Good day and thank you for standing by. Welcome to the CVRx Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mike Vallie with CVRx. Please go ahead, Mike.

Good afternoon. Thank you for joining us today for CVRx's third quarter 2022 earnings conference call. Joining me on today's call, are the company's President and Chief Executive Officer, Nadim Yared; and its Chief Financial Officer, Jared Oasheim. The remarks today will contain forward-looking statements including statements about financial guidance. The 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 the CVRx's President and Chief Executive Officer, Nadim Yared.

Thank you, Mike, and thanks to everyone for joining us today. I'll begin today's call by providing an overview of our third quarter performance, followed by an operational update, a review of our financial results by our CFO, Jared Oasheim, and then I will conclude with our thoughts for the rest of 2022 before turning to questions and answers. Starting with the review of the third quarter, our total revenue was $6.2 million, an increase of 82% over the third quarter of 2021. These results were driven by the continued execution of our growth strategy in the United States and internationally. In the U.S., our heart failure business generated $4.9 million, approximately doubling the third quarter of 2021. This growth was due to positive impact of our commercial expansion strategy supported by an increase in marketing and awareness campaigns. Now for an update on operational development during the third quarter to support greater adoption and use of Barostim. Our focus areas are: one, the continued expansion of commercial infrastructure; two, innovation of our product portfolio; and three, the expansion of the clinical body of evidence. Starting with the continued expansion of our commercial infrastructure. During the quarter, we added three new territories, bringing the total to 23. We continue to expect adding, on average, three new territories per quarter targeting 26 territories by year-end. We are gaining traction with several of our marketing programs, including our direct-to-consumer pilot, the new branding campaign and expanded patient education programs. We will continue to prudently invest in new marketing initiatives assessing the ROI of each before rolling them out more aggressively. Our second area of focus is innovation of our product portfolio. During the quarter, we officially launched our new implantable pulse generator, which is smaller in size than the prior generation and…

Thanks, Nadim. Total revenue generated in the third quarter was $6.2 million, which is an increase of $2.8 million or 82% when compared to the same period last year. Revenue generated in the U.S. was $5 million in the third quarter, which is an increase of 96% over the same period last year. Heart failure revenue in the U.S. totaled $4.9 million in the third quarter on a total of 167 revenue units as compared to $2.5 million in the same period last year on 84 revenue units. The increase was primarily driven by continued growth as a result of the expansion into new sales territories, new accounts and increased physician and patient awareness of Barostim. At the end of the third quarter, we had a total of 91 active implanting centers as compared to 38 at the end of Q3 2021 and 71 at the end of Q2 2022. At the end of the third quarter, we had a total of 23 sales territories in the U.S. compared to 11 at the end of Q3 2021 and 20 at the end of Q2 2022. Revenue generated in Europe was $1.1 million in the third quarter, which is an increase of 39% when compared to the same period last year. Total revenue units in Europe increased from 38% in Q3 2021 to 61% in Q3 2022. The increase in revenue was primarily due to the lessening impact of the COVID-19 pandemic in Germany and our continued investments in the European commercial organization, partially offset by an unfavorable currency impact on revenue. Gross profit was $4.8 million for the third quarter, an increase of $2.3 million when compared to the same period last year. Gross margin increased to 78% for the third quarter compared to 74% for the same period last…

Thanks, Jared. This is an exciting time for CVRx, and we are enthusiastic about the progress we expect to make in the final quarter of 2022. We remain focused on the commercialization of Barostim and look forward to sharing more information on the mortality and morbidity data in the first half of 2023. We remain confident that our incredible team will continue to drive the business forward. And now I would like to open the line for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Matthew O'Brien with Piper Sandler. Go ahead, your line is now open.

Great. Thanks for taking my questions. I'm not sure if this is for you, Nadim or for you, Jared, but the Q3 performance on the top line was excellent. You're up about almost $1.2 million sequentially versus Q2 and what's typically a seasonally softer quarter. The guidance for Q4, kind of the midpoint is only up about $600,000, $700,000, so even less than you did in Q3. You took the top end of the guidance range down. I just kind of narrowed everything. So is there something, I don't know if I'd say OUS is, we had a big bolus of patients though U.S. is going to be much lower in Q4. Or is there something in the U.S. you want to point out specifically. Just to give us some commentary about the Q4 guidance specifically, I'd appreciate that. And then I do have one follow-up.

Sure, Matthew. First, thank you for joining us today. I know this has been a very busy day for you on the news. So we do have appreciate you taking the time. Listen, regarding the guidance for Q4 and as you can imagine, as we advanced through the year, that kind of uncertainty for the full year starts narrowing down, just shifting it forward. And while we have been tracking, I would say, slightly above the midpoint over the year, this has translated similarly to being slightly above the midpoint in Q4. So by narrowing the cone, the consequences of that is a visible reduction here of the top end of it, but also more of an increase on the bottom end of it. So that's why the midpoint of Q4 has been raised versus prior expectations. We don't expect anything different than the business so far, knock on wood, it does not seem - we don't seem to have a covered impact in Q4. Let me rephrase this. The COVID impact seems to be milder than previous quarters or previous year, what we saw in Q4 last year. So knocking on wood here that the climate, the macro environment stays the same as it was in Q2, Q3, so we continue performing here based on the expectations.

