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spk00: Good day and thank you for standing by. Welcome to the Silk Road Medicals 2021 First Quarter Earnings 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 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Ms. Caroline Paul from Investor Relations. Please go ahead.
spk06: Thank you. And thank you all for participating in today's call. Joining me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer and Chief Operating Officer. Earlier today, Silk Road Medical released financial results for the three-month-ended March 31, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, physician training and adoption, growth in our organization and reimbursement, market opportunity, commercial and international expansion, label expansion, and our product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our yearly report on Form 10-K filed with the Securities and Exchange Commission on March 1st, 2021. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 4th, 2021. Silk Road Medical disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. And with that, I will turn the call over to Erica.
spk07: Thanks, Caroline. Good afternoon, and thank you for joining our first quarter 2021 earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer and Chief Operating Officer. With the beginning of the end of the pandemic in sight, we are on the precipice of an exciting time, not only for Silk Road, but for the healthcare delivery system as a whole. As of April 28th, confirmed COVID-19 hospitalizations have fallen by 70% since early 2021. Furthermore, nearly 70% of the Medicare age population in the U.S. is fully vaccinated and getting back to routine healthcare activities. Physicians are back to the important work of caring for patients with carotid artery disease and we are intensely focused on moving our trained physicians up the adoption curve to capitalize on the recovery we are beginning to see across the U.S. We have ushered in the trans-carotid era and yet we are just beginning to scratch the surface of our total addressable market opportunity. Our long-term goal is to leverage our proprietary technology and expertise in new markets and expand the pool of patients that we can address. To this end, we are pleased with our meaningful advancements, not only towards driving the adoption curve in the U.S., but also towards new indications, new therapies under development, and expansion outside the U.S. Our first quarter performance was characterized by substantial progress across our commercial and operational initiatives. Physicians performed almost 3,000 TCAR procedures in the quarter, and we achieved total revenue of $22.1 million, reflecting growth of 16% year over year. Based on the strength of our first quarter results, momentum exiting the quarter, and expectations for continued recovery throughout the year, we expect top-line revenue for 2021 to be in the range of $103 million to $108 million, representing year-over-year growth of 40% at the midpoint. As anticipated, significant COVID-19 hospitalizations in November and December persisted into the first two months of this year. followed by a strong recovery in March, which has continued into the second quarter. We are optimistic that the pace of recovery will continue to accelerate and patients will become increasingly comfortable re-accessing both routine and inpatient care. Turning to our two strategic priorities for 2021, which we outlined during our fourth quarter earnings call, we continue to make meaningful strides on both, number one, U.S. commercial execution and driving the adoption curve, and number two, preparation for a potential standard surgical risk label expansion for the on-route stent. Starting with the adoption curve, as we've said in the past, the majority of our procedures are driven by trained physicians with at least one year of TCAR experience. That being said, it's no secret the past year has been a challenge for providers, patients, and industry personnel alike trying to deliver healthcare as usual in a constrained pandemic environment. Now that we are seeing some but not all of these constraints lifted, we're intensely focused on our already trained physician base of over 1,800 physicians exiting 2020. Many of those physicians were trained in the latter part of 2019 and early 2020, just before the pandemic began. As we've stated in the past, the first year following training is crucial for physicians to create a foundation from which to confidently increase their adoption of TCAR. To better serve these physicians, We have refocused our commercial and professional education organizations to provide additional hands-on in-person training and workshops to further adoption of TCAR and reinforce its benefits. As well, we continue to develop targeted marketing and sales tools segmented by physician TCAR experience and behavioral attributes and are measuring the impact of such efforts. We are pleased with progress made during the pandemic and excited about our momentum as it subsides. Thus, as always, we are focused on the large, untapped market opportunity in front of us to drive TCAR penetration in high surgical risk patients. Moving on to our second key priority, preparation for a potential standard surgical risk label expansion for the en route stent. As a reminder, the en route stent's current indication is for patients who are considered at high risk for having an adverse event from carotid endarterectomy, or high surgical risk. Standard surgical risk simply denotes an absence of one or more high surgical risk criteria. While there is ample market opportunity within high surgical risk patients, gaining access to the standard surgical risk patient population would increase our TAM by approximately 50%, while also positioning us on a level playing field with CEA for clinical decision making. During our fourth quarter earnings call, we indicated that we have made substantial progress with respect to our regulatory strategy by submitting a PMA supplement for the expanded indication. Furthermore, We are busy developing our launch strategy, defining reimbursement pathways, and anticipating post-approval study requirements. In