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spk09: 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.
spk02: 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.
spk13: 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?
spk01: Thanks, Ray. As Ray noted, Axonix generated net revenue of $85.9 million in the fourth quarter of 2022. This represented an increase of 62% compared to the prior year period. Sacral neuromodulation revenue was $70.3 million, of which 98% was generated in the United States. Volcomed revenue was $15.6 million, of which 79% was generated in the U.S. Gross profit in the fourth quarter of 22 was $63 million, representing a gross margin of 73.3% compared to 66.6% in the prior year period. Higher sales volume, bulk of med sales, and a product mix weighted toward the F15 neurostimulator contributed to a favorable gross margin compared to the prior year period. Operating expenses in the fourth quarter of 2022 were $66.6 million. Included in operating expenses is a $2.1 million non-cash charge for the change in fair value of contingent consideration related to the Bulk Med acquisition. Excluding acquisition-related charges, adjusted operating expenses were $64.5 million in fourth quarter 2022 and $51.6 million in the prior year period. Net income in the fourth quarter of 2022 was $700,000 and benefited from $3.8 million of interest and other income. Net loss in the prior year period was $15.2 million. In the fourth quarter of 2022, Axonix generated $10.1 million of adjusted EBITDA we are pleased to note that this marks the third quarter in a row Axonix has generated positive adjusted EBITDA. The attractive financial profile of the company and the inherent operating leverage in our business model is becoming more evident in our financial results. To set proper expectations, in the quarters ahead, there will be periods where we will swing back and forth between positive and negative adjusted EBITDA based on the seasonality of top-line results and corresponding gross margins. Based on current trends, we expect Axonics to be adjusted EBITDA and cash flow positive on a consistent basis at an annualized revenue level of approximately $350 million. We also generated positive free cash flow in the fourth quarter. As of December 31st, cash, cash equivalents, and short-term investments were $357 million compared to $350 million as of September 30th. With respect to fiscal year 2023 revenue guidance, we are reiterating the outlook that was provided in our January 11th pre-announcement. Overall company revenue is anticipated to be $342 million based on sacral neuromodulation and bulk of med revenue, each growing 25% compared to the fiscal year 2022. That concludes our prepared remarks, and I will now turn the call back to Neil. Thanks, Dan.
spk02: At this time, we are ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question, so we request that you please limit yourself to one question and one follow-up. Shannon, please begin the Q&A session.
spk09: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Travis Steed with Bank of America. Your line is now open.
spk15: Hi, everybody. Thanks for taking the questions. I guess I'll start with the market growth. I appreciate the numbers you gave. I don't know if there's a source that you had for those numbers, if you had your claims database or kind of how you came up with those numbers on the market growth. I think we had pretty similar numbers in our market model as well. But also, if you could just talk about kind of the path on getting to like mid-teens growth for next year, any green shoots you're seeing, you know, momentum from the DTC, just some other color around what you're seeing in the marketplace to help provide confidence in that sustained mid-teens market growth from here.
spk02: Let me just take the first part. So, Travis, this is Neil. On the question about the sources for the market growth, It's partially definitive healthcare claims data for the claims that have been uploaded as of this date, so that's partially the driver of 2022, and then also using the information that Medtronic discloses in their quarterly results. I'll turn it over to Mike. Yeah.
spk13: So, look, in terms of the future, I mean, I think it's pretty clear, right? This market is accelerating. It's happening in real time, and we've seen it certainly in the three quarters of 2022. And I think the DTC campaign is what is creating a lot of these green shoots, as you referred to them. I mean, think about the magnitude of the number of people that are visiting our website inquiring about advanced therapies, whether it be for stress incontinence or urinary urge incontinence, whatever the case might be. So I think that's happening. I think that it's interesting to note that our competitor, despite, as they referred to, competitive pressures, also saw increases. in their revenue in this category in their last quarter. So we take that as good news, and we're thrilled to see that. We've said all along since the beginning that it's about raising the tide here, and it'll float everybody's boat in this current duopoly that we're involved in. So we're going to continue to press hard on our DTC initiatives. We're not going to spend that much more in 23 than we did in 22, just because there's so many people inquiring that we want to give justice to the people who fill out these quizzes and get them placed for a consult with a qualified physician in their local area. And I think the last comment I would say is if you just take a step back and you think about what has transpired from an innovation standpoint in this market in three years, I mean, in November of 2019, the only thing you could get was a device that would last two to five years in your body, that was not MRI compatible, and was not easy to use. And here we are now with a whole lineup of products that will last 20 years or longer in a person's body, whether they be rechargeable, not rechargeable. And think about what we've done now from a rechargeable standpoint, where You know, you've got a product that, you know, is going to last decades in your body, and you maybe have to recharge this thing for one hour every six months or maybe in some cases as long as 10 or even 12 months at a time. So I think it's a combination of many factors that are contributing. Innovation is key. Advertising, so to let people know that it's not normal to leak urine. And then, of course, the number of feet on the street that we have. and then the whole innovative piece of the puzzle. So hopefully that's not too long-winded, but covers kind of the basis of why we're bullish about this. Now, it's taken a little bit of time to be able to get third-party data and to be able to be very clear about growth rates that we've been seeing, and partially because of the pandemic. And it's funny how everybody seems to want to forget that we just lived through this for a number of years and things are much better today. But we've only had now, actually, if you think about it, Exonix has operated in a quote-unquote normalized environment for approximately four months since we started to commercialize in November 2019.
spk15: Great. Thanks, Ray. And then maybe one for Dan on margins. I heard your comments kind of back and forth on EBITDA over the course of 2023. maybe put a little more color on that. And you gave this $350 million number, which seems like it'd be there by the end of 2023. And so as you moved into 2024, you know, what's the pathway for margins? You know, once you start to hit sustained profitability, you know, how quickly can you get to, you know, 20, 30% EBITDA margins in this business?
spk01: We've always basically not, well, we've never put a specific timeframe on it. What we're looking at throughout 2023, as we mentioned, you know, on the gross margin outlook is we're expecting to see a, 100 basis point increase in 23 over 22 on the gross profit basis, and that's driven by a better manufacturing year-old overhead absorption and partially offset by inflation and supply chain costs. And then as you get out into 2024 and you look at the crossover point into positive cash flow and adjusted EBITDA positive, as time goes on, the operating leverage here, and we've said this numerous times, we expect to significantly increase and in some In some cases, we've said double the revenue we have with roughly the same sales and marketing spend we have with minimal ads. I think when you just look out not that far, you can get to your 20% EBITDA operating margins. I just don't want to put a stake in the ground as to what quarter that's going to happen. That's fair.
spk15: Thanks for taking the questions, and I'll let others jump in. Thank you. Thanks.
spk09: Thank you. Our next question comes from the line of Larry Beagleson with Wells Fargo. Your line is now open.
spk06: Good afternoon. Thanks for taking the question. Congrats on a strong end to a strong year. Ray, I wanted to ask about the guidance. You had about a 33% share of the U.S. S&M market in calendar Q4. The U.S. market was about $780 million. If the market grows 15% in 2023 and your share holds at 33%, it would imply U.S. sacro-neural modulation sales of over 290 million, which is above your guidance of 278 worldwide. So my question is, is there something unusual about your share in calendar Q4? Do you expect the U.S. market to grow below 15% this year, or is there just some conservatism here?
spk13: I think the short answer, Larry, we're just trying to be a little conservative, not get over our skis. And, you know, I mean, you know, we can't predict perfectly what exact percentage the market's going to grow in 2023. I mean, all we can do is, you know, put our heads down and execute the game plan as we've been doing, which, you know, is not new to you, Larry. I mean, we've been talking about this as Exxonix has been all about execution since we you know, took the company public in, you know, on Halloween in 2018. So, you know, look, our objective, of course, is to give guidance and obviously to overachieve. I mean, that's what everybody's focused on. And so I don't think there's more to it than other than that.
spk06: Okay, fair enough. Ray, I feel compelled to ask because we keep getting asked about it. um on tibial nerve stimulation um you know you don't seem you know maybe i'm just you know asking i guess if anything has changed you don't seem interested in having access uh to this technology you know internally uh for for you know for axonics nor do you see it as a threat you know i'd love to hear your updated thoughts on on why thanks for taking the question well thanks larry but personally i'm i'm boycotting boycotting those questions but dan has volunteered to answer
spk01: It's an inside joke, Larry. You know us well. Look, our position hasn't changed. We understand. We know these companies well. We've tracked them for the better part of 10 years now. And look, our thinking is, you know, an implant is an implant. Our device has a 90% efficacy in our FDA study. We haven't seen any efficacy from any of the implantable tibial companies that comes close to that. It's a complex procedure and a part of the anatomy that these doctors aren't trained to do. And there are obviously a lot of questions about how you do market rollout and then ultimately what reimbursement looks like coming from the CPT editorial panel. So I would just leave it at that. Look, we're watching it. We'll pay attention to this. This is going to unfold over the next three to five years, and we'll see how it plays out. But we're not concerned, and we certainly don't see it as a short-term or intermediate-term competitive threat.
