Okay. How's that?
Sounds good.
Okay. All right. Good morning, everyone. Thank you for joining us for Canaccord Genuity's 2026 MedTech Diagnostics and Digital Health and Services Forum. My name is John Young, and I'm one of the med tech analysts here. I'm very pleased to be joined today by the management team of CVRx, Kevin Hykes, President and CEO, and John Landry, who officially stepped into the CFO role this week. John joined CVRx with more than two decades of med tech experience, including most recently as CFO of Nyxoah, and before that, 12 years at Vapotherm. For those less familiar with the story, CVRx is a Minneapolis-based commercial stage medical device company focused on neuromodulation solutions for patients with cardiovascular disease. Kevin, I want to start just with the Q3 results, and I think the call was pretty candid.
You said that the headwinds are being more impactful and more persistent than anticipated, and 2026 revenue guidance has seen two consecutive cuts. Before we get into the specifics, could you step back and tell us what you got wrong in your assumptions coming into this year, and what is the single most important thing that has to go right for CVRx to return to consistent growth?
Thank you, John. I appreciate it. Thank you for the chance to speak this morning. As it relates to Q3, and I guess even bigger picture in that week, I want to be really clear. We believe that this opportunity is absolutely intact. We have not underestimated the opportunity to significantly change the way that this disease is treated. What we did underestimate is the persistence and the magnitude of some of the headwinds we're facing in this market. Probably most obviously is our largest Medicare Advantage payer, whose behavior has changed dramatically over the last three quarters and gone from a 30-day approval rate in the mid-80s to now 12% as of the end of Q3. That was probably one of the most significant drivers of our revenue, revised guidance this quarter, and of the revenue we delivered.
The second headwind that we did not fully anticipate or appreciate was this chronic understaffing in the field of heart failure. It's a small specialty to begin with, only 1,400 of these physicians, which is crazy given the size of the disease state, but there are fewer and fewer physicians entering the field, which has created almost a constant churn of job hoppers, which has tremendous destabilizing effects on a program that you're trying to build. We thought at one point that that was perhaps cyclical or seasonal or regional, but we're seeing this across the entire country. We're seeing it in our clinical trial interactions where we have principal investigators who committed to us in May that they would stick around for four years and be the principal investigator at Johns Hopkins, and they've already changed jobs, and the site isn't even yet enrolling patients.
It's not going away. It's a structural issue. We are doing our best to mitigate it. I can talk about that further. The third piece of this is execution, and that we can control. The good news here is that we know what good looks like, and we've had pretty significant turnover as a result of this transformation, which was concentrated in four of our nine regions. In the five regions where we have experienced tenured teams and experienced leaders, and where we, through the metrics, know that they're running our playbook, we're seeing 20+% growth on average. In the four regions where the turnover is 80+% in the last 12 to 18 months, we're seeing a very different story. We know the strategy works.
We know it can work even in the face of these headwinds, and we need to get those less tenured reps to the same place that their peers are and delivering on the strategy and treating patients day in and day out. The good news is, our tenure has never been higher, and our turnover is now at a two-year low. Those are obviously labile numbers that change, but we're happy with the trends we're seeing and the stability we brought to that team. Big picture, the dream's alive. It's about execution, because that's the element of those three that we can, in fact, control, and it's about putting the best defenses we can in place for the other two.
Got it. I think we will jump into all those details. John, I want to ask you, because you have joined the company officially four weeks ago, CFO officially starting this previous week, but obviously you did a lot of diligence and fresh eyes coming into this opportunity. You are joining CVRx at a challenging moment, but clearly you had conviction to take this job. I would love to know what gives you that conviction. What do you see for CVRx?
Right. No, thank you very much, John, for the opportunity to be here and the very kind intro. When I looked at CVRx, I think overall, I am thrilled to be part of the CVRx team. I have followed the company for a period of time, and I really believe that we have a couple things going for us here at CVRx. We have a great technology. Barostim is a great technology. We have a very passionate, patient-focused team here at CVRx that is really put this patient in the front and center of everything we do. In addition, we participate in a very large market opportunity, a $10 billion total addressable market opportunity. We have best-in-class gross margins, and we have had historically 15% growth. I think right now, obviously, there is some near-term challenges that we need to work our way through.
