Good morning, everyone. Thank you for joining us at the William Blair Growth Stock Conference. My name is Margaret Kaczor Andrew. I am the analyst at William Blair and Company, who covers CVRx. Before we begin, I'm required to inform you that you can obtain a complete list of research disclosures or potential conflicts of interest at williamblair.com. With that, really pleased to present Kevin Hykes, President and CEO of CVRx. I think this might be your first presentation, maybe, at a conference, so-
No pressure.
No pressure at all. And Jared Oasheim, CFO of CVRx. Thanks, guys.
Thank you. Good morning. My name is Kevin Hykes. As Margaret said, I'm the new CEO of CVRx since February of this year. It's a pleasure to speak to you today. These are our forward-looking statements. More information on our risk factors is available on our website. By way of introduction, I'm a 32-year medical device veteran. I spent the first 17 years at Medtronic in the U.S. and Europe in a variety of customer-facing roles, and now 16 years running growth stage medical device companies. The opportunities were largely focused on market development and therapy development and new technology introduction in the areas of electrophysiology, neurostimulation, structural heart, et cetera. I joined CVRx as a board member in late 2022 and became CEO in February of this year.
There's been a number of questions since then, as you might imagine, about why I chose to join the company full-time, and in my mind, it came down to sort of three factors that I found to be present in each of the value creation opportunities I've been successful with in the past. The first is a significant addressable market, in our case, a $2.2 billion net addressable TAM. The second is a highly differentiated technology, in our case, the first neuromodulation therapy for the treatment of heart failure. And the third is a significant unmet need, and as you'll see in a few slides, this is a population for whom there are very few options and who are suffering significantly with their heart failure. So Barostim is the world's first neuromodulation therapy for the treatment of heart failure symptoms.
It's also among the first recipients of the FDA's Breakthrough Device Designation. The company is located in Minneapolis, Minnesota. We have a fully integrated manufacturing capability, and we've been public since 2021. We have over 200 employees and have treated over 4,000 patients on a worldwide basis. Heart failure is a debilitating condition that affects over 6 million Americans today. It results in 1.1 million hospital discharges, 1.3 million emergency room visits, and 8 million physician office visits each year, and is expected to cost the system over $70 billion by the year 2030. Heart failure has a significant impact on the quality of life of patients that suffer from it, and while there have been existing treatments that have proven to extend life, very few have any impact on quality of life.
Patients, especially those with a reduced ejection fraction, referred to as HFrEF, report significant impact on their quality of life. 66% report mobility problems, 68% report pain and discomfort, and 76% find the activities of daily living to be difficult. Interestingly, when surveyed, these patients consistently rank quality of life over life-extending therapies. In a most recent study, 65% would trade a shorter lifespan for living with fewer symptoms. This highlights the gap that exists today in the treatment continuum for heart failure. Guideline-directed medical therapies for heart failure begin with medications and are followed shortly thereafter by consideration for implantable cardioverter defibrillators or cardiac resynchronization therapy. Importantly, drugs and ICDs, which have been proven to improve mortality in heart failure, have almost no quality-of-life benefit for these patients.
CRT therapy does improve exercise capacity, but only in a limited subset of these patients. As their disease progresses over the years and they reach the end stage, these patients become eligible for left ventricular assist devices and cardiac transplantation. Unfortunately, however, 70% of the HFrEF patients are ineligible for CRT therapy and are left suffering with their quality-of-life symptoms. The heart failure community refers to these patients often as the walking wounded or the forgotten middle, and these are the patients for whom Barostim therapy is indicated. So I'll share a little bit about the therapy itself and the mechanism of action, but homeostasis in the human body requires a balance between the two parts of the autonomic nervous system. The first is the sympathetic system, which governs the body's fight or flight response.
