Greetings, and welcome to the CVRx Q1 2023 Earnings Call. At this time, all participants are in a listen-only-mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Vallie. Thank you. Please go ahead, sir..

Good afternoon. Thank you for joining us today for CVRx’s first quarter 2023 earnings conference call. Joining me on today’s call are the company’s President and Chief Executive Officer, Nadim Yared; and Chief Financial Officer, Jared Oasheim. 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 several 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 CBRx’s President and Chief Executive Officer, Nadim Yared..

Thank you Mike, and thanks to everyone for joining us. I’ll begin today’s call by providing an overview of our first quarter performance, followed by an operational update, a review of our financial results by our CFO, Jared Oasheim; and then I will conclude with our thoughts for the rest of 2023 before turning to Q&A.

We are thrilled with our first quarter performance, which demonstrated solid execution on multiple fronts. We are able to share the preliminary data from the BeAT-HF study during the quarter and continue to grow our U.S. heart failure business.

This is a testament to our team’s ability to accelerate adoption of Barostim through the increased capabilities of our commercial organization and our marketing and awareness efforts. At a high level, our Barostim therapy continues to gain traction.

The feedback from physicians at active implanting centers is extremely positive with many reporting meaningful impact on the quality of life for their patients suffering from heart failure. Now let’s dive into the details of our performance.

Starting with the review of the first quarter, our worldwide revenue for the quarter was $8 million, an increase of 96% over the first quarter of 2022. The U.S. heart failure business generated $6.8 million of revenue, an increase of more than 132% over the first quarter of 2022. This accelerating top line performance in the U.S.

was highlighted by March, which was by far the best single month in the company’s history. While we don’t know how much of the revenue performance in March is attributable to the announced unblinding of the BeAT-HF study in February or to our commercial execution over recent quarters, we can definitely say our strategy is working.

We are also seeing these strong adoption trends continue into April. Now turning to an update on the operational progress we made during the first quarter, starting with the continued expansion of our commercial infrastructure. During the quarter, we added 3 new territories, bringing the total to 29.

We remain excited with the quality of sales talent we have been able to attract and look forward to continuing to build upon that quality in 2023. During the first quarter, we made significant progress with our marketing initiatives, including our direct-to-consumer and patient education programs.

We will continue to optimize these campaigns to improve cost effectiveness and evaluate the broader rollout to capitalize on the accelerating momentum in our business.

Moving to our next area of focus, the expansion of our clinical body of evidence, I want to provide an update on our ongoing interaction with FDA regarding our potential label expansion following the post-market BeAT-HF data we recently announced.

We have started an interactive discussion with FDA to ensure that our submission is designed in a way that is most effective for their review process. Based on the data collected so far and guidance from our executive steering committee, we remain optimistic that we will receive a label expansion.

However, please keep in mind that our 2023 guidance showing significant growth does not assume any positive impact from a label expansion. We look forward to reporting our progress over the coming months. Wrapping up the quarter, I want to express my gratitude to our team and thank everyone for their continued support.

We had a strong first quarter with impressive revenue growth, particularly in the U.S. where our heart failure business performed exceptionally well. We remain confident in our business to help bring relief to many patients suffering from heart failure. I will now turn the call over to Jared to review our financials.

Jared?.

Thanks Nadim. In the first quarter, total revenue generated was $8 million, representing an increase of $3.9 million or 96% compared to the same period last year. Revenue generated in the U.S. was $6.9 million in the current quarter, which is an increase of 127% over the same period last year. Heart failure revenue in the U.S.

totaled $6.8 million in the current quarter on a total of 225 revenue units compared to $2.9 million in the first quarter of last year on 99 revenue units. This increase was primarily driven by the continued expansion of the U.S.

heart failure business into new sales territories, new accounts and increased awareness among physicians and patients about Barostim. At the end of the current quarter, we had a total of 122 active implanting centers compared to 56 on March 31, 2022, and 106 on December 31, 2022. We also had 29 sales territories in the U.S.

at the end of the current quarter compared to 17 at the end of Q1 2022 and 26 on December 31, 2022. Revenue generated in Europe was $1 million in the current quarter, an increase of 2% compared to the same period last year. Total revenue units in Europe increased from 50% in Q1 of 2022 to 52 in the current quarter.