spk05: All right. Thanks for taking the questions.
spk09: Thank you. Our next question comes from the line of Chris Pasquale with Nefron Research. Your line is now open.
spk18: Thank you. Congratulations, guys, on a great year. I wanted to maybe dig in on the other half of Larry's question about the guidance and the assumptions there and talk about bulk mids. You know, 25% is a nice round number. How are you thinking about the goals for that franchise in 23? And you talked about getting more involved with the gynecology call point. Is that something that you're planning for this year?
spk13: Yeah, thanks, Chris. I appreciate the question. Once again, I think that it's very difficult to predict, right? Oh, we're going to grow this particular product line at 75% again this year. I mean, it's very, very difficult to do that. So we're, once again, trying to be conservative and We think this product's got a lot of legs, as we have seen so far, and has very quickly become, you know, first-line therapy for women with stress urinary incontinence. Now, having said that, you know, we treated, you know, the number was maybe call it 52,000 or so patients in 2022. You know, but if we go back to slings in 2015, there were 350,000 sling operations done in 2012. And you can imagine, right, it's difficult for a woman to agree, yeah, I'd like an operation because I cough or sneeze and leak some urine or exercise. I mean, it's an annoying problem. There's no question about it. And it can directly impact people's quality of life. We understand that. But women don't want an operation for a stress urinary incontinence. That's not what they want. And so I think it's just going to take some time for us not to persuade the people, the women, but to persuade the physician community that BulkMed is the right solution for the vast majority of patients who present with these symptoms. That's our challenge. And, you know, as you know, Chris, medicine changes slowly. It's almost like built in, you know. And it's just going to take time for us to continue to create awareness and get the physicians to really start talking about this as an option to their patients. Now, you mentioned the GYN community, right? So that's a community that we haven't been aggressive with, but we're starting now to market to that community. But even within our core urology and urogynecology community, I mean, not enough of them are currently offering Volcomed, right? Now, we just started to scratch the surface. So if you're asking me what do I think the potential is, the potential is for hundreds of millions of dollars of sales of Volcomed on an annual basis. But it's just going to take us some time for us to be able to get there and to get these physicians, in effect, prescribing Volcomed. not talking about, well, you know, there's this other option, and I've been doing these sling operations, and they really work, but let me tell you about the adverse event. Oh, but yet there's this, you know, there's this option, you know, that you may want to consider. No, that's not the talk track that they should be using, right? So we got some work to do, and we're very bullish about it. It's just that we're really trying not to get over our sleeves, our skis on this. So, you know, give us a little more time, but inherent in your question is how bullish are we, and it's hard to be more bullish about the potential for Volcomed to treat stress urinary incontinence as first-line therapy for patients.
spk18: That makes sense. Thanks for walking through that. Switching back to the SNM side, I'm curious what you see as the biggest remaining bottlenecks in terms of growing that market today. You guys fixed the technology problem the market had before you got there. You're raising awareness. Is the biggest rate limiter today the number of physicians who are doing the procedure or how much of their practice they're devoting to it, or is it something else?
spk13: It's really a good question. It's really a good question. It really is a good question. And as you might imagine, Chris, we spend a lot of time internally talking about this. And when I say internally, I mean with our salespeople, our sales managers, and amongst senior management. So here's the problem that we're facing. And I'm going to be careful because I don't want to disparage our competitor, but you know, they had a product that just wasn't that attractive. And for 20-something years, it was the only option. So what has been implanted in physicians' minds is that sacral modulation is difficult to do. It's fussy. You know, it's not so easy to drop this lead down, and the tools maybe weren't as easy to use. And And then my patients, you know, would need to come back for reprogramming and all this other noise. And, you know, it just takes time to kind of erase that legacy mindset. And I would tell you if physicians spent more time talking to their patients and actually prescribing, once again with that word, prescribing sacral nodulation, then this market would double overnight, okay? So what does all that mean? That means that we have to be persistent. We have to be out there, you know, keep beating the drum, making things easier to use, you know, reinforcing the great clinical results that we're actually getting. I mean, we've instituted a program which our field team has embraced, which we call quarterly business reviews, where we actually sit down with our customers at the end of each quarter and say, look, here's how many patients that presented that, you know, you did an external trial on. Here's your conversion rates. Here's the satisfaction data coming out of your actual patients because, you know, we're the ones talking to those folks and making sure they're good to go and they're tucked in. So I think it's just going to take some time, and it's almost as if we've kind of created a new category called sacral neuromodulation, okay? And it ain't your grandfather's product, right? So I think that's the story. So you can tell, Chris, I mean, we're really enthusiastic about what's going on, about this business. I mean, it's turned out to be all the things that we expected in terms of how underpenetrated it is and how much potential it is. But I think, look, we're going to continue to keep our heads down. We're going to continue to execute. We're going to grow our business at record rates here. We're proud of what we've accomplished, but we honestly feel like we've just scratched the surface. We've got a lot more work to do. Sorry, I spent a lot of time not answering your question, but here's the answer. It's same-store sales. It's getting the average physician, instead of doing 12 of these things a year, to do 24 of them a year. I mean, that's how we double our business. It's not about going out and finding another 2,000 doctors who want to dabble with sacromodulation. This is about getting the people that know what they're doing, giving them better products, easier tools, better support, and just getting them to talk more about it. And I think it sounds quite simple. And in one respect, it really is, but, you know, once again, requires, you know, real keen focus and execution. Great.
spk18: Thanks, Ray.
spk13: Yeah, thank you.
spk09: Thank you. Our next question comes from the line of Cecilia Furlong with Morgan Stanley. Your line is now open.
spk11: Great. Good afternoon, and thanks for taking the questions. I wanted to follow up just on some of your comments around S&M and OUS markets. Australia and the framework that you put around there. Could you, one for Australia, just kind of frame the opportunity where the market is today on a relative basis versus the U.S.? How do you think about growth beyond 23? And then for 23 specifically in Europe and other locations where you're benefiting now from both mid-present, how we should think about S&M growth in those regions?
spk01: I mean, at a high level is right. This is Dan. Hi, Cecilia. Nice to Nice to hear you. As Ray mentioned in his prepared remarks, the Australian market for S&M we estimated around $15 million per year. And we have approvals and we have coverage, but we don't have it yet on our F-15 recharge-free product, which is why the statement that was made is we expect to do between a million and a million and a half revenue in 2023. Now, beyond that, look, we intend, like we do in all markets, to be the market leader. It's just a question of perseverance and time, and we don't want to put a specific date on that. But look, as we continue to grow, the market is so heavily skewed towards the United States for all of these products that even though we will increase our OUS sales in both product categories for S&M and also for Bulkamed, the U.S. growth is going to outdrive it. And so this will probably forever be a story about the U.S. market, but our goal, you know, intending to be the market leader and as a global player, is we want to take care of patients, physicians, and their practices worldwide. And so that's why we continue these efforts OUS. You know, we, of course, make revenue and margin off of it, but just as being a good corporate citizen and treating patients, You know, it's part of the plan. And we started in Europe, and we've worked with a number of these physicians. In our previous company, we were in Australia in a big way. And so it's kind of natural for us to also move into this market since we have the full product line and we have the approvals.
spk13: I would add two things to your question, and that is that, you know, the markets outside the United States are all capitated, you know, and that's the fundamental issue here. Um, you know, if there was a laissez faire market, you know, we'd, we'd be on it hard, but it's not the case. And, uh, you know, I've mentioned that many times before, if, you know, if you take a market, you know, like the UK as an example, which is probably the law, one of the largest markets, if not the largest market in Europe, you know, the government's going to pay for 800 implants. So, you know, you, right now you've got two companies fighting each other, you know, to get, to get the lion's share of that business and how much energy do you really want to want to spend? you know in trying to grow that business when in fact you know the state of Mississippi outsells you know outsells the country of the United Kingdom right so you can imagine you know it's a lot easier for us to expand our our efforts in Mississippi than it is in you know throughout the UK so hopefully that gives you some context why we're so focused on the US market and I You know, and there is a correlation, of course, between, you know, having bulk med available in some of these other markets around the world. But, you know, S&M is a completely different animal. You know, that's a product line that, you know, you need presence to make sure implants go well, to program the patient. So it's a much heavier lift for us to, you know, to really open up a new market. Now, last comment. Obviously, we are looking to Asia in the future. You know, we understand big potential in places like Japan and China. And, you know, that's something for the future of the company. But right now, we're going to continue to stick to our knitting and focus mainly here in the United States.
