CVRx Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 25, 2024

There are 10 speakers on the call.

Operator

Greetings, and welcome to the CVRx Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mike Vallee, Investor Relations for CVRX.

Operator

Thank you. You may begin.

Speaker 1

Good afternoon. Thank you for joining us today for CVRX's Q4 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 O'Shaughn. 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.

Speaker 1

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 ks that will be filed with SEC. I would now like to turn the call over to CVRx's President and Chief Executive Officer, Adhimi Yared.

Speaker 2

Thank you, Mike, and thanks, everyone, for joining us. I'll begin today's call by providing an overview of our 4th quarter performance, followed by operational update and a review of our financial results by our CFO, Jared Osheim. Then I will conclude with our thoughts for the rest of the year before turning to Q and A. We are immensely proud of the achievements of our team in 2023. It's been an important year for CBRx marked by significant progress in all our strategic initiatives, which have driven increased adoption and utilization of Perastem.

Speaker 2

This is reflected in our worldwide revenue, which has shown substantial growth, primarily attributed to the impressive 97% Annual expansion in our U. S. Heart failure business. As we wrapped up 2023, we did so on a strong note, showcasing consistent and effective execution across various aspects of our business in the Q4. This underscores our team's skill in accelerating the adoption of Peristem through our commercial and marketing efforts.

Speaker 2

Now let's dive into the details of our performance. Starting with the review of the quarter, worldwide revenue was $11,300,000 a 58% increase over the Q4 of 2022. This was primarily due to the execution within our U. S. Heart failure business.

Speaker 2

The increase was primarily driven by continued growth as a result of the expansion into new sales territories and new accounts as well as increased physician and patient awareness of Parastem. Turning to an update on our operational progress during the Q4. As a reminder, our focus areas for 2023 were the continued expansion of our commercial infrastructure and the expansion of our clinical body of evidence. Starting with the expansion of our commercial infrastructure. We've grown our commercial reach by adding 3 new sales territories in the United state as expected bringing our total to 38.

Speaker 2

We continue to add high caliber talent, which we believe is due to the enthusiasm around Verastem in the market. Additionally, we've been making continued and consistent headway our marketing efforts, including our direct to consumer and patient education programs. As we press forward, We continue to expect refining these initiatives to drive awareness among both patients and healthcare providers. Shifting to our 2nd focus area, which is the growth of our clinical evidence, which has driven both reimbursement and regulatory progress. In November, the Center For Medicare and Medicaid Services, CMS reassigned Verastem to new technology APC-fifteen 8 0 with an average payment of $45,000 which went into effect on the 1st January 2024.

Speaker 2

As a reminder, in 2023, Verastem was under the APC 5,465 with an average payment of $29,000 plus the transitional path through payments. We believe that this reassignment to APC-fifteen eighty will make the better stem therapy more accessible for care patients dealing with heart failure by simplifying the reimbursement landscape and ensuring fair reimbursement for facilities offering the procedure. In late December, the FDA approved expanded labeling for Barastem by revising the instructions for use for Barastem and incorporating key long term clinical data from the BEAT HF randomized clinical trial. The new labeling includes the following conclusion in the clinical section. In both pre market and post market phases, The primary safety endpoint was met and confirmed.

Speaker 2

The pre market phase showed positive results across all effectiveness endpoints indicating 6 month improvements and 6 month hall walk quality of life and YHA class and NT proBNP. The post market phase effectiveness endpoint of Cardiovascular mortality and heart failure morbidity was not met, but additional post market phase analysis such as the win ratio and freedom from all cause mortality analysis suggested the favorable effect of barastem therapy. The totality of 6, 12 24 month data demonstrated symptomatic improvements for heart failure patients. All of this data is now included in the instructions for use and can be used by our sales team when educating physicians on our therapy. The updated indication statement in the instruction for use now specifies that barastem is indicated for patients who are NYHA Class III OR Class II with a recent history of Class III, despite treatment with guideline directed medical therapies who have a left ventricular ejection fraction of less than or equal to 35% and an NT proBNP less than 1600 picogram per milliliter.