At the end of the current quarter, we had a total of 6 sales territories in Europe. Gross profit for the 3 months ended March 31, 2023, was $6.7 million, an increase of $3.5 million compared to the 3 months ended March 31, 2022. And – gross margin for the current quarter increased to 83% compared to 77% for the same period last year.

This increase was primarily driven by a decrease in the cost per unit as a result of the increase in production volumes. Research and development expenses for the current quarter were $3.4 million, reflecting an increase of 51% compared to the same period last year.

This change was primarily due to increased compensation expenses, non-cash stock-based compensation expenses and consulting fees. SG&A expenses for the current quarter were $15.4 million, representing an increase of 43% compared to the same period last year.

This increase was mainly driven by higher compensation expenses due to increased headcount as well as increases in travel expenses, non-cash stock-based compensation expenses and marketing and advertising expenses related to the commercialization of Barostim.

Other income net was $1.1 million in the current quarter compared to a net expense total of $57,000 in the same period last year. The income in the first quarter of 2023 was primarily driven by interest income on our interest-bearing account.

Net loss for the current quarter was $11.4 million or $0.55 per share compared to a net loss of $10 million or $0.49 per share for the same period last year. Net loss per share was based on 20.7 million weighted average shares outstanding for the current quarter and 20.4 million weighted average shares outstanding for the first quarter of 2022.

At the end of the current quarter, cash and cash equivalents were $103.3 million. Net cash used in operating and investing activities was $10.5 million for the current quarter compared to $10.9 million for the same period last year.

During the current quarter, we also drew down $7.5 million of debt on our current credit facility to further strengthen our financial position. Now turning to guidance. For the full year of 2023, we now expect total revenue to be between $35.5 million and $38 million. Gross margin is now expected to be between 80% and 83%.

And we continue to expect operating expenses between $76 million and $80 million. For the second quarter of 2023, we expect to report total revenue between $8.2 million and $8.8 million. I would now like to turn the call back over to Nadim..

Thanks, Jared. These are very exciting times at CVRx. We continue to see exceptional execution across our business. The revenues are accelerating, our margin profile continues to improve and our cash burn is decreasing. Simply put, our model is working as we expected to.

We have continued to see strong performance in the business through April, and as a result, are raising the low end of our full year revenue guidance and increasing our full year gross margin guidance. We look forward to continue to build on the momentum we have created and successfully execute our growth strategy throughout the remainder of 2023.

Now, I would like to open the line for questions.

Operator?.

Thank you, sir. [Operator Instructions] The first question we have is from Will Plovanic from Canaccord Genuity. Please go ahead..

Great. Thanks for taking my questions and congrats on the quarter. Just really two questions really on the M&M data. One is your discussion of the interactive discussion with FDA.

Can you give us your thoughts on the label kind of how we should think about this is like what are you going for at the high end? What are you going to for at the low end and kind of frame that discussion for us, if possible? And then secondly, your commentary on a very strong March, not sure if that’s commercial or the M&M data.

I was just – any anecdotal feedback from the physician community would be great there? Thanks for taking my questions..

Yes. Hello, Bill. Very nice hearing from you and great questions. Let me start with the question about the interactions with FDA. And as you know, there are two ways of filing a PMA supplement. One is the apologies for that. The first approach is to prepare the clinical report, submit it and then wait to hear by feedback from FDA.

The second is do it more interactively. We selected the second pathway. And this interaction would allow us to optimize the clinical report to ensure that we basically are providing the information in a way that is the most useful to FDA to make that assessment. The labeling we’re going after, as I’ve said it previously, is a treatment effect.

We would love it if FDA agrees with the opinion of our executive steering committee that is made of five key opinion leaders where they stated that, in their opinion, the totality of evidence from BeAT-HF supports this therapy as a treatment for patients suffering from heart failure.

