Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CVRx Inc (CVRX, Financial) reported a 24% increase in total revenue, reaching $11.8 million for Q2 2024.
- The US heart failure business showed strong performance, with a 29% growth in revenue.
- The company expanded its active implanting centers to 189, up from 140 a year ago.
- Gross profit increased by $1.9 million, maintaining an 84% gross margin.
- New executive hires, including a Chief Revenue Officer and Chief Medical Officer, are expected to drive market development and improve patient access.
Negative Points
- Net loss increased to $14 million, up from $11.6 million in the same period last year.
- SG&A expenses rose by 28%, driven by higher compensation, advertising, and travel costs.
- Proposed changes in CMS reimbursement could decrease hospital payments for Barostim procedures from $45,000 to $31,000.
- Revenue in Europe decreased by 6%, indicating challenges in international markets.
- Interest expense increased by $0.5 million due to borrowings under a loan agreement.
Q & A Highlights
Q: There's been a lot of changes at the organization: revenues came in line with the Street, OpEx guidance moving up just a touch here, I would imagine, on the new hires. Maybe walk us through the pathway to profitability here? And how do you get revenues high enough or expenses low enough to start generating free cash flow, and when do you think that might happen?
A: Hi, Robbie. This is Jared. Thanks for the question. The model has been built to where we're adding more individuals out into the US sales force, training them up over time, having them activate centers, and getting them more and more productive with more and more experience. While we haven't drawn a line in the sand to say when we will reach breakeven, our models are still built to show that we will continue to see increased productivity out of each one of these sales territories that we continue to add on a quarterly basis to allow us to reach that breakeven point before we would have to go back and raise capital.
Q: When I think about the reimbursement changes, how do you want us to model revenues going forward? Should that come down in line with the percentage change or reimbursement? Or are there other ways that you think you can offset that to not have ASPs go down?
A: I'm going to take a moment and just step back and remind people where we've been on the reimbursement landscape before I kind of dive into that second part of that question, Robbie. So if everybody remembers, about a year ago, the proposed rule came out for the outpatient setting in July of '23, and they had us mapped in this exact same spot, where we would be coded to APC 5465 at the beginning of 2024, which would then turn reimbursement to the hospitals to be about $30,000 January 1, 2024. We believe the costs being submitted to CMS do support us being mapped to new tech APC 1580 for at least another year, if not the creation of a level six neurostim code that would reimburse about the same level.
Q: The back-half guide here assumes a pretty nice step up Q2 to Q3, Q3 to Q4 -- better than what we've seen in the past. Just talk a little bit about the comfort in getting to that guide, especially -- and I think, Kevin, what you're kind of saying is we're going to circle the wagons; we are going to really focus on existing centers that we do well with versus expanding into new ones. Is that the message? And how do we think about your ability to again hit these guidance numbers if you're kind of doing that?
A: Thank you for that question, Matt. We are, in fact, focusing more certainly this quarter and I think through the rest of the year, driving utilization in our existing accounts -- doing more of that and doing it better and perhaps less so on opening new accounts in the short term. We're making a pretty typical transition here at CVRx from sort of an early-stage first chapter of commercialization into one that's more widespread and one that's more informed by what we've learned.
Q: If the proposed outpatient rule comes back, and they're really saying, no, we're sticking with this $31,000 reimbursement rate, is there an opportunity to shift quickly to the inpatient side and not see as much pricing pressure as a result of that? Or is that just far too aggressive?
A: Sure. I think that's a great question, Matt. The short answer is, we cannot and will not influence site of service. So we cannot ourselves shift or even wink or nod where physicians might treat patients. Our goal is to make sure that the therapy is in the hospitals, and physicians themselves are appropriately reimbursed, whether they choose to do it in the inpatient setting or the outpatient setting.
Q: I wanted to maybe go a little bit deeper in utilization per account to the extent you can give it maybe on a monthly basis. I think at our conference in June, you said you saw some good month-over-month improvement in May. Have you continued to see that improvement in July? And then again, taking that a step further into guidance throughout 2024, what is the implied Q4 utilization per center that you guys are adopting? And then how does that lead into 2025, I guess?
A: Hi, Margaret. Yeah, I'm happy to kind of break down that into two buckets here. So first, we talked about the momentum we had seen starting in March carrying through into the second quarter, and then again, in Kevin's prepared remarks, talking about seeing some continued momentum in the month of July. All of that's obviously factored into the guidance that we put together for the third quarter, and then for the full-year guide that we put out again -- we reiterated just today.
Q: Are you going to keep adding the accounts that you've kind of referenced in the past till something in that kind of 13-, 15-plus accounts -- or new center per quarter range? And then one of the other things we've spoken about is the interest driven by the new C-suite addition. So maybe that's part of the thought processes. You guys are also seeing a lot of interest externally, just as you've brought in a new CMO, a new Head of Sales, et cetera? And can you give us some metrics around that as a leading indicator into '25?
A: We do still have a funnel of accounts that are going through the activation process. We've always talked about the uncertainty of when they would actually treat that first patient and actually become an active account. But I think back to Kevin's prepared remarks; our focus is really turning towards driving utilization at a lot of these active centers, especially the high-potential centers that have already treated patients and are already on contract.
Q: I was hoping we could talk about sales force just a little bit more. I don't know if you guys have disclosed in the past or are comfortable in doing so. But maybe talking to the mix of more senior reps -- I don't know how you define that exactly, maybe with the company one to three years fully scaled versus maybe some of the newer reps, and we'll define those as maybe less than -- with the company for less than six months. What's that mix look like, and how is that ramp of new reps been trending since Q1?
A: Hey, Frank. Thanks for the question. Yeah. We don't typically disclose the tenure of the reps as they've come up to speed. We did mention that we had -- some people have taken over territories in the first quarter and getting them up to speed. I think the thing we'd like to highlight is really the reps that we are hiring here in 2024 are really high-quality individuals, getting up to speed and getting through their training programs running at a really quick pace and to the point where they can get out in the field and start making a difference
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