spk11: Great. Thank you for the call. And if I could follow up as well. Just R20, where you are at this point, kind of in the delimited market release in the If you think about 23.2, just the R20 rollout, target targeting, and also tied in with that, how we should think about the impact to gross margin.
spk13: So I think you're a little broken up, but I think your question, you were referring to our new rechargeable R20. And here's my comment about that. I'm going to not predict it. because the last time I was asked to predict the split between rechargeable and non-rechargeable, I was off a bit. So we're optimistic. Early on, we have seen that this product is capturing the imagination of physician implanters in the United States and their patients. I mean, it's a pretty cool product. So already we see an increase in rechargeable sales, in the few short weeks that we've had the product in the marketplace. But it's going to be hard to predict. I mean, that F-15, I just think it just blew people's minds, honestly, about the longevity of the product and how nice and small it is and everything else. So, you know, it's kind of a fun thing where now we have these really amazing products that are actually competing for mindshare you know, with patients and providers. So the last word there is we're agnostic. We've got great margins, or good margins, I should say, at least, on these products. And, you know, whatever it is that a physician and their patients decide to do, we're just happy that it's Exonic.
spk09: Thanks for taking the question.
spk13: Thank you.
spk09: Thank you. Our next question comes from the line of David Rescott with Truist. Your line is now open.
spk16: Hey, guys. Thanks for taking the questions, and congrats on a strong fourth quarter and strong end of the year. I guess just first on the guidance, I wonder if you could provide any color maybe around how we should think about the cadence for the year. I think consensus right now has about 34% growth in Q1. Obviously, there's typical Q1 seasonality, but, you know, year over year, year comes a little bit easier, and then, you know, growth kind of stepping down throughout the year. So just wondering first maybe how we should think about that growth on a quarterly basis through the year.
spk01: Yeah, I mean, I think, you know, you've already hit on it, David, which is we're all aware of the impact of, you know, first quarter drop-off due to, you know, seasonality, people not having met their deductibles. You know, these are elective procedures both for S&M and bulk and med. And so we're, in this particular therapy category, we're particularly sensitive to the seasonality. And so, as we've noted, the guidance for 2023 projects 25% year-over-year revenue growth for both sacral neuromodulation and bulk amid. And because of, you know, and that said, you know, because of the impact of Omicron in Q1 of last year, which contracted the markets, You know, we expect growth year over year in Q1 to be in the low 30s this quarter, year over year. And then for the remainder of 2023, what that drops out is we expect to see growth in the low to mid 20s as you look forward. So does that answer the question? Yes.
spk16: Yeah, no, that's helpful. I guess just a second one from us. You know, if you could provide any update maybe on ongoing litigation or the upcoming jury trial, maybe any risks associated with that and whether or not we should be thinking about any type of incremental spend in 2023. Thank you.
spk13: So I guess the hot flash is that the trial date has been pushed. So we're now, it was originally scheduled for mid-April. It's now scheduled for mid-August. and I really don't think there's much more to say that we haven't said before, unless, Dan, you want to add something.
spk01: No, I mean, I think the only thing I would add is the standard thing we always say, which is, I mean, going all the way back to 2019 when these claims were filed against us, is we've always said that we don't believe we're infringing on any patent claims. We take this very seriously, and, you know, at some point this will be tried, and then we'll report out on it. So, you know, as Ray said, it's been pushed now to August, and we still maintain our position. We haven't infringed on anything. Okay, thank you.
spk09: Thank you. Our next question comes from the line of Adam Mader with Piper Sandler. Your line is now open.
spk17: Hi, Ray. Hi, Dan. Good afternoon, and thanks for taking the questions, and congrats on ICQ-4 and 2022 year. Maybe, Dan, for you, I wanted to just kind of flesh out some of the P&L assumptions to the extent you're willing to share just around kind of off-ex spend, how to think about that and cadence of spending, as well as the level of DTC spend in 2023. Thanks. Okay.
spk01: I mean, just so that we're – Adam, good to hear from you. Just so we're working off the same baseline – You know, adjusted operating expenses in 22 were $240 million. And so that includes stock-based compensation as well as depreciation and amortization. What it would exclude are the non-cash charges related to the contingent consideration or milestone payment that we will someday owe to Ontura for the acquisition of Baltimore. Keep in mind, we have a milestone payment of $35 million when we sell a certain amount of bulk embed in a trailing 12-month period. Now, looking at operating expenses with that same platform, in 2023, we expect the total OPEX to be $280 million. It's a mid-teens increase above 22. And when you back that up against the 25% year-over-year increase in revenue for S&M and bulk embed, it just reiterates the operating leverage that we expect to see.
spk17: Really helpful, Dan. Thank you for the color there. And for the follow-up, I wanted to ask about one of the stats, I hope I heard it correctly, that you guys provided in the prepared remarks. But I think you said you have nearly 1,000 physician implanters doing S&M in the United States. I was wondering if you're able to kind of give a little bit more detail there and also remind us kind of how you kind of view market concentration and how fragmented the volumes are. And then I guess the other part of the question is, you know, how do you think about that number? Kind of where can it go over time? Thanks so much for taking the questions.
spk13: Yeah, thanks, Adam. So I'm trying to parse the question a couple pieces here. So, you know, if you take, the math is not that hard to come to. If you take the sacral modulation revenue that we did in 2022 and divide it, by the average selling price of, call it $15,500, you know, divided by the number of customers, then, you know, there it is, right? It comes out to about 14 S&M implants per customer. And these are, you know, not accounts. This is a physician count, right? So you could have, you know, four physicians in a given, you know, group urology practice, which may or may not be owned by the hospital, right? So that's kind of how we look at it. So those are the averages. We've kind of avoided this, as you know, Adam. We've avoided this in the early days just because it's all over the board when you're first starting. You know, you get some implanters that might be doing 50 a year. That's a great customer, right? And then some that may, you know, they may just getting reinvigorated and they may only do six. So, you know, that's where you come about that average. I mean, I think it's embarrassingly abysmal, okay? I mean, bottom line, I mean, this is silly that the average customer in the United States is doing as few as they are. Now, that presents a big opportunity and a big upside for us, right? I mean, and these numbers are better today than they were when we started in 2020, right? I mean, we are seeing incremental increases in same-store sales on that side. So, you know, it's all upside for us from that standpoint. So hopefully, I'm looking at my colleagues now to see if there was any other substantive part of the question.
spk01: No, I think... Can you do that?
spk13: How many more could be?
spk01: I think Ray has nailed it. Look, they're, you know, call it between... 2,500 and 3,000 physicians that have implanted S&M. Ray said it, I think, in the prepared remarks or in one of the earlier questions, which is we don't need to go out and find new physicians to bring them into S&M. And with the innovation that we brought to the table and the sales and marketing team and the fact that we are smothering these accounts with clinical specialists to make sure that everything goes perfectly well for their patient population, it's just time. right? It's perseverance and time for same-store sales to increase. We track this internally. We know exactly how many more units each customer did in 2022 over 2021, and it's really solid growth. And so we believe over the next five years, we're going to see a big increase in utilization. And the great news, as Ray just mentioned, is since the average, because it's not all at that level, but it's very easy for these physicians to double or triple their volume without running into any issues with access to operating suite time or patient population.
spk13: You know, and Adam, it's Ray again. Now, I have one more thing I'd like to add, and it's been really interesting with Volcomette. Because what we have found is that only about half of the customers, and by the way, we have more Bulkamed customers than we have S&M customers right now, and we found about half of them are not even doing sequential modulation. And of the half that are doing it, not all of them are our customers, right? Some of them are competitive accounts. So this is really interesting and has been a true eye-opener for us, right? And that is that, look, if you're doing Bulkamed, I mean, there is no reason in the world why you're not doing cyclonal modulation. It's just that you've got maybe a bad attitude about it, you know, given the legacy products that were out there, right? But once again, a big opportunity for us in terms of that. And having BulkMed has really helped, right? It's getting us, you know, into accounts that we normally wouldn't have been. And it's giving us a lot of opportunities for cross-selling, which we've been taking full advantage of, which I think is showing up in our market share numbers and so on and so forth. But really appreciate the questions. It's a good question. We're happy to chat about that. Good, Cutler. Thank you. You bet.
spk09: Thank you. Our next question comes from the line of Michael Polark with Wolf Research. Your line is now open.