Speaker 2

Verastem delivers betterreflex activation therapy to improve patients' heart failure functional status, 6 month hall walk and quality of life. As a result of these changes, We estimate that the U. S. Annual market opportunity for Barastem has increased to include patients considered by physicians based on this new long term safety and efficacy data as well as our commercial experience and to account for the new reimbursement assignment for barastem. We believe the U.

Speaker 2

S. Annual market opportunity is now $2,200,000,000 or 76,000 new patients annually As compared to our earlier estimate of 1,400,000,000 or 55,000 new patients representing increases of approximately 2% 38%, respectively. I want to express my gratitude to all the patients, investigators, research teams, the executive steering committee and FDA personnel who have supported our efforts in conducting the study over 7 years, especially considering the challenges encountered during the COVID-nineteen pandemic. Looking back at 2023, It was a great year for CBRx. Throughout the year, we continue to support the growth of Verastem in the United States through our commercial and marketing efforts underscoring the benefits that Verastem can provide to healthcare professionals and patients dealing with cardiovascular disease.

Speaker 2

The year wrapped up on a positive note, including the expanded I want to address my decision to retire from CVRx. While there is never a perfect time for a leadership transition, The recent completion of BeatHF, the expanded labeling and the recent reimbursement decision, there is a window that now exists before the company embarks on the next phase of growth. I believe now is the right time to bring in a CEO who can build on the achievements of the company and steer CVRx to great success. I'm confident in CVRx's future given the proven benefits of Peristem therapy, our strong commercial traction and our outstanding leadership team. The Board and I are committed to a seamless transition And I will continue in my current role until a new CEO is appointed.

Speaker 2

The Board has engaged a leading executive search firm to assist in this process. I will now turn the call over to Jared to review our financials. Jared?

Speaker 3

Thanks, Nadeem. In the 4th quarter, total revenue generated was $11,300,000 representing an increase of $4,100,000 or 58% compared to the same period last year. Revenue generated in the U. S. Was $10,300,000 in the current quarter, reflecting growth of 72% over the same period last year.

Speaker 3

Heart failure revenue in the U. S. Totaled $10,200,000 in the current quarter on a total of 3.30 revenue units compared to $6,000,000 in the Q4 of last year on 193 revenue units. The increase was primarily driven by continued growth as a result of the expansion into new sales territories and new accounts as well as increased physician and patient awareness of Barostim. At the end of the current quarter, we had a total of 178 active implanting centers compared to 106 on December 31, 2022 and 159 on September 30, 2023.

Speaker 3

We also had 38 sales territories in the U. S. At the end of the current quarter compared to 26 on December 31, 2022, and 35 on September 30, 2023. Revenue generated in Europe was $1,000,000 in the current representing a decrease of 15% compared to the same period last year. Total revenue units in Europe decreased from 68 in Q4 of 2022 to 52 in the current quarter.

Speaker 3

The number of sales territories in Europe remained consistent at 6 for the 3 months ended December 31, 2023. Gross profit for the 3 months ended December 31, 2023 was $9,600,000 an increase of $3,900,000 to the 3 months ended December 31, 2022. Gross margin for the current quarter increased to 85% compared 79% for the same period last year. Gross margin for the 3 months ended December 31, 2023 was higher due to a decrease in the cost per unit an increase in the average selling price. Research and development expenses for the current quarter were $2,200,000 reflecting a decrease of 20 percent compared to the same period last year.

Speaker 3

This change was primarily driven by a $700,000 decrease in clinical study expenses and a 0.6 $1,000,000 decrease in consulting expenses, partially offset by a $300,000 increase in compensation expenses, mainly as a result of increased headcount and a $100,000 increase in non cash stock based compensation expense. SG and A expenses for the quarter were $17,000,000 representing an increase of 21% compared to the same period last year. This change was driven by a 1 point $7,000,000 increase in compensation expenses, a $700,000 increase in marketing and advertising expenses, A $400,000 increase in non cash stock based compensation expense and a $400,000 increase in consulting partially offset by a $100,000 decrease in D and O insurance costs and a $100,000 decrease in professional fees. Interest expense increased $400,000 for the 3 months ended December 31, 2023 compared to the 3 months ended December 31, 2022. This increase was driven by the interest expense on borrowings under the loan agreement entered into on October 31, 2022.

