Please note, this conference is being recorded. I will now turn the conference over to Mark Klausner from ICR Healthcare. Thank you, Mark. You may begin.
Good afternoon. Thank you for joining us today for CVRx's third quarter 2026 earnings conference call. Joining me on today's call are the company's President and Chief Executive Officer, Kevin Hykes, and Jared Oasheim, our Chief Financial Officer, who will review our financial results. We are also pleased to have with us John Landry, the company's Incoming Chief Financial Officer, who joined in October and will assume the CFO role following the filing of our Form 10-Q. The remarks today will contain forward-looking statements, including statements about financial guidance. These statements are based on plans and expectations as of today, which may change over time. 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.
I would now like to turn the call over to CVRx's President and Chief Executive Officer, Kevin Hykes.
Thanks, Mark. Good afternoon, and thank you for joining our third quarter 2026 earnings call. We delivered total revenue of $13.8 million in the third quarter, within our guidance range, with a steady gross margin of 87%. Revenue declined 6.1% from the same quarter last year, with U.S. revenue down 4% and Europe down 27%. We continued to stabilize our U.S. sales organization, and a second major payer added a Barostim coverage policy for its Medicare Advantage enrollees. However, the headwinds we've been working through are more impactful and more persistent than we have anticipated, and while tenure is improving, the impact on performance is taking longer to materialize than we had expected, in part due to these headwinds. I want to give you a fuller picture of what is shaping our business.
I'll cover three areas: the three headwinds we're facing, which are reimbursement, physician champion turnover, and field execution, and what we're doing about each, what is working in our most stable regions and how we're extending it, and the clinical evidence that's building behind Barostim. I will then introduce our incoming Chief Financial Officer, John Landry, before Jared reviews our financial results. The first headwind is reimbursement, specifically the change in behavior from our largest Medicare Advantage payer, which further degraded over the course of the third quarter. Our reimbursement visibility is limited to the prior authorizations that we are involved with, which likely represents less than half of all prior authorizations. For those that we handle directly, the approvals that previously occurred within days are now taking three months or longer.
The 30-day approval rate with this particular payer has fallen to approximately 12% from a high of 83% in 2025, and the 90-day approval rate is still below 35%, suggesting that many prior authorizations are still in the appeals process, with our team pursuing all options, including ultimately an administrative law judge hearing, which can add 100 or more days to the approval process. For the prior authorizations associated with this payer that are handled directly by our customers, over 80% are likely abandoned upon the first denial. As a result of this dramatic change in payer behavior, we believe that some physicians are no longer recommending Barostim therapy for patients who have coverage with this payer, further weighing on our growth in the quarter.
This decline was partially offset by an increase in approved prior authorizations for patients covered by Humana, but our overall Medicare Advantage approval rate declined to 51% at 30 days as of the end of Q3 from 60% in Q2. Longer term, we remain confident in our ability to overcome this transitory reimbursement challenge. Unfortunately, this effect goes beyond any single payer. Uncertainty around reimbursement for new therapies has caused some accounts to be more cautious about starting and scaling new programs. These accounts are implementing checkpoints to ensure consistent payment across their payer mix before committing to additional implants. This often means accounts will take time to assemble a group of patients with representative coverage policies, treat them, then pause to confirm or challenge payment with each payer.
At one large health system, more than a dozen patients with approved prior authorizations have been on hold for multiple quarters while the hospital completes this payment confirmation process. We're responding to these reimbursement headwinds in multiple ways with the goal of accelerating Barostim adoption. First, we're continuing to appeal denials at every stage for prior authorizations that we manage on behalf of accounts, pursuing approvals all the way to an administrative law judge when necessary. Our success with Humana is proof that this process ultimately leads to a written coverage policy if we can prevail with the administrative law judges. Second, in recent months, we've hired field-based reimbursement managers to work directly with accounts to minimize billing and coding errors, ensure timely and accurate claims payments, and to troubleshoot with local teams when payment issues arise.
