Axonics, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Axonics Quarter 4 2021 Results Conference Call. I would like to turn the call over to your host, Mr. Anil Balogar. You may begin.

Thank you, Sarah. Good afternoon, and thank you for joining Axonics' Quarterly Results and Update Call. Presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Duren, President and Chief Financial Officer. Ray will provide introductory remarks on the fourth quarter, followed by Dan discussing in detail financial results in 2022 guidance. Ray will conclude our prepared remarks with updates on sales, marketing, and product development initiatives, followed by a Q&A session. Before we begin, I would like to remind listeners that statements made on this conference call that relate to future plans, events, prospects, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in Axonix's filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, February 24, 2022. Except as required by law, Axonix undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. I would now like to turn the call over to Ray for his remarks.

Okay, thank you, Neil, and I'd like to welcome everyone who's joining the conference call this afternoon. So we're very proud of our fourth quarter and fiscal 2021 results, considering the disruption COVID-19 has had on elective procedures in the healthcare facilities in the United States and, of course, around the world. In addition to strong commercial execution, we made important progress on several strategic initiatives that position Exonix for durable growth for years to come. Turning to fourth quarter results, Exonix generated record net revenue of $53.1 million, representing an increase of 53% compared to 2020. Sequential modulation revenue was $44.4 million in Q4 of 2021, an increase of 28% year over year, and a sequential increase of 11% compared to the third quarter of 2021. In fiscal year 2021, through a combination of market expansion and share capture, our saquenal modulation revenue grew by over 40% to $157 million, representing over 10,000 patients that were implanted during the year. With tens of millions of Americans affected by bladder and bowel incontinence, continued innovation and increased patient and physician awareness for saquenal modulation, We expect this market to grow by at least 15% annually over the next five years and turn into a $1.5 billion category. So now turning to Bulkamed, our unique biocompatible bulking hydrogel for stress urinary incontinence for women, fourth quarter revenue was $8.7 million, an increase of 27% on a sequential basis. In the 10 months of 2021 that we own this asset, BocaMed has improved the quality of life of over 20,000 women, propelling exonics into the market leader in this category. And we're just scratching the surface of what is possible in this large and highly under-penetrated stress urinary incontinence market. As it relates to the impact Omnicron had on our business, we started seeing an impact in sequenomodulation procedure volumes in the second half of December. Similar to what you have heard from other companies, the significant increase in the Omicron cases continued into January and early February, resulting in cancellation and deferral of hundreds of psychonormodulation procedures. The impact in February moderated, and we are encouraged by the improving trend line and expect this positive momentum to continue into March. Given this impact from Omicron and the normal seasonality from the annual resetting of insurance deductibles, We expect sacral no modulation revenue in the first quarter to experience a decline in the mid to high teens as compared to the fourth quarter of 2021. Importantly, we expect cases that were deferred or canceled in December and early 2022 to be rescheduled throughout the year. And as such, our outlook for growing S&M revenue by 25% in 2022 remains unchanged. With that, I'll turn the call over to Dan for a more detailed review of fourth quarter 2021 and financial results, as well as 2022 guidance. Dan, I'll give you a second.

Thanks, Ray. In the fourth quarter of 2021, as Ray mentioned, Axonics generated net revenue of $53.1 million. This represents an increase of 53% compared to $34.8 million in the prior year period. Sacral neuromodulation net revenue was $44.4 million, 98% of which was generated in the United States. Bulkamed net revenue was $8.7 million, 67% of which was generated in the U.S. Gross profit for the fourth quarter of 2021 was $35.4 million, representing a gross margin of 66.6%, compared to 63.6 percent in the prior year period. Total operating expenses for the fourth quarter of 2021 were $53.1 million. Included in operating expenses are $6.8 million of stock-based compensation expense and $2.1 million of intangibles amortization. Operating expenses totaled $33 million in the prior year period. Net loss for the fourth quarter of 2021 was $15.2 million compared to a net loss of $11.3 million in the prior year period. Cash and cash equivalents were $220.9 million as of December 31st, 2021. Turning to fiscal year 2022 guidance, we expect total company revenue of $234 million an increase of 30% compared to fiscal year 2021. S&M revenue of $197 million, representing an increase of 25% compared to fiscal year 2021, and Bulk Med revenue of $37 million, an increase of 63% compared to fiscal year 2021. We expect gross margin to increase 200 basis points year over year, to approximately 66% in fiscal year 2022. We expect to benefit from higher fixed cost absorption and purchase price discounts, as well as lower cost of goods sold on our new recharge-free device, partially offset by higher prices along the supply chain. In fiscal year 2022, we expect operating expenses to total $260 million including $35 million of non-cash expenses associated with depreciation, amortization, and stock-based compensation. The increase in operating expenses compared to 2021 is primarily being driven by investments we are making in direct-to-consumer advertising and growth in the headcount of our US field sales team. We expect these investments to pay significant dividends in 2022 and the years to come. I will now turn the call back over to Ray for additional remarks.