spk03: Hey, good evening. A lot of questions asked, so I'll boycott my second question and just ask one. I'm curious, you know, the expansion into being a tooth therapy company with Bulk Amid has proved to be highly successful. You built a real platform on a focused call point. I've asked this question before. I'm just curious for your updated views. Is there interest in adding a third leg to the stool? What does that opportunity set look like today or? or is the focus in 23 on, you know, executing on this core vision? Thanks so much.
spk12: It was Mike, right? Yeah. Yeah. Yeah. Thanks, Mike.
spk13: You know, when you're asking a question, I just keep thinking about what's going to be the headline in your report that you're going to put out after we finish. So in any event, it's going to have something to do with it. The way I answer this question might show up in this headline about the third leg on the stool, right?
spk03: You've already used the word boycott, so that's good inspiration. Use the word focus, Mike.
spk13: So, look, I think that it's not as if there aren't folks who've come to us with all kinds of other opportunities and various different products that could fit even within the urology or urogynecology arena. I just think that we're early as a company. We just continue to kind of get that point across. It's three years since we've been in commercial distribution. And as you know, we've got this thing about execution and doing things well with quality. And we don't want to lose focus. This is such a greenfield opportunity that I think if all of a sudden we were to bring something new to the game that maybe deals with men or some other kind of urology product, I think that I would be a little circumspect if I was sitting on the outside. I mean, this is such a big opportunity that I think a lot of companies would be quite envious of what we're looking at. So, therefore, we're going to stick to our knitting. It's not to say that we won't add additional, let's say, things that could make things easier in the future, et cetera, et cetera. But we're going to kind of focus in this area of incontinence and, you know, for the foreseeable future. And then we'll reevaluate. But our goal is, as we've stated, number one, market leadership and synchronal modulations. And we are more than three quarters of the way to that goal right now. So we're going to continue to press that hard. And, you know, we'd like to be a half a billion dollar company. And we think that's within, you know, within our grasp. And, you know, then maybe things change for us. And we, you know, we have more levers to push at that point. But you're not going to be surprised by some announcement that all of a sudden we decided to get into BPH or something like that. That's not the direction that we're thinking about. So I appreciate the question. Understood. Thank you.
spk09: Thank you. Our next question comes from the line of Shagan Singh with RBC Capital Markets. Your line is now open.
spk08: Great. Thank you so much for taking the question. Just one topic for me. You talked about a big focus on same-store sales and doubling and tripling volumes. Where are these patients coming from? And anecdotally, what are you hearing from customers on volume and demand in 2023? And then just on awareness, what are the levels of awareness for medical device intervention options? you know, is it quantifiable? Is it like, you know, in the single digits, double digits, like anything you can share? And I'm sorry, I missed the DTC spend for 2023. Can you just remind me what the amount was? Thank you.
spk13: So we spent about $20 million in 2022 on DTC. We'll spend approximately the same amount in 2023. Where are the patients coming from? They exist in every physicians practice in urologists and urogynecologists. They've been walking in the door and out the door. They've been getting a drug prescription and walking out the door and never coming back. And we have proven this to a lot of our customers by just getting a mail or a simple letter in the mail to their existing customers saying, hey, we've got new technology. You may want to, you know, specific to your problem, you may want to consider coming back in here once you fill out this symptom questionnaire. and we'll get you scheduled. It is unbelievable how many new patients get activated. We've talked about Botox numerous times, the fact that about 150,000 women got Botox in 2022. Well, you know, 15 or 20% of all the customers that all the patients that we treat have previously had Botox. So a big campaign of ours is getting that across to the physicians to say, look, you're just temporizing these patients. You're giving them a temporary solution for a chronic problem. Let's get them back in here. Let's talk to them about, you know, a long-term, multi-decade solution that will solve their problem. So we don't need to find the patients that are already there. And this is a point that I think is maybe counterintuitive. It's just counterintuitive. You think that, well, you go see a urologist, They're going to spend time with you. They're going to talk to you about all the treatment options. But the reality is if you took a stopwatch and you went in and saw what actually happened, I mean, they're spending minutes, only minutes with these patients. And so that's part of the issue. So you can see why we're doing all these other things. Why do we have storybooks? Why do we have clinical specialists? Why are we providing a DTC? We're trying to help have the patients identify themselves and wave their hands in front of the office and say, hey, I got this problem. Help me. Don't give me another drug prescription that doesn't work. So I think there's nothing really new about this. It's just this is what's going on. And, I mean, there are tens of millions of people that are just sitting out there right now, and they're not getting the treatment that they deserve. And we're going to do our little part to see that more of these patients get treated. And I mean, if the DTC numbers don't really get the point across, I don't know what else would. I mean, 11,000, 12,000 people are filling out a symptom questionnaire and saying, please connect me with a local provider in my community to get evaluated. These are incredible numbers. And once again, pale in comparison to the number of patients that are already sitting in EMR systems or file cabinets of customer locations around the United States. So we really appreciate that question. You've helped us, you know, even further inform about this topic.
spk00: Thank you.
spk09: Thank you. Our next question comes from the line of Michael Sarcone with Jefferies. Your line is now open.
spk14: Thanks. Hi, Ray, Dan, and Neil. Thanks for squeezing me in here. One follow-up on the DTC campaign, it does look like, you know, you're gaining some steam there. You talked about over 11,000 qualified leads in January. Could you just give us an update on kind of what the mix of those patients looks like? I know in the past you've talked about 60% treatment naïve. So any update there? And then, you know, when do you think you might start being able to mine some of the patients in terms of implants that come in through the funnel?
spk13: So, Michael, thanks for the question. It's already happening. We are, you know, able to now start to make direct correlation between patient names that have filled out questionnaires and those who are getting treated. The numbers are growing. We've said it's about a six-month gestation period before we could truly expect stuff. We are starting to see it. It is measurable. We're very encouraged by that. Having said that, nothing has changed. I mean, it may be even more people who are filling out these questionnaires that are treatment-naive. So I think, once again, that just underscores how... generally speaking, the population here in the United States is unaware that there are advanced therapies to treat this problem. So, you know, it's all good. It's all moving in the right direction. But the reason we're not spending more money on DTC is simply because we want to do justice to those individuals who've already raised their hand. And it's a process, you know. 11,000, 12,000 people raised their hand. You've got to reach out to all of those individuals, try to get them on the phone, try to get them an appointment. I mean, and if anything, what we were doing differently in 2023 is moving more towards a concierge service so that we can, you know, kind of keep people on the line and get them in the appointment book, because that's where things kind of break down, right? You know, practices are busy and and all the rest. And everything else, every other management team has said, which we don't need to repeat on this call. But could we do more? Yes. Could we spend more? Yeah. Could we generate more interest? Yeah. But once again, it's a big task to be able to do justice to the quote-unquote leads that we're getting to begin with.
spk17: All right. Thank you.
spk12: Thanks, Michael.
spk09: Thank you. Our next question comes from the line of Mike Madsen with Needham & Company. Your line is now open.
spk04: Thanks. I'll just ask one question since we're past the 30-minute mark here. So I guess just wondering about kind of the pipeline and, you know, we've seen tremendous improvements in lifespan and size of these devices in a fairly short period of time. And you seem to have been launching kind of a new version, you know, annually. So can you continue that pace and, you know, are we nearing sort of the near-term limits in terms of battery life and size and things like that for these devices?
spk13: So, you know, it's another interesting question. You know, Mike, I think the fair answer is that our engineering team has really overachieved. I don't think anybody expected, you know, this kind of longevity. with these really very small, very thin devices. We feel very confident that we've kind of wrung out a lot of what can be had on the implantable pulse generator side. So I think we're kind of pencils down there for IPGs for the moment. Our attention now is focusing on reimagining our external trial system so that that's more comfortable for people. That's something that's an initiative inside the company and other things related to just streamlining the whole process of getting patients through the care pathway and interfacing with our people and external trials and all these kinds of things. So you're going to see more innovation from Exonix, no question. It's just not going to be in the near term being defined as the next year or two. It's not going to be on the IPG side. It's going to be other accoutrements, if you may, for the system. Okay, got it. Thank you.
spk09: Thank you. I would now like to hand the conference back over to Raymond Cohen for closing remarks.
spk13: All right. Well, thank you. That was a really good, robust Q&A session. We really appreciate the questions coming from the analyst community. So just in closing, I'd like to just say that we remain grateful for the trust that physicians, patients, and, of course, shareholders have placed in Exonix. As always, I'd like to thank my colleagues in Irvine and our team in the field for their diligent efforts and dedication to fulfilling the Exonix mission of improving the lives of adults with incontinence. And so I thank you all for joining us on today's call, and we'll look forward to speaking with you more
spk09: as the year unfolds you all have a good evening this concludes today's conference call thank you for participating you may now disconnect Hello. Thank you.