Speaker 3

Other income net was $1,100,000 for each of the 3 months ended December 31, 2023, 2022. Other income net consisted primarily of income on our interest bearing accounts. Net loss for the current quarter was $9,200,000 or $0.44 per share, compared to a net loss of $10,500,000 or 0 point 5 1,000,000 weighted average shares outstanding for the Q4 of 202320,600,000 weighted average shares outstanding for the Q4 of 2022. At the end of the Q4, cash and cash equivalents were $90,600,000 Net cash used in operating activities was $39,600,000 in 2023. This is compared to net cash used in operating and investing activities of 43 point $4,000,000 in 2022.

Speaker 3

Now turning to guidance. For the full year of 2024, we expect total revenue between $53,000,000 and $57,000,000 We expect full year gross margin between 83% 84%, and we continue to expect operating expenses between $86,000,000 $90,000,000 For the Q1 of 2024, we expect to report total revenue between $11,000,000 $12,000,000 would now like to turn the call back over to Nadim.

Speaker 2

Thanks, Jared. As we set our sights on 2024, I'm excited about the opportunities that lie ahead for CBRx and the continued expansion of Peristem. Our company is in a fantastic position to capitalize on the opportunities in front of us. Thanks to our outstanding leadership team and the consistent execution of our strategic initiatives over the last 2 years. I believe CVRx is well prepared to continue to execute our strategic plans and drive sustained commercial growth.

Speaker 2

Reflecting on my 17 years as CEO, it has been an incredible experience and a true honor. I'm proud of what we have accomplished and believe the future for CBRx holds immense promises. And now I would like to open the line for questions. Operator?

Operator

Thank you. We'll be conducting a question and answer session. Our first question comes from the line of Margaret Andrew with William Blair. Please proceed with your question.

Speaker 4

Hey, good afternoon guys. Thanks for taking the questions. And then, Nadeem, you've heard my comments at JPMorgan, but I'll publicly, obviously, it's been a pleasure to know you and glad to have seen CVRx become what it is today. Maybe just to start out with, you guys are coming off an exceptional year of 70% plus growth overall, 95% of U. S.

Speaker 4

Heart failure in U. S. Heart failure. And yet you kind of look at the Q1 and you're at $11,000,000 to $12,000,000 So Maybe just walk us through the assumptions within that. What are the conservative pieces that you guys used to drive to that guidance range?

Speaker 4

Thank you.

Speaker 3

Hi, Margaret. This is Jared. I'll take that one. Maybe Nadeem can add some color later. So When we put together our guidance, we're looking at how we've been growing the number of territories over the last few quarters and also how for new active implanting centers have been coming on board.

Speaker 3

And then also taking into consideration the utilization we've seen from those centers as they get more and more experience. So after taking all of that into consideration, we came out with the guidance for of $11,000,000 to $12,000,000 again, seeing a step up from what we delivered in the Q4 of 2023. The other thing I'll just talk about a little bit is seasonality. It's not something that we've seen historically at CBRx, but we have seen other companies that have gone through a similar ramp that we have that start seeing seasonality play a factor as you go into Q1. Again, I don't think we took that into consideration here for the Q1 guidance, but rather just trying to set the bar at a level that we think we can go out and deliver in this Q1.

Speaker 3

When I think about the components of being able to hit the full year guidance, the $53,000,000 to $57,000,000 that we had talked about, Something we talked about at the JPMorgan conference was really towards the low end of that range, we're targeting adding about 14 new active implanting centers on a quarterly basis and at the high end targeting adding about 18 new active implanting centers on a quarterly basis. And then from an ASP perspective, in 2023, we were seeing results of about $31,000 for an ASP in the U. S. Heart failure side. And as we go into 2024, the range we're looking at is around $29,000 to $30,000 thinking that as we continue to see more and more volume from our in planning centers that we may see some pressure on pricing and see the request for some bigger rebates.