Whether through the interaction with FDA, we could augment that labeling or decrease it. It’s still a little bit early right now to assess that. So we’re at the beginning at the early phases of these interactive discussions with FDA.

In regard to your second questions and anecdotal evidence, we’ve had a few interactions with physicians since we unblinded the data. I just want to remind everybody here, while answering your question, Bill, that we as a company and a sponsor of the trial, we are not allowed to market the data yet. All we can do is answer questions.

So if a physician asks a question, we can answer it. If they don’t, we cannot provide the information. In our – the information I have in front of me, about half of the physicians that we are either working with or interacting with, have not asked any question about the M&M data, they may not be aware of the unblinding of the data.

The remaining half, those that are aware, the range of feedback varies widely. And what we can say right now is we have not seen any slowdown due to the data or any physician saying, well, I’m disappointed with this data. I don’t believe anymore what I’ve seen in my own patients. Therefore, I am going to slow or stop treating patients with Barostim.

So we have not seen that. It’s a double negative apologies about this. So, so far, I would say I am very satisfied here with the reaction that we have seen in the marketplace to the data for those physicians who have been exposed to the data..

Thank you for taking my questions..

Thank you, Bill..

The next question you may have is from Robbie Marcus from JPMorgan. Please go ahead..

Hi, this is Lilly for Robbie. Thanks for taking the questions. So, if you take that amount and guided for the second quarter ahead of – the Street, but you only raised the low end of the guidance by $0.5 million, which implies a slightly softer back half than what we had been thinking.

So can you talk through your thinking there? And why isn’t the full year range moving up more?.

Hi Lilly, this is Jared. Happy to take your question. Yes, we were really happy with what we saw in the first quarter. I think Nadim mentioned it in the first part of the call just talking about how we really saw some nice results in the month of March, allowing us to beat the top end of that range that we – that we had put out for the first quarter.

And we saw some of those trends continuing into April to allow us to put out some pretty solid guidance here for the second quarter. We don’t necessarily want to move too quickly on the full year guidance after just one quarter results or just seeing really strong March and seen a few positive trends into April.

But if we see the trends continuing after Q2, that’s something we’d look at that point. Got it..

Got it. That’s helpful. And maybe just a follow-up, can you talk about how you’re thinking about growth in the U.S. versus internationally? What does it take to get the international business ramping from here or is the focus for foreseeable future really on the U.S. and driving adoption there? Thanks so much..

Listen, great question, and we’ve asked ourselves this question almost on a quarterly basis. We have limited resources and limited capability in growing, right? So it’s not about throwing money and hoping what sticks on the world. We need to invest judiciously in here.

As I mentioned in previous calls, the cone of possibilities that would allow us to reach cash flow breakeven without raising additional money is wide, but not too wide. We don’t have too much margins in here of throwing money and hoping for the best outcome.

And in our opinion right now, the best return on investment right now is for us to invest it in sales and marketing in the United States. Now the situation will change in the future as we start increasing our penetration in the United States.

But right now, with the growth that we’re seeing in the United States, any dollar we can spend in the U.S., we are spending it in the U.S. When we talk about Europe, – it’s multiple countries, right? Every country is different. And even within a single country like Italy, there are 13 regions each have their own reimbursement paradigms and so forth.

Right now, our focus in Europe is in Germany. We only increased the headcount in Germany to support steady slower growth that we have because what we’ve experienced previously about a year ago was that if we maintain our presence flat in Germany, actually, it decreases, and it became an anchor around our worldwide growth.

So we hit that sweet spot where we can grow it enough so that becomes a value added, but we don’t have the ability right now to invest faster in Germany to grow it as fast in the United States.

So for the short-term, for the foreseeable future and as our penetration is still super low in the United States, our best return investment is in the U.S., we will focus on the U.S..

Great, thank you..

Thank you..

The next question we have is from Matthew O’Brien from Piper Sandler. Please go ahead..

Hi, this is Sam on for Matt. Congrats on a great quarter. I guess one question we had is about Barostim utilization since announcement of the BeAT-HF trial. Are you seeing anything changed? Or is that staying mostly the same? And then also, what kind of questions are you getting from physicians since this readout? Thank you..

