Acutus Medical, Inc.

Good day, and thank you for standing by. Welcome to the Acutus Medical Incorporated's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Caroline Corner of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Acutis' third 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 expectations as of today. Acutis undertakes no obligation to update these statements except as required by applicable law. Acutis' press release with third 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're encouraged to review. A recording of today's call will be available on the ACUDIS website by 5 p.m. Pacific time. Now I'd like to turn the call over to Vince for his comments on third quarter 2021 business highlights.

Thank you, Caroline, and good afternoon to everyone joining us on the call today. During today's call, I will update you on our key strategic priorities as well as some recent clinical, commercial, and market developments. I will also comment on our third quarter results, provide some perspective on market dynamics and and provide an update on what we are seeing in our business today. David will follow up with details on our financial and operational results, as well as our outlook for the rest of the year. Before I dive into commentary on the external environment and our Q3 operating results, I'd like to focus on key accomplishments during the quarter by our team in each of our three core technology areas, left part access, mapping and therapy guidance, and therapies. Our left heart access product line continues to be very well received by electrophysiologists and structural heart specialists as we continue to rapidly build out the breadth of the product line. Over the past year, we have refined and expanded this product line from a narrow offering of just five SKUs to over 20 SKUs today. We are seeing an encouraging adoption curve here with Q3 2021 total septal crossing revenues threefold higher than the same quarter last year. In mapping and therapy guidance, our software team delivered a unique in the industry mapping software capability that automatically calls out regions of interest to the benefit of our mappers and their physician customers, rapidly revealing new insights into cardiac signals that will help physicians better tailor their therapy for each patient while minimizing destruction of healthy tissues. We believe this feature will be particularly helpful in the large and growing population of patients with persistent and longstanding persistent atrial fibrillation where ablation results remain challenging. In therapy, our Acublate Force Sensing Ablation Catheter and System is gaining commercial traction in Europe. This product line is now annualizing at around a million dollars, and we expect further growth here in Q4. Our teams in the U.S. and EU, as well as our partner, Biotronic, have made excellent progress in installing these new therapy systems. By the end of this week, we expect to have 40 therapeutic ablation systems installed worldwide for commercial use and in support of clinical trial activity. These ablation systems are the workhorse engine behind our Acublate Force Sensing Ablation Catheter and are a leading indicator of adoption. In support of our efforts to gain RF ablation approval in the U.S., I can also update you that our enrollment in our right atrial flutter ablation trial is going well and we expect to complete enrollment and submission to allow for approval in the U.S. by the end of 2022 or early 2023. In addition to pursuing a flutter indication, we plan to imminently enroll our first patient in the US IDE for RF ablation of atrial fibrillation. This trial involves a one-year follow-up and we will keep you apprised of our progress. Also in therapy, as announced today, we treated our first patient in our pulsed field ablation CE mark study in the Czech Republic. We had previously discussed first enrollment. By the end of this year, and given the success of our animal studies, confidence of our physician investigators, quality of our product, and incredible focus from our internal teams, we have achieved this critical milestone. The AccuForce PFA CE Mark study will enroll up to 60 patients and also serve as a foundation for our US IDE study application. We are not yet providing guidance on pulse field ablation approval timelines, but we are very encouraged by program developments. Diving a little deeper into our approach to PFA, unlike the vast majority of competitor PFA programs under development that are focused on pulmonary vein isolation alone with large format so-called single-shot catheters, we are advocating for a more tailored patient-specific application of PFA energy by utilizing our focal acublate force-sensing ablation catheter as the therapeutic delivery device. This tailored approach will be further enhanced when combined with our Acumap mapping system that also facilitates identification of target treatment areas outside of the pulmonary veins, which is thought to be essential to more effectively treat patients with complex tachycardias, and persistent and longstanding persistent atrial fibrillation. This strategy is a deliberate choice on our end 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. So in summary, a careful review of of our current and future product lines reveals our tenacious focus on innovation is bearing fruit and signals a very