Finally, we are using these same field-based resources to support and reduce the impact of increasingly lengthy payment trial periods that we are encountering in the market. At the same time, we continue to build a strong foundation of coverage for Barostim therapy. Since moving to a Category I code in January, we have secured our first two written Medicare Advantage coverage policies, one from Humana in the second quarter and from a second major payer in July. Together, these two policies represent 21% of Medicare Advantage covered lives. We are making progress on appeals and ALJ rulings with most payers, and each new written coverage policy strengthens our leverage with those payers that have not yet issued policies. Payment rates have also improved. Effective October 1, the national average inpatient payment rate increased from $43,000 to $45,000.
On the outpatient front, the most recent traditional Medicare claims data shows 100% of submitted claims in Q1 of 2026 being paid, the first time we have achieved this consistency of payment. The second headwind is turnover among the heart failure specialists who are Barostim champions in our active accounts. Demand for heart failure specialists is outpacing supply as patient volumes continue to rise and fewer physicians are entering the specialty. This dynamic was a key point of discussion at the Heart Failure Society of America meeting last month. At HFSA, it was noted that more than 50% of advanced heart failure fellowship positions were unfilled in 2026. This imbalance is leading to a significant number of open roles and increasingly frequent career moves amongst practicing heart failure physicians.
When a physician who is a Barostim champion in an active account leaves for a new employer, the Barostim program can slow or even stop altogether. Our field teams work to mitigate this disruption in two ways. The first is to build sustainable, resilient programs that integrate Barostim therapy into their heart failure treatment continuum. This reduces the likelihood that a single physician departure shuts a program down. The second is by supporting the physician as they move to their new practice, providing introductions, networking support, and resources to facilitate and accelerate the establishment of a new Barostim program in the new account. Unfortunately, we find that Barostim is not often an early priority for these physicians in their new roles, as they are often being recruited to help stabilize or accelerate highly profitable end-stage heart failure therapies such as left ventricular assist devices and heart transplantation.
For this reason, it commonly takes three to four quarters to get a new Barostim program up and running. The third headwind is field execution, which is closely tied to the stability and tenure of our sales organization. Our sales transformation efforts have resulted in higher-than-normal levels of turnover, which has impacted our performance, and we are taking steps to address this. First, we have appointed Paul Verrastro to the role of interim head of sales. Paul is a proven commercial leader and is highly respected by the field team. The appointment of this trusted CVRx veteran to this role has had a significant stabilizing influence on our team.
Second, we've created new roles in order to optimize the span of control and bandwidth of our frontline sales leaders and have prioritized filling these roles from within, promoting an experienced sales leader into our first area Vice President position and experienced territory managers into the area sales director roles. Third, we've strengthened onboarding and training for new hires and have implemented a more consistent sales coaching approach across our sales director team. These steps will take time to fully manifest in our results, but we are already seeing a positive impact on stability and engagement across the team. While it is still early, we're pleased to note that turnover in Q3 decreased to the lowest level in more than two years, and average territory manager tenure is at an all-time high. However, we remain cautious about the outlook for turnover.
While these results represent meaningful progress, it is still early, and we expect continued turnover at normal market rates over the long term. That brings me to the most important point about execution. There are still significant disparities in performance across our nine U.S. regions. As noted in our second quarter call, five of our regions are growing procedures by more than 20% on average, even in the face of the reimbursement and physician champion headwinds described above. In the other four regions where we have the lowest tenure at both the territory manager and leadership levels, accelerating our growth has been challenging. These regions have been more affected by the headwinds discussed earlier, as their teams are less experienced at working through these challenges. Those four regions are our priority. We are stabilizing the teams, supporting our newer leaders, and equipping their organizations to consistently run our playbook.
Our approach is the same in every region: execute our program selling strategy by building networks of aligned physicians who understand where Barostim fits in the heart failure continuum, who can identify patients who would benefit, and who make Barostim an integral part of their disease management approach. A recent comprehensive analysis of the program selling strategy after the first 18 months of implementation found that the key differentiator of our most productive programs is the depth and breadth of their referral network. Our analysis indicates that they have four to five times as many referring and prescribing cardiologists as less productive non-program accounts, and as a result, generate referrals and implants at a significantly higher rate. Our program development work at the account level is supported through our local, regional, and national medical education and awareness efforts.
