Right, good afternoon. My name is Bill Plovanic with Canaccord Genuity, and welcome to our 44th annual conference. With us today, we have CVRx, and Kevin Hykes, President and CEO, and Jared Oasheim, CFO. The format's going to be a fireside or a PowerPoint presentation for about five to 10 minutes, followed by a fireside chat. With that, I'll bring Kevin up. Thanks.
All right. Thank you, Bill. It's a pleasure to be here, and to have the opportunity to update you on CVRx's progress. These are our forward-looking statements. Further information is available on our website as to our risk factors. CVRx has developed the world's first neuromodulation therapy to improve the symptoms of heart failure. They are among the first recipients of the FDA's Breakthrough Device Designation. The company is located in Minneapolis. We have a fully integrated manufacturing facility there. We've been public since 2021, have about 225 employees, and as of this month, have treated about 4,500 patients. Heart failure, as you may know, is a burdensome disease with a significant impact on quality of life and healthcare systems around the world.
In the United States, it's responsible for 1.1 million hospital discharges each year, 1.3 million emergency room visits, 8 million physician office visits, and annual costs expected to reach $70 billion by 2030. And while existing treatments for heart failure have been proven to extend life, few of them offer significant symptomatic relief for patients suffering from heart failure. It negatively affects the quality of life, particularly in those patients who have what's called HFrEF, or heart failure with reduced ejection fraction. Those patients, 66% of them, report mobility problems, 68% pain or discomfort, 76% find usual activity of daily living difficult, et cetera.
You know, and interestingly and consistently, when surveyed, these patients tell us that they would trade off longevity, years of their lives, for symptom reduction, and that's been surveyed multiple times over multiple years, and the results are very consistent. So clearly an opportunity here in heart failure and in HFrEF in particular, reduced ejection fraction heart failure. Guideline-directed medical care begins with what's called the Quad Therapy or the Quad Pillars of medical management, and those are four heart failure medications that most early diagnosed heart failure patients are initiated on. Few of them can tolerate all four of those medications, certainly fewer still at a therapeutic dosage for each of those four. But that's really where the journey begins.
For patients with reduced ejection fraction, they're often considered for an implantable cardioverter defibrillator implant at an early stage, and a small portion are candidates for what's called CRT or cardiac resynchronization therapy. At the end of their disease progression, they become candidates for LVAD or transplant if they survive to that point. So sort of two bookended treatment paradigms for this disease state. You know, unfortunately, only about 30% of those patients are eligible for CRT, and that does have a quality of life benefit. Only about 70% of them respond to the therapy, so it's imperfect for sure.
But that leaves a significant number of patients that the heart failure specialists call the walking wounded or the forgotten middle, patients that are between the early initiation of medical therapy and an ICD, and the much later, perhaps 10 years later, eligibility for an LVAD or a transplant. Those walking wounded are, in effect, the patients indicated for Barostim therapy. That indication gives rise to a $2.2 billion U.S. annual net addressable market for the therapy. It starts with about a prevalence pool of 6 million U.S. patients, an annual incidence rate of 1.3 million new diagnoses, roughly 290,000 patients that are NYHA Class II or III with reduced ejection fraction, and on a very conservative basis, about 76,000 of those who are truly candidates for Barostim therapy and can access it.
So that gives rise to roughly a $2.2 billion market opportunity. It's important to note that as of today, Barostim has penetrated less than 2% of that eligible annual incidence, so significant work to be done and patients to be helped. The therapy itself, the system consists of an implantable pulse generator that looks a lot like a pacemaker and a single lead with a carotid sinus tip that's sutured onto the carotid sinus and onto the baroreceptor, which sits just above the carotid sinus on the wall of the vessel. It's typically implanted on an outpatient basis. It requires a small incision in the neck for the placement of the lead and a pacemaker-like pocket beneath the collarbone. Importantly, it's entirely extravascular, so there are no leads in the heart or in the vasculature at all.
Also importantly, the procedure is remarkably predictable and safe, so a 97% freedom from complications, which is sets a pretty high bar for a medical device, and it's implanted in about a 60-minute procedure, so relatively straightforward and simple implantation. The recent 24-month post-market publication for Barostim therapy demonstrated that the therapy is effective, predictable, and durable out to 12 and 24 months. Patients receiving Barostim saw a two times clinically meaningful improvement in exercise capacity and quality of life. 68% of them improved by at least one New York Heart Association class, and importantly, 94% of these patients improved on a clinically meaningful basis on at least one of these three endpoints. So a remarkably predictable therapy with a very high response rate. Again, within the device sector, those are impressive numbers.