The second is the parasympathetic function, which really addresses the body's sort of breed and feed or rest and digest function. So when the body's at rest, it's really dominated by the parasympathetic function. So heart failure is characterized by an imbalance in the autonomic nervous system, which results in progressively worsening heart failure symptoms. This results because of a decrease in electrical signaling to the brain from the body's natural pressure sensors, called the baroreceptors. This decrease in signaling causes an increase in the fight or flight response, in the sympathetic tone in the body, which ultimately increases the heart failure symptoms, such as shortness of breath, fatigue, and impaired mobility. In effect, it's putting the cardiovascular system on sort of a permanent state of overdrive. Barostim leverages a well-understood mechanism to address these symptoms by rebalancing the autonomic nervous system.
It restores normal electrical signaling to the brain, which decreases the fight or flight response, decreasing sympathetic nerve activity and thus decreasing heart failure symptoms. Unlike some novel therapies, patients indicated for Barostim are identified using established classification criteria. Barostim patients are NYHA functional Class III, or functional Class II with a recent classification of 3. They're on maximally tolerated guideline-directed medical therapy, and they've had a cardiac echo that suggests their ejection fraction is less than 35%. They also have a marker and a blood test called NT-proBNP, which is a measure of heart failure exacerbation, and it indicates that their heart failure is at least temporarily stable. So effectively, these are stable HFrEF patients on guideline-directed medical care who are still symptomatic.
This indication leads to a $2.2 billion net addressable market in the United States alone, and that's on an annual incidence basis alone, and does not refer to the prevalence of this condition. Interestingly, as of today, we are less than 2% penetrated into this annual prevalence pool. There are three components to the system. The first is an implantable pulse generator. It looks a lot like a pacemaker. It has a battery life of about six years. The second is a carotid sinus lead, and the third is a programmer that's used to optimize the therapy on a patient-by-patient basis. The system is implanted in a 60-minute procedure with a 97% freedom from major adverse events.
It's typically done on an outpatient basis, and as you can see in the diagram on the left, requires a small incision in the neck above the carotid sinus and a second incision below the collarbone, where the IPG is placed. The lead is implanted onto the carotid sinus and tunneled below the skin, much like a pacemaker, to the implantable pulse generator in the chest. The system is entirely extravascular, so there's no hardware or leads in the vascular system in the heart. It's entirely subcutaneous, and the procedure is roughly the equivalent of a pacemaker implant in terms of safety, so extremely safe and predictable. So the recent publication of the BEAT-HF manuscript at 24 months has demonstrated Barostim to be an effective, predictable, and durable therapy for improving the symptoms related to heart failure.
It demonstrated a two times clinically meaningful improvement in exercise capacity and quality of life, and 68% of patients in the study improved their NYHA class by at least one level. Importantly and impressively, it demonstrated a 94% response rate to the therapy, which is remarkable for any medical or device therapy. It also showed a positive signal for all-cause mortality, a 34% relative reduction in all-cause death, LVAD or transplantation, in this case, out to four years. It also showed a significant reduction, 74% relative reduction, in the risk of receiving advanced heart failure interventions like LVAD, transplant, CCM, CRT, or CardioMEMS. Again, out to 4 years. You can imagine this data point is of particular interest to payers who are paying for these very expensive heart failure therapies. And finally, it demonstrated a 51% reduction in serious cardiovascular events.
This was made up of a 50% reduction in cardiac arrhythmias and cardiac arrest, a 44% reduction in MI and angina, and a 63% reduction in hypertension. So on the strength of this data, and based on my diligence over the last 4 months, and the fact that we're currently 2% penetrated in this $2 billion market, it's my firm sense that we have a significant opportunity to drive adoption of this therapy in today's HFrEF indication. And to do that, we are increasing our focus on the key barriers that exist to the adoption of this therapy and that will preclude it or allow it to become standard of care for the treatment of this condition. The first is increasing therapy awareness among referrers and patients.
The second is developing a more robust portfolio of clinical evidence, and the third is improving patient access to Barostim. So in the first case, we will increase awareness among referrers and patients in the community as the appropriate role of Barostim in the treatment continuum. We will continue to focus our primary focus on the heart failure specialists. There are 1,400 of these physicians in the United States, and they hold roughly 24% of our indicated patients, and they're ultimately the key champion for this therapy. We will also continue to support the electrophysiology community, of which there are 3,000 physicians treating 16% of our indicated population.
