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spk10: Good day, and thank you for standing by. Welcome to the CBRX second quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1 1 on your touchtone telephone. I would now like to hand the conference over to your speaker. You may begin.
spk09: Good afternoon.
spk00: Thank you for joining us today for CVRX's second quarter 2022 earnings conference call. Joining me on today's call are the company's president and chief executive officer, Naveem Yared, and its chief financial officer, Jared O'Shaughnessy. The remarks today will contain forward-looking statements, including statements about financial guidance. The statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company's SEC filings, including the upcoming Form 10-Q that will be filed with the SEC. I would now like to turn the call over to CVRX's President and Chief Executive Officer, Nadeem Yared.
spk01: Thank you, Mike, and thanks to everyone for joining us today. I'll begin today's call by providing an overview of our second quarter performance, followed by an operational update, a review of our financial results by our CFO, Jared Olsheim, and then I will conclude with our thoughts for the rest of 2022 before turning to questions and answers. Starting with the review of the second quarter, our total revenue was $5.0 million, an increase of 61% over the second quarter of 2021. These results were driven by the continued execution of our growth strategy both in the United States and internationally. In the U.S., our heart failure business generated $3.8 million, an increase of approximately 89% over the second quarter of 2021, resulting from a record number of revenue units sold in the quarter. This growth was due to the expansion into new implanting centers and existing implanting centers continuing to increase their average quarterly volume. Throughout 2022, we have seen the positive impact of our commercial expansion strategy supported by an increase in marketing and awareness campaigns. Additionally, we have continued to see some encouraging trends stemming from commercial investments made in Europe during the fourth quarter of 2021. I now want to give you an update on the operational development during the second quarter to support greater adoption and use of Parastim. As a reminder, our focus areas are, one, the continued expansion of commercial infrastructure, two, innovation of our product portfolio, and three, the expansion of the clinical body of evidence. Let's begin with the continued expansion of our commercial infrastructure specifically our U.S. direct sales organization. During the quarter, we added three new territories, bringing the total to 20, and we expect to add an average of three new territories per quarter, finishing the year with about 26 territories. The caliber of the sales organization and their ability to drive the adoption of Parastim continues to exceed our expectations. We are making positive headway in select geographies where our direct-to-consumer pilot program to support patient education is being conducted with our new branding campaign. We will continue to look for ways to optimize the program as we expand further. Additionally, we continued our pilot to advance patient education in select institutions aimed at patients who are already speaking with physicians about our bare-stim device. The first phase of this pilot has been successful, and we have started expanding the program to additional institutions. With both our direct-to-consumer marketing program and expanded patient education program gaining traction, we are happy with the progress made to date. For the remainder of 2022, we will continue to invest in their rollout, optimization, and expansion, including the continued hiring of in-house expertise to support the successful growth of these programs. Our second area of focus is the innovation of our product portfolio. In the first half of the year, we received clearance on three pre-market approval supplements related to our BarroStim platform. The first was for BarroStim MRI conditional labeling, which allows all heart failure patients who have received or will receive a BarroStim device to undergo an MRI exam under certain conditions. The second was for our new implantable pulse generator, which is smaller in size than prior generation and has 20% longer battery life on average. And the third was for our new programmer, which is a tablet form factor with an even simpler programming software. We are now in the process of launching the new platform. Our third and final focus is the expansion of our clinical body of evidence. The BEAT-HF clinical trial is designed to demonstrate the mortality and morbidity benefit of barostim in the heart failure patient population with reduced ejection fraction. The timeline for BEAT-HF remains on track with all the necessary events expected to accrue by the end of this year. Once we have collected all the required events, we will provide a more detailed review of the unblinding process, which we continue to believe will occur during the first half of 2023. In addition, we remain on track with BATWIRE, our ultrasound-guided implant toolkit. We continue to expect the trial to be fully enrolled in 2023 and expect FDA approval by the end of 2024. Despite some difficult challenges from COVID, inflation, and supply chain disruption in the first half of 2022, we are immensely happy with what we are able to accomplish. The performance seen in the second quarter is encouraging as it validates the growing demand for barostem, Looking ahead, we remain committed to executing our commercial plan and are on track for continued growth for the balance of 2022. I'll now turn the call over to Jared to review our financials. Jared?