So when I joined the company in February, I began an outreach effort with our, our physician customers, with patients, with our team. Spent a lot of time looking at the results of the first few years of our commercialization efforts at CVRx. And on the basis of that diligence and the data that I just showed you, and the tremendous opportunity to treat the 98% of these indicated patients that are not being served today, we concluded that we really needed to focus on the HFrEF indication primarily and, and for the foreseeable future. This is a true opportunity without significant alternatives in this population. So on that basis, we've implemented or are in the process of implementing a true market development-based approach to our commercialization efforts. And that involves, first and foremost, the identification of the specific barriers to adoption that exist for Barostim therapy.
Each therapy, each device therapy has a different sort of makeup of adoption barriers. In our case, it's not the size of the device or the predictability of the response or the complication rates. It really comes down to three things that we think, if properly addressed, would allow us to significantly deepen the adoption of this therapy in heart failure. The first of those is to dramatically increase the awareness of this therapy, not so much in the heart failure community, who know us well, but in the broader cardiology community, and the general cards who manage about 44% of our indicated patients, and really getting to them in a way we have not been able to in the past, to help them understand how this therapy would fit into their practice and into the continuum of care for these patients.
Importantly, getting to their nurses and their APPs and the people in their practices that see these patients day in and day out. The second key barrier that we will address is to develop a much more robust set of evidence supporting this therapy. Really, it stems from my continued exposure to physicians who say, "My patients do far better on this therapy and on a much broader range of endpoints than I read about in the literature. You need to study this or that." And they pepper us with anecdotes and say, "You should look at arrhythmia, arrhythmia burden, arrhythmia reduction, or diuresis improvement, or my ability to uptitrate medication." So a lot of work we can do here on datasets that we already have in-house or that we could acquire.
So it doesn't necessarily require a new prospective trial, but it's really about mining these datasets to publish a lot of these secondary but very important endpoints, to fill out the comprehensive sense of what this therapy can do for patients. It also involves a more robust publication of the mechanistic underpinnings of this therapy. The mechanism itself, the role of the baroreceptor, has been studied for almost 100 years. That is well known and accepted, but physicians say, "Hey, I'd like to know a little bit more about PV loops or the cardiac cycle or the arrhythmia burden," and other sort of mechanistic elements that sit down one or two level. So that's an important focus of ours as well.
Finally, perhaps not surprisingly, we need to significantly address the barriers to access that this therapy has, like any novel therapy, and to work with payers to improve coding and coverage and payment for this procedure, and we've done that and are making great progress, but that'll be something we work on for a significant time to come. In parallel with this, we're directing our sales efforts in a much more deliberate fashion and really focusing on building sustainable Barostim programs. So like any early-stage commercial venture, in its early days, CVRX spoke to anyone that would listen and started programs with anyone that was willing. That's very common. We're now...
As we look at what happened, what we learned from, what worked, what didn't, we're now trying to be much more deliberate about identifying the characteristics of a program that can reach a self-sustaining level of adoption, and a program that's resilient and can survive the loss of a key physician or a surgeon changing roles or a temporary reimbursement issue, a program that's really taken this therapy and baked it into how they treat heart failure. So we're learning a lot. We're adjusting our account mix accordingly, and we're really trying to focus on taking accounts that aren't there yet and getting them to that fully adopted level, and as we add new accounts, really understanding the characteristics of those that can get there as well.
In support of that effort, I have added five new executives in the last three months, who are very directly related to those barriers to the adoption of the therapy and to our emerging commercial focus. The first is Dr. Phil Adamson, the company's first Chief Medical Officer, joined us after 10 years as the CMO of Abbott's heart failure business, a world-renowned heart failure physician and scientist. We're thrilled to have him, and his impact is already being felt. The second is a new Senior Vice President of global clinical research, someone well known to me, who is adept at mining datasets pragmatically and creatively to build out the literature as I've described, as we need to do.