Thank you, Dan. So, I'd now like to provide updates on our product development and sales and marketing initiatives. Suffice it to say, we're very excited about what Exonix has on tap in 2022. On the product development front, we have engaged with the FDA on an interactive basis throughout our PMA submission for the newly developed Exonix recharge-free synchrono modulation system. We are very close to the finish line and anticipate FDA approval before the end of the first quarter. We expect to begin shipping the new device within days following FDA approval. We're confident that the introduction of our recharge-free device will continue to drive market expansion and advance exonics on its path to market leadership. At over 15 years at typical stimulation settings and over 22 years on low energy settings, this new device will have the longest functional life labeling of any non-rechargeable neurostimulator the FDA has ever approved. This recharge-free system will have a positive impact on our business, since many physicians have only known and implanted non-rechargeable sacromodulation systems for the last two decades. As we did with the introduction of the first long-lived MRI-compatible rechargeable sacromodulation system in late 2019, our new recharge-free INS sets a new standard for what is possible in sacromodulation. The fully recharge-free system is full-body 1.5 and 3T MRI compatible, and employs the same stimulation engine, along with a wireless patient remote control that, unlike our competitor's device, does not require a communicator, nor does it require recharging or replacement batteries. In accounts that are loyal to Exonix, this new device will allow us to capture business we previously couldn't service. And more importantly, having an S&M portfolio that now includes a recharge-free option will allow us to take another crack at competitive accounts that previously didn't come our way because the physician believed that a non-rechargeable system was best for their patients. In order to maximize the potential for an exceptional product launch and market share capture, we are ready to go with a full-scale market launch that includes running seminars around the United States in the second quarter. These seminars proved exceptionally successful when launching our first generation SNM system in late 2019 and BulkMed in the second half of 2021. So I would now like to spend a few minutes discussing the large and under-penetrated market opportunities our therapies address. Okay, I think we're back. I think we're back live now. There were some technical difficulties. I was speaking about our initial approach to raising awareness, which we still employ to this day, and that is to encourage practices to identify patients that have been previously treated with drugs and or Botox and are eligible for exonics therapy. With our assistance, the practices then send mailers to these patients, which discuss the availability of a long-lived new device that is MRI compatible, highly efficacious, and easy to use. The program has been very successful and is one that provides a tremendous return on investment for both Exonix and our physician customers. We also reach patients via print advertising, radio, and a combination of digital activities including Facebook ads, paid internet search, and search engine optimization. These various channels direct patients to Exonix branded websites where the person registers and then qualifies themselves based on answers to a short online symptom questionnaire. Now, we partner with a third-party call center that is staffed by a team of nurses well-versed in incontinence and the therapies we offer. This effort has resulted in over 50,000 inquiries last year and a few thousand qualified leads that were provided to physicians that offer exonic therapy. Now, we've taken The learnings from the last two years of our direct-to-patient and direct-to-consumer efforts. We went to school on what has and hasn't worked for other MedTech advertising campaigns, and we are now excited to take the next step in our DTC journey. Beginning in April, we will be airing television commercials locally and nationally on network television as well as streaming channels. Television will allow exonics to reach millions of women in 2022 and potentially generate hundreds of thousands of inquiries. Our messaging will need not to distinguish between urge, stress, or fecal incontinence because we offer solutions for all of these conditions. We believe this will increase our response rates, lower cost per lead, and drive more patients into practices that offer exonics therapy. Our omnichannel strategy will help establish the Exonix brand and allow us to engage patients with incontinence across multiple platforms with a consistent message that new, life-changing incontinence therapies are available to them. It will also be clear to physicians that we are behaving like and plan to be the market leader in this category. To prepare and fully capitalize on the market growth and share capture we anticipate in both the near and long term, we have grown our U.S. field team to approximately 300 individuals. The team is evenly split between quota-carrying sales professionals and clinical specialists that support cases. We are confident that the breadth and depth of our team matches the market potential for sacramental modulation and stress urinary incontinence treatment for the next several years. In closing, We're grateful and humble for the trust physicians, patients and shareholders have placed in exonics. And I'd also like to thank our field team and our colleagues in Irvine for their diligent efforts and dedication to fulfilling our mission of improving the lives of adults suffering from incontinence. So at this time, we're happy to take questions and I'll turn it to the operator.

Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Larry Bigelson from Wells Fargo. Your line is open. You may ask your question.

Good afternoon. Thanks for taking the question. Ray, can you hear me okay?

Yes, thank you, Larry.

Great, great. So I wanted to start on the primary cell device. You know, the information you shared tonight was interesting on the 15- to 20-year battery life, if I heard correctly. So my question is, Ray, you know, how do you think your device is going to stack up to what we've seen so far, you know, from the Medtronic, you know, new non-rechargeable device that they just got approval for? And are you going to be able to market that 15 to 20-year claim? I think you mentioned on this call, if I heard correctly, I think they said theirs is about 10 to 15 years, and I had one follow-up.

Yeah, no problem. So, Larry, look, I think that – There's no question that we're gonna be able to market the claim because that's the data that we submitted to the FDA and they have already accepted our longevity claims based on our robust internal testing and accelerated life testing. So just to give you a comparison, to pick a point, a one milliamp implant for us is gonna get 17 1⁄2 years out of our device. and that's typical settings. So we're really excited about that, and we think it's going to compare not only quite favorably, but once again, as I made in my prepared remarks, this is going to be the longest time in terms of longevity in the body for any non-rechargeable neurostimulator that the FDA has ever approved. So we're quite excited about that. And then, of course, the product, I think very importantly, I mean, it uses the same clinician programmer, the same wireless patient remote. It's got the same engine. We'll have the same conditions for MRI compatibility that we have in our existing products. So we think this clearly is going to set a new standard in psychonorm modulation for what is possible. And I'll just add by saying, of course, we're not abandoning by any means our long-lived rechargeable device which could easily get over two decades in the body, and currently only requires charging once a month for an hour. So we're real bullish about this, Larry, and I think the key thing for us is to be able to offer the complete line and give a physician's choice, depending upon maybe the age of the patient or whatever other parameters they may decide, to move a patient in one direction or another. We're agnostic from that standpoint. We just want them to implant Exonix.

That's super helpful, Ray. And then just for my follow up on your DTC effort, could you describe how much you're going to spend in 2022? And what gives you the confidence you won't, you know, help your competitor more than yourself, you know, given that their share is still higher? Thanks for taking the question.

Yeah, you broke up a bit. Hopefully this line is not broken up. Larry, can you hear my response? Well,

If I can hear you, fine.

No, no, I heard your question. So your question fundamentally was, you know, what gives us confidence that we're not going to be advertising, you know, for our competitor, right? And the answer is that we're not advertising sacral modulation. We're advertising exonic therapy for patients who have incontinence. So I think that that's what we're doing. So we feel pretty confident about that. And, of course, the rising tide, as we've said all along, floats all boats, right? So if this helps the category in general, we're okay with that. But we're being smart about it. We recognize that there is a competitive offering, and so we're purposely – orienting our commercials so that we can pick up patients with any form of incontinence, whether it be stress or urinary or whatever the case might be. We're not gonna make those distinctions, and besides, in a 30 second commercial, you really can't. Further to that, just to give you a complete fulsome answer, anytime somebody raises their hand, they're directed to a website, They fill out a survey if they're interested. Obviously, that's the first level of qualification. And then we have, as I mentioned in my remarks, a call center where people, you know, these are registered nurses who not only understand incontinence, but they understand our offerings. And they'll call out to those patients, speak with them about their condition. and then offer them an opportunity to get connected to a center that is offering exonics therapy. So this is not about sending people to a website, putting a physician locator on it, and letting patients decide who they want to go to willy-nilly. So we've had a lot of experience with this over the last year, and so we feel like we've got that system down, and we'll be getting the right kind of return on our investments.

Thanks a lot, Ray. Thanks for taking the questions.

Thank you, Larry. Appreciate it.

Your next question comes from the line of Chris Pasquale from Guggenheim. Your line is open.