Speaker 3

And then from a territory perspective, we've been adding at about 3 per quarter since the IPO. We feel like that is a pretty good pace to continue on. And that's what was factored into that $53,000,000 to $57,000,000 guidance for 2024.

Speaker 4

Okay. And so if we take that into context, and I appreciate your comments on kind of the center ends and so on, but You guys are armed with both a better reimbursement rate as well as the new clinical data. So I know it's early, maybe there hasn't been a big clinical conference at this point in time yet for you guys to start more actively presenting on that. But Where are you, I guess, in terms of sales force training as well as putting together an education program, excuse me, as it relates to pushing the new label?

Speaker 2

Yes. I'm not going to take this question. So first, thank you for your previous comment. I am going to miss these interactions When I retire, I'm not there yet. We're committed to the transition in here as long as how long it takes.

Speaker 2

I used to remember that I resented some of the difficult questions that you guys would ask me, but for the time, I understood all of the hard work that you put into this and to understand And I end up enjoying these interactions. To answer your questions, yes, now that we have in between Christmas and New Year's Eve, we got the Approval from FDA to be able to communicate all of our efforts right now in January has been about how do we get out and educate and physicians. And we have our global sales meeting actually next week to make sure that all of our sales force is trained and equipped with all of these tools. So this is an ongoing process right now to get the word out to patients and providers and payers about the new data. We're very excited about this next phase.

Speaker 4

Okay, great. And just one last question for me. Saw the $7,000,000 burn on a cash rate this past quarter. How should we think about that going forward? Are you guys going to step on the gas panel in terms of expenses with the label and etcetera?

Speaker 4

Are you going to continue to try to maintain that cash burn around 7 or better? Thank you, guys.

Speaker 3

Yes. Thanks for the question. We gave guidance around spend on OpEx, seeing an increase there to get us up to about $86,000,000 to $90,000,000 The vast majority of that growth in spend from 23 to 24 will go into the sales and marketing organization, specifically in the U. S. So we're going to continue to be where we can to invest in the business to be able to help more and more patients gain access to this therapy.

Speaker 3

And then I think it's a bit of a wait and see, right? Let's see how physicians, let's see how patients react to the new clinical data. If the new payment code is a little bit easier for come on board at a little bit of a faster rate, then we'll consider making some additional investments. But the guidance we put out, I think, being a little prudent in making sure that we're able to maintain that cash burn at or below the levels we've seen historically. And Overall, we believe the trend will continue where that burn will come down so that we can use the cash we have on hand to get cash flow breakeven without needing to go out and raise

Operator

money. Our next question comes from the line of Robbie Marcus JPMorgan. Please proceed with your question. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Please proceed with your question.

Speaker 5

Afternoon. Can you guys hear me

Operator

okay? Yes.

Speaker 5

Fantastic. And Nadeem, yes, best of luck to you in the future. Hopefully, it takes a long, long time to find a Replacement for you, I say that selfishly. So just two questions here and I'll ask them both together. They're a little bit It's long winded, so forgive me.

Speaker 5

But just on the pricing side, Jared, are we assuming pricing essentially flat versus 2023? Or can you take that up given how healthy that code is? I guess I'm not sure why it would go down. And then the second piece is Just on the as

Speaker 2

I look at the guidance and I look at

Speaker 5

where the stock is trading in the aftermarket is down a little bit, I think it's on the guide. It's assuming a pretty meaningful slowdown in growth in terms of units sold this year. It's actually about the same number of units at the midpoint of the range per the math that I have anyway. But it seems like expanded label and more centers and everything else like that, the absolute number of units should go up this year versus what you did last in terms of growing total number of units. So why would that be the case?

