Silk Road Medical, Inc.

Good afternoon, and thank you for joining Silk Road Medical's second quarter 2023 earnings call. All lines are muted. Following prepared remarks, we will host a question and answer session. Please press star, then 11 to enter the queue. Now, I will turn the call over to Marissa Beisch with Gilmartin Group for a few introductory comments.

Great, and thank you for joining 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 months ended June 30, 2023. 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 the 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, expense management, expectations for hiring and growth in our organization and our business, position training and adoption, market opportunity and penetration, commercial and international expansion, regulatory approvals, reimbursement, competition, and product 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 Factor section of our latest quarterly report on Form 10-Q filed with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 1, 2023. 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 now I will turn the call over to Erica Rogers, Chief Executive Officer.

Good afternoon, and thank you all for joining us. I'm proud to report another strong quarter for Silk Road as we fortify our leadership in stroke prevention, execute our commercial objectives, and innovate next generation solutions. In the second quarter, we achieved revenue of $45.3 million, reflecting 37% year-over-year growth, driven by over 6,450 TCAR procedures. The quarter reflects the seventh straight sequential increase in procedures per physician. demonstrating broad and deepening demand for key car as we increase touch points with physicians. Based on our first half performance and current trends in our business, we are also updating our 2023 outlook. We now anticipate between $180 and $184 million in revenue for the full year, reflecting 30% to 33% year-over-year growth. We are beginning the third quarter with 80 active sales territories, covering roughly 2,600 trained positions in over 1,200 leading hospitals. As a reminder, on our last earnings call, we shared that we had accelerated our 2023 hiring plan to welcome a wave of high-quality talent, which also yielded an opportunity to optimize our territory designs and sales management structure. Our realignment work continued early into the second quarter, and we are pleased to share that our field team has transitioned smoothly following these changes. The energy of our team is palpable, and we are optimistic about our continued commercial progress leading to incremental territory expansions into Q4 and beyond. Let me take a moment to discuss the exceptional skill and day-to-day impact of our field team, who now covers the majority of high-volume carotid centers in the United States. This team of sales professionals and therapy development specialists, along with their colleagues from our reimbursement office of medical affairs and professional education teams, comprehensively support our physician customers, along with the entire continuum of carotid artery disease care providers. They spend each and every day focused solely on carotid artery disease as trusted and clinically adept partners to our customers. Each person in our field team undergoes an intensive three-month training program, including proprietary didactic training, CT, MRI, and ultrasound imaging assessment, principles of local and general anesthesia, blood pressure management, and pre- and post-op medication management. We train our team with the skills to assist physicians in moving forward with TCAR and when to discourage the use of TCAR when appropriate, a skill born out of our commitment to patient outcomes, our North Star. While our U.S. commercial engine drives forward, We are also advancing the next generation of TCAR products to fortify our leadership in stroke prevention. In the second quarter, we initiated the full-scale commercial launch of Inflate, the first balloon purpose-built for TCAR, and the fifth product in our portfolio. The launch is tracking to our expectations, and we look forward to updating you on our future progress. In addition, we are very pleased that we received 510 clearance for our next generation neuroprotection system or NPS plus in April. This product supports additional ease of use and further minimizes the risk for complications. We are on track for a limited market release later this year. Finally, we are also very pleased to share that we received PMA approval for tapered configurations of our enroute stent in mid-June. The new configurations will provide greater choice for physicians to address the diversity of patient-specific anatomy. With the cadence of our Enflate Balloon and enroute neuroprotection system plus launches in mind, as well as inventory considerations, we anticipate launching our tapered on-route sizes in the first half of next year. With three major product clearances and approvals, our R&D pipeline efforts are bearing fruit, extending our leadership in the TCAR category and freeing up our R&D team to work on the next set of next-generation solutions. Internationally, we are making meaningful progress towards unlocking the $2.3 