spk06: Thanks, Nadeem. Total revenue generated in the second quarter was $5.0 million, which is an increase of $1.9 million or 61% when compared to the same period last year. Revenue generated in the U.S. was $3.9 million in the second quarter, which is an increase of 87% over the same period last year. Heart failure revenue in the U.S. totaled $3.8 million in the second quarter on a total of 128 revenue units, as compared to $2 million in the same period last year on 67 revenue units. The increase was primarily driven by continued growth as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of barostim. At the end of the second quarter, we had a total of 71 active implanting centers as compared to 31 at the end of Q2 2021 and 56 at the end of Q1 2022. At the end of the second quarter, we had a total of 20 sales territories in the US compared to eight at the end of Q2 2021 and 17 at the end of Q1 2022. Revenue generated in Europe was $1.1 million in the second quarter, which is an increase of 7% when compared to the same period last year. Total revenue units in Europe increased from 47 in Q2 2021 to 52 in Q2 2022. The increase in revenue was primarily due to the lessening impact of the COVID-19 pandemic in Germany and our continued investments in the European Commercial Organization, partially offset by an unfavorable currency impact on revenue. Gross profit was $3.8 million for the second quarter, an increase of $1.6 million when compared to the same period last year. Gross margin increased to 76% for the second quarter compared to 71% for the same period last year. Gross margin was higher due to a decrease in the cost per unit and an increase in the average selling price. This was partially offset by a larger percentage of our revenue units coming from full systems versus battery replacements. Research and development expenses were $2.4 million for the second quarter, which is an increase of 4% when compared to the same period last year. This change was primarily driven by increased headcount. SG&A expenses were $12.5 million for the second quarter, which is an increase of 122% when compared to the same period last year. This was primarily driven by increases in compensation expense due to increased headcount, stock compensation, public company costs, travel, and an increase in marketing and advertising expenses related to the investments associated with the commercialization of Barrow Stem in the U.S. Net loss was $11.1 million, or $0.54 per share, for the second quarter as compared to a net loss of $17.7 million, or $48.48 per share, for the same period last year. Net loss per share was based on approximately 20.5 million weighted average shares outstanding for the second quarter and approximately 366,000 weighted average shares outstanding for the second quarter of 2021. At the end of the second quarter, cash and cash equivalents were $121.3 million. Net cash used in operating and investing activities was $10.1 million for the second quarter compared to $6.8 million for the same period last year. We continue to prudently monitor our cash usage in support of our growth initiatives as we progress toward profitability. Now turning to guidance. For the full year of 2022, we now expect total revenue between $20.5 and $23.0 million, gross margin between 75% and 76%, and operating expenses between $58 and $61 million. For the third quarter of 2022, we expect to report total revenue between $5.5 million and $6.0 million. I would now like to turn the call back over to Nadeem.
spk01: Thanks, Jared. We are enthusiastic about the momentum we have developed in the second quarter and throughout the first half of 2022. And we are very well positioned to leverage that momentum and accelerate the adoption of Parastim throughout the rest of 2022. Before I open the line for questions, I wanted to thank everyone at CVRx for the tremendous work they have done to get us where we are today. We have only made it to this point because of the dedication and hard work of our team. Now, I would like to open the line for questions. Operator?
spk10: Thank you. As a reminder to ask the question, you will need to press star 11 on your telephone. Please stand by while we compile the Q&A roster. Again, that's star 11 to ask the question. Our first question comes from the line of Robbie Marcus with JP Morgan. Your line is open.
spk04: Hi, this is Alan on for Robbie. Congrats on the good quarter. Just to touch on the macro environment in the US on the first quarter, you'd highlighted that staffing shortages had continued to be a challenge for your volume growth. So I guess like how have those trends continue to develop into the second quarter? And what does your guidance assume for the impact in the back half of the year?