Speaker 5

Why wouldn't it be even faster? And why wouldn't growth in the U. S. Be a little bit more healthy given all these tailwinds that you're seeing? Thank you.

Speaker 5

Yes.

Speaker 3

Hemant, on the pricing piece, I think that one's a little bit easier to cover first. So we had talked about U. S. Heart failure average selling prices being around $31,000 in 2023 and setting expectations with this guidance to be around $29,000 to $30,000 I will add, We have also seen a list price increase in 2024 for Barostim. And so there are opportunities for the price to go up as we go into 2024 from what we saw in 2023.

Speaker 3

But our assumption from the beginning was that As we continue to see more and more volume, we are going to continue to see more and more pressure from our customers to see bigger discounts and bigger rebates. And so I think we're just being a little prudent on that price expectations at the beginning of the year to see how it actually plays out with this new code for customers throughout 2024. So I'm sure we'll continue to monitor what that average is coming in at here in the first and the Q2 and then be able to make some updates if it's necessary for the rest of the year. And then for the guide, As far as pure units, yes, we will continue to see growth in the number of patients that are getting treated between from 23 to 24, seen, like I said, a slight down tick in that average selling price. When we come out At the beginning of the year with our guidance, we want to feel confident being able to go out and meet these numbers.

Speaker 3

And so when we put together the model, We were looking at productivity staying flat because we were able to achieve these levels of about 2 revenue units per 18 new center adds on a quarterly basis throughout 2023. And I think when you factor that into the model, that's towards the top end of that guidance for the U. S. As well. One thing I'd just like to address as well is Europe, where we've been seeing a flat quarterly revenue of about $1,000,000 for the last 4 to 6 quarters.

Speaker 3

And so when you look at the overall growth rate for revenue worldwide, that does hinder us a little bit with expectations that there is no growth, just hoping for a flat result from 'twenty three to 'twenty four with European revenue. Hope that answers your question.

Speaker 5

Yes, understood. Thank you so much.

Operator

Our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your question.

Speaker 6

Great. Thanks. This time I'll not hit the hang up button instead of the talk button. First off, Nadeem, congratulations on the retirement, we'll miss you. For the question, I was wondering if you could just walk us through what the change, if any, in hospitals has been since the reimbursement has been finalized end of last year.

Speaker 6

Has it have you seen any easier times Getting into hospitals, talking about reimbursement, getting doctors excited, initiation of potential new programs at hospitals, just any change in the sentiment out there?

Speaker 2

Ravi, thank you first for your nice words and great question. The answer is going to be qualitative at this stage because the code just entered, right, January 1, and we are now a couple of weeks and we're not commenting on the results in January at this stage. But qualitatively, we expect it to help particularly with the site activation, which would lead To the possibly in the future, the less delay between the first two patients, they do have a site and patient number 3, 4. I don't know if you recall, but earlier when after we did the IPO, we tried to explain that phenomenon that we were observing and we kept observing over the past couple of years, which is when a site becomes an actively implanting centers after doing their first one or two implants, we notice a pause of 3, 4 months before they start considering patient number 3, 45. And that pause was driven by 2 elements.

Speaker 2

One is seeing the effect of the device on their own patients. And but second, most importantly, and we did not understand the impact of that, Was understanding the payment level because the TPT is still seen as an obscure way of getting payment The hospitals, the calculation formula for TPT is very complicated and very few administrators at hospitals understand how the accounting work for that PPT. So after doing a couple of patients, they wanted to wait to see the payment coming back. So at least one of those two elements we fact would be alleviated by having a code with a simple code, simple number just adjusted for the zip codes, which is They understand how it works. So I cannot answer quantitatively yet.

Speaker 2

At this stage, it will be the answer will be only qualitative, Ravi.

Speaker 6

Great. No, that's helpful. And maybe as you think about Balancing as you talked about in prior questions, balancing your cash burn with now the updated label and the finalized reimbursement. How are you thinking about balancing OpEx spend to drive sales rather than just cash preservation? What goes into the decisions?