Yes, Sam. Great question. So in terms of utilization, I’m assuming that we mean here is a treatment of new patients with the device. So we’re not talking about programming more or replacement of batteries for patients who receive the therapy 5 years ago.

So in terms of de novo patients receiving a therapies, which correlates with the revenue, we’ve seen a super strong barge, and we are very happy with it. And that trend continues in April.

What we don’t know yet is how much of that can be attributed to the data that was basically, we issued a press release in middle to late February around the 21st of February or it’s just execution. We know we have a great team. We’ve done fantastically well, and we’ve been growing our business in the United States, approximately 100% year-over-year.

Maybe that’s only the result of just superb execution and maybe it’s both. So all we can say at this stage is that we have not seen a slowdown. It’s a double negative. And the acceleration that we’re seeing is a bit too early to say it is due to the data that was unblinded..

Great. Thank you. And then just the last part on kind of what questions you’re getting from physicians..

Yes. Thanks for reminding me about the second question. So physicians questions, I’m assuming it is based on the data. The largest question that we received at THT was about one component of the primary endpoint. I don’t know if you’ve seen the data, but we had that chart that Dr.

[indiscernible] presented, and I actually summarized it that same evening in our press conference. That chart has all of the points, all of the dots on the right side favoring the device with the exception of one dot, which was close to the center with a wide header bars, but on the other side of that segment. And that was the heart failure morbidity.

So those are the hospitalization due to heart failure. What Dr. [indiscernible] presented at the symposium at THT was that in his analysis, 2020 was a very different year.

The rate of heart failure hospitalizations in the control arm, we’re about one-fourth of the same rate of hospitalizations in the same arm in the other years and the p-values of the chart, how different 2020 was for this specific group as compared to any other year.

And that led us to consider and ask the question, what would the data look like if 2020 was not there? If 2020 is not existing if we do not have a pandemic in 2020, but instead of filling 2020 with fake numbers, we said, all right, well, if 2020 did not exist. We went from 2019 back into 2021. So he – Dr.

[indiscernible] presented additional data at the German Congress of Cardiology known as DGK at Manheim, where he did that analysis, and it shows concordance of the data. So all of those dots on that chart now are on the right side, favoring Barostim.

That was a direct answer to the biggest question we kept hearing is – and the question is, how can you explain that you have such a dramatic effect on reducing mortality but yet you’re not reducing morbidity. And that analysis ignoring the data from 2020 answered that question.

So Sam, that’s, I would say, what the – if there was one single feedback, I would summarize it as such..

Thank you so much..

Thank you..

The next question we have is from Margaret Kao from William Blair. Please go ahead..

This is [indiscernible] Malgorzata on from Margaret. Thanks for taking our questions and congrats on the strong quarter. I guess one on the DTC campaigns. You’ve obviously mentioned you’re monitoring and testing a variety of different channels.

So just wondering what you’ve seen from those and if kind of just any notable increases and awareness following those results and following the readout....

Yes. Excellent question [indiscernible]. Nice hearing from you again. It was great seeing you last month. Listen, in our opinion, based on the data that we’re looking at, our direct-to-consumer efforts appears to be paying off. And we started expanding to new geographies, but only to the areas where we have active implanting centers.

And we are very happy with the results that we saw in the first quarter. We are super happy with the results we saw in April in regard to the effect of DTC to drive utilization. In terms of different channels, we will keep testing new channels. You know, right now, we are present on Facebook. We are present on Google AdWords.

We are present on some TV channels. I am not going to go through this in details.

But many of you if you happen to be in this area, if you happen to be above a certain age and possibly suffering from symptoms similar to heart failure or if you have somebody in your family or your friends, having those symptoms, Facebook has probably shown you one of those ads..

Awesome. Thanks. And then just a quick follow-up on the BATwire trial, is there any more color you could give there on adding more sites in patients? Just wondering if we could get a bit more detail on how that’s progressing and potentially how many of the estimated 400 patients have been enrolled? Thanks for taking my question..