But I think given the thing that really excited me in the diligence process was understanding that we had five of the regions, five of the nine regions that were driving 20+% growth. I think when we execute on our playbook and we have tenure in the sales organization, we can drive that double-digit growth, which I am excited about. Yes, while there will be some near-term challenges that we need to overcome, I am very confident that over the long term, we are going to be able to deliver long-term double-digit growth and be able to drive significant shareholder value for our organization.
I know it is still early, but do you have any priorities for your first 100 days as CFO? Maybe could you give us a preview of maybe how you expect to change how CVRx builds its forecasts and sets guidance going forward?
Sure. Absolutely, John. I think over the next, say, 100 days or so, what I really want to do is dig into the business, learn the business, understand the key revenue drivers, understand all of the key inputs that really make the business move forward, and understand how we connect with customers and bring the technology into market. I want to understand all the levers we have in our P&L as well as our balance sheet. Then ultimately work with Kevin and the team to help drive adoption of Barostim into the marketplace. So that will be something I am looking at here in the first 100 days. In terms of forecasting, I think probably my historical experience is that generally it is focused in on the inputs. Inputs are very key in determining the outputs of the forecast.
I think understanding what those are, dialing those in, and making sure we have a good understanding of that so that we can extrapolate and forecast out the business going forward. I think that will be something I look at over the long term as we look into 2027. I think in the near term, the focus is, as we provided our guidance, we really took a look at the inputs that we could control. As we factored in guidance for the upcoming quarter, we took a look at making sure that we factored in all the key headwinds that Kevin alluded to earlier in developing that forecast.
Got it. I think we will jump into just the MA headwinds that you guys are seeing. So the 30-day approval rate for UNH, which is your largest Medicare Advantage payer, has fallen to 12% from 83% in 2025. You said that they are denying every prior authorization at this point, and often the first three appeals as well. I know that the playbook today is to push denials to the administrative law judge until the payer writes the policy, and you did see some success there with Humana already. Have you reached an ALJ hearing yet for UNH yet, or when do you expect that to happen, and how many cases are in the pipeline?
Yeah. So thank you. Maybe I will take that up one level first. The strategy is really twofold. The first is sort of strategically to engage at a policy level with each and every one of these Medicare Advantage payers, certainly the 10 big ones, and to encourage them to write policies on the basis of In this case, Humana, the number two Medicare Advantage provider in the country, has a written policy that allows us to go into United, Aetna, Cigna, et cetera, and say, "Look, the number two player is covering this. 100% of fee-for-service Medicare is covering this. You need to cover this for your beneficiaries." So it is sort of a top-down, bringing data and leverage and competitive pressure to bear to try to get them to write a policy.
That can happen as part of their annual review cycles, which are staggered across the year, or it can happen on the basis of an off-cycle review. We are doing that with every single piece of new data and every new policy that we get. We go back to those large players and say, "You need to get on board." On the other end of things, tactically, we are fighting hand-to-hand combat on the prior authorization front. As you noted, that is a pretty well-known playbook, and it is effectively having the resources and the persistence to fight each and every denial through all three cycles of appeal, and ultimately, if necessary, to the administrative law judge level.
You need to win more than 50% of the time with the administrative law judges, and you have to win enough cases, you have to have enough critical mass that the payer decides it is cheaper for them to write the policy than to continue to fight. We are working both of those strategies. We have never, until this year, had to take a United case to the administrative law judge. We had this dreamlike state where they were approving 100% of our, well, nearly 100% at three days. We did not know. We had never seen that before. We were thrilled with what we were seeing. Obviously, that changed in January and February. They had gone from our best and most predictable and largest to now our toughest payer. We are working on it. There is a pipeline full of these ALJ cases in the works.
There are a few that have been heard. We are continuing to load the pipeline, but it is a difficult process to handicap, and that is one of the reasons we are very conservatively guiding for this quarter and likely for next year. Until we have a better sense of how long that is going to take, we do not want to predict success.
I know it is hard to handicap, but maybe another approach for investors to think about it is, how long did it take with Humana from the first ALJ ruling to that written policy that you guys received? You could think about just the timeline of length between those two.