addition to investments in our top two priorities, we continue to invest in long-term growth initiatives aimed at strengthening our ability to deepen and broaden our presence, as well as open up new market opportunities. These include investments in new and improved TCAR products, new trans-carotid therapies, and international expansion. And we have made meaningful advancements in all three. With respect to our product pipeline, I am very pleased to announce that the FDA recently approved an IDE for our night one feasibility study in acute ischemic stroke. In night one, we will be assessing the role of transcarotid access and flow reversal, our two core competencies, in a new procedure we call neuroprotection in transcarotid embolectomy, or NITE, N-I-T-E. We believe this is the first study of its kind to be conducted under a US IDE and represents an important step toward realizing a future of trans-carotid therapies for neurovascular diseases. Our vision is big and bold, and we believe NITE and other trans-carotid procedures will solve difficult clinical problems in the treatment of complex neurovascular disorders and become an important part of the treatment paradigm in the future. Leapfrog innovations typically require an accumulation of clinical evidence, and NITE-1 is likely the first of multiple future studies toward that end. While there are many milestones on the journey toward commercialization, this study should advance our understanding of the clinical benefits NITE can provide in the context of acute ischemic stroke. The era of trans-carotid therapies in neurovascular diseases has begun, and Silk Road is leading the way. We look forward to sharing more details as 2021 progresses and in the years ahead. To summarize, we are very pleased with the progress that we are making on all fronts as we continue to invest in our long-term growth. We are excited to announce that we are expanding our operations to include a facility in Minneapolis, which is an important talent pool for aspiring and experienced med tech professionals and a great compliment to our continued and growing presence in Silicon Valley. With that, I will now turn the call over to Lucas Buchanan, our Chief Financial Officer and Chief Operating Officer.
spk01: Thank you, Erica. Revenue for the three months ended March 31, 2021, was $22.1 million, a 16% increase from $18.9 million in the same period of the prior year. Growth was driven by increased adoption of TCAR across an expanding base of hospital accounts, trained physicians, and active sales territories, partially offset by regional headwinds related to COVID-19. Gross margin for the first quarter of 2021 was 75% compared to 72% in the first quarter of the prior year, which was driven primarily due to lower fixed costs per unit from increased production volume in comparison with the prior period. As a reminder, gross margin in the three months ended March 31, 2020, was impacted by unfavorable production variances as a result of temporarily idle manufacturing operations due to COVID-19. Total operating expenses for the first quarter of 2021 were $26.7 million, a 17% increase from $22.8 million in the first quarter of 2020. R&D expenses for the first quarter of 2021 were $5.5 million, compared to $3.1 million in the first quarter of 2020. The increase was primarily driven by the timing of research and development initiatives. Sales, general, and administrative expenses for the first quarter of 2021 were $21.2 million compared to $19.7 million in the first quarter of 2020. The increase was primarily attributable to expenses related to growth in our commercial team and personnel-related expenses. Expense growth was partially offset by the continued reduction in travel, trade show, and other expenses due to COVID-19. We expect continued growth in operating expenses over the course of 2021 as we expand our commercial team and invest in a number of continued and new R&D initiatives. Net loss for the first quarter was $10.7 million, or a loss of 31 cents per share as compared to a net loss of 9.5 million, or a loss of 32 cents per share for the same period of the prior year. We ended the quarter with $136.1 million of cash, cash equivalents, and short-term investments. Regarding the accounting impact of the voluntary recall of certain lots of our en route stent, the obligation to customers was recorded as an accrued liability, whereas the replacement product from our supplier is considered a receivable. As such, these effects were confined to our balance sheet as of year end 2020 and first quarter end 2021. Turning to our commercial strategies that Erica discussed earlier and on our fourth quarter 2020 call, we continue to be focused on driving the adoption of TCAR among our increasingly large trained physician base. In the first quarter, and to put this through the pandemic lens, of the almost 3,000 procedures performed, over three-fourths were performed by physicians trained in 2019 or prior. With our continued focus on driving adoption for less tenured physicians trained in late 2019 and in 2020, We expect to bear the fruits of these efforts throughout 2021 and beyond. We are also on track towards our goal of training at least 200 new physicians in 2021 to continue filling the pipeline. With respect to our commercial organization, we are also on track towards our goal to end the year with 50 or more active sales territories, and we expect to have additional sales professionals hired and in training for further territory expansion in 2022. These collective efforts will aid in further driving the adoption curve, but also prepare us for the potential standard surgical risk indication. Lastly, we are updating our guidance range for 2021. We now anticipate revenue to be in the range of $103 to $108 million, representing growth of 37% to 44% over 2020 revenue of $75.2 million. As such, we are increasingly confident that our physician base will perform over 14,500 procedures this year. Our guidance assumes continued normalization in both the healthcare delivery system and patient behaviors, as well as continued progress with vaccinations. At this point, I would like to turn the call back to Erica for closing comments.