spk10: Thank you.
spk09: 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.
spk02: 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 1, 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.
spk13: 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&M 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 sequenal 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 US 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 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 from 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 exonic 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 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 $1 to $1.5 million 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?
spk01: Thanks, Ray. As Ray noted, Axonix generated net revenue of $85.9 million in the fourth quarter of 2022. This represented an increase of 62% compared to the prior year period. Sacral neuromodulation revenue was $70.3 million, of which 98% was generated in the United States. Volcomed revenue was $15.6 million, of which 79% was generated in the U.S. Gross profit in the fourth quarter of 22 was $63 million, representing a gross margin of 73.3% compared to 66.6% in the prior year period. Higher sales volume, bulk of med sales, and a product mix weighted toward the F15 neurostimulator contributed to a favorable gross margin compared to the prior year period. Operating expenses in the fourth quarter of 2022 were $66.6 million. Included in operating expenses is a $2.1 million non-cash charge for the change in fair value of contingent consideration related to the Bulk Med acquisition. Excluding acquisition-related charges, adjusted operating expenses were $64.5 million in fourth quarter 2022 and $51.6 million in the prior year period. Net income in the fourth quarter of 2022 was $700,000 and benefited from $3.8 million of interest and other income. Net loss in the prior year period was $15.2 million. In the fourth quarter of 2022, Axonix generated $10.1 million of adjusted EBITDA we are pleased to note that this marks the third quarter in a row Axonics has generated positive adjusted EBITDA. The attractive financial profile of the company and the inherent operating leverage in our business model is becoming more evident in our financial results. To set proper expectations, in the quarters ahead, there will be periods where we will swing back and forth between positive and negative adjusted EBITDA based on the seasonality of top-line results and corresponding gross margins. Based on current trends, we expect Axonics to be adjusted EBITDA and cash flow positive on a consistent basis at an annualized revenue level of approximately $350 million. We also generated positive free cash flow in the fourth quarter. As of December 31st, cash, cash equivalents, and short-term investments were $357 million compared to $350 million as of September 30th. With respect to fiscal year 2023 revenue guidance, we are reiterating the outlook that was provided in our January 11th pre-announcement. Overall company revenue is anticipated to be $342 million based on sacral neuromodulation and bulk of med revenue, each growing 25% compared to the fiscal year 2022. That concludes our prepared remarks, and I will now turn the call back to Neil. Thanks, Dan.
spk02: At this time, we are ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question, so we request that you please limit yourself to one question and one follow-up. Shannon, please begin the Q&A session.
spk09: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Travis Steed with Bank of America. Your line is now open.
spk15: Hi, everybody. Thanks for taking the questions. I guess I'll start with the market growth. I appreciate the numbers you gave. I don't know if there's a source that you had for those numbers, if you had your claims database or kind of how you came up with those numbers on the market growth. I think we had pretty similar numbers in our market model as well. But also, if you could just talk about kind of the path on getting to like mid-teens growth for next year, any green shoots you're seeing, you know, momentum from the DTC, just some other color around what you're seeing in the marketplace to help provide confidence in that sustained mid-teens market growth from here.
spk02: Let me just take the first part. So, Travis, this is Neil. On the question about the sources for the market growth, It's partially definitive healthcare claims data for the claims that have been uploaded as of this date, so that's partially the driver of 2022, and then also using the information that Medtronic discloses in their quarterly results. I'll turn it over to Mike. Yeah.
spk13: So, look, in terms of the future, I mean, I think it's pretty clear, right? This market is accelerating. It's happening in real time, and we've seen it certainly in the three quarters of 2022. And I think the DTC campaign is what is creating a lot of these green shoots, as you referred to them. I mean, think about the magnitude of the number of people that are visiting our website inquiring about advanced therapies, whether it be for stress incontinence or urinary urge incontinence, whatever the case might be. So I think that's happening. I think that it's interesting to note that our competitor, despite, as they referred to, competitive pressures, also saw increases. in their revenue in this category in their last quarter. So we take that as good news, and we're thrilled to see that. We've said all along since the beginning that it's about raising the tide here, and it'll float everybody's boat in this current duopoly that we're involved in. So we're going to continue to press hard on our DTC initiatives. We're not going to spend that much more in 23 than we did in 22, just because there's so many people inquiring that we want to give justice to the people who fill out these quizzes and get them placed for a consult with a qualified physician in their local area. And I think the last comment I would say is if you just take a step back and you think about what has transpired from an innovation standpoint in this market in three years, I mean, in November of 2019, the only thing you could get was a device that would last two to five years in your body, that was not MRI compatible, and was not easy to use. And here we are now with a whole lineup of products that will last 20 years or longer in a person's body, whether they be rechargeable, not rechargeable. And think about what we've done now from a rechargeable standpoint, where You know, you've got a product that, you know, is going to last decades in your body, and you maybe have to recharge this thing for one hour every six months or maybe in some cases as long as 10 or even 12 months at a time. So I think it's a combination of many factors that are contributing. Innovation is key. Advertising, so to let people know that it's not normal to leak urine. And then, of course, the number of feet on the street that we have. and then the whole innovative piece of the puzzle. So hopefully that's not too long-winded, but covers kind of the basis of why we're bullish about this. Now, it's taken a little bit of time to be able to get third-party data and to be able to be very clear about growth rates that we've been seeing, and partially because of the pandemic. And it's funny how everybody seems to want to forget that we just lived through this for a number of years and things are much better today. But we've only had now, actually, if you think about it, Exonix has operated in a quote-unquote normalized environment for approximately four months since we started to commercialize in November 2019.
spk15: Great. Thanks, Ray. And then maybe one for Dan on margins. I heard your comments kind of back and forth on EBITDA over the course of 2023. Maybe put a little more color on that. And you gave this $350 million number, which seems like it could be there by the end of 2023. And so as you moved into 2024, you know, what's the pathway for margins? You know, once you start to hit sustained profitability, you know, how quickly can you get to, you know, 20, 30% EBITDA margins in this business?
spk01: We've always basically not, well, we've never put a specific timeframe on it. What we're looking at throughout 2023, as we mentioned, you know, on the gross margin outlook is we're expecting to see a, 100 basis point increase in 23 over 22 on the gross profit basis, and that's driven by a better manufacturing year-old overhead absorption and partially offset by inflation and supply chain costs. And then as you get out into 2024 and you look at the crossover point into positive cash flow and adjusted EBITDA positive, as time goes on, the operating leverage here, and we've said this numerous times, we expect to significantly increase and in some In some cases, we've said double the revenue we have with roughly the same sales and marketing spend we have with minimal ads. I think when you just look out not that far, you can get to your 20% EBITDA operating margins. I just don't want to put a stake in the ground as to what quarter that's going to happen. That's fair.
spk15: Thanks for taking the questions, and I'll let others jump in. Thank you. Thanks.
spk09: Thank you. Our next question comes from the line of Larry Beagleson with Wells Fargo. Your line is now open.
spk06: Good afternoon. Thanks for taking the question. Congrats on a strong end to a strong year. Ray, I wanted to ask about the guidance. You had about a 33% share of the U.S. S&M market in calendar Q4. The U.S. market was about $780 million. If the market grows 15% in 2023 and your share holds at 33%, it would imply U.S. sacro-neural modulation sales of over 290 million, which is above your guidance of 278 worldwide. So my question is, is there something unusual about your share in calendar Q4? Do you expect the U.S. market to grow below 15% this year, or is there just some conservatism here?
spk13: I think the short answer, Larry, we're just trying to be a little conservative, not get over our skis. And, you know, I mean, you know, we can't predict perfectly what exact percentage the market's going to grow in 2023. I mean, all we can do is, you know, put our heads down and execute the game plan as we've been doing, which, you know, is not new to you, Larry. I mean, we've been talking about this as Exxonix has been all about execution since we you know, took the company public in, you know, on Halloween in 2018. So, you know, look, our objective, of course, is to give guidance and obviously to overachieve. I mean, that's what everybody's focused on. And so I don't think there's more to it than other than that.
spk06: Okay, fair enough. Ray, I feel compelled to ask because we keep getting asked about it. um on tibial nerve stimulation um you know you don't seem you know maybe i'm just you know asking i guess if anything has changed you don't seem interested in having access uh to this technology you know internally uh for for you know for axonics nor do you see it as a threat you know i'd love to hear your updated thoughts on on why thanks for taking the question well thanks larry but personally i'm i'm boycotting boycotting those questions but dan has volunteered to answer
spk01: It's an inside joke, Larry. You know us well. Look, our position hasn't changed. We understand. We know these companies well. We've tracked them for the better part of 10 years now. And look, our thinking is, you know, an implant is an implant. Our device has a 90% efficacy in our FDA study. We haven't seen any efficacy from any of the implantable tibial companies that comes close to that. It's a complex procedure and a part of the anatomy that these doctors aren't trained to do. And there are obviously a lot of questions about how you do market rollout and then ultimately what reimbursement looks like coming from the CPT editorial panel. So I would just leave it at that. Look, we're watching it. We'll pay attention to this. This is going to unfold over the next three to five years, and we'll see how it plays out. But we're not concerned, and we certainly don't see it as a short-term or intermediate-term competitive threat.