spk01: Alan, thank you for joining us. Yes. So if you recall, the first quarter had a tale of two cities. The beginning of the quarter was difficult. We had some remnants of the COVID impact in the United States. The back half, the second half of the quarter was actually very solid. And we commented at the time about the staffing shortages and the labor shortages being one of the obstacles that we were trying to overcome with our concierge program to shift some of the education burden of patients. Whatever is possible, ethical and legal for us to do, we are wanting and willing and able to do this type of education. And that has translated into reducing the negative impact. of the labor shortage as our clients, and that's why we're seeing the results we are seeing. As it relates to the guidance for next quarter, maybe, Jared, I'll turn to you.
spk06: Yeah. Hi, Alan. This is Jared. So as for the guidance for Q3 and for the rest of the year, we are still expecting to see a bit of a headwind from that hospital staffing shortage related to new center activation. And so even though we were able to see 15 net new centers be added in the second quarter, we are still expecting the numbers to be in the high single digits for each quarter, meaning, you know, 7, 8, or 9 in Q3, 7, 8, or 9 added in Q4 for the rest of this year.
spk04: And then, you know, what kind of benefit have you seen from the new product approvals, the new MRI conditional approval that you got earlier in the year? And how should we think about the benefit from those approvals as well as the new programmer on the back half?
spk01: Thank you, guys. Yeah, thank you. Great question. If you recall from our previous communication on this topic, we expected the impact of these new programs to be minimum. We did not expect that to generate additional revenue, but rather be a source of a better customer and better patient satisfaction with our product and technology. particularly the conditional MRI compatibility. You know, without it, when patients had to undergo an MRI, they could not. So if a patient has, for example, a stroke that is not related to our product, it limited the ability of physicians to order or prescribe an MRI to diagnose the patient. With this new labeling we have right now, they can do an MRI under certain conditions that are in our labeling, and we're very excited about this. So it's more about increasing patient satisfaction, but also physician and nurse satisfaction with our product technology. And the same can be said about the size of the device, about the battery longevity down the road, and about the ease of use and the smaller form factor and the portable form factor of the new programmer as well. In summary here, we don't expect those to generate more revenues, but rather just move us a notch forward in here in terms of satisfaction.
spk10: Thank you. Please stand by for our next question. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is open.
spk05: Afternoon. Thanks for taking my questions. And I think, Jared, you started to address this a little bit. But, you know, this was your best new center ad quarter that you've had so far as a public company. And I think over the last maybe couple of years where there's some centers that were delayed in Q1 that couldn't get going because of the staffing issues slash like access to to facilities, so that's why this quarter was better. And then we should expect a little bit more moderation later in the year. And then can you talk about some of those centers that you did add, you know, if they're higher volume opportunities for you, any kind of feedback there would be helpful. And then I do have one follow-up.
spk06: Yeah. Hi, Matt. Good questions. So, yeah, I was trying to allude to it earlier. We did see a spike in new centers in the second quarter, and obviously we're very happy with the numbers that we did see come through. It's really hard to say what was holding back some of these centers from treating that first patient to officially be identified as an active implanting center in our metrics. But, you know, we were happy with the results that we saw. As far as the new centers that were being added, our focus remains on targeting high-volume centers and going after those that are treating the most ICD patients on an annual basis. However, when we get an inbound request from physicians that they want to start a barostim program, we are obviously going to work with some of those more regional centers to get them on boards and allow them to start treating their patients with this therapy as well. So it still is a mix of those high volume centers that we're going on and targeting and some of those more regional centers that are reaching out to us and asking to start utilizing the device.
spk05: Got it. And then you more than doubled a number of active centers here in the last year. Can you talk about, and I'm assuming you've got some of these metrics, but, you know, 128 units this quarter, I believe is the number. sold, how many of those came from the ones that you were selling into a year ago or before, i.e. the last, you know, the people that have kind of matured into, you know, a more active account over the last 12 months?
