CVRx, Inc. (CVRX) Q2 2021 Earnings Report, Transcript and Summary

Good day and thank you for standby. Welcome to the CVRx Second Quarter 2021 Earning Call. At this time, all participants' are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Mike Vallie of Westwicke. Please go ahead.

Good afternoon and thank you for joining us today for CVRx’s second quarter 2021 earnings conference call. Joining me on today's call are the company's President and Chief Executive Officer, Nadim Yared; and Chief Financial Officer, Jared Oasheim. 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, including the upcoming Form 10-Q that will be filed with the SEC. I would now like to turn the call over to CVRx’s President and Chief Executive Officer Nadim Yared.

Thank you, Mike, and thank you everyone for joining us this afternoon for our first earnings call as a public company. First, I'm very grateful to all my colleagues at CVRx, to our Board of Directors, to our partners, our investors, our customers, the healthcare providers, and most importantly to our patients. You all trusted us, you believed in us, we stood tall on your shoulders and for that, we will be forever grateful. It has been a long journey to this point from the time I joined the company in 2006, and I am incredibly proud of the continued efforts of this group, the results of which are going to change the way patients are treated for heart failure. Before providing an overview of our performance during the quarter, I would like to start by giving an overview of who CVRx is for those of you who are not familiar with our story. We are a medical device company focused on transforming the lives of patients suffering from cardiovascular diseases by developing, manufacturing and commercializing innovative and minimally invasive neuromodulation solutions, which we believe offer a compelling value proposition for large and significantly under-penetrated markets. Our primary focus is on the treatment of patients with heart failure. Heart failure is one of the most prevalent cardiovascular diseases. We estimate that globally, approximately 26 million people suffer from heart failure, including approximately 6.2 million people in the US and 8.6 million people in the five largest European countries. Every year, 1.3 million new heart failure patients are diagnosed in the US and 1.4 million in the five largest countries in Europe. Heart failure usually develops from an imbalance of the autonomic nervous system. Our proprietary platform technology, Barostim is designed to leverage the power of the brain to address this imbalance. Barostim therapy utilizes a widely accepted mechanism of action. It works by sending electrical pulses to better receptors on the carotid artery to signal the brain to decrease sympathetic activity, also known as the fight or flight mechanism, and increase parasympathetic activity, which is commonly referred to as the rest and digest response. Our second-generation products Barostim neo is the first and only commercially available neuromodulation device indicated to improve symptoms for patients with Heart Failure with Reduced Ejection Fraction, which we refer to HFrEF. Barostim is implanted during a one hour minimally invasive procedure that is typically performed on an outpatient basis. HFrEF patients are treated with guideline directed medical therapy that often includes three classes of medications, diuretics, beta-blockers and ACE inhibitors. Some HFrEF patients are indicated for cardiac resynchronization therapies, CRT in short, which actually are biventricular pacemaker. These CRT devices have proven to be an effective therapy, but we estimate that the majority of HFrEF patients are not eligible to be treated with CRT and that is what our device is now an option. Our solution, Barostim neo is approved by FDA to address the symptoms of heart failure in the significant population of HFrEF patients, not indicated for CRT, and who is NT-proBNP is less than 1600 picograms per millilitre. We estimate that our initial annual market opportunity for HFrEF is $1.4 billion in the US and $1.5 billion in the five largest countries in Europe. In the second quarter of 2021, we continue to build out our commercial organization, and the early results from our commercial strategy are encouraging. Total Revenue in the second quarter was $3.1 million, an increase of approximately 150% over the second quarter of 2020. This growth was entirely driven by continued strong performance in the US in heart failure, which generated $2 million. We are very happy with the early adoption of Barostim by physicians during the first half of 2021. We have seen a growth in the US coming from new centers that are treating that first patients and from existing centers that are treating more patients that they have in the past. In addition to our strong operational