The third is Bonnie Handke, our Senior Vice President of Patient Access, formerly 25 years at Medtronic, one of their most senior reimbursement leaders focused on cardiovascular. Obviously materially engaged now on multiple fronts, as we deal with Medicare and commercial payer opportunities across the spectrum. The fourth is Robert John, who joined us after 10 years at Abbott, leading their heart failure business, a seasoned sales exec with time at Guidant and Medtronic, and Pfizer, and so we're thrilled to have him, and he's now making his mark felt on our sales force. And finally, we hired the company's first Chief Human Resources Officer, and obviously, the sales force is growing rapidly.
It will continue to grow rapidly, and our ability to hire, attract, retain talent, compensate them effectively across the company, but especially within the sales team, is a critical factor in our success. So we're thrilled to have an HR executive of her competency. She helped grow AtriCure from 200 to 1,200 employees and grew their sales team from 50 to 350. So she knows the playbook, and we're thrilled to have her on board as well. So that's a brief update on what we've been up to. I'm thrilled to be here, and we'd be happy to chat further, Bill, and take whatever questions come up.
Excellent. We have here, cover you with some questions here. Kevin, Jared, thanks for joining today, and thanks for the audience for taking the time. Just we'll start out on guidance. You basically had a reset in Q1. You did reiterate the Q2 guidance. You're calling for $50 million-$53 million, so we're looking at 27%-35% growth. Talk about the visibility you have into the business today, especially as it relates to sales force turnover, which I think influenced the original reset. Kinda where are we through that process, and how is that going?
Yeah. Thanks, Bill. Thanks for having us. Good question. So I, I'll take that one. First, from a visibility perspective across the business, there's really two different pieces that we look at. Number one is on the sales force side, I'll touch on that in a minute, but the other is on the account side. When we look at bringing on new accounts, we have visibility all the way from the beginning, where we identify a champion or are targeting specific types of accounts based on number of patients they're treating or types of therapies they've adopted in the past, all the way to the point where they've signed the contract, gone through value assessment committees, and are starting to look at treating patients. So we get pretty clear visibility all the way through that process.
So it really helps us start to understand what types of accounts are coming through that funnel and when they could potentially activate as an active implanting center in the future. As for the sales force, again, a lot of visibility into, you know, areas that we are recruiting for. We look for, you know, high-volume cities where they potentially have a lot of heart failure patients. We try and look and open a rec in that area, trying to bring on really strong candidates. From the point that the candidate actually starts with CVRX, to the point that they're out there trying to activate centers and help patients, we get to see them all the way along, right? We're seeing them in the training classrooms, understanding if they understand the mechanism of actions, the types of patients that we're going after.
All the way then to, you know, their interactions, their first interactions with potential customers and trying to get these champions up and running to activate centers. So we get a lot of visibility. As far as going back to Q1, what we saw was a little bit higher than expected turnover in that sales force for a variety of factors. But since then, we've been able to bring on a lot of really strong candidates in the first half of the year that we believe will be able to pay off here in the second half, in some of those investments that we've made.
Yeah, maybe I'll just add a little more color. Thankfully, we had a very brief transition period between the old sales leader and Robert John joining us, and also thankfully, we had a very seasoned sales and marketing executive on my staff already, who was able to step into that role, so we had a seamless handoff. When we made the change, and again, a month ago, we had a team handed over to our new leader that was in great shape, with turnover back to normal and a focus on the business. So thankfully, I think we have... That's always a scary process, any sales transition. This was about as atraumatic as I've ever experienced. So we're thrilled to have that team excited about their new leader and back on the streets, focused on patients.
Excellent. Then, I think we were surprised that in terms of seasonality, you don't really expect an impact. Most med tech companies kind of go through the growth phase in early stage, and they get to a certain point where we start to see that Q3 slowdown. You don't expect that, and why wouldn't you expect it? You just haven't gotten big enough yet or?
Yeah, it's a good question. I think we've talked about in the past that we have seen some seasonality as it relates to the European portion of the business-
Mm
... seen a bit of a slowdown with interactions with physicians during the month of August and sometimes early September. But we haven't seen it in the U.S. at this point, and I think part of that is that we are still early in this growth phase, and it just hasn't played a factor.
Okay, let's switch over back to the sales strategy. You know, big part of the story today is the new executive team hires that you've made. I mean, you've gotten—brought in a lot your, your teams in. One, is that everybody? Is there any more senior leadership roles you need to add to? And then two, you know, as we talk about Robert John and the others, just walk us through the rationale behind the new hires where, you know, we talked about any more gaps you need to fill. Or is this... You know, and as you made some transitions, is this just really you've gotten to a certain point, you need different skill sets? Or kinda just any-
Yeah
... any background on that.