spk06: Yeah, so one of the timelines we've been monitoring is when centers reach that one-year mark, it appears that they're starting to step up and treat more patients more often. And then again, we're seeing another inflection point around that 18-month mark where they're starting to reach that long-term goal of almost treating one patient per month per center. And so that continues to be the trend that we saw here in the second quarter of this year is that the newer centers, the ones that are under 12 months, are trying the device. They're seeing how it works on their patients. They're testing what reimbursement is going to come back at. After they get that, they start treating a patient every other month or every third month. And then once they cross the one-year mark, they start feeling comfortable doing a little bit more But once they reach 18 months is where we're seeing that trend of patients starting to be treated about one per month. It's still small volume, right? We don't have dozens and dozens of accounts that have reached that 18-month mark, but still in the early data set, that's the trend we're seeing.
spk05: Excellent.
spk06: Thank you.
spk10: Thank you. Please stand by for our next question. Our next question comes from the line of Margaret Cazor with Wimbler. Your line is open. Hey, good afternoon, guys.
spk08: Thanks for taking the questions. I wanted to follow up a little bit on some of the new commercial activities that you guys have launched and maybe just to start out with the strategic account managers and their impact on larger national accounts. One, have you seen an impact at this point? And then two, you know, when should we hear more about this? And is it going to be a series of updates or, you know, you'll just update us over time and we'll see it in the new centered account?
spk01: Yeah. Hello, Margaret. Glad to hear your voice. Listen, in regard to the addition of the strategic account director, Kevin Denton, The goal for us is to ensure that those multi-site institutions, IDNs or others, that span over multiple geographies, multiple territories, but yet have one single contract, that you have a single person following on the contracting process. And that has started paying off. Now, what we do not report are the centers that are under an active contract for that exact reason. You know, Kevin and his team, if they sign up an agreement with a large group that has 100 sites, practically we could sell at 100 sites. But really? No, because we need to develop this program at every single site with a champion and the clinical team around this program. And therefore, we don't report the sites that have an active agreement with us. We report a site that has an active implanting experience. So they have done at least one implant in the previous one month. So bottom line, this is a well-needed activity. You've seen this also in play with other similar companies at our stage where those contracting at these high levels are important. And we're starting to see the impact. And it still requires a lot of work with the clinical team to develop a program. But at least that's part of the contracting. When it's signed at the high level, at the umbrella level, it simplifies a lot the process.
spk08: Okay, great. And then just to follow up, just like my other two colleagues had on the new accounts, obviously it was great to see a larger new center number. It does sound like, according to Jarrett, if you target kind of that high single-digit increase in new centers through the rest of the year, it's pretty similar maybe to what we thought before going into year end. So correct me if I'm wrong about that. Ultimately, to the extent that these do ramp and do reach productivity a little bit faster relative to our prior expectations, it seems like that should be a good thing. So any details around that would be useful, especially as it relates over the next 12 to 18 months. Thanks, guys.
spk06: Yeah, Margaret, the only thing I'll add to it is, you know, like we said before, we're going to continue to be opportunistic. If the sites are coming on board and starting to treat patients at a faster pace or the utilization on a monthly basis is going up and we need staff to support the implants or be able to go and open some of these new centers that could be associated with national contracts, we'll make those investments. The goal here is to grow at a fast pace to help as many patients as quickly as possible. But at the same point, we don't want to put resources in places that aren't going to be helping to drive top line and be able to help patients early on.
spk08: Fair enough. Thanks, guys.
spk10: Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of Alex Norwick with Craig Hallam. Your line is open.
spk03: Craig, good afternoon, everyone. I was just hoping to expand upon Matt's question. Looking at the pipeline of sites out there, could you maybe frame up how many accounts or sites the sales organization is actively speaking with or currently trained today? Just how many are down the path of looking at Verisim, let's say, seriously? And just where can those implanting account numbers or site numbers, where can those trend throughout the remainder of the year?