Thanks. Appreciate you taking the questions. Ray, you said you're just scratching the surface of what you can do with Volcomid. What else can you do there? Are there product line extensions or clinical trials you want to pursue that you think could drive more adoption, or is it just about touching more physicians?

Thanks, Chris. It's a good question. We don't need to do anything. I mean, this is, we have physicians that are evangelizing the therapy based on the results that they're seeing with the patients. I mean, this is a phenomenal alternative that anybody who is coughing, sneezing, pick up objects, exercising, and leaking urine, I mean, we can get them fixed up in 15 minutes, you know, whether it's in an office, ambulatory surgery center, outpatient section of a hospital. So for us, it's just more about going out there with our team and accessing more of these accounts and giving them access to the product. So this thing is growing like weeds, as you've seen already, and there's no pushback in terms of, A, the quality of the product, the ease of administration, the immediate results that patients are getting. So we don't have a burden to really do anything else other than go out there and offer this product and support these customers. So this thing's got legs. and I think we've seen that already, and we expect the revenue just to continue to flow in and obviously provides us with a lot of other benefits besides just the revenue and the margin.

Got it. Okay. And then, Dan, if I heard you right, you're guiding to a roughly $70 million increase in OPEX on a cost $50 million increase in revenue. It certainly makes sense to invest in the future growth of the business, but that seems like quite a bit of investment or negative leverage in this year in particular. Can you talk a little bit about where that's going and how you think about this level of spending? Is this a one-time investment year and then we start to see leverage as we get into 2023?

I think that's right. I don't think I'd characterize this one time. I think at a high level, there's obviously increases across a number of departments as we scale up and have just more activity. But obviously, the big drivers, as you've called out, are the DTC campaign, in addition to other marketing programs. And I think we glanced off of this on the call, but didn't get into it. But we've also added a number of sales reps and clinical specialists in the U.S. field sales team. And as a secondary, since you brought up VulcanMed, We started out, you know, with four U.S., what we call key account managers, which are the bulk of MEDREFs, and we now have increased that to 25. And so what you're seeing is, you know, increase in spending across a number of departments, primarily focused on revenue generation, and then we are talking about a sizable, you know, certainly for us, increase in DTC spending. It's the type of program we're going to push hard as long as we see return on investment and revenue growth. And look, when we optimize it in regional and local territories, then we'll be able to cut back on some of the bigger expenses. And it's the type of program that, you know, we don't know if it runs for, you know, one year, two years, or three years. But at some point, the leverage will come in because it will take some patience, some time to go through the process and the care pathway to get implanted. But it's the type of investment that will produce returns for the next, you know, one, two, or three years.

Got it. Thanks.

Your next question comes from the line of Cecilia Furlong from Morgan Stanley. Your line is open. You may ask your question.

Great. Thank you for taking the questions. I wanted to start just with the revenue guidance, understanding the sequential dynamics in the S&M business. But could you just talk about, one, what you're expecting from Bocomid, 4Q to 1Q, and then throughout the balance of 22, as well as how you incorporated revenue the launch of a recharge-free platform and your thinking in terms of sequential acceleration in the business to the balance of the year?

Certainly. So for 2022, as we said, we expect total revenue of $234 million, and that's both sacral neuromodulation as well as bulk med. The S&M piece is $197 million of that, which represents 25% year-over-year growth. We're expecting in Q1 a mid to high teen sequential decline compared to the fourth quarter, and that's due to seasonality and also the Omicron variant, which is in certain markets hampered elective procedures. And as we look forward at quarters two through four in 2022, when you factor in seasonality, we expect the S&M revenue in the second and third quarters to have roughly equal weighting of 25% of the total revenue. And then the fourth quarter, which is always strongest to be approximately 30% of the total revenue. On the bulk of that side, what we're expecting to see in Q1 is a slight decrease from Q4 2021 of just a couple hundred thousand dollars. And then we expect to see that increase quarter over quarter by approximately $500,000 each, which is how we get to $37 million in revenue for 2022 for bulk of that.

Okay, great. Thank you. And if I could also just follow up, as you think about the initial launch of the recharge free platform, how you're thinking about either targeting accounts where you have the majority of share Medtronic sell as a portion versus those accounts that maybe you've been leveraging BulkMed to get into where you haven't had a presence before, but just the ability now to have the recharge free platform in your portfolio. I'm just curious if you could provide some high level commentary around how you think about that initial launch.