spk07: Thank you, Lucas. As we exit the first quarter, we remain confident that that our fundamentals are intact and our business outlook remains strong. During the first quarter, we made headway on product, clinical, regulatory, and commercialization fronts, further expanding our leadership as the sole player innovating trans-carotid therapies. I'd like to conclude with a reminder that May is National Stroke Awareness Month. And the COVID-19 pandemic has served as an unfortunate reminder of the consequences for people who are unable or unwilling to access and receive timely care for life-threatening carotid artery disease. We remain steadfast in our commitment to prevent and treat strokes, and needless to say, we continue to see enormous potential for our technologies to transform stroke prevention and care pathways globally. With that, we will now open it up to questions. Operator?
spk00: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the found key. Please stand by while we compile the Q&A roster. First question comes from the line of Robbie Marcus from J.P. Morgan. Your line is open.
spk03: Hey, guys. This is actually Alan on for Robbie. I had two quick questions. For the first one, you know, I was just wondering if you could comment on kind of the trends that you saw over the course of the quarter, say like January to February to March, and what you're really seeing so far in April. We've gotten some kind of a color from other peers outside of your space, really highlighting that March and then April works significantly better. So I was wondering if we should assume the same for you guys.
spk07: Yeah, I mean, as we talked about in the prepared remarks, certainly we saw the effects of the pandemic heading into the first part of Q1, you know, January and February, deeply affected by hospitalizations and, you know, just a whole crimping of the healthcare system, and I'll let Lucas kind of comment on where we are today.
spk01: Yeah, Helen, we like to call kind of Thanksgiving through February, you know, Q5 of 2020, and we were anticipating a rebound in March, and indeed that's played out, and as Erica mentioned, continued into April. March also had the most selling days, but it also had kind of the least COVID barriers around it relative to prior months.
spk03: Got it. And then the second question is really on the night one trial. Are there any details you can kind of give us on like the endpoint amount of in terms of what you're looking for in terms of the time endpoint? And, you know, any details you can provide us on that would be very helpful. Thank you.
spk07: Yeah, sure. Obviously, some more details will become public as we move forward throughout the year. But I think, you know, let's calibrate in that this is a feasibility study. And so that means that the endpoint, really, what we are aiming to accomplish is looking at the feasibility and safety of the use of trans-carotid access and flow reversal in the presence of large vessel occlusions. And so it's really all about that, all about studying the feasibility and safety as we move forward in that study. I think the point that I would like to emphasize here is that we're really excited about night one, obviously. This is a major event and certainly moving moving the treatment of stroke forward in a significant way. But the headline really is that the trans-carotid era has begun for neuro, and that this is the first of what we hope to be many initiatives in this space.
spk03: Sorry, one more quick follow-up. You know, can you provide some color on, like, when you look at the existing devices on the market today, just in a few words, what are, like, the shortcomings that you're really looking to address? You know, we've obviously seen that TCAR makes, you know, the procedure much safer compared to CEA, but, you know, we don't have the same kind of safety data, so to speak, for stroke. So where exactly are the flaws that you're looking to address? Thank you very much.
spk07: Yeah, and I appreciate the question because, like TCAR, you know, we really looked at the fundamentals of carotid endarterectomy and the fundamentals of transfemoral CAS to understand why, you know, what were the shortcomings in those two procedures. and what was potentially leading to poor patient outcomes in some cases. And so, you know, this is not a new endeavor for the company. We've been involved in looking at acute stroke and other neurovascular disorders for a long time. And we believe there's room for improvement in stroke, particularly around the things that we know lead to a poorer outcome, even with complete recanalization. Things like first-pass efficacy we know matters. Things like emboli in new territory we know matters to outcomes in the end. So these are just a couple examples of the things that we think are potentially interesting to address here.
spk00: All right. Next question comes from the line of Rick Weiss of Stifel.
spk04: Hey, guys. This is actually Dylan Haas on for Rick. Thanks for taking the question. I just had a question related to standard risk, one on the filing and one on the potential pace of adoption. I'll just ask both up front. First, on the filing, could you provide any sort of color on the feedback or discussions you've been having with FDA? And then just as we think about the potential pace of adoption post-approval, How are you guys thinking about how fast uptake could be among currently trained docs, ones that we speak to? Some seem already more aggressive about treating some of their patients, others more conservative, and just kind of trying to understand how you guys think about how quickly they could flip the switch on that.