performance, we continue to add talent to the leadership of the organization. In early July, we announced the appointment of Martha Shadan to our Board of Directors. Martha brings a long track record of success in helping to commercialize medtech innovations for both startups and large companies. And we look forward to leveraging her experience during this critical growth phase of our business. Our plan is to utilize our first-mover advantage to become the global leader in minimally invasive neuromodulation solutions that improve the health of patients with HFrEF and other cardiovascular diseases. Our main strategic levers to drive growth are the following: one, continue building our commercialization infrastructure with a specialized direct sales force and marketing team in the US to promote awareness among physicians and patients to accelerate the adoption of Barostim neo. Two continue our innovation of Barostim neo to enhance our value proposition. Three, expand upon our significant body of clinical evidence and four, over the long-term, leverage our platform technology to expand into new indications and strategically pursue new international markets. Regarding the first lever, a key component of our strategy to drive adoption is the expansion of our commercial infrastructure, in particular, our direct sales force in the US. During the second quarter of 2021, we added 2 new US territories bringing the total to 8, we expect to have a total of 14 territories by the end of 2021. The Territory Managers are supported by a group of field clinical engineers whose role is to provide the clinical and technical expertise to healthcare providers. The outpatient medicine procedure is currently mapped to APC 5465, for which the Centre of Medicare Services, CMS reimburses at national average of $29,500 approximately. In addition, CMS granted CVRx a transitional pass through addon payment, TPT to cover the cost of the device for three years, which took effect in January 2021. We estimate that Medicare covered HFrEF patients represents 67% of our patient population. For patients covered by private payers, which we estimate to be 19% of our patient population, our market access team had implemented the program to support the prioritization requests modelled on our industry's best practices. The initial results from this program are encouraging. Regarding our second growth lever, continuous innovation of our products, we are developing a new generation of the implantable pulse generator that has 40% longer battery life on average. This new IPG is expected to be released in the first half of 2022. But the R&D program that I'm very excited about is the development of a new ultrasound guided implant toolkit that we call BATwire. We believe BATwire could potentially expand our addressable patient population by allowing the inclusion of more frail patients. In addition as a result of this simplified implantation process, we believe more physicians including electrophysiologist, would be comfortable implanting BAROSTIM NEO. In June 2021, the first clinical procedure using BATwire was performed here in the US. Regarding our third growth levels, the expansion of the clinical body of evidence, we have the post market study of BeAT-HF. This is a randomized control study designed to demonstrate the mortality and morbidity benefit of better stem in the HFrEF patient population. The post market study has been completely enrolled and has entered the follow up phase which allows for the accrual of mortality and morbidity events. We expect to accrue all the events needed for the final analysis by the end of 2022 and unblinded data in early 2023. Finally, regarding the long term growth level, expanding into new indications, we have received breakthrough designations by FDA for two additional indications resistant hypertension and heart failure with preserved ejection fraction or HFrEF. Our focus in the short term is to grow our penetration in HFrEF before we begin our clinical efforts in expanding to new indications, such as the resistance hypertension, or HFrEF or exploring any potential clinical benefits for arrhythmia or chronic kidney disease. We are incredibly excited about what we have been able to accomplish as an organization over the years. We recognize that our journey has not been a straight line. But the organization and more importantly, our team has shown exceptional resilience to reach this point. It is still early in our US Heart Failure commercialization efforts, but we are encouraged by our progress during the first half of 2021. We have put a tremendous foundation in place that we believe will allow us to help bring relief to a huge population of heart failure patients, who have not had a device based treatment option before. And now, I would like to turn the call over to Jared for a financial review.