Our top five performing regions are leveraging these resources aggressively, which we believe is a key element of their success. These data suggest to us that we have the right strategy. The playbook clearly works when the right conditions are in place. Our focus is on creating these conditions for success in every region by ensuring there's a stabilized team, an optimized onboarding curriculum, and a common coaching approach. The goal is simple: demonstrating consistent double-digit growth across all nine regions. I want to finish on the clinical front, where the news continues to be very encouraging. We had a significant presence at HFSA in October, our largest meeting of the year, with nine podium and poster presentations, including the late-breaking REBALANCE presentation. REBALANCE is the largest reported real-world Barostim cohort to date, with 435 patients enrolled across 45 U.S. centers.
In the 238-patient subset that corresponds to the current U.S. commercial indication, the results demonstrated sustained improvements in New York Heart Association functional class over the 24-month follow-up period and a clinically meaningful and statistically significant increase in average left ventricular ejection fraction of 4.8 percentage points at 12 months and 8 percentage points at 24 months. Real-world evidence like this is an important complement to data from randomized clinical trials and helps clinicians and payers understand the outcomes that they can expect from Barostim therapy in everyday clinical practice. We anticipate that much of the data from the HFSA presentations and posters will be published in the scientific literature in the near future. BENEFIT-HF also generated a great deal of interest at the meeting and is driving significant visibility, credibility, and engagement with physicians.
We continue to see strong demand for center activation and are seeing an encouraging early stream of enrollments as clinical teams integrate the trial into their research offerings. One final update on the clinical front relates to the new FDA real-world evidence pathway to expand existing indications. We are in discussions with the FDA on a potential real-world evidence-based PMA supplement leveraging this new pathway. We are encouraged by the collaborative nature of these discussions and are hopeful that we can agree on a protocol with the FDA in 2027. If we are successful in doing so, we will then execute the analysis on our real-world dataset to explore a case for label expansion. We look forward to updating you on our progress as discussions with the FDA continue. In conclusion, we're working through the three discussed headwinds and responding actively to each.
Our focus is on improving execution in our less tenured regions and building on the significant progress we are making in evidence and awareness. We're pleased by the increasingly consistent nature of reimbursement for traditional Medicare patients and will continue to fight for Medicare Advantage patient access through the prior authorization process. We will also leverage our two written Medicare Advantage coverage policies to encourage more payers to follow suit. We're very pleased with the pace and impact of the clinical evidence that we're building and with the strong positive reaction in the heart failure community to the BENEFIT-HF trial. Before I turn the call over to Jared to review our financial results, I would like to introduce John Landry, our incoming Chief Financial Officer, who joined us in October.
John brings more than 20 years of financial leadership experience in the medical device industry, and we're delighted to have John on board. I also want to thank Jared, who's been an important part of this company for over a decade, for his significant contributions to the company and his continued engagement and support through this transition. John, welcome, and I will turn it over to you for a few introductory remarks. Thank you.
Thank you, Kevin. I am excited to join the CVRx team and look forward to interacting with many of you soon. These first few weeks have reinforced my conviction in the CVRx opportunity. I believe that we have a passionate, patient-focused team and a great technology with best-in-class gross margins and a growing body of clinical evidence. By driving consistent revenue growth in this large multi-billion dollar heart failure market, I believe that we will be able to drive significant value over time. In closing, I would like to thank Jared for his support during this transition, and I will now turn the call over to him to walk through our financial results.
Thanks, John, and welcome. Unless otherwise stated, year-over-year comparisons are for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. Total revenue was $13.8 million, a decrease of $0.9 million or 6.1%. Revenue in the U.S. was $13 million, a decrease of $0.5 million or 4%. Revenue units in the U.S. totaled 412 compared to 420. The decreases were primarily driven by headwinds previously discussed by Kevin. Third quarter revenue also reflected higher-than-usual implants by centers that already had existing units to implant, which was more than offset by a larger annual purchase that occurred in the third quarter that we otherwise would have expected to occur in the fourth quarter, and is therefore reflected in our fourth quarter guidance. We expect to continue to see quarter-to-quarter variations based on these timing dynamics.