spk05: All right. Thanks for taking the questions.
spk09: Thank you. Our next question comes from the line of Chris Pasquale with Nephron Research. Your line is now open.
spk18: Thank you. Congratulations, guys, on a great year. I wanted to maybe dig in on the other half of Larry's question about the guidance and the assumptions there and talk about bulk meds. You know, 25% is a nice round number. How are you thinking about the goals for that franchise in 23? And you talked about getting more involved with the gynecology call point. Is that something that you're planning for this year?
spk13: Yeah, thanks, Chris. I appreciate the question. Once again, I think that it's very difficult to predict, right? Oh, we're going to grow this particular product line at 75% again this year. I mean, it's very, very difficult to do that. So we're, once again, trying to be conservative and We think this product's got a lot of legs, as we have seen so far, and has very quickly become, you know, first-line therapy for women with stress urinary incontinence. Now, having said that, you know, we treated, you know, the number was maybe, call it 52,000 or so patients in 2022. You know, but if we go back to slings in 2015, there were 350,000 sling operations done in 2012. And you can imagine, right, it's difficult for a woman to agree, yeah, I'd like an operation because I cough or sneeze and leak some urine or exercise. I mean, it's an annoying problem. There's no question about it. And it can directly impact people's quality of life. We understand that. But women don't want an operation for a stress urinary incontinence. That's not what they want. And so I think it's just going to take some time for us not to persuade the people, the women, but to persuade the physician community that BulkMed is the right solution for the vast majority of patients who present with these symptoms. That's our challenge. And, you know, as you know, Chris, medicine changes slowly. It's almost like built in, you know. And it's just going to take time for us to continue to create awareness and get the physicians to really start talking about this as an option to their patients. Now, you mentioned the GYN community, right? So, you know, that's a community that, you know, we haven't been aggressive with, but we're starting now to market to that community. But even within our core urology and urogynecology community, I mean, not enough of them are currently offering BulkMed, right? Now, we just started to scratch the surface. So if you're asking me what do I think the potential is, the potential is for hundreds of millions of dollars of sales of BulkMed on an annual basis. But it's just going to take us some time for us to be able to get there and to get these physicians, in effect, prescribing BulkMed. not talking about, well, you know, there's this other option, and I've been doing these sling operations, and they really work, but let me tell you about the adverse event. Oh, but yet there's this, you know, there's this option, you know, that you may want to consider. No, that's not the talk track that they should be using, right? So we got some work to do, and we're very bullish about it. It's just that we're really trying not to get over our sleeves, our skis on this. So, you know, give us a little more time, but inherent in your question is how bullish are we, and it's hard to be more bullish about the potential for bulk med to treat stress urinary incontinence as first-line therapy for patients.
spk18: That makes sense. Thanks for walking through that. Switching back to the SNM side, I'm curious what you see as the biggest remaining bottlenecks in terms of growing that market today. You guys fixed the technology problem the market had before you got there. You're raising awareness. Is the biggest rate limiter today the number of physicians who are doing the procedure or how much of their practice they're devoting to it, or is it something else?
spk13: It's really a good question. It's really a good question. I mean, it really is a good question. And as you might imagine, Chris, we spend a lot of time internally talking about this. And when I say internally, I mean with our salespeople, our sales managers, and amongst senior management. So here's the problem that we're facing. And I'm going to be careful because I don't want to disparage our competitor, but you know, they had a product that just wasn't that attractive. And for 20-something years, it was the only option. So what has been implanted in physicians' minds is that sacral modulation is difficult to do. It's fussy. You know, it's not so easy to drop this lead down, and the tools maybe weren't as easy to use. And And then my patients, you know, would need to come back for reprogramming and all this other noise. And, you know, it just takes time to kind of erase that legacy mindset. And I would tell you if physicians spent more time talking to their patients and actually prescribing, once again with that word, prescribing sacral nodulation, then this market would double overnight, okay? So what does all that mean? That means that we have to be persistent. We have to be out there, you know, keep beating the drum, making things easier to use, you know, reinforcing the great clinical results that we're actually getting. I mean, we've instituted a program which our field team has embraced, which we call quarterly business reviews, where we actually sit down with our customers at the end of each quarter and say, look, here's how many patients that presented that, you know, you did an external trial on. Here's your conversion rates. Here's the satisfaction data coming out of your actual patients because, you know, we're the ones talking to those folks and making sure they're good to go and they're tucked in. So I think it's just going to take some time, and it's almost as if we've kind of created a new category called sacral neuromodulation, okay? And it ain't your grandfather's product, right? So I think that's the story. So you can tell, Chris, I mean, we're really enthusiastic about what's going on, about this business. I mean, it's turned out to be all the things that we expected in terms of how underpenetrated it is and how much potential it is. But I think, look, we're going to continue to keep our heads down. We're going to continue to execute. We're going to grow our business at record rates here. We're proud of what we've accomplished, but we honestly feel like we've just scratched the surface. We've got a lot more work to do. Sorry, I spent a lot of time not answering your question, but here's the answer. It's same-store sales. It's getting the average physician, instead of doing 12 of these things a year, to do 24 of them a year. I mean, that's how we double our business. It's not about going out and finding another 2,000 doctors who want to dabble with sacromodulation. This is about getting the people that know what they're doing, giving them better products, easier tools, better support, and just getting them to talk more about it. And I think it sounds quite simple, and in one respect it really is, but, you know, once again requires, you know, real keen focus and execution. Great.
spk18: Thanks, Ray.
spk13: Yeah, thank you. Thank you.
spk09: Thank you. Our next question comes from the line of Cecilia Furlong with Morgan Stanley. Your line is now open.
spk11: Great afternoon, and thanks for taking the questions. I wanted to follow up just on some of your comments around S&M and OUS markets, realizing Australia and the framework that you put around there. Could you, one for Australia, just kind of frame the opportunity where the market is today on a relative basis versus the U.S.? How do you think about growth beyond 23? And then for 23 specifically, in Europe and other locations where you're benefiting now from both mid-present, how we should think about S&M growth in those regions.
spk01: I mean, at a high level, as Ray – this is Dan. Hi, Cecilia. Nice to hear you. As Ray mentioned in his prepared remarks, The Australian market for S&M, we estimated around $15 million per year, and we have approvals and we have coverage, but we don't have it yet on our F-15 recharge-free product, which is why the statement that was made is we expect to do between a million and a million and a half revenue in 2023. Now, beyond that, look, we intend, like we do in all markets, to be the market leader. It's just a question of perseverance and time, and we don't want to put a specific date on that. But look, as we continue to grow, the market is so heavily skewed towards the United States for all of these products that even though we will increase our OUS sales in both product categories for S&M and also for Bulkamed, the U.S. growth is going to outdrive it. And so this will probably forever be a story about the U.S. market, but our goal, you know, intending to be the market leader and as a global player, is we want to take care of patients, physicians, and their practices worldwide. And so that's why we continue these efforts OUS. You know, we, of course, make revenue and margin off of it, but just as being a good corporate citizen and treating patients, you know, it's part of the plan. And we started in Europe, and we've worked with a number of these physicians In our previous company, we were in Australia in a big way, and so it's kind of natural for us to also move into this market since we have the full product line and we have the approvals.
spk13: I would add two things to your question, and that is that the markets outside the United States are all capitated, and that's the fundamental issue here. If there was a laissez-faire market, we'd be on it hard, but it's not the case. And I've mentioned this many times before, if you take a market like the UK, as an example, which is probably one of the largest markets, if not the largest market in Europe, the government's going to pay for 800 implants. So right now, you've got two companies fighting each other to get the lion's share of that business. And how much energy do you really want to spend in trying to grow that business when, in fact, you know, the state of Mississippi outsells, you know, outsells the country of the United Kingdom, right? So you can imagine, you know, it's a lot easier for us to expand our efforts in Mississippi than it is in, you know, throughout the UK. So hopefully that gives you some context why we're so focused on the U.S. market. And, you know, and there is a correlation, of course, between, you know, having Volcomed available in some of these other markets around the world and But, you know, SNM is a completely different animal. You know, that's a product line that, you know, you need presence to make sure implants go well, to program the patient. So it's a much heavier lift for us to, you know, to really open up a new market. Now, last comment. Obviously, we are looking to Asia in the future. You know, we understand big potential in places like Japan and China. And, you know, that's something for the future of the company. But right now, we're going to continue to stick to our knitting and focus mainly here in the United States.
