases with a point ablation catheter and drop those lesion sets very fast. And as Doug Gibson said at our rhythm theater, he's been our number one collaborator and contributor over the last year, physician from Scripps here in La Jolla, has been with us shoulder to shoulder the whole year. as we've evolved our waveforms and our energy delivery, he said at the Rhythm Theater, he's like, I'm not sure how I see a circular PFA catheter is going to be any faster in even doing the pulmonary vein isolation than a point ablation catheter if tuned properly. So if we can go after the 75% of ablation cases that aren't going to be dealt with by a circular catheter or circular lesion, plus be competitive in the pulmonary lens alone, I like our chances. And I think we've got an absolutely fantastic point ablation catheter with force sensing on it, which, by the way, people are increasingly thinking force sensing is going to matter with PFA versus the out-of-the-gates view was that maybe it wouldn't. When you tie that together with a mapping system, which, again, we think you're going to want to have, If you're doing anything outside of the pulmonary veins, particularly a mapping system that maps the whole chamber in a minute or two and helps you find targets to ablate, I think we've got a very competitive program here.
spk09: Well understood. Thank you, Vince.
spk08: This concludes all of the questions in the queue. Thank you all for participating in today's call, and have a great day, everyone.
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