Axonics, Inc.

Good day, and thank you for standing by. Welcome to Axonic's fourth quarter 2022 results conference call. At this 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Neil Bullocker. Please go ahead.

Thank you, Shannon. Good afternoon, and thank you for joining Exonix's fourth quarter 2022 results conference call. Presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Deeren, President and Chief Financial Officer. Before we begin, I'd 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 Axonics' 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, March 1st, 2023. 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.

Thanks, Neil. I'd like to welcome everyone joining this afternoon's call. So our fourth quarter of 2022 and the financial results were nothing short of outstanding. Exxonix generated record revenue of $86 million, an increase of 62% compared to the prior year period. This marked the third quarter in a row in which our revenue has grown at least 50% year over year. More specifically, cyclone modulation revenue was $70.3 million, an increase of 58% compared to the prior year period. This record level of revenue is being driven by a combination of higher utilization of our S&M systems in existing accounts and the addition of new accounts. Bulk Med revenue was $15.6 million, representing an increase of 79% compared to the prior year period. Record results were driven by solid reorder rates from existing accounts and the onboarding of new customers. Our gross margin hit a new high-order mark of 73.3% in the fourth quarter. Now, we also generated $10 million of adjusted EBITDA in the quarter as we continue to benefit from the operating leverage inherent in our business model. Dan will discuss our financial performance and outlook in further detail in his prepared remarks. I would now like to provide a few updates on sales, marketing, and product development initiatives. In 2022, the launch of our long-lived F-15 recharge-free system completed our cycle no modulation portfolio. We captured a high share of wallet in existing accounts and activated new competitive accounts. From the time of our U.S. commercial launch in late 2019, we have continually enhanced the value proposition Exonix offers to our customers, and we now have nearly 1,000 physicians in the United States implanting Exonix S&N systems. In addition, we acquired BocaMed, our unique hydrogel for the treatment of female stress urinary incontinence. We're the only company that offers solutions for all forms of bladder and bowel incontinence, be it urgency for urgency, frequency, stress, or fecal incontinence. We have grown our U.S. field team and therapy support specialist group to provide best-in-class service and support to physicians and their patients. We have invested in a multi-channel DTC campaign to reduce stigma and increase public awareness that incontinence is not normal and that the symptoms can be treated with advanced therapies. We also launched a call center to assist in connecting people who have incontinence to specialists in their local community. We have conducted numerous medical education seminars for physicians and their clinical staff on, uh, secondary modulation, implanting best practices, and how to improve navigating patients through the care pathway. We have hosted dozens of physicians at our headquarters in Irvine to meet with senior management, tour our manufacturing facility to see firsthand the care and quality that goes into making our products, and of course to discuss how we can ensure that more of their patients are getting the long-lasting, efficacious symptom relief that they deserve. Physicians are seeing Exonix act like the market leader, We have demonstrated our commitment to this category, and it is clear that exonics has been causing the matter of the U.S. sacral normodulation market expanding significantly since our entry into the U.S. market just a few years ago. More specifically, based on external definitive healthcare claims data and the limited directional information from our S&M competitor that they disclosed, we estimate that the U.S. sequenol modulation market compounded at an annual growth rate of 18% from 2019 to 2021 and 14% from 2019 to 2022, consistent with the mid-teens outlook we projected going all the way back to the time of our IPO. It's important to note that this level of growth was generated in the midst of a global pandemic and widespread staffing shortages that you have heard many physicians and management teams discuss previously. As it pertains to 2022 specifically, we understand that analysts had pegged U.S. market growth at 6% for this year, or for last year. I want to provide some important context to that figure. First, there was significant disruption and adverse impact from Omicron last i.e., COVID-19, in the first quarter of 2022, so much so that the overall market is estimated to have contracted by 5% in that period. If we exclude the first quarter due to Omicron and just look at the last three quarters of 2022, the U.S. cyclone modulation market grew approximately 10% year-on-year during that period. And perhaps most encouraging is that the market growth has accelerated each quarter by of 2022, generating 8% growth in the third quarter and 18% growth in the fourth quarter. As we have said many times, the addressable market in the United States remains large and highly underpenetrated. According to IQVIA, over 18 million total prescriptions were written for OAB drugs in 2021 