spk11: Great. Thank you for the call there. And if I could follow up as well, just R20, where you are at this point, kind of in the delimited market release, and then if you think about 23.2, just the R20 rollout, account targeting, and also tied in with that, how we should think about the impact to gross margins.
spk13: So I think you're a little broken up, but I think your question, you were referring to our new rechargeable R20. And, you know, here's my comment about that. I'm going to not predict it because the last time I was asked to predict the split between rechargeable and non-rechargeable, I was off a bit. So we're optimistic. Early on, we have seen that this product is capturing the imagination of of physician implanters in the United States and their patients. I mean, it's a pretty cool product. So already we see an increase in rechargeable sales in the few short weeks that we've had the product in the marketplace. But it's going to be hard to predict. I mean, that F-15, I just think it just blew people's minds, honestly, about the longevity of the product and how nice and small it is and everything else. So You know, it's kind of a fun thing where now we have these really amazing products that are actually competing for mindshare, you know, with patients and providers. So the last word there is we're agnostic. We've got great margins, or good margins, I should say, at least, on these products. And, you know, whatever it is that a physician and their patients decide to do, we're just happy that it's exonics.
spk09: Thanks for taking the questions.
spk13: Thank you.
spk09: Thank you. Our next question comes from the line of David Rescott with Truist. Your line is now open.
spk16: Hey, guys. Thanks for taking the questions and congrats on a strong fourth quarter and strong end of the year. I guess just first on the guidance, I wonder if you could provide any color maybe around how we should think about the cadence for the year, I think. Consensus right now has about 34% growth in Q1. Obviously, there's typical Q1 seasonality, but, you know, year over year comes a little bit easier. And then, you know, growth kind of stepping down throughout the year. So just wondering first, maybe how we should think about that growth on a quarterly basis through the year.
spk01: Yeah, I mean, I think, you know, you've already hit on it, David, which is we're all aware of the impact of, you know, first quarter drop-off due to, you know, seasonality, people not having met their deductibles. You know, these are elective procedures both for S&M and Bulkamed. And so we're, in this particular therapy category, we're particularly sensitive to the seasonality. And so, as we've noted, the guidance for 2023 projects 25% year-over-year revenue growth for both sacral neuromodulation and Bulkamed. And that said, because of the impact of Omicron in Q1 of last year, which contracted the market, we expect growth year over year in Q1 to be in the low 30s this quarter, year over year. And then for the remainder of 2023, what that drops out is we expect to see growth in the low to mid 20s as you look forward. So does that answer the question?
spk16: Yes, yeah, no, that's helpful. I guess just a second one from us. You know, if you could provide any update maybe on ongoing litigation or the upcoming jury trial, maybe any risks associated with that and whether or not we should be thinking about any type of incremental spend in 2023. Thank you.
spk13: So I guess the hot flash is that the trial date has been pushed. So we're now, it was originally scheduled for mid-April. It's now scheduled for mid-August. And I really don't think there's much more to say that we haven't said before, unless, Dan, you want to add something?
spk01: No, I mean, I think the only thing I would add is the standard thing we always say, which is, I mean, going all the way back to 2019 when these claims were filed against us, is we've always said that we don't believe we're infringing on any patent claims. We take this very seriously. And, you know, at some point this will be, be tried and then we'll report out on it so you know the race that has been pushed now to august and we still maintain our position we haven't infringed on anything okay thank you thank you our next question comes from the line of adam mater with piper sandler your line is now open
spk17: Hi, Ray. Hi, Dan. Good afternoon, and thanks for taking the questions, and congrats on ICQ-4 and 2022 year. Maybe, Dan, for you, wanted to just kind of flesh out some of the P&L assumptions to the extent you're willing to share just around kind of off-ex spend, how to think about that and cadence of spending, as well as the level of DTC spend in 2023. Thanks.
spk01: Okay. I mean, just so that we're, Adam, good to hear from you. Just so we're working off the same baseline, you know, adjusted operating expenses in 22 were $240 million. And so that includes stock-based compensation as well as depreciation and amortization. What it would exclude are the non-cash charges related to the contingent consideration or milestone payment that we will someday owe to Ontura for the acquisition of Baltimore. Keep in mind, we We have a milestone payment of $35 million when we sell a certain amount of bulk embed in a trailing 12-month period. Now, looking at operating expenses with that same platform, in 2023, we expect the total OPEX to be $280 million. It's a mid-teens increase above 22. And when you back that up against the 25% year-over-year increase in revenue for S&M and bulk embeds, It just reiterates the operating leverage that we expect to see.
spk17: Really helpful, Dan. Thank you for the color there. And, you know, for the follow-up, I wanted to ask about one of the stats, I hope I heard it correctly, that you guys provided in the prepared remarks, but I think you said you have nearly 1,000 physician implanters doing S&M in the United States. I was wondering if you're able to kind of give a little bit more detail there and also remind us kind of how you kind of view market concentration and how fragmented the volumes are. And then I guess the other part of the question is, you know, how do you think about that number? Kind of where can it go over time? Thanks so much for taking the questions.
spk13: Yeah, thanks, Adam. So I'm trying to parse the question a couple of pieces here. So, you know, if you if you take The math is not that hard to come to. If you take the sacral modulation revenue that we did in 2022 and divide it by the average selling price of, call it $15,500, you know, divided by the number of customers, then, you know, there it is, right? It comes out to about 14 S&M implants per customer. And these are not accounts. This is a physician count, right? So you could have four physicians in a given group urology practice, which may or may not be owned by the hospital, right? So that's kind of how we look at it. So those are the averages. We've kind of avoided this, as you know, Adam. We've avoided this in the early days just because it's all over the board when you're first starting. You know, you get some implanters that might be doing 50 a year. That's a great customer, right? And then some that may, you know, they may just getting reinvigorated and they may only do six. So, you know, that's where you come about that average. I mean, I think it's embarrassingly abysmal, okay? I mean, bottom line, I mean, this is silly that the average customer in the United States is doing as few as they are. Now, that presents a big opportunity and a big upside for us, right? I mean, and These numbers are better today than they were when we started in 2020, right? I mean, we are seeing incremental increases in same-store sales on that side. So, you know, it's all upside for us from that standpoint. So hopefully, I'm looking at my colleagues now to see if there was any other substantive part of the question. No, I think... You did ask how many more could be.
spk01: I think Ray has nailed it. Look, they're, you know, call it between... 2,500 and 3,000 physicians that have implanted S&M. Ray said it, I think, in the prepared remarks or in one of the earlier questions, which is we don't need to go out and find new physicians to bring them into S&M. And with the innovation that we brought to the table and the sales and marketing team and the fact that we are smothering these accounts with clinical specialists to make sure that everything goes perfectly well for their patient population, it's just time. right? It's perseverance and time for same-store sales to increase. We track this internally. We know exactly how many more units each customer did in 2022 over 2021, and it's really solid growth. And so we believe over the next five years, we're going to see a big increase in utilization. And the great news, as Ray just mentioned, is since the average, because it's not all at that level, but it's very easy for these physicians to double or triple their volume without running into any issues with access to operating suite time or a patient population.
spk13: You know, and Adam, it's Ray again. Now, I have one more thing I'd like to add, and it's been really interesting with Volcomette. Because what we have found is that only about half of the customers, and by the way, we have more Bulkamed customers than we have S&M customers right now, and we found about half of them are not even doing sequential modulation. And of the half that are doing it, not all of them are our customers, right? Some of them are competitive accounts. So this is really interesting and has been a true eye-opener for us, right? And that is that, look, if you're doing Bulkamed, I mean, there is no reason in the world why you're not doing cyclonal modulation. It's just that you've got maybe a bad attitude about it, you know, given the legacy products that were out there, right? But once again, a big opportunity for us in terms of that. And having Bochumet has really helped, right? It's getting us, you know, into accounts that we normally wouldn't have been. And it's giving us a lot of opportunities for cross-selling, which we've been taking full advantage of, which I think is showing up in our market share numbers and so on and so forth. But really appreciate the questions. It's a good question. We're happy to chat about that. Good, Cutler. Thank you. You bet.
spk09: Thank you. Our next question comes from the line of Michael Polark with Wolf Research. Your line is now open.