Yeah. Every payer's different, right? Critical mass to Humana is a little different than it is to United, but it took between four and six months of steady ALJ cases for us to win that battle.
Got it.
That's probably our closest analog. I think United's bigger. It probably takes more to get them to move.
Yeah.
But the playbook works, and there's a chance that the top-down strategic piece of this, it's a bit of a domino effect, and you also work the small regional players. Sometimes a small regional Medicare Advantage provider can trigger behavior from one of the larger payers who's in a market, who's in one of their most competitive markets. We're continuing on all fronts.
One of the downstream effects of this that you described on the Q3 earnings call was that health systems are pausing implants until they confirm payment, including one system that had about a dozen approved patients on hold for multiple quarters now. How widespread is this? Is it just that one account? Does it also represent a backlog that could convert into revenue once you get that UNH ruling, perhaps in four, six months or whenever it does come along? What are you doing to address this?
Yeah. That is a great question. This is a dynamic, and it is not related to United specifically, but what we are seeing now and have been seeing is a degree of caution and skepticism on the part of these health systems that has only increased year-over-year, quarter-over-quarter. We have many instances, so unrelated to a prior authorization, these are actually, in some cases, approved prior authorizations that are refused payment after the fact. The hospital has spent $50,000, $60,000, $80,000 on a surgical procedure and a medical device. They have a prior authorization in hand that says, "United or Cigna or Aetna, we will pay for this." Then the payer refuses to pay after the fact, which obviously freaks out the CFO.
I do not know if there is a better word for that, because they go nuclear and they say, "CVRx or Medtronic or whomever, this is your fault. You told us you were getting paid. We did not get paid. Now we are out X number of thousand dollars. Shut this thing down and help us get paid." That is what we do. That can shut a health system down for six months or 12 months to get them paid. That is happening. In the old days, it was with the MACs, with fee-for-service Medicare. In our case, that has been solved. It is happening now with some of these Medicare Advantage plans.
The hospitals, as they start these new programs, not just Barostim, but if they start a new technology or new therapy, they want to make sure they are going to get paid, and they are less willing to believe what companies like CVRx tell them. They say, "Well, let us assemble." I am talking about a specific example in the Midwest, very, very large health system that said, "We are going to find five patients from our five largest payer groups, get them all prior-authed, and then we are going to treat them and see what happens. We will call you when we see if we get paid or not. Leave us alone." In the meantime, in this case, we were adding more prior-auths to the pipeline. We ended up, we had 12 patients, so we treated five.
They went away for 60-plus days and came back to us and said, "Well, some of them were paid. They were all paid, but a couple of them were paid a little bit less than we thought. We're not yet ready to start." In the meantime, there's 12 patients now with heart failure, a morbid condition, and they're getting worse, sitting on the sidelines. They've approved prior authorizations, and they're waiting, and they're waiting, and they're waiting while this system digs into what happened with three of the five. They find out that actually, in this case, it was their billing department that miscoded these submissions. It's fixable. It's all fixable and solvable, but it adds friction. That's more just kind of a general systemic issue right now.
There's such skepticism and concern that it adds a lot of challenge to getting a program up and running. We will succeed at that center and others like it, but it just takes longer than anyone would like.
Got it. Then maybe another systemic issue that you've called out too now is just the turnover in heart failure specialists that you're seeing with the only 1,400 in the U.S. and the job hopping that's occurring. My question to you, Kevin, is, why did it take so long to realize this? If it is the new reality, does the commercial model need to change?
Yeah. Great question. We've been watching this happen, and again, it's not unique to CVRx or the physicians that we deal with. We were wondering, as we started to see more and more of this, even last year, is this regional? Is it sort of the time of year? Is it certain kind of career stage people? We began to also then see it in our clinical trial, as I'd mentioned, a different angle, different centers in some cases, but the exact same dynamic where there's this almost 18-24-month churn. It was really catalyzed last month at the Heart Failure Society of America meeting, where they were from the podium, their leadership was saying, "Look, we have a crisis in this specialty.