spk01: Yeah, Alex, hey, great to see you here. Listen, we have not disclosed this number. Again, it's the complexity of disclosing a number that could misguide because of those IDN and the large account groups. So, for example, let's say, hypothetically speaking, if we sign an agreement with Tenet, do we count in all of the hospitals they have? How about the clinics? How about the standard centers or the OBLs that they own? You know, it It is so complicated. That's why we don't venture into disclosing that number. I don't know how else I can help you with this one.
spk06: Maybe I'll just chime in here too, Alex. One of our standard responses for this is we're always at least a quarter ahead for contracts signed. We see the pipeline of what's coming through, contracts that are signed, coalitions that are being worked from an implanting perspective, that they can start identifying patients to actually start treating those patients and so we we have some visibility into this but it's been varying between centers as far as how quickly they move from a contract sign to treating that first patient and so you know we wish we had uh more informative data that we could give to the to all of you folks at this point related to those contract signs but there's just too much variability as to the timeline from contract sign to becoming an active implanting center.
spk03: Yeah, I understood. That makes sense. And going back to the cadence discussion that we had on the Q1 call, but looking at Q2 here, would you say there was a big bifurcation versus beginning of the quarter versus end of the quarter for number of barostem implants per site? Or would you say things kind of trended generally stable throughout the quarter? for procedure volumes.
spk06: Yeah, thanks for bringing that up, Alex. Yeah, Nadine mentioned it earlier. Q1, it was almost silence in the month of January and then starting to see some recovery in February. really a big march for procedures to be able to hit the numbers that we did in Q1. As we moved into Q2, it really has moved into a stable setting. We haven't really seen an impact from COVID or hospital staffing shortages to actually perform procedures. So month over month, just seeing steady growth as we marched all the way through Q2.
spk03: Okay, understood. And then just lastly, maybe just an update on reimbursement. Speak to the process and statics here to upgrade to a Category 1 CPT code, the potential to make the TPT pass-through payment permanent. And then just any feedback on reimbursement you're hearing from the field.
spk01: Absolutely. I can address this, Alex. So in regard to the Category 1 code, so the CPT-1 coding, this process usually takes three years from the moment physician society takes ownership and start down the process. And of course, we are in discussions with multiple physician societies in here. We have not yet disclosed if we selected one of them to champion the process. And the process is public. So as soon as this will go on the docket, we'll disclose it to the market and to all of you. And we'll talk about what it means and the next step from it. But don't expect from, you know, I do not expect from my perspective a category one code before 2025. And it might be shocking to you, but even if they started today, the earliest they will get to it will be late 2024, early 2025. Now, is this hurting us right now? I would say, yeah, of course, because it gives the perception that the therapy is experimental. That's what a category three means. But are the hospitals getting... Yeah, of course, because it gives the perception that the therapy is experimental. That's what a category three means. But are... Are the hospitals getting paid today? Yes. Are physicians getting paid today? In general, yes. We are able to get them the payment they deserve by crosswalking the procedure to similar procedures. And we have a very solid reimbursement team in headquarters and also in the field to support those endeavors and the billing processes. And after the billing, when they get the payments, you know, there is the need here. To negotiate with payers and so forth, we are doing this. So that's the situation with Category 1 code. In regards to the transitional pass-through, so this is the hospital payment system. Currently, we have a transitional pass-through that removes the price of the device from the existing code, which pays, as a national average, around $30,000 this year and $29,900, also almost $30,000 next year. and substitute instead of it the price of our device, which is, as you know, $35,000. So that is giving hospitals a decent reimbursement that seems to be economically viable for hospitals to continue adopting BarroStem for Medicare patients. For private patients, the payment is negotiated usually between the hospital and the payer, and in general, it is known that private payers do reimburse hospitals a little bit more than what Medicare does. So from that perspective, we believe also that private payers, when they are authorized, the payment to the hospital is also economically viable. So the question for the TPT is about the duration. Right now, it's a known fact, actually, our TPT expires in the end of 2023. So we still have a year and a half to go with this process. We started down the path of asking CMS to consider creation of a higher paying code for therapies like ours. There are a couple of other companies that have also joined this effort. In this most recent public filing by CMS, which is their proposal for the outpatient payment systems, they mentioned our request and that they still don't support it, but they are opening this for public comment. It's a huge first step. Of course, we will comment on it, and we'll be waiting, I would say, eagerly for the final decision from CMS, which will be late November, early December, and we'll see if we have a permanent code or not. Nevertheless, we still have a year with the TPT right now. In an absolute worst-case scenario for us, where we do not receive a new code, we will have to revert back to selling our device at around... $25,000. And that's why you would hear Jared and sometimes me repeating to you in your estimate, in your forecast for the future of our therapy, put in here an ASP of $25,000, $26,000 that will still make it economically viable to hospitals even without a TPT as a worst case scenario. In a good case scenario, we get a new code and we maintain the pricing and our ASP stays in the $28,000, $29,000 range. Chad, I don't know if there's anything to add in here. And Alex, did I answer the question in here? It's a complicated topic. Sorry about going long.