Sure, sure. This is Ray now. You know, it's pretty straightforward. So, as we've said before, it's not as if our existing accounts are clamoring for a non-rechargeable device, okay? I think this is important to say. We've got, you know, happy customers. They're implanting our device. I mean, you know, 10,000 of our devices got implanted last year alone, you know, 98.5% of that in the United States. So, So there, you know, will we get some business on the margin? You know, are there some patients that are in exonic loyalist accounts that still wind up with an interstim 2 because they may have had one in their body before? You know, there's some of that that's going on, and clearly we have some accounts that have been splitting their volumes. So we'll see some incremental increase in the existing accounts that we have today. Now, as you mentioned, Cecilia, appropriately, you know, our target is competitive accounts. And we have quite a number that have been waiting, right, for us to come out with this new product that we haven't gotten any business from. And so we're going to target them, of course. And then a lot of those accounts, interestingly enough, have started with Bocomet. So we're already behind the counter, so to speak. So it's a combination of all those activities. And as you probably know, salespeople are a special breed of cat. They follow the path of least resistance. So that's the guidance, right? Let's get the business where we can get it and try to light up the scoreboard the best that we can. So For us, you know, we're just very thankful that, you know, the pandemic seems to be receding. Things are, you know, opening up nicely around the country. There's still a little bit of a hangover, clearly. We got a lot of patients that we're hoping that we'll reschedule their procedures now that the hospitals and ASCs are, you know, open to doing procedures. And so, you know, we're very optimistic about things, and we think that You know, the only thing that's held us back, quite frankly, has been the pandemic. And, you know, with that receding and with, you know, the new product offering and, you know, additional stuff that we have planned for this year, along with the advertising, you know, we're quite bullish about what 2022 will offer for Exonix.

Great. Thank you very much for taking the question.

Absolutely. My pleasure. Thank you.

Your next question comes from the line of Adam Mader from Piper Sandler. Your line is open.

Hey, Ray. Hey, Dan. Thanks for taking the questions and congrats on the progress. Wanted to start on the primary cell device, and maybe you could just level set us for the market today. How is that split between rechargeable and non-rechargeable therapy? And then the second part of the question is, if you were to look forward kind of 12 months from now, Ray, I mean, how do you think your device mix will stack up, recharge versus recharge-free, and then add a follow-up?

Sure, sure, sure. You know, I just want to make a point. We talk about a recharge-free system. We're talking about a recharge-free system where neither the IPG, which is implanted in the body, or the patient remote needs to be recharged. That is not the same offering that our competitor has. It's true that you don't have to recharge their IPG, but the rest of the accoutrements all need to be plugged in the wall and recharged on a regular basis. I'm going to answer your question backwards, Adam, if you don't mind. We would expect that given a year or so from now, we probably will see a 50-50 split in terms of our non-rechargeable versus rechargeable product. And, you know, maybe that's not the most enlightened projection, but probably can't be too far off one way or another if we stick with the 50-50 idea. So that's ultimately, I think, where this thing goes. Now, your question about, you know, what is currently the case in the marketplace, you know, I think it's important to kind of remind people that the number one selling product in the That's the product that we've been competing with. It is a non-rechargeable device. We just have not seen much penetration of the competitor's rechargeable system. Have they sold some? Sure. But once again, the product that we've been competing with has been interesting, too. And we continue to replace those products. Nearly 15% of our overall volume is still replacements of these legacy products in these physician offices. So I think we'll pick up more of that business as time goes on, now that we have a long-lived, non-rechargeable system to offer. So there aren't two markets. I think this is really important for people to understand. There's one, there's a physician, who's communicating with their patients and trying to move those patients in the best direction that they can. So it's not like patients are coming in with a strong preference, per se. We've done surveys about this, and what the patients tell us is they're following the advice of their physician, and that shouldn't surprise anybody.

Really helpful, Coleray. Appreciate all that. And then for the follow-up, wanted to ask about the recent journal publication that talked about, you know, higher prevalence than previously anticipated on incontinence and how you think that could potentially benefit therapies like sacromodulation, Volcomed. I think the journal article talked about the need for routine screening as part of preventative care for all adult women. So, you know, is this a tail end for the category? Is it something that could have a light switch effect? Is it something that kind of just benefits the category over time? Just any color there would be helpful. Thank you.