Thanks, Nadim. Before turning to an update on our performance, I wanted to outline key components of revenue and what information we will be disclosing going forward. We generate revenue through direct sales of our devices to hospitals in the US and Germany and to a lesser extent to distributors in other European countries. In addition to key revenue metrics, we will also be providing updates on key drivers of revenue, which includes US active implanting centers, which our customers that have completed at least one commercial heart failure implant in the last 12 months. The next metric is US and European sales territories, which are the number of active commercial sales territories as of the end of the quarter. And the final metric is revenue units, we will be providing heart failure revenue units sold in the US and total revenue unit sold in Europe. As for the second quarter results, total revenue generated in the current quarter was $3.1 million, which is an increase of $1.9 million or 150% when compared to the same period last year. Revenue generated in the US was $2.1 million in the current quarter, which is an increase of $1.9 million or 969% over the same period last year. Heart failure revenue in the US totaled $2 million in the current quarter on a total of 67 revenue units as compared to only $65,000 in the second quarter of last year for two revenue units. The increase was primarily driven by continued growth following the US heart failure commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of Barostim. At the end of the current quarter, we had a total of 31 active implanting sensors compared to 19 in Q1, 2021. The number of sales territories in the US increased from six in Q1 of this year to eight during the current quarter. Revenue generated in Europe was $1 million in the current quarter, which is a decrease of $35,000 or 3.3% over the same period last year. Total Revenue units in Europe decreased from 49 in Q2 of 2020 to 47 in the current quarter. The relatively flat performance in Europe is primarily due to the continued impact of the COVID-19 pandemic in Germany. The number of sales territories in Europe remains consistent at six during the current quarter. Gross profit was $2.2 million for the current quarter, which is an increase of 1.3 million or 144% over the same period last year. Gross margin decreased to 70.8% for the current quarter, compared to 72.4% for the same period last year. Gross margin in the current quarter was lower, due to a larger percentage of our revenue units coming from treating new patients, versus battery replacements for existing patients. New patients receive a full system that includes an IPG and a stimulation lead, and therefore have a lower gross margin than a standalone IPG used for a battery replacement. This was partially offset by an increase in our average selling price. We believe that the negative impact to gross margin for treating more new patients will be offset in the near term, by increasing production, to meet the increased demand, which will in turn drive down the cost of our devices over time. R&D expenses were $2.3 million for the current quarter, which is an increase of point $0.1 million or 5.8%, when compared to the same period last year. This change was primarily due to an increase in stock based compensation expense from approximately $10,000 in Q2 of 2020 to $190,000 in Q2 of 2021. SG&A expenses were $5.6 million for the current quarter, which is an increase of 3.8 million or 207% when compared to the same period last year. The primary driver was an increase in compensation including salaries and commissions, mainly as a result of increased headcount. In addition, stock based compensation expense increased from approximately $20,000 in Q2 of 2020 to $430,000 in Q2 of 2021. Other expense, net was $11.4 million for the current quarter compared to income of $33,000 for Q2 of 2020. This change was primarily driven by an $11.4 million increase in a non-cash expense related to the increase in the fair value of the preferred stock warrants. Net loss was $17.7 million, or $48.48 per share, for the current quarter as compared to a net loss of $3.7 million, or $10.18 per share, for the same period last year. Net loss per share was based on 366,000 weighted average shares outstanding for the current quarter and approximately 360,000 weighted average shares outstanding for the second quarter of 2020. The weighted average shares outstanding were adjusted for the 1-for-39.548 reverse stock split that became effective in June of 2021. Turning to the balance sheet update. At the end of the current quarter cash and cash equivalents were $47.1 million, compared to $54 million as of March 31, 2021. On July 2, 2021, we closed on our IPO of 8,050,000 shares of common stock at a public offering price of $18 per share, which included 1,050,000 shares of common stock issued upon the full exercise of the underwriters option to purchase additional shares. The net proceeds from the offering after deducting the underwriting discounts and other offering expenses was approximately $133.3 million. The ideal also triggered the conversion of all outstanding shares of our convertible preferred stock into an aggregate of approximately 11.93 million shares of common stock. Pro forma, cash and cash equivalents as of June 30, 2021 was $180.4 million after including the net proceeds from the IPO, and we had approximately 20.3 million pro forma shares of common stock outstanding at the end of the current quarter. This is after adjusting for the conversion of outstanding shares of preferred stock into shares of common stock and the sale of shares of common stock in the IPO. Net cash used in operating and investing activities were $6.8 million for the three months ended June 30, 2021 compared to $2.3 million for the same period last year. The primary driver was an increase in compensation, including salaries and commissions, mainly as a result of increased headcount across the entire organization. Now turning to guidance, as a matter of fact that’s going forward we will be providing formal guidance on full-year total revenue gross margin and operating expenses and next quarter total revenue. For the full year of 2021, we expect total revenue between $13.3 million and $13.9 million. Gross margin between 72% and 74% and operating expenses between $34 million and $36 million. For the third quarter of 2021, we expect to report total revenue between $3.3 million and $3.6 million. I would now like to turn the call back over to Nadim.