Got it. Okay. So just a little bit of conservatism based on the macro environment.

Yes. There is still a slight concern in Europe with the exchange rates. We've seen the euro drop, and we lost about 10%, 15% of our top line just based on the exchange rate difference between the beginning of the year and now. That is a concern, but due to the relative size of our business now in Europe compared to the U.S. I would not believe that this would be dramatic in Q4 just to watch out closely.

Okay. And I'll stick with two questions because I would love to ask a little bit more about the new center [indiscernible] in the quarter. But just on the BeAT-HF side, something I hear a lot from investors is it is binary. Utilization will go down if this doesn't show a mortality or benefit. So can you just maybe put a little bit more color around the totality of the data, what data is going to fold into this decision from FDA. When are we going to see the BeAT-HF data? Is there a specific confidence you should be expecting? And then just the process that will be involved with that as far as is bundling all this data together to put it in front of FDA for them to consider it.

Great question, Matthew. The - as you noted in your question, this is not a binary yes or no answer. Trying to simplify this. First, there is the safety component, all right? And now that we've had a lot of experience with our device and with the safety that we've seen when we did the unblinding in 2019 for the symptomatic endpoint, we feel very comfortable right now with the safety of the device in the trial. And of course, there are guardrails within the trial design itself that have not been triggered. So hopefully, all of this is looking good on the safety perspective. Now on one end of the spectrum, we could meet the primary endpoint, and that's our goal, right? But a trial being a trial, we don't know where that would be until we outline the data, and we are still blinded at this stage. But the best case scenario for us is we meet the primary endpoint as is designed. The primary endpoint is designed as a number - total number of events, and we're looking at the biennial - negative biennial difference between the two arms. So without going into too much detail is the difference between the total number of events between the treatment arm, the patients who received the Barostim versus the control arm, patients who have not received a Barostim. And an event is either one cardiovascular mortality or the patient receiving a left ventricular assist device, LVAD or receiving a heart transplant or having received the heartier hospitalization. Now if we meet this endpoint, that's the best case scenario. But right short of this, there is a plethora of other outcomes that we will be looking at in terms of additional endpoints and additional analysis. Those are not primary endpoint…

Yes, that was an excellent answer and exactly what I was looking for. Thank you so much.

Thank you.

Thank you. One moment please for our next question, our next question comes from Margaret Kaczor with William Blair. Go ahead, your line is now open

Hi, good afternoon, guys. I'll take over from Matt's question on the centers because, again, well above our expectations now for at least the second quarter in a row, and now more, I think, when we had anticipated for the full year. So I'll sort of ask the question I did last year, which is how should we think about these new - or sorry, last quarter. How should we think about these new site adds, their backlog of patients, their ramp trajectory and what's driving these new centers that and the growth in them as we look forward?

Yes, hi Margaret, thank you again for the question, great question. Listen, the - we're very happy with the activities that we've see in the results that we are seeing from our territory managers, particularly the newer ads in here, those territory managers that we've been adding here in the past few quarters. Yes, you are correct that the number of added centers, the real terminology that we're using in here is actively planting center. So those are centers that not only we sign an agreement with, but they also implanted their first patient. So that number exceeded yours and our expectations for the quarter. But this does not really translate into an immediate effect in revenue in the same quarter. And I think I've mentioned this previously, when a center starts, and this could be unique to our therapy or maybe not. But when they're starting, they implant one or two patients. Then we've noticed that they pause for a few months until they see and confirm the effect on their own patients. So they want to know this clinical data that they've read in a publication. Do they see it themselves on their own patients. And second, do they see the payments coming back, particularly from the sense of Medicare and Medicaid services, CMS, particularly that we have the transitional pass-through and that is somehow a new thing for many of the centers. They want to know that this therapy is being paid as they expected. So we see a pause for a few months, and then they start and they start growing incrementally. What we've also noticed are that the first 20 centers that started implanting Barostim commercially that now have the longest experience are still going with a very high average utilization rate, and we're eager to get those additional the remaining now, I would say the following 70 centers of that curve. To get to the same level as the first 20 sites, however - this, I would say, a secondary effect of that slowed down after doing one or two patients is that those 20 centers we added in the last - in this Q3 this past quarter, we may not see an impact until middle of next year on those centers. Yes, we see one, at least one per site in this quarter, but to see the real impact of having two or three consistent implants per quarter. That is going to be a few quarters away from us. So that's a great news for our business toward the second half of next year, and we're very happy with it. No question about it.