Speaker 6

Why is the amount of OpEx you're spending the right amount? If you spent double it, do you think you'd be able to double your sales? Thanks.

Speaker 3

Yes. Good question, Robbie. Right? I mean, the simple question is, have we proven the model, Right. And I think we have 2 more years of experience after the IPO showing that we've been able to add 3 territories on a quarterly basis, while continuing to see that overall per territory increase as that number continues to grow.

Speaker 3

And as we see more feedback from customers After the new label from FDA and after the new code has come out, we're going to continue those conversations. As we see the results of those conversations and reactions from physicians and patients through our DTC campaigns. I think that's where we will continue to make some tests, right? And I think Some of those investments are baked into the guidance that we gave of the $86,000,000 to $90,000,000 to start seen is there opportunities to continue to spend a little bit more because the goal at the end of the day for us is to help more and more patients. And if we can do that at a pace while not diminishing our cash balance too quickly, I think we'll take advantage of it.

Speaker 3

But that's something that we'll continue to work on throughout 20

Speaker 6

Great. Thanks a lot.

Operator

Our next question comes from the line of Bill Plovanic with Canaccord. Please proceed with your question.

Speaker 7

Great, thanks. Good evening and thanks for taking my questions. I'm going to start out with, you mentioned on just The list price increase in 2024, I could just there's always a big difference between list price and the ASP. Just kind of curious to what extent are the if you could quantify that for us? And then just We're a bit surprised your R and D expenses come down a lot.

Speaker 7

How should we think about the OpEx spend in 2024 relative to 2023 As it relates to the SG and A versus the R and D like, so in R and D, are there any major new projects kicking off that we should think about or is this kind of the run rate that going forward?

Speaker 3

Yes, good questions, Bill. Thanks for the question. So on the list price, there was a 10% increase on the list price for the U. S. So you've seen an increase from a $35,000 list price up to $38,500 So that's where all of the tracking discussions will start as we move into 2024.

Speaker 3

And then going down to the OpEx guidance, the split between R and D in SG and A. As I mentioned earlier, the vast majority of that increase is going into SG and A. As you can imagine, We saw a bit of sunsetting of the BHF clinical trial as we went throughout 2023. And so that's driving some of that reduction as we march through 2023, especially into the Q4, Seeing that trial closed down, those expenses turn off and we're able to reduce the overall spend in research and development. What we have going on right now, we'll have some smaller projects within research and development like our post market 3, continuing to do some investigator initiated research programs with different sites that are proposing them through our program on our website.

Speaker 3

And then we continue to do some early work with designing the next clinical trial. And Nadim has talked about this before where we were admitted to an advisory program from FDA for one of our breakthrough device designations, specifically our ejection fraction above 35% patient population. And so We'll continue to look at that trial design to see if we can get to a point where we feel comfortable that we can win the trial and not spend too much money and decide at that point in time whether or not we want to kick it off. But at this point, that's not baked into the guidance in the spend for 2024.

Speaker 7

Okay. And then if I could also ask since we're working the P and L here, is just on the gross margin. I'm trying to understand The guide on the gross margin is 83% to 84%. You've been solidly at 84% or above For the past three quarters, what are the dynamics that would cause the gross margin to go down next year, especially considering You're likely to have stable to increasing ASPs and higher volumes.

Speaker 3

Yes. Good question. So as we set the guide For 2024, we're looking at the 2 different components, right, ASPs and the costs. First on the ASPs, we've mentioned that the guide is doing a reduction in that overall U. S.

Speaker 3

Heart failure ASP from 31,000 down to closer to that 29.5 at the midpoint. So that can have an impact on the overall gross margin results for 2024. And then the second component is the cost. We've talked a lot about As we see the volume increase, we should see an overall trend of seeing that cost come down. So as we see production go up, the cost should come down.

Speaker 3

However, if we continue to buy components for these devices, We're going to have to go out and negotiate new contracts with new vendors at different times. And at those points in times, we may see a price increase for the components themselves, not necessarily as much focused on the labor and overhead pieces of that. So both of those factored into our decision to guide us at the 83% to 84% for 2024.