Yeah, thanks, Adam. That's a good question. I wish I could say that anything in medicine is a light switch, but it's not. As you know, things change very slowly. And, you know, it's unfortunate. And I say it's unfortunate because here's the fundamental problem we have. Primary care physicians have no idea about cyclinomodulations. Primary care OBGYNs don't treat, for the most part, urinary incontinence, right? This is part of the problem. So what we're looking to do here is not just stimulate the urology and urogynecology market. These are the docs that are actually offering these therapies. But we also want, with our advertising, to stimulate the market in general, right? And we hope that, you know, if patients are coming into their regular doctor, and as you know, women mainly see GYNs, and if they're walking in these offices and they're saying, look, I'm leaking, and I saw an ad on television, how can you help me? Either that stimulates them to get in the game to do VolcanMed or to refer that patient out to a urogynecologist as an example. So, you know, there's so much blue sky in this category, it's truly unbelievable. We're sitting on top of a unicorn opportunity with a TAM that is really quite unbelievable. And I think that it's been, quite frankly, a very sleepy corner of our business up until this point. But we aim to change that, and given the prevalence and incidence of these problems that exist out there, we think that creating some buzz out in the marketplace, particularly among potential patients that now are gonna hear for the first time, there's actually a solution And I dare say this is very analogous to what we've seen from Inspire, right? Nobody knew that there was a neuromodulation device that could treat sleep apnea, but now with their cute commercials, you know, if you're using CPAP, you're thinking, hmm, maybe I should go look into this other product. So this is a well-kept secret. We've been banging that drum. Dan and I have been talking about this now for eight years, and it's We've been banging the drum, and I think now it's one of those situations where I think it's the right time. We have the right technology now. We're going to have that full line of products for people to choose from. We don't care what kind of incontinence you have. We can get you treated, and I think we've positioned Exonix quite nicely to benefit from additional awareness in the marketplace. So I really appreciate that question, Adam. It gave me a chance to say a few more things I wanted to talk about.

Thanks for the call, Ray.

Your next question comes from the line of Mike Madsen from Neodem and Company. Your line is open.

Yeah, thanks for taking my questions. You know, it seemed like the fourth quarter there was a bit more of a divergence between your performance and Medtronic. I mean, they had been admitted that they lost share in the quarter. So what I'm wondering is, you know, did something change? I mean, is it the Salesforce expansion? Is it the bulk amidst strategy of cross-selling? You know, is there something going on there? Because there wasn't any change from a product perspective, at least at that point in time.

Mike, we got great products. We got great people. We provide exceptional service. And it's just a matter of time. And I think that, you know, look, we've only been at this for a short period of time. I mean, just to remind people, we launched our product in November 2019. We had four months where we were not impacted by a global pandemic. Ever since that day, Mike, we've been under that cloud. I think what you're seeing now is, you know, here we are. It's been basically two, well, not even two full years, but it's been two years since we've been out there, you know, calling on these practices. And I dare say that we're not going anywhere, right? That we are turning our customers into raving fans of Exonix. They love our people, they love the quality of the product, they're getting better results than they've ever seen in this category. Our BocaMed product now is being able to literally cure stress urinary incontinence at least for the next five or seven years after these injections. So I think you're just starting to see the momentum building around the Exonix brand, and people recognizing that we do business in a different way. When we talk about, you know, one of our mantras is no patient left behind, I mean, this is something that really resonates with our customers. They understand that we actually care about these patients. We want to make sure that they're going to continue to do well over time. It's not about selling something and walking away and leaving it up to chance. We're really committed, and we're working very hard with these practices to embed our people there so that they're confident, you know, about not only the quality of the product, but that they get to know, you know, our people and their commitment and so forth. So, Mike, I just think it's, quite frankly, it's a result. You know, our Q4 numbers and the fact that we're making serious progress in the market is a result of a million little things that we've been doing, you know, since we launched this product in the United States.

Okay. Makes a lot of sense. And then with regard to the TV campaign that you mentioned, you know, how is that going to be sort of rolled out? I can't imagine you're going to go national all at once, or maybe you are. And then, you know, what sort of metrics are you going to use to kind of judge the performance?