Thanks, Jared. We are very optimistic about the future of CVRx. Cardiovascular diseases, in particular heart failure, have a tremendous impact on a patient's quality of life. These patients cannot do the things they enjoy, like playing with their grandkids, let alone the most basic day-to-day tasks, like walking up and down stairs. With Barostim, we offer patients the chance to get their lives back. We are laser focused on driving its widespread adoption to bring the benefits of this therapy to as many patients as possible. We are in the early stages of our commercialization. But we believe the recent influx of capital will help fuel the acceleration of our growth for years to come. And now, I would like to open the line for questions.

[Operator Instructions] Your first question comes from the line of Robby Markose with JPMorgan. Your line is now open.

Hey. Thanks for taking the question. Congrats on the first quarter public. Really just two questions from me. First -- and I'll ask them up front. First, really nice US heart failure performance. It'd be great to get a sense, second quarters in the rear and you got it for the full year a little above the street. It’d be great to get a sense of what you're seeing out in the field, what the reception is from implanters, how it's going training doctors and getting hospitals on board? And just any qualitative or quantitative comments you could give about what you're seeing in the field so far and over the summer. And then the second one, I'll just ask, price came in really nice in second quarter in the US? How should we be thinking about pricing for the balance of the year? Thanks.

Thank you, Robby for the question. Let me answer the first one, and I will ask the Jared answer the question regarding pricing. In regards to feedback from customers in the field, listen, we had the Heart Rhythm Society meeting last week. Although the attendance was lower than usual, I would estimate it to be one quarter to one-third of the attendance. In my 25 years-plus experience in medical devices, I have never ever been as busy as last week in a medical conference. From my perspective, that it is testimony here to the interest that we're seeing from electrophysiologists, which are, I think an important group of customers we have. One of the feedback I would like to relate, came from a very important key opinion leader, an electrophysiologist. I will respect the confidentiality of the comment. This key opinion leader treated three patients last quarter with Barostim. And his feedback to me was I've seen enough. And I pulled them a little bit more to understand what has he seen enough. I mean, the data is the data and we have data from BeAT-HF that shows the improvement in the quality of life. And his comment was that the visible impact on a patient goes beyond what the numbers show on The Minnesota Living with Heart Failure Questionnaire scale. We talk about 11, 12, 13 points of improvement depending on the which trials we're looking at, our data. But what he is seeing in his patients is a visible, visible impact. And he is very impressed with it. And he was actually talking to another electrophysiologist about this. So obviously, from my perspective, so far the feedback is overall positive. The reception will receive at HRS was exceptional, despite the low attendance. And I'm very excited in here. So I don't know, if you have any follow-up questions or if I may be turn it to Jared to answer the question regarding pricing.