So I think the short answer to the first question is yes, this is it for now. It's an exhausting process and extremely important, and we're thrilled to have landed these five very senior seasoned executives. I-
And quickly.
Yes, more quickly than we could have imagined. Thank you.
Yeah.
So you know, there's a piece of this that is about new roles that never existed, like a Chief Medical Officer, like a Chief Human Resources Officer, like a senior vice president of reimbursement, patient access. Those have not been roles we've had in the company or have had the luxury of filling. So there's a piece of this that's about building the competency we need for this next chapter, and to be able to grow a business effectively from $50 million to $250 million or $500 million. There are other elements that are part of the natural transition that companies at our stage go through, where executives that were perfect for one chapter of the company's life aren't maybe the right folks for the next chapter.
So there's a piece of that as well, but I think we're largely now stable, and we're developing a great chemistry, and I'm excited to get back to the hard work of helping patients and driving adoption.
Good. Yeah, it's never easy to go through that transition. On the Q2 call, you identified it, well, a subtle shift in strategy, let's go deep rather than wide, right? Because you have a pretty good account base or focus. Walk us through the rationale. What'd you see in the data that said, "Wait a minute, we need to focus on their existing accounts rather than adding a bunch more?" What did you do to the sales incentives to promote this, right? 'Cause-
Yep.
People follow incentives.
Yep.
And then, you know, kind of just operationally, what are the reps doing differently? We'll start with that.
Yeah. So I'll start with that, and you can jump in. You know, again, not surprisingly, a company, I don't know if we'd call us an adolescent or a... We're certainly not in elementary school anymore. As you change, sort of, change chapters and you look back and say what worked and what didn't, you try a lot of things, and you really try to learn as much as you can. You know, what we found is that the most successful programs are those that have multiple champions, not just one. Often, multiple surgeons, vascular or cardiothoracic or both, not just one, are using our therapy consistently. And whether consistently is once a month or once a week, or sometimes multiple times a week, but it's become just part of what they do.
Very importantly, they're centers who've developed a network of referrers in their community. So they're not just... A lot of these heart failure centers treat very sick patients who aren't our candidates. 24% of our patients are within these advanced heart failure centers, but 44% are out in the community. So the most successful programs have developed a network of referral physicians and APPs in the community that allows them to tap into a much, much bigger catchment area. By doing that, it creates the consistency of use that, where it sort of becomes part of their treatment continuum. They don't think about it, we don't have to be there each week to remind them. The program doesn't shut down if our sales rep changes jobs, or if one of the surgeons goes on leave, right?
A small program with only one or two physician champions is vulnerable to a lot of disruption. It's just part of these businesses. So, you know, that's what really seems to work best. So we've looked at that carefully and said: What are the characteristics that you could identify beforehand that says, "This is an account that's likely to get there?" So we have, for the first time, to answer your third question, we have a very prescriptive now blueprint that says, "You can't just open accounts anywhere you want. It's gotta have three or four of these five characteristics." Ideally, all five, right? So we're starting to change where they hunt. We're also starting to say, you know, it's about sort of getting them to this sustainability level. It's not about just finding revenue units wherever you can.
So eventually, and we haven't done it yet, we've had enough change in compensation this year for one year, frankly, but we're moving towards what I think is a best-in-class approach that says we're gonna... Once we can measure something like consistency of treatment or number of referrers or, or referral productivity, we might start actually to put comp against that and say, "We're gonna pay you more to generate five units from five different referrers than just one deep champion that just does this on his own or her own.
That's actually—please, thank you for the setup. How do you get out there to the local community? Are you responsible? Is that physician? You know, to get those referrals in, you know, are these meet and greet lunches? Are these-
Yeah
... you know, you know, going, visiting offices, who's doing the pavement pounding? How do you execute on that?
Yeah. So it's, to some degree, it's all of the above. There, there are 25,000 community cardiologists, right? We cannot possibly call on all of them. We wouldn't want to, so we're being very targeted, and we can use Entresto prescription data, for example, to understand which of those general cardiologists have a greater concentration of heart failure patients. They all have some, but some of them have more, for sure. So where we're using human assets, it's on a very targeted basis. We're also doing... I think we did over 100, sort of, referral dinners last year.