But we will significantly increase our focus on the general cardiologist in the community and importantly, on the advanced practice providers that they work with, the nurses and the PAs in their practices that see many of these patients, 44% of them, day in and day out. Our ability to reach and influence those community physicians is critical to the long-term adoption of this therapy and ultimately to achieving standard of care. We will also increase our direct-to-consumer marketing efforts, and the company has developed an early but very effective DTC capability that leverages multi-channel DTC advertising to feed patients to an online screener. Eligible patients are then handed off to a program that's called Barostim Connect, which is an education, support, and care coordination capability at the company that helps patients and their families through this journey.
We're thrilled with the results and the impact of this program, which now touches 20% of all implanted Barostim patients. Ultimately, by reaching into the community and activating patients and referrers, we will build more sustainable Barostim programs. An initial program often begins with a heart failure specialist in a center who serves as the therapy champion. They often find their first patients from within their own population and refer them to a surgical partner at their center, most often a vascular surgeon, in some cases, a cardiothoracic surgeon. As they gain confidence in the therapy and as their program gains momentum and visibility, we see increasing parallel streams of patients and referrals into those champions. Ultimately, in our case, multiple champions in a center, who then refer those patients to, ultimately, multiple surgical partners in that center for implantation.
By involving a more comprehensive set of physicians in the Barostim program, we hope to drive deeper adoption of the therapy and ultimately broader acceptance in the treatment of heart failure. This is critical to our efforts to reach standard of care. A second area of focus is to develop a steady cadence of clinical evidence for Barostim therapy in two key areas. The first is in a broader publication of the outcomes benefits of this therapy. What I've heard over and over again in my four months of diligence from physicians is that the results that they see in their patient population are better than what we've published so far in the literature. They've encouraged us to study the therapy more broadly and to publish on a much wider range of benefits that they're seeing in their populations.
Examples of this would be the ability for physicians to optimize medical therapy once patients have been stabilized on Barostim. Often, they cannot tolerate guideline-directed medical care because of blood pressure and cardiovascular instability. Another area is a reduction in heart failure hospitalizations, or possibly even looking at the arrhythmia burden that these patients suffer and whether Barostim may have a positive impact there. In effect, they're encouraging us to close the gap between what they see, their observed outcomes, and those that we've published to date. A second important area of focus is developing additional evidence supporting the mechanism of action for this therapy, the physiologic and hemodynamic data that underpins the therapy and that helps explain why it works as well as it does. Fortunately, the data sources for this work are largely under our control and exist today, and that those are the data...
The databases like the BEAT-HF trial, a number of registries that we're running around the world, and a number of physician-initiated research studies. So we don't believe that it will require a significant prospective clinical trial to generate the evidence necessary to support this effort. The third area where we were focused is to accelerate patient access to the therapy. Our reimbursement efforts will continue to focus on leveraging this long-term data to improve private and public payer coverage, to establish and work towards permanent codes for the therapy and procedure, and to maintain appropriate payment for the procedure in both the inpatient and outpatient settings. On the right, you see the payer mix of Barostim-eligible patients, 67% of which are Medicare patients and about 20% of which are commercial patients.
With the current penetration of Medicare Advantage plans, that means that roughly half of all Barostim patients will require a prior authorization, at least in the near term, to receive our therapy. And for that reason, we are increasing our support and focus and investment in our internal prior authorization support capabilities as part of the Barostim Connect program. As a result of several positive developments over the last 12 months, Barostim procedure reimbursement is now simple and increasingly consistent across sites of service. In 2024, Barostim will be reimbursed on an outpatient basis at $45,000 per procedure, and based on a proposed inpatient rule announced several months ago, inpatient reimbursement will move from roughly $23,000 to $42,000, very close to that of the outpatient setting. So new executive leadership will support our strategy to address these key barriers to adoption.