Yes. Sure, Nadim. I'll jump in on the pricing question that Robby has. So, yes, Robby, we did come in with about $2 million of US Heart Failure revenue on the 67 units and that average selling price then works out just shy of $30,000 per unit. That is above what we have been modeling internally. And, we've seen this now for a couple of quarters where we've seen a higher average selling price for the US Heart Failure business. But we have not shifted our internal plans and expectations for our base selling price for the US. And really, the main reason just comes back to the commercial ramp and the number of new centers that we plan to bring on over the next couple of years. We know that price is going to continue to be an area of focus for the value analysis committees. And so at this point, we're still not ready to shift our internal models to a higher price.

Great. Thanks for both the answers. Appreciate it.

Yes. Thank you, Robby. Again, thank you for your comments about our first earnings release as a public company both Jared and I are very excited.

Your next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is now open.

Afternoon, thanks for taking my questions. And let me reiterate Robbie's comments on -- on the good first quarter out of the gate here. So the Nadim, you mentioned how busy you were at HRS. And just all the interest level that you're getting, is there any thought to -- again, coming out of the IPO with having more capital available accelerating the sales ramp to kind of on-schedule. I think you're at six, in q1, you're up to eight now. Any thoughts now, just given the feedback you've seen recently with that capital going ahead and accelerating the number of sales territories in the US?

Oh, excellent question, Matt. And I wonder in here, you know me right. We are not going to put a cap on our growth, right. Now, when we talk about assays ramp. First, we are very happy with the results that we are seeing in the US related to the early commercial ramp, no question about it. And we are continuing to hire as the expected base. Actually, we are seeing as the new account managers now getting up to speed quickly with our technology and getting great response from physicians, as the physicians become aware of BAROSTIM NEO. Now, with that said, two things you have to take into account. Number one, of course, will be opportunistic. And of course, when we see an excellent talent out there, that matches the outstanding color that we have been able to attract so far. Absolutely, we'll go above any plan that Jared has put in place. So the plan that Jared has put in terms of adding three reps per quarter, we can go above it very easily once we see the talent that we're interested in. Number two, the interest level that we saw at HRS was not only from physicians -- that the industry participate heavily in these meetings, and they network among each other, and they saw the buzz that we are creating, and that will help us and has already helped us in here in our recruitment strategy. You have to take into account matters, well, another elements when you talk about a commercialization strategy, feet on the street is an extremely important element, but there is one element of the puzzle. We have to make sure that we have the training capacity to absorb the increase in headcount, which we are doing. We need also to be able to absorb or at least invest at the same level in marketing and awareness creation. And those go hand-in-hand. So I can tell you, we will not stop. We will not gap. But at the same time, don't assume that we can go from zero to infinity, with a vertical lineup. There has to be a ramp in here, and we have to be careful and the expectations for. Jared, do you want to add anything in here about the talent retention and attraction?

No, I think, Nadim, you've had most of it. Yes, I mean it. So far we've been really happy with the level of talent that we've been able to recruit, with the publicity of the IPO. There's obviously a lot of inbound interest from others within the industry as well. That being said, we like to have a pretty steady state as far as the number of reps that we bring on at CVRX. So that we can make sure that we are training them up in the right way and getting them effective as quickly as possible. So I think that that's still going to be the base case for us.

Okay, very helpful. Appreciate that. And then, can you just touch ever so briefly on the OUS number, which is a little bit later what some of us remodeling, I really don't think it's the end of the world. But just touch on that more importantly for me, of the 67 implants that you did in the US in Q1, where a majority of those really at the 11 sites that you had when you were exiting Q4 of last year. What I'm really getting at is, are you starting to see some of those sites, really like Nadim mentioned one of the clinician conditions did three in class last quarter alone. Are you starting to see some of these guys really start to ramp up and you that -- you can get more comfort that some of these sites can do three, four, or more per quarter. Thanks so much.