We ended the quarter with a total of 262 active implanting centers in the U.S. as compared to 258 as of June 30, 2026, and 250 as of September 30, 2025. The center count reflects adding new centers while some lower-activity centers became inactive, consistent with our focus on deeper adoption within active centers. As of September 30, 2026, the number of sales territories in the U.S. was 56 as compared to 50 as of September 30, 2025. Revenue in Europe was $0.9 million, a decrease of $0.3 million or 27%. Total revenue units in Europe decreased to 38 from 50 in the prior year period. The number of sales territories in Europe remained consistent at five. Gross profit was $12 million, a decrease of $0.8 million or 6%. Gross margin was 87%, consistent with 87% a year ago.
R&D expenses decreased $0.5 million, or 16%, to $2.7 million. This change was driven by a $0.4 million decrease in headcount expenses, a $0.2 million decrease in consulting expenses, partially offset by a $0.1 million increase in clinical trial expenses. SG&A expenses increased $0.5 million, or 2%, to $22.4 million. This change was primarily driven by a $0.7 million increase in legal expenses, a $0.4 million increase in travel expenses, and a $0.4 million increase in consulting and contract labor expenses, partially offset by a $0.8 million decrease in advertising expenses and a $0.1 million decrease in insurance expenses. In total, operating expenses were $25.1 million for the quarter and approximately $77 million year-to-date. Interest expense increased $0.1 million to $1.6 million.
This increase was driven by higher interest expense resulting from increased borrowings under the term loan agreement with Innovatus Capital Partners. Other income net decreased to $0.4 million from $0.9 million. This balance consisted of interest income on our interest-bearing accounts. Net loss was $14.2 million, or $0.52 per share, compared to a net loss of $12.9 million, or $0.49 per share. Net loss per share was based on 27.2 million and 26.2 million weighted average shares outstanding, respectively. As of September 30, 2026, cash and cash equivalents were $58.7 million, compared to $64.6 million as of June 30, 2026, and $85.1 million as of September 30, 2025. Net cash used in operating and investing activities was $11 million, compared to $10 million for the three months ended September 30, 2025.
During the quarter, we also raised approximately $6 million through our at-the-market facility. Given the OpEx reductions we made, we believe we have at least 18 months of cash runway. That runway does not include any additional proceeds from the ATM. Now turning to guidance. For the full year of 2026, we now expect total revenue between $56 million and $57 million, compared with our prior range of $58 million-$60 million. For the fourth quarter of 2026, we expect to report total revenue between $11.7 million and $12.7 million. This change reflects the continued impact of reimbursement delays with our largest Medicare Advantage payer, the impacts of physician champion turnover, and a slower-than-expected recovery in our less tenured regions. We continue to expect full-year gross margin between 86% and 87%.
In light of the revenue outlook, we have taken a comprehensive set of actions to reduce our baseline cost structure. These included reductions in non-commercial functions while we continue to invest in our sales and reimbursement teams. We are being disciplined about filling open positions and have pulled back on marketing and R&D projects that we do not expect to impact revenue. We continue to expect operating expenses for the full year to be between $99 million and $101 million, reflecting these actions, which include one-time severance charges recognized in the second half of 2026. Before I close, I want to say what a privilege it has been to help build CVRx alongside this team since 2015 and to bring Barostim to more patients.
I'm confident John will be a terrific partner to Kevin, the team, and all of you, and I thank you for your support over the years. With that, I'll now turn the call back over to Kevin for closing remarks.