alone. It is worth noting that according to Definitive Healthcare, over 3 million Americans received an OAB diagnosis from their physician in 2021. Looking at all these factors, we remain confident that the second home modulation market will expand at a mid-teens annual growth rate for years to come. Now, turning to an update on our commercial team, we now have 340 field-based personnel in the United States, of which 165 of them are directly involved in selling or sales management, with the balance of our personnel being clinical specialists. We are well staffed at this time and expect a modest increase in commercial team headcount in 2023. The Exxonix Find Real Relief direct-to-consumer advertising campaign continues to progress well. As many of you know, the advertisements on national television and Facebook encourage adults with incontinence symptoms to visit findrealrelief.com, our patient-facing landing page. The website provides information about exonics incontinence solutions and directs individuals to complete a short symptom quiz or questionnaire. The campaign underscores our commitment to a population, primarily female, that for too long has gone underserved and undertreated due to lack of awareness of advanced therapies. Many of our customers continue to tell us that patients come into their practice asking about exonics therapy after seeing our ads on television or on the internet. The campaign continues to generate goodwill with our physician customers as they are grateful that we are helping to ensure that adults with these conditions are being seen by a clinician and advancing along the care pathway. In the fourth quarter of 2022, we had over 420,000 unique individuals visit our website to learn more about exonics therapies. Since launching their campaign in April of 22, the number of unique web visitors totaled approximately 2.25, excuse me, 1.25 million individuals. We take 2.25 as well, but 1.25 is the right number. Now, this is the important part. Qualified leads, as we refer to them, are individuals that complete the symptom questionnaire on our website. In the fourth quarter, there were 33,000 qualified leads. And since launching in April, our campaign has generated 90,000 of these such survey responders or questionnaire responders. In fact, in January of this year, the number is accelerating and there were over 11,000 people who filled out a symptom questionnaire in January alone. Our call center continues to work diligently to connect qualified leads with a specialist physician in their local community. Now, turning to international activities, we recently launched commercial operations in Australia. which we kicked off with a well-received physician seminar held in Sydney during the President's Day weekend. The company's field team has started with four sales professionals who have years of experience in cyclone modulation and strong relationships with implanters in Australia. Exonix estimates that Australia is currently a $15 million S&M market with approximately 1,200 S&M procedures performed annually. Our competitor has regulatory approvals for their short-lived InterSim 2 product and InterSim Micro. Now, Exonix currently has regulatory and private reimbursement approvals for our rechargeable system in Australia, as well as for Bulkamix. Now, the F-15, this is the recharge-free or non-rechargeable system, is currently under regulatory review by the Australian TGA, and we expect approval in the coming weeks. We also recently submitted our latest rechargeable device called the R-20 for regulatory review and expect approval in the second half of 2023. Our competitor already has regulatory approvals, you know, for their products in legacy products in Australia. Okay. It's important to note that even after receiving regulatory approval for our F-15, we will have to wait for private reimbursement approval in Australia, which we expect will come by the year end. As such, we are only forecasting one to one and a half million dollars of revenue contribution from Australia in 2023, with a much more significant contribution coming in 2024. Now, turning to product development initiatives, we've received regulatory approval, U.S. regulatory approval for the Exonix R20 rechargeable simulator in January of this year and previously from Health Canada in December of 2022. Now, this device utilizes the same small 5cc form factor as our previous rechargeable product, the R15, however, requires recharging just once every six to 10 months for one hour and has an expected useful life in the body of at least 20 years. Early feedback from customers that have implanted the device have been overwhelmingly positive. Now, in summary, Looking back on 2022, we're proud to have exceeded the commercial and operational objectives that we set forth at the start of last year. More importantly, we recognize the impact that Exonix is having on changing the lives of people with bladder and bowel dysfunction. In fact, in 2022 alone, our sacral normodulation systems and Bulkamed were used to treat over 65,000 patients worldwide. And yet, we are still scratching the surface of what is possible in the large, underserved, undertreated markets in which we participate. Our mission-driven team remains committed to innovating, supporting our dedicated physician customers and their patients, and raising awareness of our best-in-class therapies. So with all that said, I'll now turn the call over to Dan for his detailed review of fourth quarter financial results. Dan?