Matt, excellent questions, plural in here. You have so many questions. So if I forget to answer any one of them, let me know, right. So I will address the question regarding Europe. And then I’ll turn it to Jared to take the second question, and we can go on from there. So the first question is, the Germany. Europe for us, most of our sales in Europe are coming from Germany and Q2, Q1 saw the first half of this year we were still struggling with COVID there. We hired a new Vice President of Sales and Marketing, Thomas Hengstele. And he started on January the 2 with us. It wasn't until June, that Thomas was able to move with his own team face to face. So everything was being done remotely on the phone, and there is a limit of how much you can do. So from that perspective, Europe was slow Q1, Q2, but we're hopeful that now that he's able to meet with his team and with customers face-to-face, things will start going back slowly back to normal. Luckily, for us the US has been which is our area of focus and interest, has carried the bag for us in Q2 and covered this gap. Jared?

Yes, Matt, I can cover kind of the breakout of the 67 US heart failure revenue unit. So we've been trying to slice and dice the data. And I think the simple answer is that we're still early in this commercial ramp. And so it's really hard for us to segregate, early active implanting centers versus those that were just joining just this last quarter. And just a reminder for everyone here so we had 11 active implanting centers leaving the end of 2020. Of those 7 had done their first implants just in the fourth quarter as well. So, I mean, we're talking 27 of the 31, implanting centers, doing their first case in the last nine months. So I think we need a little bit more time before we can start to really segregate these longer term accounts from the newer accounts and seeing what levels of productivity we're seeing at each one of them. That being said, we have seen a handful of accounts that have started to exceed our long-term goals. And just for everyone on the phone, our long-term expectations for these sites are that they're treating at least one patient per month, or 12 patients a year. And we have seen a handful of our longer term sites that have started to exceed that long-term goal for us already. So, there's some positive signs, but I think the data is just a little too early to start breaking out of the existing centers versus the new ones.

Got it, makes sense. Thank you so much.

Thank you, Matt.

Your next question comes from the line of Margaret Kaczor with William Blair. Your line is now open.

Hey, guys, good afternoon. Thanks for taking the question. Maybe, I wanted to start with the active and planning centers because it seemed to come in above our expectations. So, could you give us a sense of what drove that success, maybe the profile of some of these accounts? And as we look forward, I guess that both within these and some in your pipeline, how does that implanting clinician base look like as you go deeper within them?

Thank you for the question Margaret. So, simply, we are focusing in this phase of the growth of the company; number one on growing volume in our existing account and number two, we're targeting the next wave, which we started actually this year with 200 accounts that have done the highest number of ICD implants. And Jared mentioned earlier, our long-term goal is to get to one patients per center per month as an average, so we would have some doing more, we would have some doing less than that. With this in mind, we have to consider one more element. You know that many customers right now before they embark on a new therapy like Barostim, it has to go through a contracting process and part of it is going through the value assessment committee. We have seen in some situations where the value assessment committee will ask the physicians to do a certain number of units, then we'll wait a period of time until they verify that the payment is coming back profitable to the institutions and then they resume so when you see an accounts we'll see their x moving 3, 4, 5 very quickly and then nothing for the next three months to six months. It's not it's almost by design, right? So, we should not be very excited about it, at the same time, about the ramp, very quick three to five in the first three months. But at the same token, we should not panic when the sites will slow down for a period of time. And with this, let me turn it Jared in here to answer the second part of your question.

Yes. And Margaret, so we did see those 12 new academic planting centers come on in Q2. I don't think it shifts our plans as far as how quickly we're planning to bring new active implanting sensors on over the long haul. Part of this just comes down to timing with a couple of the sites being able to treat some patients in June versus doing their first implants in early July. And so, longer term, we're not necessarily changing the rate at which we're expecting new implanting centers to be coming on.

Okay, that's useful. And you're touching on a little bit. And it's more around utilization as we think about the second half the year versus the first half. You know, obviously, utilization is pretty strong this quarter. And I understand a few of them are going to be doing these three, four procedures up front, and then maybe slowing down coming back. But on the same token, you should continue to hire or add new centers, I should say. So, we look at your guidance, it sort of implies overall utilization, at least in our model coming down a little bit relative to what we saw in the second quarter. So I'm just curious, if that that math works out for you guys, especially as maybe some of the sites six months, nine months ago continue to ramp higher.