bright future for the company. We are seeing strong performance in our left-hand access and therapy categories, which will become increasingly important revenue contributors over time. Our mapping and therapy guidance business has progressed somewhat slower than expected, and we are actively addressing the factors contributing to the adoption rate including upgraded software to improve position experience and enhance training for our teams. With that, I'll turn to an update on the external environment as well as our recent performance. During our last earnings call in August, we described the operating landscape as very fluid, and this is exactly how things played out. In the U.S., we saw COVID-related shutdowns in several parts of the country, including Arizona, Florida, and Nevada, where we happen to have a high concentration of mapping and left-hand access customers. In Europe, we saw extended cath lab shutdowns, partly due to managing COVID risk, as well as longer-than-usual vacations. In many instances, we found that labs where we have business in Europe were closed for as long as six to eight weeks versus the normal seasonal pattern of where labs are largely shuttered for three to five weeks. The combination of COVID impacts, including peak resurgence, extended seasonality, broader hospital restrictions, and staffing shortages created greater than expected headwinds in the quarter. While we saw momentum in procedure volumes in late September, the magnitude of the rebound was insufficient to offset a lower than planned installed base, lower capital sales and conversions, and procedure disruptions. We have been actively monitoring market trends, and we are seeing general stability here in Q4. Turning to Q3 results, we generated revenue of $4.6 million, representing good growth versus the prior year third quarter and essentially flat compared to the second quarter of 2021. Year-over-year growth was driven by higher procedure volumes globally and an increased capital equipment revenue. On a sequential basis, higher capital sales offset a decline in disposable sales tied to COVID-19-related procedure deferrals and extended seasonality. We ended the quarter with an installed base of 71 AccuMap systems. During the quarter, we made the strategic decision to remove and reposition the certain systems with below target utilization or where key physician users had relocated to a new geography. As we focus our commercial strategy, we are also looking to optimize console placement. Targeting the right accounts where we can drive higher adoption will allow us to optimize utilization of our cash and human resources. This does not mean that we won't continue to grow our installed base, but simply means that we will be extraordinarily disciplined where we make the considerable investment to install a new system. In the U.S., the pace of new system installations in Q3 trailed our internal expectations. We also are still seeing lab access restrictions and certain hospital policies to limit new technology evaluations, as well as lengthy administrative processes. This is regardless of strong physician support in a number of centers, Further, as procedure volumes have rebounded post-COVID surges, the market generally seems to be favoring technology familiarity and predictable patient throughput to clear patient backlogs resulting from COVID disruptions. In Europe, we saw seasonality play a major role in installed base trends. Moving to global procedures, We saw over 50% growth versus last year's third quarter, but a decline sequentially versus Q2 of this year related to factors previously discussed. In the U.S., we saw improvement in volumes month by month during the quarter. Procedure volumes in Europe were stable throughout the quarter at a lower level than Q2. All told, we are encouraged by what we are seeing across the board with respect to procedure volumes here in Q4. Overall, while our business trajectory has improved, I am not satisfied with our performance or commercial execution. The external environment has proven a major headwind, and the impact that pandemic has had on procedure volumes, hospital access, recruiting, and new technology adoption has been more severe than expected. At the same time, we have not fully executed on our own internal initiatives. We recognize this as a management team and are responding accordingly. In the U.S., we have centered our business around what we call power pods, which are regions where we have a high concentration of accounts, utilization, and correspondingly, acutest representations. This has led to our strong performance in the southeastern and southwestern United States. The U.K. and parts of Central Europe take on a similar profile with strength in concentrated areas. Going forward, the key is to replicate and expand this model. This strategy will drive long-term success and deeper account penetration, but will also likely take longer to scale than we had initially anticipated. In no way does the pace of our ramp shake our conviction in the value we can provide our physician customers and patients. As we build this company for the long term, we remain steadfast in our mission to bring differentiated and highly valuable technology to this large and growing market. I will be happy to cover this in more detail in the Q&A, and I'll now turn it over to David for our financial results. David?