spk07: Sure. Appreciate the question. With respect to the IDE, sorry, with respect to the PMA supplement, We're just not in a position to give any more color at the moment. Obviously, we have filed the supplement. The clock is ticking, and there really are no meaningful updates beyond that at this time, other than we continue to prepare for the moment if and when approval comes our way. And that preparation looks like getting the commercial team ready, the reimbursement strategies outlined, and the potential post-approval studies outline. So that's the work that we're really engaging in now.
spk04: Got it. And then just as we think about guidance for the full year, it essentially seems like kind of raised the lower end by the, you know, relative to what we had in the first quarter, and just trying to get any other added color on how you're thinking about the rest of the year, whether they're still being conservative about current trends and to the extent at which they'll continue. Any added color on that? Just kind of curious about your thinking about guidance.
spk01: Sure, Dylan. I can take that one. We're really kind of two months into the normalization process, so to say, with March and April, with January and February coming. you know, being really COVID affected. So our guidance, you know, assumes continued normalization as we commented in the healthcare delivery system as a whole, as well as patient behaviors. But in hindsight, you know, throughout the pandemic, you know, those two aspects have been at times unpredictable and or variable. And so there is some continued acknowledgement of that, as well as typical things like seasonality in Q3 driven often by vacations amongst providers and patients. And as we and others have said in the past, you know, 2021 could be a year where vacations are a bigger effect. And so that's all part of our thinking. Cool. Thanks for taking the questions, guys.
spk00: Thank you. Next question comes from the line of Daniel Ansalfi of SVB Clearing.
spk08: Hey, good afternoon, everyone. Thanks so much for taking the question. Congrats on a solid quarter. Just a question for you, Erica, around this, what sounds like a sort of new or maybe more focused initiative to ramp efforts around your existing physician base. I think, Lucas, you gave a data point around the number of procedures that your earlier trained physicians did in the quarter. But I guess I'm just curious to see how quickly, so with these new efforts, how we should see these physicians that were trained later in 2019 and early 2022 kind of immediately pre-pandemic. Now that the pandemic is starting to ease, should we expect to see a similar ramp that we saw with the earlier trained physicians from a utilization perspective, or is there something different amongst this physician base that we need to be mindful of that might drive a little bit of a slower ramp? That's my first question. I have one follow-up.
spk07: Okay. Thanks, Danielle. Hi. And thanks for the question. Yeah, I think what's fair to say is there's nothing fundamentally different about these physicians in terms of you know, their DNA, if you will. What is different is the moment in which they came into their TCAR experience. If you think about it, if you got trained and certified as a TCAR physician in latter 2019 or early 2020, really early, and then all of a sudden we're slammed with a pandemic and your overall procedural volumes go down, patients stop coming into your offices, You stop being able to engage the way you would like to with your Silk Road sales professional team. All of those things really have an impact on how these physicians moved early in their adoption journey. And so the focused effort, Danielle, is really to make sure that those physicians are really on the same footing as all of the other physicians that we've trained thus far. And so we have a very focused effort. We've segmented these physicians by behavioral traits and where they are in their journey. We have targeted engagement tools. We have hands-on programs that are in-person that are targeted for each of these segments. So I'm super pleased with the commercial team's approach to this, Danielle, and I think it ensures that these physicians can get off to the same journey as the physicians we've trained previously.
spk08: Okay, got it. That makes sense. So this is more just a little bit more hand-holding immediately coming out of the pandemic is maybe the right way to think about it than anything fundamentally different about the physician base we're talking about. I think that's a fair comment. Okay, cool.
spk01: Okay. And, Danielle, just real quick, you know, my comments were intended to highlight that, you know, there's – there's real upside because, again, the procedures were really driven by the more experienced physicians. So as we get programs and tools and tactics to the less experienced, we hope that bears fruit.
spk08: Yep, understood. Got it. And then I was curious, too, if you could comment, Erica, you mentioned in the past, particularly during the pandemic, some centers actually shifting, accelerating shifting to the less invasive, shorter length of stay TCAR procedure versus CEA for the patients that they were doing, albeit likely at a suppressed level of volumes overall. And I'm curious to hear if you've seen that trend sort of broaden as we continue to move through the pandemic and physicians are more focused now on getting more patients just in general through procedures, not just you know, carotid procedures, but procedures overall, they're juggling a lot. Hospitals are very cash crunched. You know, have you seen the benefit of a shift to a more predictable, less costly, safer procedure like TCAR, and how sticky is that now as we come out on the other end of this? Thanks so much.