Yes. Margaret Kaczor, I can take that one. So I mean, just back to the Nadim's point earlier, we have seen some of these new academic cleansing centers come on with a bit of a governor assigned to on saying that they can go out and treat a couple patients, step back, see what the reimbursement looks like, including the transitional pass through payments. And then be able to restart once they see positive reimbursements coming through at the hospital level. And so, we're trying not to get ahead of ourselves here as far as utilization at each one of these sites, knowing that we have that long term goal of each one treating at least one patient per month. But we have seen some really positive results so far in Q1 and Q2. And I just don't necessarily want to make a significant shift in what we expect for productivity in Q3, Q4, just at this moment.

No. That's fair enough. And just last question for me, I guess, you guys mentioned in press release, driving growth by increasing patient flow at the implanting centers. And so I wanted to get a little bit more color of how you're doing this? Is it driving the medical network with other clinicians getting those patients to some of these implanting sites? And why shouldn't that that process continue to ramp and improve as we go on? Congrats on the quarter guys, thanks.

It's an excellent question Margaret. Again, so listen, the three areas in here of focus to drive the flow of patients. Number one is the prevalence model, right, looking at the patients who have already seen the ICD or coming back to the device clinic for the six month follow-up visits. The second is the incidence model. So educate the physicians reminding the healthcare providers every time they're talking to a patient, about an ICD to mention medicine. And the third element of it is the referral from the outside world to them. And they were experimented right now with two models. Number one, our sales that are going to talk and educate the cardiologist in the community to make sure that once they hear or if they hear from their patients about medicine they don't have the ignorance or no awareness about the therapy. And at the same token, try to encourage them to send some of their patients who they may have not sense to an electrophysiology department or a vascular surgeon to be treated with medicine. That's one leg of the strategy. The second leg is we're experimenting as well, with a direct-to-consumer education campaign. Now, we did some of that back in the days in 2008 and 2009 when we were conducting the hypertension trial and more recently, in 2016 and 2017, when we were rolling HF. We did advertisements on Facebook and other social media, but also sometimes TV clips and others. It's a whole program. So it's not only getting a link on a website. It's everything that happened after the split to take the patient in hand and generate the patient's engagement and the patient follow-up to convert that lead into an implanted and treated patients. So we're still at the experimental phase of those programs. We're looking very closely to what other companies are doing, for example, Inspire Medical, with their device, and Boston Scientific with Watchman. And we're learning from looking at as those two good examples with us. I don't know if that answers your question here about the referral law. You ask as well, so why shouldn't that continue? Well, it will continue. At the same time, you've got that dynamic that we're talking about that we're adding so many sites that will go through the initial bolus of patients and then nothing for three to six months, waiting for that payment. So you get all of that dynamic getting into play and looks really comfortable in here with the guidance that Jared has issued.

Your next question, or your last question comes from the line of Bill Plovanic with Canaccord. Your line is now open.

Hey. Great. Thanks. Good evening and thanks for taking my questions. At this stage, your commercialization, it's probably more about rep profile, making sure you have the right reps, right. You have a handful at this point, you're up to eight and then the activities they’re doing are repeatable and reproducible. And so, my question lies in, one, in terms of the profile of the rep where do you feel you are in that process? And kind of dialing down, you have a couple of different on board, I would assume. So you're getting a little better feel for that. And then the second is, when do you think -- since you have a real repeatable, reproducible kind of model that you can really start significantly adding to the sales force? Does this take six months, 12 months, 18 months? I mean, you're essentially two quarters into a launch, so I think any help would be greatly appreciated on that. Thanks.