All three of the executives on this page have joined the company in the last three weeks. The first is Dr. Phil Adamson, who is our new Chief Medical Officer. Dr. Adamson is a world-renowned heart failure specialist. He was most recently the chief medical officer of Abbott's Heart Failure business and is an author of over 150 publications. Interestingly, he began his early work doing NIH-sponsored research on the role of the autonomic nervous system in heart failure. I've known Dr. Adamson for 24 years. He's a remarkable physician and leader, and we're thrilled to have him join the company. There's perhaps no better chief medical officer for CVRx today. The second executive, Jennifer Englund, is our senior vice president of Global Clinical Research.
She is a highly experienced clinical researcher, has worked at Medtronic, Coloplast, Mardil Medical, Monteris, a number of growth stage companies, and is particularly adept at creative and pragmatic evidence generation, like I described several slides ago. So we're thrilled to add her to the team. The last executive is Bonnie Handke, who's our Senior Vice President of Patient Access, Reimbursement, and Healthcare Economics. She was, until last week, responsible for Medtronic's renal denervation, structural heart, and peripheral vascular reimbursement on a global basis. She's a 25-year veteran of Medtronic. I've known her for 25 years, and she will bring a remarkable set of relationships and experience to this company, which will be a tremendous asset going forward. So switching to the financials, the company has delivered 87% revenue growth since 2020.
In 2023, we delivered $39.3 million in revenue with a gross margin of 84%, and we finished the year with 178 active implanting centers in 38 US territories. In Q1, we delivered revenue of $10.8 million, with US heart failure revenue of $9.7 million, a 43% growth rate on a year-over-year basis. US heart failure ASPs of $30,500 and 39 active US territories. We had 190 active and planning centers, gross margins of 85%, and a cash balance of roughly $80 million at quarter end. As many of you know, we saw higher than expected turnover in Q1, and as a result, experienced some disruption in our selling efforts.
I'm pleased to mention that the reaction from the sales team to the changes we've made since then has been very positive, both to the revised compensation plan, to the change in their national sales leader, and the reception of our new interim sales leader, who was, prior to this, our chief marketing officer. As a result, we've seen zero turnover in Q2 in our sales force, which leads me to believe that we have stabilized the team and are gaining our momentum back. I'm also pleased that we're continuing to attract very impressive candidates who are applying for work at CVRx, and we had an impressive Q1 recruiting class that we're pleased with.
So based on the strength of the business in April and May, and in particular, the stability we're seeing within the sales team, we are choosing to reaffirm both our Q2 and 2024 guidance as of today. We continue to believe that we will deliver revenue within the range of our guidance of $11.3 million-$12.3 million for the second quarter. So in closing, I believe that CVRx represents a significant opportunity for value creation and the potential to impact thousands of patients who are living and suffering with heart failure today. We have a massive $2.2 billion annual market opportunity. We have a well-defined patient population with few alternatives, medical or device-based, and we have a highly differentiated therapy with a proven safety track record and an extremely impressive response rate.
Most importantly, we have a focused plan to drive Barostim therapy to standard of care. Thank you for your time. We'd be happy to take some questions.
Perfect. So we've got 10 minutes, obviously, folks from the audience, feel free to raise your hand. I'm sure Kevin would be pleased to- yeah.
Yes, does it matter?
Would you be pleased to answer your questions more so than mine, but we'll start with mine maybe.
Sure.
So you know, you identified a few different initiatives, both kinda leadership hires, as well as, what caught my attention was, your descriptions around early adopters versus some more mature centers or adopters. So maybe you can walk us through the differences between, you know, the way that maybe prior management had discussed it, which was experience leading towards the maturity of these centers. What you found in your time, so meaning maybe some experienced centers didn't hit the maturity that you had referenced, you know, in that at least particular slide. And then what would you like that to be as you look at the next 12 months, 24 months, and beyond?