Thanks, Jared. Before we close, I would like to summarize where we are. The third quarter and our updated outlook reflect real challenges, particularly the reimbursement delays with our largest Medicare Advantage payer. We are addressing each headwind directly, and we have reduced certain operating expenses while preserving investments in our growth drivers. It is going to take longer than we would like to accelerate our growth, and we expect the benefit of these actions to build gradually, but we remain confident in the outcome and in the value of this therapy. The need has not changed. There are 6.7 million Americans living with heart failure today. Approximately 339,000 of them are indicated for Barostim, and roughly 76,000 new patients are diagnosed and enter our indication each year. This represents a $10.5 billion market opportunity, and we are less than 2% penetrated.
With a gross margin of 87%, our mindset is squarely on returning this business to a growth trajectory. We have a therapy that works, a large market with significant room to grow, and a team that is working every day to change how heart failure is treated. That is why I remain excited about what we can build together and about the value we can create for patients, physicians, payers, and our shareholders. Now, I would like to open the line for questions. Operator?
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Brandon Vazquez with William Blair. Please go ahead.
Guys, it is Max on for Brandon. Can you hear me all right?
We got you.
Yeah. Hey, thanks, guys. A lot of moving pieces here. Can you just double-tap on what's assumed in the guidance for Q4 2026, and how should we think about some of these headwinds? Again, I know it's early, but how should we think about some of these headwinds as we start to fine-tune our models for 2027?
Yeah. I'll cover the headwinds first, Max. Thank you. Obviously, as we laid them out, the real impactor here has been the continued degradation of UnitedHealth, our largest and formerly most predictable and consistent payer. And that has just continued to decline now to a 12% level versus 83.5% a year ago. And so that has been a significant headwind, certainly in this quarter. The second headwind relates to this champion turnover issue, which we've been tracking for some period of time, trying to understand if it was regional or episodic, whether it was kind of a summer thing. And we have concluded, especially coming out of the Heart Failure Society meeting last month, this is unfortunately the new reality in heart failure.
There are only about 1,400 heart failure specialists in the U.S., far fewer than would normally be the case given the size of the disease state. The challenge is there are very few new physicians entering the field. And from the podium at multiple points last month, some of the leaders in the field said, "Our specialty is challenged and potentially in a crisis because we're not attracting new physicians to the field." In fact, last year only 60% of the fellowships were filled. This year, the number I understood from the podium last month was 43% of the available heart failure specialist fellowship roles in the U.S. were filled, so 57% empty. This is creating significant job hopping and significant open roles, which causes challenges for our programs, as you can imagine.
The third piece, which thankfully is more in our control, is the performance of our field teams. We are pleased that where we have tenure and where we have teams with seasoned leaders that are running our playbook, we are seeing better than 20% growth on average. That represents the five most tenured regions of our nine. Four of the nine regions do not have that level of tenure or experience in their leadership team and are struggling to deliver similar growth. That is within our control, and we are heavily focused on bringing those four regions up to the same level of execution. Maybe I will let Jared speak to how that plays into guidance.
Yeah. Max, what we communicated was for the fourth quarter, we would expect to be between $11.7 million and $12.7 million. On the year, that equates to $56 million-$57 million. Again, just reiterating what Kevin talked about, this impact from the largest Medicare Advantage payer is weighing on these numbers. Based on what we have visibility to today, these are the results we are expecting here for the fourth quarter.
That is helpful. Kevin, just another one for you. I think last quarter, and correct me if I am wrong, we had one major Medicare Advantage payer with a coverage policy, and now we have two. Is there anything you guys can do proactively to ensure this does not happen with a third?
Sorry, there may be some confusion there. We indeed added a second written coverage policy in August from a top 10 provider. That policy, along with Humana, actually have significantly improved in terms of their approval rates. Humana is approaching 80% or 90%. As you would imagine, they have a written coverage policy, so they are covering virtually every prior authorization almost immediately. Separate from that, UnitedHealthcare, our largest payer, does not have a written coverage policy. For that reason, and given their significant change in behavior since Q1, they are denying every single prior authorization that is submitted and denying the first, second, and third appeal in many, many cases. Our strategy is, in fact, to get as many payers to write policies as we possibly can, obviously including UnitedHealth.