Well, you know, look, we are going national to start. I mean, we're not playing around with this. This is a serious undertaking. We've spent a lot of time and energy on the messaging and making sure that we feel confident about what the ad's going to look like and all the rest, and we're going to make a big splash with this and so forth. Now, initially, the only real metric that you can measure is going to be response rates. It's going to be how many people are actually you know, going to those specialty websites and qualifying themselves and filling out the survey. That's going to be the first thing that we're going to be looking at. And we have a pretty good sense about what to expect. But in measuring how many of those, so then the next thing we'll measure is how many of those individuals can we actually place with an appointment into an Exonix account, right? That's gonna be the two top metrics that we're gonna look at at first, and then we're gonna have to be a little bit patient, because once again, these are people with a problem. We don't know, have they taken drugs, have they failed drugs, have they tried Botox? We're gonna have no idea. So they're gonna have to work their way, as Dan mentioned earlier, they're gonna have to work their way through the care pathway. Some people are gonna be ready for procedures right away. Others are going to need to go through the process of being differentially diagnosed and then maybe taking some drugs for OAB or having a conversation about stress urinary incontinence and what their options are and so on and so forth. So it'll take some time, and we won't be shy about reporting back out, but we've got to see how it's going to go first. Nobody's ever done this in this category before, so it's kind of a little bit of the brave new world.

Okay, great. Thank you.

Sure.

Your next question comes from the line of David Rescott from Truist Securities. Your line is open.

Hey, Ray. Thanks for taking the questions. I want to start off on guidance and just get your thoughts behind the approach to guiding this $234 million revenue estimate for the year rather than a range. If I heard you correctly, I think in that prepared remarks, you mentioned that there were cancel S&M procedures that are expected to be rescheduled throughout the year. So I guess my question is, what level of visibility do you have in the business and how should we read into this guide's number when we think about the level of existing backlog or those expected to be rescheduled this year versus those that are newly scheduled throughout the course of the year?

Well, I mean, I'm not really exactly sure. I'm looking at Dan on how to answer that question other than to say, look, we gave you what we think is our best estimate. And we felt that providing a range doesn't provide us with really any upside. Because if we put the range, everybody's going to expect the high end of that number. And if we come in at the low end of the number, then everybody's going to be disappointed. So we just basically put forth what we think we can do. And obviously, as is the case with any management team, our objective is to beat those numbers. And in terms of... you know, visibility, you know, this is a different kind of a pipeline, right? We're not selling capital equipment where, you know, you have X amount of prospects and, you know, you're waiting for the purchase orders and things of that nature. I mean, this is a very fast-paced, volatile business where patients walk in the door, you know what I mean? And then ultimately, you know, we got to get them treated. So it's not, you know, we have a lot of metrics, Of course, all our analytics are looking backwards, right? I mean, that's the key thing. But we have a good sense, right, of how many procedures each of our accounts are doing. We've had plenty of surveys that have been done either by ourselves or the analyst community or institutional investors themselves. So the feedback from our customers is that they expect the market to grow significantly as this pandemic recedes. So hopefully, you know, what we're talking about, you know, growing your business 30% year over year is never that easy. It's not like you wake up and, you know, just look at the scoreboard. But we think there's plenty of potential for us to exceed, you know, what we've put forth.

Okay. I guess on BulkMed, you know, Salesforce, they're fully kind of trained in BulkMed, a few quarters in the bag. And in the past year, we talked about this as having halo effect or, in your words, you know, being catnip for some of these new S&M accounts. So I guess my first question is, what level of pull-through have you seen so far within S&M accounts? And the second question to that, you know, is it possible to think about maybe a more material halo effect within the S&M business bearing fruit in the second half of 2022, you know, if that S&M business is more impacted by Omicron in the near term? And I guess, you know, if I were to ask a different way, are there S&M accounts now that are being activated that were pulled in because of Volcomad that may just not ramp in the near term because of COVID or staffing shortages that may more materially do so in the second half of the year?

So I think if I simplified, you know, the question, you know, clearly we believe the second half of the year is going to be more fruitful, but we're optimistic that the second quarter of this year will be, you know, as good as we experienced in the second quarter of last year, right? That was probably a good clean quarter for us. So we don't think we have to wait until summertime to see, you know, an uptick in the business. We think our customers are anxious to get patients treated, and as long as the elective procedures are open, then I don't see any reason why, you know, we can't get these patients in and get them treated. There's no question that bulk med has been contributing to the halo effect, as you referred to it, and we've talked about it in the past and has gotten into a lot more accounts. And I think, you know, we're going to see really the fruits of that labor. We've seen some already, of course. in Q4, but we're going to see the fruits of that labor in 2022. That's really where we're going to start to, you know, how should we say, reap the benefits of having this expanded product line and being able to treat, you know, all these types of patients with incontinence. So, there's no doubt that it's worked well. The seminars that we ran for BulkMed last year yielded quite amazing results in terms of the number of physicians that have started. We had 328 people attend these seminars. I think the latest numbers I've seen is that we have about 80% of those physicians that attended are actually treating patients with BocaMed already. And we've picked up a few dozen accounts because of this in places that, in accounts that we weren't in before. And we expect that trend to continue, particularly now or as soon as we get the approval on the, you know, recharge-free system. So hopefully that, you know, we'll start to see, you know, the fruits of all of our labor really, you know, come to bear in 2022. All right. Very helpful.