billion global market opportunity for KiPAR. In China, we are focused on approval of our enroute stent following clearance of our enroute neuroprotection system earlier in the year. In Japan, we continue to investigate distribution partners while we move towards reimbursement submission. In both geographies, we are conducting regulatory activities to support future clearance of our next generation en route NPS Plus that was just cleared in the U.S. Looking beyond our Q2 progress and commercial momentum, I'd like to take a moment and address the proposed national coverage determination issued by CMS in July. As a reminder, CMS's proposed decision is to cover TCAR and other methods of carotid stenting, collectively known as CAS, in both high and standard surgical risk patients that are either asymptomatic with greater than 70% stenosis or symptomatic with greater than 50% stenosis. A second 30-day comment period is underway with a final decision expected on October 9th. The bottom line of this proposal is access, broader access to less invasive options for patients with carotid artery disease, including for underserved and underdiagnosed populations. As stated in the proposed decision, quote, CMS believes the expansion of coverage for carotid artery stenting to our beneficiaries will serve to allow greater numbers of individuals to access this procedure for stroke prevention. CMS is also acknowledging the importance of patient preference in choice of treatment to ensure that patients receive the most appropriate treatment and that physicians are held accountable for their outcome. Underwritten by the deep knowledge of the risks and benefits of differing treatment options and market forces, CMS has elevated the role of FDA labeling and indications for use, society guidelines and clinical practice updates, regional and national quality initiatives hospital credentialing committees, and multidisciplinary panels, and importantly, physician and patient shared decision-making. These forces serve to ensure patients are given the best opportunity for a successful clinical outcome. As the experts in the treatment of carotid artery disease, our assessment of this proposal starts with our deep understanding of this patient population and the referring and treating physicians managing their care, and centers on three principles. First, and most importantly, data supports TCAR first for patients. Patients get TCAR because of the vast clinical evidence in support of the procedure, especially as compared to the alternatives. Over decades of study, CEA has shown a persistently higher rate of serious surgical complications, including myocardial infarction and cranial nerve injuries as compared to TCAR. While transfemoral CAS has shown a persistently higher rate of periprocedural stroke. Meanwhile, TCAR was specifically designed to solve the tradeoff between the excess stroke risks of transfemoral CAS and adverse events associated with open surgical procedures by effectively mitigating both. As acknowledged by CMS in their review, Large, contemporaneous, propensity-matched, real-world evidence has revealed direct comparisons of TCAR to both CEA and transfemoral CAS. For example, in the December 2019 Journal of the American Medical Association, Shermerhorn et al. compared outcomes of TCAR and transfemoral CAS in 3,286 propensity matched patients. The authors found a statistically significant decrease in stroke, death, and stroke death for patients who underwent TCAR versus transfemoral CAS. In addition, the authors found a significant decrease in stroke or death at one year in TCAR patients. Similarly, in the Journal of Vascular Surgery in 2020, Decor Aridia et al. found TCAR reduced procedural stroke risk by 72% over transfemoral CAS in the elderly, therefore also reducing the rate of disabilities from stroke, which can include impaired speech, restricted physical abilities, limb paralysis, difficulty gripping items, and slowed ability to communicate. Stroke is a devastating complication. These data are just a few examples of the recent and now vast literature, well in excess of 25,000 patients' worth of published TCAR data that clearly defines contemporaneous risks and benefits of carotid intervention methodologies. TCAR's clinical evidence and safety profile is rooted in our purpose-built flow reversal technology, which is not only safe but exquisite as measured by stroke rate and the hidden procedural fingerprint of silent cerebral ischemia. We firmly believe that patients are at a disservice if we aren't preventing every chance of cell death in the brain from procedure debris. And our technology is the only carotid stenting approach that diverts all sizes of debris, unlike distal filter-based approaches, which by definition discriminate by size. The risk-reward in favor of TCAR extends further when we consider its rapid and safe learning curve, well documented in the medical literature, showing that adverse event rates are achievable from procedure one of a physician's TCAR experience, and remains reproducible across a broad spectrum of patient presentations. The transfemoral CAS learning curve is also well documented, with at minimum over 70 cases required to lower the periprocedural