The way that you get that to happen is you take each and every denial and you appeal it, and you push those appeals all the way to the administrative law judge after the third denial, if necessary, and hopefully win at the ALJ level. Once you amass enough wins at that level, which are paid for by the payer, they ultimately flip over and write a policy, as was the case with Humana. Sorry if I wasn't clear about that earlier, but we are doing that with each and every prior auth that's submitted. The challenge we have is that we only have visibility to less than half, maybe about a third of the prior authorizations for Barostim. Those third of the prior authorizations run through our internal system, our C-PAS group, and so we know exactly what happens to them.
What we can't see is what's happening with roughly two-thirds of the other prior auths in the market. We know for a fact, as is the case across the industry, only 20% of denials are ever appealed by a clinician group or a hospital system. If those UnitedHealth prior auths are being denied, they're likely not being appealed, and those are patients who were receiving our therapy who now are not. Hopefully that answered your question.
Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Chase Knickerbocker with Craig-Hallum Capital Group. Please go ahead.
Hey, guys. This is Nick Mattiacci on for Chase. Thanks for taking our questions. Just on the planned cost savings, can you help us quantify the annualized savings and how we should think about the operating expense run rate entering 2027? Then just on that same topic, you guys mentioned that you're continuing to invest in sales and reimbursement while reducing spend elsewhere. How should we think about the net impact of those changes?
Yeah, I can take that one. I appreciate the questions. We are not going to get too detailed on the 2027 operating expense guidance at this point in time, but what we can say is there was a moderate level of heads that were reduced as part of this action, and there were some additional project spend that was paused for the time being that were not tied to our sales or marketing organizations for the most part. We are not going to get into the details on total value of the cost savings, but our total OpEx number stayed roughly the same for the year that we had previously guided, as we also incurred some additional severance costs in Q4 that were not in the original plan. Those two kind of net against each other.
But as we go into 2027, we have a lower cost basis that we can then build off of into the future.
Got it. Then just again on the large Medicare Advantage payer that has been causing the troubles, can you just expand on what you think needs to happen for those rates to improve, and do you guys see a realistic path forward to resolving these issues with that payer?
Yeah. I think that the, as I mentioned, the way that that would be resolved would be ultimately for this payer to write a written policy. As I mentioned with Humana, every ALJ loss costs these payers roughly $10,000. If they ultimately determine that once they start losing more than 50% of the ALJ cases, and once we can push enough of those denials through to the ALJ process, ultimately it is in their best interest to write a policy. That is exactly what happened with Humana. So that is the strategy we are pursuing with United, with our largest payer. What that requires is time, and each of these ALJ, the ALJ process alone takes over 100 days after the third denial. That is incremental to the first three cycles.
So, it takes time to amass those cases, to push them through the ALJ, and to start to win. But that is in fact what happened with Humana. We were winning 57% of the time when they finally wrote the policy. So that is the approach and the playbook. It is not a Barostim playbook. That is kind of the commonly accepted industry approach to generating leverage and support for ultimate written coverage policies. Was there a second part to the question? Sorry if I missed that.
Oh, no. You covered everything there. I appreciate that. And then just on the higher-than-usual number of implants from inventory at hospitals, is there any way you can quantify the impact of this dynamic and, I mean, maybe give us a better sense of the underlying implant volume growth?
Yeah, I am happy to take that one. I think the reason for pointing that out was that, you know, we did experience a larger purchase in the fourth quarter of last year, kind of a typical process, end-of-year customers, you know, trying to reach their rebate levels. We actually saw that similar customer, that same customer, make that purchase in Q3 of this year. And the reason for pointing that out was more to help explain the guidance for Q4, as we are looking at that. But we are not going to get into any more details on the quantities that were included in those types of deals.
Understood. Thanks for taking the questions.
That concludes our question-and-answer session. I will now turn it back over to Kevin Hykes for closing remarks.
Thank you, operator, and thanks everyone for joining today. We appreciate your continued support and look forward to updating you on our progress next quarter. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.