Mm.
to a week, somewhere in the country, where we had 20 referral cardiologists, a clinical expert, heart failure specialist, and now our own Chief Medical Officer, talking about the therapy, helping them understand, again, how does this fit into how you treat these patients? And importantly, reminding them that this forgotten middle, there are, in fact, now device therapies to help those patients who are—they're living longer 'cause of the drugs, but they're not living any better, and we can change that. So it's a combination of direct access, it's referral dinners, it's omni-channel marketing, it's webinars, it's publications. So it's sort of a spectrum of things that's, I think, appropriately sensitive to cost.
Perfect.
If that answers your question.
It does. So you've also kind of separated your account base. You have an A account that's doing all the right steps. As we look at those accounts, are those the oldest, or you threw out some kind of characteristics of a performing account, or they just happen to have all the things in place, and it's not really related to age or, you know? I'm trying to kind of-
Yeah, I don't think we have found a chronologic component to that. It's—I think it's about the raw materials. Can you develop multiple champions? Does the administration support it? Do you have a good, you know, payer environment? Do you have multiple surgeons? So it's... And sometimes the most recent ones are getting there much faster than the early ones did. So it's, I think it's just more about being intentional and understanding the components of what good looks like.
Okay, so let's switch to clinical. We're running out of time. Just you, the data, of mining the data, from what you have to kind of get it out there to help, how long does that... You know, is this stuff that we'll see this come out at society meetings in the next six to 12 months, or is it, do you think that'll take longer to help you kind of drive?
Yeah. I think that the easier of those will certainly start to flow through even late this year. We have a healthy physician-initiated research program, where we sponsor research like that. We have six registries, we've got a number of data sets we've purchased that we're using AI to kind of chew through and look for real-world evidence. So it'll be a mixture of things based on the depth of work required, but it's not necessarily- does not depend on a four-year prospective trial. This is all stuff that's within our grasp.
... the goal is to create a steady cadence of that data.
Okay, and I have to finish on reimbursement. That's kind of a shadow overhang for next year right now. Were you surprised when you saw the CMS proposal for the outpatient reimbursement, and what's the plan of action as we move forward?
Yeah, happy to cover that one. So, two components to this, one, outpatient, the other, inpatient. Just quickly on the inpatient side, we did get the final rule from CMS, saying that they were going to increase the payment levels that hospitals are receiving on the inpatient types of procedures. It is a smaller portion of the business, but still something important to call out. On the outpatient side, we're in the exact same position that we were in one year ago. We were originally mapped to APC 5465 that would reimburse about $30,000. We went through their process to collect feedback from physicians and customers, submit that data to CMS in this open comment period.
Also go in front of a physician panel, where we presented five minutes' worth of data explaining why it made sense for us to be mapped to a new tech APC. The end result of that physician panel was a 5-0 vote in our favor last year. We're gonna go through that same exact process this year. The meeting will take place at the end of August. After all of that, we'll see the final rule in November, where we expect to land in the same spot where we are today, which is APC 1580, because we're using the same data that's showing a similar cost being submitted to CMS that was used last year. Any rational person would think that if you have the same inputs, you would get the same output, so that's the expectation.
Worst case scenario, then we're gonna have to look at our prices longer term, to try and figure out what makes sense for these hospitals, looking at the different payer mix, but also procedure mix between inpatient and outpatient, to determine if we'd have to drop our ASPs.
Okay, and then last question, I promise, is pathway to profitability. That's another overhang for the story, is, kinda racing to the line with the cash you have. Talk about the possible pathways today. Where does the leverage come from to get there, and at what revenue level do you believe you have to be to be free cash flow positive?
Yep. So right now, $70 million of cash in the bank. Most recent quarter, we burned about $10 million. We still have access to another $20 million in our debt facility, so if nothing changed in our burn profile, we have nine quarters of cash. Our belief is that we will see leverage in this model because we've made significant investments in the sales and marketing organization and in the leadership team that we believe will pay off to allow us to grow revenue at a faster pace than SG&A moving forward. So we don't believe we need to go raise capital at this point in time. But the key point to follow up with is, it doesn't mean we won't raise capital at some point in the future.
If we see opportunities to invest in the company to see faster growth, we're gonna take advantage of that, 'cause the goal here is to help as many patients-