Yes. I will not comment on the sites that we are adding at this stage. The – all I can say is my colleague, we are a very small team at CVRx, and particularly our clinical team.

Right now, at this stage, at this moment, our focus is the analysis of BeAT-HF data, the mortality, morbidity data and the discussions with FDA and the filing of the PMA supplement, and that is taking precedence over anything else. Now BATwire is continuing in the background, but that has not been our focus in the past couple of months.

If we have any update to provide, we will do our best to include it in the next quarterly release..

Great. Thanks again..

Thank you. Have a good night..

The next question we have is from Alex Nowak from Craig-Hallum Capital Group. Please go ahead..

Okay. Great. Good afternoon everyone. I want to continue off that last question there. And now, with BeAT-HF being read out, the FDA is going to want to do – will do whatever it wants to do there. But obviously, your team is going to be focusing on getting BeAT-HF, good to go and submit to the FDA.

But I guess what other studies, small or big, do you want to go ahead and green-light here in the upcoming quarters? What’s next?.

Hey Alex, how are you, great question. Here is what we have disclosed in the past. We do have the post-market study that just completed with BeAT-HF. Right now, unless if FDA asked us to do yet another post-market study, it will be our own initiative. And we have currently a large registry that is currently enrolling in the United States.

It’s called rebalance. And our objective here is to try to collect as much data as possible within reason. Obviously, we don’t want to create additional burden on hospitals where we know they have still staffing shortage. That’s number one. And number two, we don’t want the cost to CVRx to be over an overburden.

So, that rebalance registry is ongoing as we speak. The second element is we have opened up the door to academic investigators at institutions who have an experience with Barostim to submit a request for a study to CVRx.

We have an independent adjudication committee that looks at the scientific merits of the study and if it’s positive, then we help with some of the funding of these. We call this program, the BIIR, Barostim Investigative Initiated Research. So, those are the ongoing elements. And of course, we have got BATwire.

I just answered the question previously on this topic. And then finally, we have been accepted in a new program at FDA, which is called TLAP, the total life cycle program and advisory program. This program is in a pilot phase at. They would accept up to 15 projects this year only in cardiovascular.

I am happy to say that our project’s proposal was accepted by FDA on January 6th. So, I believe we are the first pilot project within that. We are looking at expansion of the market that we are going after. This obviously would require new trials. It’s a bit early in the analysis phase. We are working with FDA.

The essence of TLAP is very intriguing and exciting. It is only for programs that have a breakthrough designation. And if you recall, we have a breakthrough designations for hypertension and the other side of heart failure, which is the preserved ejection fraction.

And the essence or the promise of the TLAP program is for FDA to work with the sponsor and include other stakeholders such as payers or patients or patient advocacy groups or physician groups, physician societies and so forth to ensure that the future trial that will be conducted answers all of the requirements of all of the stakeholders.

Now, it’s a little bit early. It is still a project. We don’t have a plan yet to start a trial. It would take months of work in here with all of these stakeholders to design a trial, and then we will have to make a decision when is the appropriate time for CVRx to invest in this trial.

So, it is a little bit premature right now to discuss the details of this trial is because we don’t know yet the details of the trial.

But I am very happy here to disclose to you and everybody else that CVRx has been selected as part of this pilot project with FDA, and we are super excited with the weekly interaction we are having with FDA and with the other stakeholders on this topic..

Okay. Very exciting, excited to hear what comes of that. With regards to BeAT-HF being submitted to the FDA, I know the discussions are underway now as far of the breakthrough designation.

What is the latest timing internally for submitting that package for label expansion?.

It will depend. Usually, one would say, if it’s the classical road that we are following, usually it takes a company about three months to assemble the PMA submission and submitted to FDA. I have seen companies taking 1 year or 15 months to do. In our case, since it is a PMA supplement, the product is already approved.

So, it’s more focused on the clinical report of the post-market phase of it. The three months seems to be a good approximation. If we are following the traditional way, and then FDA would have six months to provide their feedback on it. So think of it, Alex, as being end of the year situation.

Now in our case, we may take more time upfront as we are working this interactively with FDA, with the hope that the review process by FDA will be faster and more predictable..