Thanks for taking the questions.

Thank you.

Again, ladies and gentlemen, if you have questions at this time, please press star under the number 1 on your touch-tone telephone. Your next question comes from the line of Dania Antelfi from SVB Alluring. Your line is open.

Hey, good afternoon, guys. Thanks so much for taking the question. Right. I just have a high level question and then a more specific question. So high level, you know, I think even through a pandemic, it's safe to say your U.S. launch has exceeded expectations. Is there a way to quantify or even qualitatively ascertain how much growth has come from market share gains versus market expansion? And I guess, you know, are market share gains still a meaningful part of the growth story or how much of the low-hanging fruit has been had already from a market share perspective?

You know, it's funny, Danielle. You know, you're asking us about market share when there's only one part of the equation that we know, which is our revenue. We don't know the revenue from the other part. And, you know, the fact that there was a comment about, you know, that they gave up market share to Exxonix in this most recent quarter, you know, I mean – It's not a surprise to us. The only surprise was actually the admission. But we still don't have a number. And so it's really impossible for me to answer that question. So, you know, I mean, we've said that we think it'll be a combination, right, of expansion of the market and market share gains. And if you decode our 25%, like we've said, we think the market will grow at least 15 and we'll pick up the rest in market share gain. So I think we've kind of given the answer. But honestly, we're trying to talk about this with literally one hand tied behind our back because we don't have the other numbers.

Yeah, what I was going to add is what we're seeing across the entire customer base is an increase in annual unit volume. And what's not surprising to us, but I think probably interesting to people on the call, is we're also seeing a number of physicians now that have maybe, you know, not really been practicing S&M for a long time now asking to get retrained by us and to get back practicing this therapy. And so, you know, I would say if there's any surprise post-commercial launch from 2019, it has been – The market's more underserved and larger than we originally expected, and this latest data that Ray talked about on the prepared remarks of the 78 million women in the U.S. that suffer from incontinence, you know, is substantially higher than what we were operating off when we went public. And so I think, you know, the blue sky that's in front of, you know, the two S&M players is vast, and this market's going to continue to grow for the next five to seven years.

Yep, got it. Okay. And then, you know, Ray, this is maybe an unfair question because it sounds like it's hard just to say. But I was just curious how sticky the market share gains you have made versus Medtronic have been. And I guess maybe a way to ask the question is in accounts where you've gotten traction, how sticky has the share been since Medtronic has launched a rechargeable device? Thanks so much.

We just have not had any impact from the – competitive rechargeable product. We cannot ascertain any impact quite frankly. I'm sure that accounts that are loyal to our competitor, I'm sure they've tried that or to some extent may have tried that product, but it's been a non-issue for us. I think the only time when we saw some accounts go back the other direction was back in 2020 when the competitive product got MRI compatibility claims. And that was the last time that we actually saw some accounts that had started with us that kind of switched back. Since then, we just haven't seen that. So hopefully that's a direct answer to your question. So most of the action that we see is, It's like what Dan said, where we've got new people that are wanting to get in the game for the first time. And now in 2021 and in 2022, we can train somebody up. We didn't have that capability per se back in 2020 when we first launched, nor was it a focus of ours. And, and then also, you know, competitive accounts that, you know, want to work with Exxonix because they they've heard from their colleagues about the quality of our products and the quality of our people. and the fact that we pay a lot of attention to every account, and we're there for every procedure, and we make sure that every patient is programmed well and is followed up. So that's the game, right? And we think we're doing business in the right way, and that's going to continue to accrue to our benefit over time.

Thank you very much.

Thank you. Appreciate the questions.

I'm showing no further questions at this time. I would like to turn the conference back to Raymond Cohen.

Super. Thank you, operator, and thank you for everyone for listening in today. We appreciate all the questions from the analyst community, and we look forward to speaking with you all again. Bye-bye now.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a wonderful day. You may all disconnect.