Speaker 7

Okay, great. Thanks for taking my questions.

Operator

Yep. Our next question comes from the line of Alex Nowak with Craig Hallum. Please proceed with your question.

Speaker 8

Okay, great. Good afternoon, everyone. Now with BHF done, FDA approval in hand, that's all wrapped up. Holistically, where is BaroStim going to go next? There's a ton of potential as you know in the Baroceptor simulation.

Speaker 8

Does it make sense to spend clinical study dollars to go deeper into the left side of the indication, the increase of the ejection fraction or change of the BNP requirements? Or does it make more sense to really go after a completely new indication?

Speaker 2

Alex, excellent question. So we spoke in the past that we believe from the mechanism of action in some previous experiment that the device could have applicability beyond heart failure, particularly we spoke about hypertension, chronic kidney disease and arrhythmias. And in the past, FDA has granted us based on previous clinical data that we submitted to FDA 2 device breakthrough device designation, BDD, 1 in heart failure with preserved ejection fraction and one in resistant hypertension. So when we considered both of those two indications, resistant hypertension and HFpEF, it was Probably or likely that one of these 2 will be the 2nd indication we go after. Then when we got invited to be one of the 15 initial pilots that FDA started this year with a new program called the TAP, Total Life Cycle Advisory Program, TAP, that was limited only to breakthrough device designated indications for new products.

Speaker 2

We started working with FDA about the half PAS indication. So this is the heart failure indication with ejection fraction above 35%. For us, it would make more sense to go after these indications for multiple reasons. One of them is the synergy In the sales and marketing efforts, the physicians will be the same, the call points will be the same, even some of the direct to consumer marketing campaign would be the same, most of the education would be the same and so forth. Is it a new indication?

Speaker 2

I would say yes, because those two diseases are different. And if we are approved in EF above 35%, that would significantly and substantially increase the addressable market of our therapy. So while we are excited about this opportunity, we are in the early phase of the design of the study. Part of the TAP program is the requirement to collect stakeholder inputs before we start the enrollment of the trial. So we need to collect input not only from the regulators and physicians, but also from patients, payers, guideline committees and so forth and we are in this We actually had a very constructive meeting last week during the Harteiler Collaboratory with regulators, payers, patients and key opinion leaders and medical societies as well in one single meeting.

Speaker 2

So this is where we are right now. On the question of when do we start this program, it's early to know how long it will take to design or finalize the design of the trial. And then second question will be the question of spending that Jared was talking about in the for the previous question that he got.

Speaker 8

Okay. That's And Nadeem, obviously congrats on the retirement and getting to Verastem where it is today. You're obviously on the Board. In your conversation with them about the transition that will take place here. Is there still a is there a plan for you to remain on the Board?

Speaker 8

Any views you can kind of give there?

Speaker 2

Alex, thanks for asking the question. So listen, at the end of the day, I will do whatever is needed in here to ensure that CVerx has the best and smooth transition possible between me and the next CEO. So yes, I help the Board in terms of the search. We meet with the search committee on a daily basis to identify and look at all of the candidates internal and external. And Whether I stay on the Board or not is not the point.

Speaker 2

The question is, what is the most effective way for me to be helpful, not only during the transition, but also after the transition, depending on what the Board and the new CEO will need from me. Listen, this is my baby. I've been here 17 years. I'm not going to drop it one day and forget about it. So it's in my best to ensure that I dedicate the time needed in here to ensure the smooth as possible transition.

Speaker 2

And whichever form that takes, I realize it's immaterial, whatever the new CEO and the Board want me to do, I will do.

Speaker 8

That's good to hear. And then maybe just a quick question for Jared. Whenever we get a new code, hospitals always go through a transition process. So for Q1 guidance, can we assume that there's a little bit of conservatism built in for hospitals going through that transition where they might be a little more hesitant to buy just because they got to figure out the reimbursement dynamics again?