We're short-staffed to begin with, and we are making fewer and fewer new heart failure physicians each year." They quoted a 60% fill rate of the heart failure fellowships for last year, now dropping to 43%. There are 110 heart failure fellowships this year. Only 50 of them are filled with new physicians who want to enter the space. Again, it's solvable. As we've described in the past, the heart failure physician for us is the gatekeeper. They're a very necessary gatekeeper and champion. Our goal is to get beyond those gatekeepers into the communities that surround their centers. That's where the bulk of our patients live and are being treated and where their disease is being managed.
For us, it's getting the gatekeeper's blessing to go into the community and generate referrals through the gatekeeper initially, and ultimately around and past the gatekeeper once they're allowed to do so. We're stuck with them in the short term, but for us, good is defined as a referrer in the community that understands our therapy well enough that they can send it straight to the surgeon, and the gatekeeper's fine with that.
How many of your active accounts have you seen this turnover, if you're able to estimate that? Also, how many of your active accounts have you been able to set up these systems where you could go around the heart failure specialist if they've left already, where they have a durable-
Yeah
reorder pattern?
I would say in general, we haven't quoted specifics, but it's on the order of 20%-plus over some period of time is going to experience this. Whether it's the most senior heart failure physician changing roles or it's one of the lieutenants who gets a promotion and moves across the country. Again, it is manageable, and I can talk in a minute about what we do about it, but it does not seem to be going away, and it's just something we're going to have to structurally live with. Our response to that is the same as the one that we put in place six months ago in terms of creating sustainable, robust programs that drive deep adoption.
The more you can build our therapy, the first device therapeutic therapy to treat this population, the more that can be part of how they treat the disease and not dependent on a single champion, but in fact, part of their disease management progression that all of the physicians buy into, that's the best way to insulate yourself from one or two of these physicians. We're doing that already. We're doubling down on that, and it's not happening. It takes time to build a network of physicians like that. But where we have those robust networks, we see a more resilient ecosystem, right? And we can survive it. In terms of your question about in how many cases do we have a community doc who has enough experience to sort of go, it's still limited, right? That's the goal. We're getting there.
It works, but that takes a lot of time.
Got it. Then maybe we can move on to the sales force. You're starting to see some stability. Q3 turnover was the lowest in more than two years, and average territory manager tenure is at an all-time high for the company now. Yet the four least tenured regions continue to struggle. What are the leading indicators that tell you those regions are turning, and when should we expect to see that in the numbers?
So, as I mentioned, that is the element of these headwinds that we can, in fact, control, and we've been very deliberate about how we have built that team and how we've tried to promote from within. We've tried to do everything we can to stabilize that group. Turnover is challenging in sales teams, for sure. We have made great strides in terms of stabilizing the group, putting leadership in place that they know and trust, creating roles that deal with span of control where that's an issue, so that they're getting the support and the bandwidth they need from their bosses. The indicators we look at is, are they using the tools that we developed? Are they running medical education programs? Are they generating community referrals? It's the same metrics we use with the experienced, highly tenured regions. It's watching those very carefully.
The magic here is in the coaching. Often in these businesses, you'll hear people describe the role of the frontline sales leader as perhaps the single most important job in the company. That's absolutely true. It's getting those frontline sales leaders who have eight or 10 sales reps reporting to them, sitting down regularly, coaching these new hires, telling them how you approach an account, what tools we have developed that may be most appropriate for the selling challenge there, right? That's where the rubber meets the road, and that's where we'll focus.
Got it. Just touching on guidance quickly, Q4 guidance implies 21%-27% year-over-year decline, but that was partly due to an unquantified large order that was pulled into Q3. Excluding that order, what does the underlying run rate look like for the company, and do you view Q4 as the trough quarter?
Yeah, thanks for the question, John. In terms of the trough quarter, we don't necessarily see Q4 as our trough quarter. I think as we think about our baseline and run rate, I think we're thinking about it more in terms of the 2026 total number for the fiscal year, sort of our baseline, and we'll grow from that. As we develop that Q4 guidance, we have had good visibility in the near term, so we've been able to deliver on our revenue guidance most recent quarters. We have very good visibility within the upcoming quarter. I think as we look at going forward for 2027, we'll provide guidance at the appropriate time for that next year. I think our Q4 guidance factored in these headwinds that Kevin alluded to, whether it's champion turnover, sales force, reimbursement challenges.