Yeah. So I would say this is not inconsistent with the prior approach, but what I've found, and based on my experience in introducing therapies very much like this throughout my career, is that you really need to be focused at a program level. And initially, in any commercial venture, you start by... You have a lot to learn, and you start by trying to identify physician champions who then identify patients, and off you go. The company now, after three years, has really learned what works best and what actions build the most sustainable Barostim programs, and those that have adopted the therapy and that will continue to utilize the therapy despite a disruption in the sales force, or a physician that might change careers, or a change in hospital administration.
And so what that represents to us, the healthiest programs that we've seen, move from that very typical initial stage, where you have a single champion, a single implanter, and the champion finding patients from within, in reach, they call it, finding patients within their own practice, to programs that have support in the community, that have multiple physician referral streams from physicians that have been activated within their referral networks, patients activated by DTC, so multiple flows of patients into the champion or multiple champions. And as the program gains traction and visibility, and as the outcomes are demonstrated to fellow physicians in the center, we do see additional champions coming on board. And ultimately, we also see additional surgeons, cardiothoracic or vascular surgeons, saying, "Hey, I'd be happy to do this procedure. Takes less than an hour, I get paid well for it.
I've got room in my schedule. Sign me up." So that's really what, what we're trying to do is bring a more programmatic mindset to what we do. We still, and had to go through the initial stage, which is learn as much as you can and start programs wherever you can. But really now it's understanding how do you build these things into sustainable sort of little flywheels that will continue with the adoption of the therapy, whether we're there each day of the week or not.
And so maybe if we go back, you know, a year ago versus today, and sorry to pin you on a number, but we are investment analysts, so we can't help it. But, you know, can you just ballpark for us, you know, maybe it used to be 50% were mature, and maybe that had pulled back, whether sales rep turnover or, you know, like you said, they didn't quite develop as many of those referral networks, and kind of patient identifiers as you expected. And again, on a 12-24 month-plus time period, how does that mix of mature versus early stage?
Yeah, so I'm not gonna get into the numbers and the specifics-
Fair
... around the stages. What I can tell you is, it's a pretty representative sample-
Okay
... for a company at this stage. Sort of, I think of this as sort of turning the corner from the first commercial chapter to the second. So it's a, it's a pretty typical distribution of centers, and what we're trying to do is really try to get more of them to that sort of advanced adoption, sort of critical mass stage, get them there faster... than we have done in the past, and that's again, a pretty typical transition that companies like this go through. So the good news is we know what good looks like. We have clear examples of when these programs work and why that's good, and ultimately, we know how to direct our sales teams to do the very activities that build those sort of self-sustaining programs.
Okay. And then, you know, you had the three very impressive hires. Unfortunately, we don't have Dr. Adamson-
No, I wish he could be, but yeah.
here, with us. But, maybe you can talk about the, the initial initiatives that they will be focused on. What kind of, you know, KPI might not be the right one for this-
Yeah.
What's their outcome, you know, that you'd like to see over the next 12 months?
Yeah, great question. So, you know, I think their hires actually parallel very closely the three initiatives that I mentioned that are now a key focus of the company, that being expanding awareness among referrers and patients, number two, clinical evidence, and number three, patient access. So Dr. Adamson, he's practically a force multiplier across all three of those, but he's a critical resource for a company like ours at this stage. We have not had a permanent Chief Medical Officer in the history of the company. So to have somebody like Dr. Adamson, both spending time in the field with key customers, advising us on the clinical portfolio, interacting importantly with the payers, with the Chief Medical Officers at the payers themselves, that is a hugely valuable resource, and especially somebody like Dr. Adamson, who's so well known and widely respected. So he sort of covers everything.
Jennifer Englund, the new SVP of Clinical Research, is largely focused on that second effort, and that's really understanding of all the data we've generated, how do we mine that for a steady cadence of publications, both on the outcomes that we are hearing about in these patients day in and day out, sort of capture all those anecdotes and publish them, as well as on the physiologic underpinnings? And the mechanism of action for this therapy has been studied for 70 years. NASA started studying the role of the baroreflex here in your neck 60, 70 years ago when astronauts came back from space with messed up blood pressure. So there's no magic there, but there's a lot more we can publish, we think, to give people additional confidence and to explain why the effect of the therapy is so profound on a physiologic basis.