spk03: Yes. No, that was perfect. I really appreciate all the info here. Thanks.
spk01: Fantastic.
spk10: Thank you. Please stand by for our next question. Our next question comes from the line of William Plovenick with Canaccord. Your line is open.
spk07: Great. Good evening. Thanks. Um, just the, the main question I have is, you know, we saw the acceleration of new account additions in the quarter and you're doing that with your current staff and, you know, you've been pretty methodical on the build out thus far. I was wondering, you know, do you plan on either a accelerating new account onboarding with the existing commercial org or expanding the commercial org faster? And it seems like you're getting to that. As you know, I always ask the question, is it reproducible, repeatable? And it seems like you're starting to get to that point, at least with account onboarding. Thanks. That's right.
spk01: Yeah. Hey, Bill. Thank you. Thank you for joining us. So, yeah, is this a situation of rinse and repeat? And it seems to be so. It seems to be repeatable. It seems to be scalable. Yeah. Are we planning to accelerate? No. Are we being opportunistic in some situations? Yes. The model seems to hold true. And, you know, our plan is to continue adding free territories every quarter. But we'll be opportunistic when we see a chance to go.
spk07: Okay. And then... I don't know if this was covered or not. Just did you provide if we're going to see, when we're going to see the M&M data?
spk01: Yeah, this was not covered in the Q&A. We still are expecting to accrue all of the events that we need. And as a reminder, it will be 320 mortality and morbidity events before the end of this year, this current year, 2022. And the unblinding will happen Very likely in the first half and possibly end of first quarter of 2023. Now, as we get closer to that date, the cone of uncertainty regarding the date is narrowing. Comes a moment when we will feel comfortable about the schedule of the unblinding. And we will do a public communication about the exact sequence of the unblinding. Now, this trial, whenever you're talking about mortality and morbidity, it's a complicated matter. Why? If a patient is hospitalized, and it's a long hospitalization, so think about it. Medical management patients who did not receive a better stem is admitted for a heart failure event, and that event takes a month to resume. You have to wait that full month. Even the date of occurrence happens, you have to wait until the patient is discharged and all of the data has been collected and all of the data has been adjudicated in a blinded fashion by our primary event committee before the data becomes data. And that is what creates some of the uncertainty, Bill, between the time when we will get the event until the time that we know, all right, this is the data. Let's look at it. And as I mentioned earlier, toward possibly before the end of the year, I hope, we'll be in a position to communicate the exact timeline of the unblinding process.
spk07: Great. Thanks for taking my question.
spk01: Thank you.
spk10: Thank you. That concludes our question and answer session for today. I would now like to turn the call back over to Nadine Yarid for closing remarks.
spk01: All right. Thank you, operator, and thanks again, everyone, for joining us for our second quarter earnings call. We, as you can imagine, we do appreciate your ongoing support, and we look forward to updating you on our progress on our next update. Have a great evening.
spk10: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
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