stroke and death rate. When properly informed of the comparative risks and benefits, we are confident that patients will overwhelmingly choose TCAR. Second, TCAR is redefining the standard of care in an expanding market. As we have said in the past, the prevalence of severe carotid artery disease is estimated at over 4 million people in the United States, with over 400,000 people receiving a new diagnosis of critical carotid stenosis every year, and less than 200,000 who receive procedural treatment to address the at-risk lesion. We also know that there are likely more strokes from carotid disease than there are carotid interventions to prevent those strokes. But given the comparative procedural risk of CEA and transfemoral CAS, carotid intervention is historically very conservatively applied. We believe TCAR is changing this paradigm. Among patients already treated, we have made substantial progress converting CEA and transfemoral CAS procedures to TCAR by educating and driving awareness of the safety and efficacy profile of TCAR across the care continuum. With its comparatively short learning curve and broad patient applicability, TCAR is well positioned to reach farther into an underserved and underdiagnosed at-risk population, while offering a compelling stroke prevention option for the remaining currently medically managed populations of over 200,000 patients. Should the CMS final decision mirror today's proposal, we expect to see tailwinds for TCAR, including increased screening, diagnosis, and demand for minimally invasive carotid intervention as a whole. Third, TCAR is entrenched, marked by the deeply rooted and concentrated nature of carotid disease referral and treatment patterns, predominantly from internal medicine and neurology to vascular surgery. And rather than attempting to shift longstanding and entrenched referral relationships, our strategy with TCAR from the beginning was to become an effortless part of this network. And our work to establish TCAR has resulted in a tenured presence in hospitals performing the vast majority of carotid procedures today. An important component of patient momentum toward TCAR is their referral to the vascular lab for definitive ultrasound diagnosis of a suspected carotid blockage, which typically results in an immediate referral to a vascular specialist. We see significant self-referral from vascular surgeons in these vascular labs who are already screening patients with peripheral artery disease. whom they proactively screen for carotid disease. We are also seeing neurology, primary care, internal medicine, and cardiology increasingly encourage patients to choose TCAR as the minimally invasive carotid stenting option. Because the last thing they want for their patients, not to mention the reputation of their hospitals and programs, is the devastating possibility of a stroke during a procedure with prophylactic intent. In addition, our work to establish TCAR has resulted in diffusion of TCAR in most major fellowship training programs and an increasingly tenured presence in hospitals performing the vast majority of carotid procedures today. In addition to TCAR being entrenched in the continuum of care, Our field team itself is entrenched as essential partners to our physician base, from diagnosis to case planning and post-operative care. The nature of their leadership and relationships across the referring and treating physician communities stems from their thorough understanding and ability to meet the specific patient and physician needs in this market. We have spent years developing and cementing the strengths of this team. And the hard work of navigating multi-specialty dynamics and hospital credentialing committees to firmly establish minimally invasive TCAR alongside open surgery is largely behind us. We are on the ground and running deeply embedded in the carotid continuum from vascular imaging labs, referring physicians, and ancillary health providers to in-hospital nurses, anesthesiologists, and hospital administrators. Our track record of pristine patient outcomes is favorably influencing referring physicians, And TCAR's hospital's efficiency and favorable economics are now well understood by hospital administrators. After years of battling the inertia of CEA and rising to the challenge of meeting and exceeding a high bar, TCAR's momentum is building and its own inertia is setting in. In summary, looking across today's market forces, there are many dynamics that continue to work in TCAR's favor. We are confident that our team and our business will continue to drive the paradigm shift towards more minimally invasive patient options. And we are pleased to be the leading force for stroke prevention for patients with severe carotid artery stenosis. We expect the renewed focus on this topic to act as a rising tide to the diagnosis and screening of carotid artery disease, and ultimately the safe and effective treatment of more patients. We are excited and motivated by our second quarter progress, and we are unwavering in our drive to reach standard of care in treating this patient population. With that, I'll now turn the call over to Lucas Buchanan, our Chief Financial Officer and Chief Operating Officer.