Speaker 3

Yes, good question. Whenever we put out guidance, we're looking at a lot of different factors, right? And we're always being prudent to make sure that we can put out guidance that we're able to go out and achieve. And so I think We take all of those points into consideration when we put that guide together of $11,000,000 to $12,000,000 for the Q1.

Speaker 8

All right. Excellent. Thanks for the update.

Speaker 3

Thank you.

Operator

Our final question comes from the line of Frank with Lake Street. Please proceed with your question.

Speaker 9

Great. Thanks for taking the questions and I'll echo everybody else's comments related to your I think there was a comment at the end of that string related to, if we elect to grow more aggressively, we'll think about the strategy to do so At that time, can you maybe walk through some of the different areas you would think about prioritizing if you did elect to aggressive more aggressively invest? Is it faster headcount growth, more aggressive on AIC activation, direct to consumers, maybe think about the or help us think about the prioritization if you did grow faster or attempt to grow faster?

Speaker 3

Yes. Hi, Frank. And just to reiterate, right, I think our plans are always to try and treat as many patients as possible. And we have lot of people out in the field today with our current number of territories to be able to go out and help more and more of those patients. And so we think we're going to continue to see growth just from the team that we have out there Today, where could we invest faster, right?

Speaker 3

If we had an open checkbook, there's plenty of opportunities. And how this is a platform technology where if we were able to go out and run clinical trials and get approvals from FDA, it opens the door to a whole bunch of new patients that could benefit from this therapy. In the more immediate term, yes, I mean, it's all of those areas, right? It's do you invest more in more sales reps out in the field, you invest more in DTC and the key thing for us is doing it in a thoughtful way, right. We don't want to just throw money at things and hope that it works.

Speaker 3

We're being very prudent on how we're utilizing our cash to make sure that there is no need to go raise more money. Can do this on our own without having to go do another financing. And if there is a decision to ever raise more money in the future, it's mean, us being opportunistic because we've been able to prove out some of those additional tests that we've run as a business.

Speaker 9

Okay, that's helpful. And then maybe just one more sticking with the commercial organization. As Companies progress through this model. There's always an initial influx of onboarding new centers that are implanting the technology and that has utilization catches up, sometimes you see a shift to incentivizing the sales force to more aggressively go after improving utilization, just given the leverage effects of doing that once you have a large network of active implanting centers. My assumption is you're still focused probably more on the activation of implanting centers, but Maybe talk to how you think about that progression versus new centers versus eventually being more aggressive on pulling the utilization lever?

Speaker 2

Frank, excellent question. So in our case, it's a little bit different Because when we activate a center, that's the implanting center, but the referral network is all around that center. So yes, we need to ensure that our sales force is focused on training and educating cardiologists in the community to send their patients to that implanting center. That's part of the market development that we do. So I'm not going to go into detail about plans as we have the global sales meeting next week.

Speaker 2

And our sales doesn't know their incentive plan yet. But I think I've given you enough hints about it. It's all about not only activating the implanting centers, but also building the referral network around it. This is after we activate a center, they do their first few implants. Then the key here, the name of the game is get as many are referring cardiologists around this hospital to send their patients to the hospital.

Speaker 3

Yes. And Frank, I'll As I mentioned with the guidance, the expectation is to continue to add new centers on a quarterly basis as well at a similar pace to what we had seen historically. So We expect to continue to see growth from both aspects. Number 1, seeing new centers come on board. Number 2, seeing those centers get more and more experience And history has told us the more experience they get, the more patients they're treating on average, so seeing higher productivity.

Speaker 9

That's helpful. Thanks for taking the questions.

Operator

That concludes our question and answer session. I'd like to hand it back to Nadim Yarden for closing remarks.

Speaker 2

Yes. Thank you, operator, and thanks again to everyone for joining us for our Q4 earnings call. We appreciate our ongoing and we look forward to updating you on our next progress on our next update actually next slide. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Earnings Conference Call
CVRx Q4 2023
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