spk07: Yeah, really insightful question. I think you're right in your insights in that physicians and hospitals are keenly interested in getting back to the business of treating patients. And I sort of alluded to that in my prepared remarks, which is physicians are back. And certainly against that backdrop, efficiencies are an important part of the story. And I think it's not only efficiencies for physicians and hospitals and all the cost benefits and sort of productivity benefits that come along with that, but it's also reflected in how patients re-emerge and re-enter into the healthcare system. So I think net overall, the efficiency of TCAR, the improved outcomes, the less invasive nature of TCAR, all of that continues to serve as a tailwind for adoption. And I think it's also safe to say that in the physician groups and individual physicians who really took advantage of the efficiencies during COVID, I think we're pleased about the stickiness of that. We haven't seen a reversion, in other words, and why would you, right? I mean, after you've experienced the efficiency of TCAR, why would you go backwards? And that's, in fact, what we're seeing.
spk08: Thanks for that.
spk00: Again, to ask a question, you will need to press star 1 on your telephone. And to withdraw your question, press the pound key. Your next question comes from the line of Adam Mader of Piper Sandler.
spk02: Congrats on a solid start to the year, and thanks for taking the question. So first one for me is just on the procedure environment. It sounds like things got a lot better in March and April, but wanted to ask for a little bit more color there. So what are you seeing from a hospital or ICU capacity side of things? What are you seeing from kind of a patient willingness standpoint? And then also the diagnostic funnel. I mean, are we kind of back to pre-COVID levels or 80% there, 90%? Just any color there would be helpful. and then I have a follow-up or two. Thanks so much.
spk07: Yeah, Adam, I can give you some high-level color on those three things. Let me try to unpack them one at a time. So on hospital capacity, I think, you know, the good news is with vaccinations really increasing and greater than 70% of the Medicare population vaccinated, and again, that's our patient population, right? We are seeing hospital admissions go down for COVID and certainly deaths, thankfully, going way down. So hospital capacity is less and less of an issue, as well as hospital resources. So it's not just about beds. It's also about people. And I think we're seeing more resources come up as the pandemic wanes here. As it relates to patient behavior, this is the real interesting one. You know, there are some real tailwinds to patient behavior, not the least of which is vaccination and elderly people just feeling better about being out and about in the world. I think also beneficial is the fact that they can enter the healthcare system and have a family member beside them. You remember during COVID, Adam, you know, you couldn't bring a family member to the hospital or even to your doctor visit. So things like that are really having a positive impact on getting patients back to the business of routine maintenance and routine care. And certainly many of them deferred that routine maintenance and care for a long time. And so I think that speaks to your final piece, which is the funnel. And there are not only brand new diagnoses occurring, but also patients who deferred their kind of just routine follow-up exam on their carotid who are now coming back into the system. And in many cases, disease has progressed farther than it might otherwise have.
spk02: Got it. That's helpful color. Thanks for that. And then I guess, and maybe I missed this in the prepared remarks, but just any update on the international expansion initiatives that you're pursuing, China and Japan. Just wondering if there's an update on the progress and potential timelines there. Thanks.
spk07: Yeah, the update is we are making progress. So nothing specific to report nor timelines here on this call, but we're pleased with the progress that we made in the quarter.
spk02: Okay, got it. Sorry for the feedback there. And then one last one, Erica, if I can sneak it in. Just maybe curious about, you know, the carotid market more broadly and, you know, how you think that recovered and, you know, if you think you took share. you know, in the first quarter sequentially, and, you know, if you did take care, you know, if that came at the extent of CEA or transformal stenting. Thanks so much.
spk01: Adam, I'm happy to take that one. You know, we don't have all the data yet from 2020, but we, you know, we do believe overall procedure volumes were down as a function of COVID-19, and obviously our procedures were up. And so we are kind of taking share at a national level, and we're looking at that at an individual physician level, too. They're depressed as well, but we continue to grow the adoption curve. So the trends are positive in that environment and certainly coming out of it. And CEA continues to be, you know, the gold standard, and that's where we're focused on taking share from because that's where most of the procedures are.
spk02: That's really helpful, Lucas. Thanks so much. Thanks.
spk00: Showing no further questions at this time, I would now like to turn the conference back to Erica for closing remarks. Thank you all very much for attending the call today. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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