Yes, absolutely, Bill. And it shows as well here your hybrid experience being on the investment side, but also on the industry side. Listen, the rep profile that we are hiring, no surprise in here, they come from other medtech companies with a vast, vast, vast majority. I'm talking here, I do not recall hiring anybody who has not have had a previous experience relevant in research with a medtech company, particularly the large cardiovascular companies. We're not limiting this to companies who are operating in the CRM, or the electrophysiology space. You will see us as well hiring from other companies that have a similar referral or a coalition building paradigm that will -- like what we have with our therapy. So let me explain this a little bit more. If you're selling a therapy that is a substitute for an existing therapy, versus if you are developing a new therapy that requires building a coalition in the hospital, those are sometimes two different skill sets. So we look at other companies who have done more of the latter, while creating of those coalition, right, and building them up. And we look at sales reps who have had demonstrated success doing these, rather than those sales reps who have been very good at forming an existing clients by just shifting from a therapy A to therapy B, or for example, from a stent A to a stent B. That said, you mentioned eight sales reps, those are eight territories. And I will let Jared explain the difference between what a territory is and what a rep is? And then I'll answer your question regarding the rep. Jared?

Yes, I can chime in on that Nadim. Yes. And so, just for everybody's education here on the territory discussion, so these are account managers that have been in seat for at least six months, have gone through the full training process and kind of gotten ramped up. And we've gotten to a point now where we can carve out a territory for them. And so, the number that we're presenting here of eight territories are those account managers that have been in seat for at least six months and have had the territory assigned to them.

So anytime we're quoting a number, it's for the six months like for the training. Plus, this is ns number, net-net. So you have to take this into account as well, Bill. Otherwise, our plan is to hire three reps per quarter. And we feel comfortable with this ramp, very comfortable. I don't know Jared you can add any detail or any color in here.

Yes, the only other thing I'll point back to is in kind of the prepared remarks that Nadim mentioned that our expectation is to end the year with 14 territories in the US.

And then -- thank you. And then my final question is, that was an impressive presentation at HRS. That room was pretty -- that theatre was well attended. I'm just curious in terms of -- for the reps or the folks in attendance, were you able to pull a lot of leads after this and does this change kind of the thinking? They think this is really the first time you really got to profile this product live at a medical meeting, given the timing of approved volume. So does this -- if we kind of look at the lead pipeline, does this kind of change your thoughts in anyways you have performed?

Yes, Bill, by the way thank you for stopping by at the hospital and theatre. We felt very excited about their standards. And if you recall, that was the first presenter, who's -- the slides were loaded on the system, but the operator would not be able to load them. And he did a fantastic job going over the story without even slides to support them. Anyway, it's hard sometimes to correlate excitement to resolve. So whatever I come back and tell Jared about the excitement, I see -- you've got the CFO hats on, and he says, well, we need to see the numbers and the early indicators and your excitement that may not translate into different early indicators. That said, we do have a secret weapon. And I wish I could introduce you to him. We hired our Chief Marketing Officer, Paul Verrastro at the beginning of this year. And he knows everybody, and everybody knows him. He asked us to do one more investment, which is book hotels for our leadership team at hotel rooms -- at the hotel that was adjacent to the conference. And we had so many side discussions, sometimes going way after midnight with some of the key opinion leaders here in the electrophysiology field. So I left the meeting very, very excited. I don't have the number of leads. But at the same time, Jared would look at this and says, well, Nadim, your excitement doesn't mean anything. We need to see the early indicators before we commit here, the higher numbers. You know that dynamic, right?

Yes. Thank you very much. Yes.

That concludes our question-and-answer session for today. I will now turn the call back to Mr. Yared for closing remarks.

Thank you, operator. We appreciate hear that everybody was able to join us for our first earnings call as a public company. You heard from the tone of my voice. I am very excited to be a CEO of a public company. But at the same time in here, we're learning as we go. So thank you for your patience with us. We do appreciate your ongoing support. And we look forward here updating you on our progress on our next quarterly earnings call. Thank you. Have a good night.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.