Okay. Understood. That makes sense. And then just one more clarification just for Jared. The step up in inventory, did you mention what that was for? It looks like you would may be worried about supply chain issues or you are getting ready for some pretty big demand.

So, just a step up of the inventory what was could cause there?.

Yes. Hey Alex. Thanks for the question. So, we did see that jump up in inventory from the end of the year. Part of this was us building up some finished goods towards the end of 2022 and getting that finished up here in early 2023. Part of that was trying to get some more inventory over into Europe with a lot of question marks around MDR.

We obviously were able to kick the can on that MDR deadline with some of the updates that came through in the industry over the last couple of months, a couple of weeks. So, it’s less of a concern there. And then also part of it is just supply chain, right. We had a lot of supply on the shelf. We were able to build out that finished goods.

So, it doesn’t hurt to have some more goods available so that we are able to sell the units if there is the demand there..

Yes. 100% makes sense. Thanks for the update. Appreciate it..

Thank you, Alex..

Thank you. The final question we have is from Frank Takkinen from Lake Street Capital Markets. Please go ahead..

Hey. Thanks for taking the questions. I wanted to follow-up with one more on the utilization question. In the past, you guys have spoke to – in the first couple of months, a facility may treat one or two patients, and they may wait three months to six months before reinitiating treatment for additional patients beyond there.

Did that dynamic play out at all in the strong March and April months that you called out, maybe where you have a bolus of clinics going from that are post that three-month to six-month evaluation period, getting comfort with the technology and then accelerating used within their patient pools?.

Hi Frank, this is Jared. I will take that one. Yes. I think what we have seen is a lot more of the same from those same types of groups. We just have more centers that are now reaching that point of being with us for or being active for more than 24 months.

And so as they cross that threshold, we are seeing them treating almost one patient a month on average. And that’s that long-term goal that we are pushing all of these sites to reach.

So, the growth that we saw in March and continuing into April, I think is seeing new sites being activated, treating those first few patients, but then also seeing all of those other sites continuing to treat more and more the longer they are with us..

Okay. That’s helpful. And then maybe just for my second one. As it relates to the BeAT-HF data, my assumption is it’s going to go in the process of FDA communications, submission, hopefully, label expansion.

At the same time, is there anything you can be doing with the guidelines to start having any conversations about how you could be positioned within the guidelines once we get through the FDA, the communications and hopefully, label expansion?.

Yes. Frank, this is an excellent question. In my understanding, companies have very little influence with the guideline committees. The guideline committee, in general, they are proud to be super independent without any conflict of interest.

Therefore, the only thing that sponsors of trials can do is provide the peer-reviewed manuscript with the data and ensure that the guideline committee has seen them. So, there is no lobbying that is allowed before that, and we are limited here to just sending them an e-mail with the manuscript when the manuscript is published.

Now, I want to Frank – to answer your question in here and give a little bit more color. I just want to make sure that I reiterate one point, and I don’t think I have made that enough. Our model that has this path to getting us to profitability without raising additional cash is based on the current labeling we have.

This is by no means a lack of confidence in us getting additional label, but it’s more about us being super confident with our model based on what we have today in our hands and not needing anything else to get to the cash flow breakeven point and the same can be said about payment levels and reimbursement.

So, based on what we have today on our hands, we have a clear path to get to profitability. Anything above this and in our opinion, we will get the label expansion will be an upside, i.e., getting us to that cash flow breakeven earlier or allowing us more flexibility in terms of investment in our future.

Makes sense, Frank?.

Yes. That’s perfect. Good context. I appreciate me taking the questions..

Fantastic. Thank you so much..

Thank you. That concludes the question-and-answer session. I would like to turn the floor back over to Nadim Yared for closing comments. Please go ahead, sir..

Thank you, operator and thanks everyone for joining us for our first quarter earnings call. We appreciate your ongoing support, and we look forward to updating you on our progress on our next update. Good night..

Thank you, sir. Ladies and gentlemen that then concludes today’s conference. Thank you for joining us. You may now disconnect your lines..