So that's really what she will do, and she has done lots of major, pivotal, sort of multicenter prospective studies, but she's also done a lot of really scrappy work, pragmatic work to find data sources and get it published, and that's what we need. The third area is reimbursement. That's pretty clear. So Bonnie Handke is a veteran 25-year senior Medtronic leader who will focus on coverage, coding, and payment, who will also focus on the tactical aspects in our work with the payers, our work on prior authorizations, sort of working the friction out of the system, and that's inevitable for a therapy at this stage. It's always a battle, but it's time for the company to specialize and invest in that and bring more horsepower to bear on that very frustrating but necessary sort of process with the payers.
Yeah, and you know, on that process, it's something that we've heard in the field as well, you know, that maybe you guys can strengthen the reimbursement group or the reimbursement support. I think as investment analysts, we don't necessarily understand the workflow that a patient has to go through-
Yeah
or you have to go through to get that prior auth off. So, maybe describe to us in more detail what that might look like, where you guys can take out those inefficiencies, let's say.
Sure, so, you know, there's a couple different ways to think about it, and we've joked about it, but reimbursement is. It's a necessary evil with any novel therapy. It's unavoidable. This company is actually doing better than most that I've been involved with at this stage, but it's a little like Whac-A-Mole, and you solve one issue, and the next one pops up, and a Medicare administrator changes their CMO, and all of a sudden, overnight, they stop covering you. So you've got to engage. So it's more of a sort of war of attrition. There's no sort of major fundamental blowups here. It's just more staying diligent and keeping the pressure on these payers to...
And getting to a point, especially with prior authorizations, you almost need to make it more difficult and costly for them to say no than to say yes. And you do that by appealing each and every... Companies at our stage with what's called a temporary code, a T-code, are. It's an automatic denial by any prior authorization process. So you expect the first answer is always no. You go back, you appeal the first time, you appeal a second time, you appeal a third time, and if necessary, you actually go to an outside medical review, and that costs them money, costs them about $8,000, $5,000-$8,000, and so once you push things that far, and you start winning, they ultimately back off, and they say, "Hey, this isn't going away. This is legitimate.
It's being approved even by our outside reviewers, and so we're gonna start to cover these more broadly or more simply," and you know, that ultimately then leads to a written policy. So it's really across that spectrum of really fighting the fight, both on the private and the public side, and not giving up, and there's a model there. It works. It's frustrating. It takes a long time, but it's absolutely necessary.
Okay. Now, I'd be remiss not to ask a finance question. Sorry, Jared.
That's all right.
But you guys did reiterate your Q2 guidance. You already reiterated your full year guidance. We're obviously most of the way through the quarter, so got to feel pretty good about Q2. Can you give us any additional, you know, clarity, in terms of what utilization you're seeing maybe in the field, especially for some of those centers, maybe that did lose their rapid, maybe did see a falloff in demand, and then how that points towards the second half, where you guys are assuming more utilization increases relative to-
Sure. Maybe I'll let Jared answer that one.
Yeah, happy to take that one, Kevin. Yeah, so when we talked about what we saw in Q1, it really came down to the month of February, where we saw a bit of a blip where utilization rates started to drop. We made some changes within the sales organization, including the comp plan, as Kevin mentioned. We saw a return to normalcy for utilization in the month of March, and so the way we have viewed this is it was a bit of a shift.
What we had expected in Q1 is now starting to come through in Q2, and then Q2 would come in Q3, and it's not one of these things where we can overnight catch up to what the early expectations were within the year, but, you know, we believe that we've made the changes necessary in order to see return to normalcy for these utilization of all the centers that are out there.
Okay, great. Well, we'll talk more about that in the breakout, which will be in Vernon A. Appreciate it again.
Thank you. Thank you.