spk03: Hey, good evening. A lot of questions asked, so I'll boycott my second question and just ask one. I'm curious, you know, the expansion into being a tooth therapy company with Bulk Amid has proved to be highly successful. You built the real platform on a focused call point. I've asked this question before. I'm just curious for your updated views. Is there interest in adding a third leg to the stool? What does that opportunity set look like today or or is the focus in 23 on executing on this core vision? Thanks so much.
spk12: It was Mike, right? Yeah. Yeah. Yeah. Thanks, Mike.
spk13: You know, when you're asking a question, I just keep thinking about what's going to be the headline in your report that you're going to put out after we finish. So in any event, it's going to have something to do with it. The way I answer this question might show up in this headline about the third leg on the stool, right?
spk03: You've already used the word boycott, so that's good inspiration. Use the word focus, Mike.
spk13: So, look, I think that it's not as if there aren't folks who've come to us with all kinds of other opportunities and various different products that could fit even within the urology or urogynecology arena. I just think that we're early as a company. We just continue to kind of get that point across. It's three years since we've been in commercial distribution. And as you know, we've got this thing about execution and doing things well with quality. And we don't want to lose focus. This is such a greenfield opportunity that I think if all of a sudden we were to bring something new to the game that maybe deals with men or some other kind of urology product, I think that I would be a little circumspect if I was sitting on the outside. I mean, this is such a big opportunity that I think a lot of companies would be quite envious of what we're looking at. So, therefore, we're going to stick to our knitting. It's not to say that we won't add additional, let's say, things that could make things easier in the future, et cetera, et cetera. But we're going to kind of focus in this area of incontinence and, you know, for the foreseeable future. And then we'll reevaluate. But our goal is, as we've stated, number one, market leadership and synchronal modulations. And we are more than three quarters of the way to that goal right now. So we're going to continue to press that hard. And, you know, we'd like to be a half a billion dollar company. And we think that's within, you know, within our grasp. And, you know, then maybe things change for us. And we, you know, we have more levers to push at that point. But you're not going to be surprised by some announcement that all of a sudden we decided to get into BPH or something like that. That's not the direction that we're thinking about. So I appreciate the question. Understood. Thank you.
spk09: Thank you. Our next question comes from the line of Shagan Singh with RBC Capital Markets. Your line is now open.
spk08: Great. Thank you so much for taking the question. Just one topic for me. You talked about a big focus on same-store sales and doubling and tripling volumes. Where are these patients coming from? And anecdotally, what are you hearing from customers on volume and demand in 2023? And then just on awareness, what are the levels of awareness for medical device intervention options? Is it quantifiable? Is it like in the single digits, double digits, like anything you can share? And I'm sorry, I missed the DTC spent for 2023. Can you just remind me what the amount was? Thank you.
spk13: So we spent about $20 million in 2022 on DTC. We'll spend approximately the same amount in 2023. Where are the patients coming from? They exist in every physicians practice in urologists and urogynecologists. They've been walking in the door and out the door. They've been getting a drug prescription and walking out the door and never coming back. And we have proven this to a lot of our customers by just getting a mail or a simple letter in the mail to their existing customers saying, hey, we've got new technology. You may want to, you know, specific to your problem, you may want to consider coming back in here once you fill out this symptom questionnaire. and we'll get you scheduled. It is unbelievable how many new patients get activated. We've talked about Botox numerous times, the fact that about 150,000 women got Botox in 2022. Well, you know, 15 or 20% of all the customers that all the patients that we treat have previously had Botox. So a big campaign of ours is getting that across to the physicians to say, look, you're just temporizing these patients. You're giving them a temporary solution for a chronic problem. Let's get them back in here. Let's talk to them about a long-term, multi-decade solution that will solve their problem. So we don't need to find the patients that are already there. And this is a point that I think is maybe counterintuitive. It's just counterintuitive. You think that, well, you go see a urologist, they're going to spend time with you, they're going to talk to you about all the treatment options, but the reality is if you took a stopwatch and you went in and saw what actually happened, I mean, they're spending minutes, only minutes, with these patients, and so that's part of the issue. So you can see why we're doing all these other things. Why do we have storybooks? Why do we have clinical specialists? Why are we providing a DTC? We're trying to help have the patients identify themselves and wave their hands in front of the office and say, hey, I've got this problem. Help me. Don't give me another drug prescription that doesn't work. So I think there's nothing really new about this. It's just this is what's going on. And, I mean, there are tens of millions of people that are just sitting out there right now, and they're not getting the treatment that they deserve. And we're going to do our little part to see that more of these patients get treated. And I mean, if the DTC numbers don't really get the point across, I don't know what else would. I mean, 11,000, 12,000 people are filling out a symptom questionnaire and saying, please connect me with a local provider in my community to get evaluated. These are incredible numbers. And once again, pale in comparison to the number of patients that are already sitting in EMR systems or file cabinets of customer locations around the United States. So we really appreciate that question. You've helped us, you know, even further inform about this topic.
spk00: Thank you.
spk09: Thank you. Our next question comes from the line of Michael Sarcone with Jefferies. Your line is now open.
spk14: Thanks. Hi, Ray, Dan, and Neil. Thanks for pleasing me in here. one follow-up on the DTC campaign. It does look like, you know, you're gaining some steam there. You talked about over 11,000 qualified leads in January. Could you just give us an update on kind of what the mix of those patients looks like? I know in the past you've talked about 60% treatment naive. So, any update there? And then, You know, when do you think you might start being able to mine some of the patients in terms of implants that come in through the funnel?
spk13: So, Michael, thanks for the question. It's already happening. We are, you know, able to now start to make direct correlation between patient names that have filled out questionnaires and those who are getting treated. The numbers are growing. We're seeing, you know, we've said it's about a six-month gestation period before we could truly expect stuff. We are starting to see it. It is measurable. We're very encouraged by that. Having said that, nothing has changed. I mean, it may be even more patients or more people who are filling out these questionnaires that are treatment-naive. So I think, once again, that just underscores how, generally speaking, the population here in the United States is unaware that there are advanced therapies to treat this problem. So, you know, it's all good. It's all moving in the right direction. But the reason we're not spending more money on DTC is simply because we want to do justice to those individuals who've already raised their hand. And it's a process. You know, 11,000, 12,000 people raised their hand. You've got to reach out to all of those individuals, try to get them on the phone, try to get them an appointment. I mean, and if anything, what we were doing differently in 2023 is moving more towards a concierge service so that we can kind of keep people on the line and get them in the appointment book, because that's where things kind of break down, right? Practices are busy and all the rest. And everything else, every other management team has said, which we don't need to repeat on this call. So But, you know, could we do more? Yes. Could we spend more? Yeah. Could we generate more interest? Yeah. But once again, it's a big task, right, to be able to do justice to the quote-unquote leads that we're getting to begin with.
spk12: All right.
spk17: Thank you.
spk12: Thanks, Michael.
spk09: Thank you. Our next question comes from the line of Mike Mattson with Needham & Company. Your line is now open.
spk04: Thanks. I'll just ask one question since we're past the 30-minute mark here. So I guess just wondering about kind of the pipeline and, you know, we've seen tremendous improvements in lifespan and size of these devices in a fairly short period of time. And you seem to have been launching kind of a new version, you know, annually. So can you continue that pace and, you know, are we nearing sort of the near-term limits in terms of battery life and size and things like that for these devices?
spk13: So, you know, it's another interesting question. You know, Mike, I think the fair answer is that our engineering team has really overachieved. I don't think anybody expected, you know, this kind of longevity with these, you know, really very small, very thin devices. We feel very confident that we've kind of wrung out a lot of what can be had on the implantable pulse generator side. So I think we're kind of pencils down there for IPGs for the moment. Our attention now is focusing on reimagining our external trial system so that that's more comfortable for people. That's something that's an initiative inside the company and other things related to just streamlining the whole process of getting patients through the care pathway and interfacing with our people and external trials and all these kinds of things. So you're going to see more innovation from Exonix, no question. It's just not going to be in the near term being defined as the next year or two. It's not going to be on the IPG side. It's going to be other accoutrements, if you may, for the system. Okay, got it. Thank you.
spk09: Thank you. I would now like to hand the conference back over to Raymond Cohen for closing remarks.
spk13: All right. Well, thank you. That was a really good, robust Q&A session. We really appreciate the questions coming from the analyst community. So just in closing, I'd like to just say that we remain grateful for the trust that physicians, patients, and, of course, shareholders have placed in Exonix. As always, I'd like to thank my colleagues in Irvine and our team in the field for their diligent efforts and dedication to fulfilling the Exonix mission of improving the lives of adults with incontinence. And so I thank you all for joining us on today's call, and we'll look forward to speaking with you more as the year unfolds. You all have a good evening.
spk09: This concludes today's conference call. Thank you for participating. You may now disconnect.
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