All that is baked into the Q4 numbers, including these orders that moved what have historically been in Q4, moved into Q3 this year. All that is factored into the guidance, and again, we see 2026 as the baseline, not necessarily Q4.
Got it. You guys are facing a lot of headwinds. I do want to ask you, what conditions need to be in place for CVRx to return to double-digit growth? Some of these headwinds, our view is that you can address, such as the sales force execution. Some of them might be a bit harder, out of your control, like UNH at this point. Which one of those can you address, such as to get back to that double-digit run rate that you had for growth?
Happy to take that. I think it is the execution piece, right? What we are seeing, again, we know that the strategy works. The fundamentals of this market are intact. The fundamentals of the therapy, the clinical evidence, the broader reimbursement environment is, in fact, improving in spite of this United thing. In those regions where we are executing and where we have tenured teams, in spite of those headwinds, they are delivering double-digit growth. I think we will continue to grind away on these systemic or environmental headwinds, but it is really about getting that team productive across all nine regions, and I think we can return to double-digit growth with that alone.
Got it.
if not more.
And maybe we can move on to clinical evidence, Kevin. Could you talk about just the steady stream of evidence that's building for Barostim? What are you excited about, and what are your plans to continue this evidence generation?
Yeah, thank you. We've identified evidence as one of the three fundamental barriers to adoption in our market. The first is awareness. Where does this fit? The second is reimbursement. Can a patient get it covered? And the third is evidence. And we're thrilled with the quality and the quantity of evidence we have been able to produce and are producing around Barostim therapy. At this most recent Heart Failure Society meeting, which is our largest of the year, we had nine different posters or presentations at the podium. Some very compelling data, including largest data set ever published on our therapy, 450-some patients at two years, which demonstrated durable, significant improvements in ejection fraction and in kidney function and in New York Heart Association class, among others. So, really, really solid evidence building around the original class III or the phase III trial data.
We're also excited about a relationship we have with a number of real-world evidence providers, most importantly a company called Truveta, which represents about 30-some health systems, 30 million patients in the U.S., so that the real-world evidence databases that have now been developed, and there are many of them now, are an important new avenue for evidence production, and in some cases, can even be used with FDA to expand labeling. And so, that's a new pathway. It's complicated. FDA is still sort of building that bike as they ride it, but we're thrilled at the potential to continue to generate significant data about how this therapy impacts patients with heart failure, including morbidity and mortality. And so, there's a number of things on the horizon we'll be talking about more, but that's another huge opportunity for us.
The last, I'd say, is our BENEFIT-HF trial, which will be the largest therapeutic device trial ever done in the field, 2,500 patients at 150 centers. It'll take us four to six years to fully enroll and read out the trial, but we believe in this therapy. We believe it is worth investing in, and that's the sort of long-term significant data that will support this therapy for years to come, and ultimately in the guidelines and with payers as well. We're putting our money where our mouth is. We're thrilled with the feedback we're getting on that trial. It's early days. We're still trying to get these centers up and running, but that is seen by the community as a signal of our confidence and certainly a credibility builder for the company.
And John, the company ended Q3 about $59 million of cash. It burned about $11 million in Q3. On the call, it was noted the company's cost actions provide about 18 months of runway. How do you think about just funding the business with the stock at the current levels?
Sure, absolutely. I think we've obviously taken some initiatives to reduce our overall operating expense levels, so we've knocked that down. We've been able to do so in a thoughtful way to make sure that we can preserve investments in growth drivers. So, it's very critical that we maintain those investments in growth drivers to drive the top-line revenue. We've also taken steps to reallocate monies from non-commercial, non-revenue growth drivers to help supplement that. And then as we look at maintaining our cash position, it's critical in our mind that we want to maintain 18 months of cash, so OpEx was one of those measures that we've taken to do that. In the prior quarter, we utilized the ATM for approximately $6 million to help offset some of that quarterly cash burn. We do have that tool available to us.
We have about $43 million available under that facility. So, we'll take a look at that and other options as we look to continue to finance the business and execute on our strategy going forward.
Got it. Kevin, John, thanks so much for being here today. Appreciate it.
Thank you.
Okay. Thank you.
Thanks.
Okay. Thank you.