Okay. No, that was great. And that leads me into 2023. I know you're not providing guidance if you've provided guidance in the past or at least on the IPO. So as we look at the numbers, you're pulling forward the number of experienced centers relative to what we had in the past. Would you slowdown the new center adds to make sure that the ramp cycle of these new adds remains good or is this truly a good symbol and your view of the adoption profile as we go into 2023?

Yes, no absolutely not, Margaret. We will not slowdown. We're very happy with the activity level we're seeing, and we will continue on this - fulfilling our commitment, but also trying to maximize the impact that we can have. Now where we are limited - we were limited a little bit was with our cash burn. And Jared has been very diligent on maintaining us into that cone that will allow us to reach cash flow breakeven within the money raised. But having now the access to this facility gives us a little bit more flexibility. So if we're seeing things are accelerating and though the acceleration could consume a little bit more of cash, Jared and I can look at it and make the decision, but we're not artificially throttling the growth.

And Margaret, this is Jared. I'll just chime in as well. As far as expectations going forward, we're still guiding towards the high single-digit adds per quarter going forward. I know the last couple of quarters, we've been able to exceed those expectations by getting 15 new adds in the second quarter and 20 here in the third quarter. But the overall average for the last year, I think, has been low teens or low double-digits. And so we still run into the issues with hospital staffing shortages to get centers active and start treating patients, and that's why we're still guiding towards that high single-digit adds per quarter going forward.

Okay great. No, I appreciate that. And then I wanted to also follow-up on the BeAT-HF data as well that for my follow-up question that. Given some of the nuances that could come out of the data, when should we see kind of the full data set? And as you think about that impacting potential adoption curve, is it going to be difficult to try to explain this to clinicians or could you actually get more adoption because some of these, at least the high-level numbers will be better, even though you may or may not get the indication expansion? Thanks guys.

Yes, excellent question, Margaret. So we have not yet defined where and how we will communicate the data. But as you mentioned, it is in the nuances. So it's - we need to spend here the time and effort to make sure that the message is well understood. That said, that message initially will be to investors. The message to physicians and healthcare providers have to be limited with the indication of use is that FDA will allow us to use. So that's where the limitation is. And that, we have to wait for the FDA processes, whether they will invite a panel of experts and the independent panel of experts could add three months to the schedule or not. And if they decide to move without a panel of experts, we've seen them do it in some instances in the past then, this could go faster. And before we communicate to physicians any new claims, we have to wait for this - the claim data. I'm sorry, the claim labeling from FDA to be approved, we cannot do anything else. So I would urge everybody not to expect an uptick in sales the same or the first day we announced the results.

Thanks guys.

Thank you. One moment please for our next question, our next question comes from Bill Plovanic with Canaccord. Go ahead, your line is now open.

Great thanks, good evening thanks for taking my questions. Just first off, is the U.S. business continues to evolve, Nadim, you and I had - this conversation, but where do you believe you are in terms of a reproducible, repeatable business and it's simply - is this still more of a figuring it out thing or is this just dollars at the problem to expand sales and kind of grow it? How would you characterize where you are today?

Yes, hello Bill, I know you've been busy here hence, you are, I think, in a conference as well today. So thank you for joining us on this call. Listen, great question. I believe we're still at the beginning of it. There are so many unknowns that we're trying to understand in terms of adoption, physician training, but all the way down to sales rep selection, sales training and so forth. I think we've done great strides on all of these fronts in the past year, but I would not be arrogant to say that we have figured it out and you can throw more money on it and it will grow. So we keep learning, we keep learning.

Okay. And then I'm just trying to understand, you have three years of cash on hand. And I understand putting a shelf up, I mean that's just standard practice. But with the debt and bringing the debt down, especially when it's running at 12% all in or 13% all-in, I'm kind of curious why now, like you can - I mean that's something that could have been held off for another 12, 24 months given you have three years of cash. Why would you put that in place now?

Hi Bill, this is Jared. Thanks for the question. I think as we were looking at the options in front of us, we just wanted to have access to a non-dilutive set of capital so that we could have some optionality as we look towards more strategic investments in the future. And we mentioned it in the earlier part of the call, where if we do see a positive readout from morbidity and mortality and want to accelerate the investment in the commercial organization, having access to this debt facility can allow us to do that, right? And same thing as we look at other trial designs for potential indication expansion. We also look at that and say if there is a cheap way to go out and expand the indication, go after another patient population using this debt facility to do so would be a good way to manage the business going forward. And all of that means that nothing is set in stone. We just wanted the ability to have options in front of us to make additional investments in strategic areas as we move forward.

Okay. And then just on the back wire, you've pushed that out a little. Just is there something with the product? Are you going back to redesign? Why is this kind of taking so much longer than originally expected?

No, nothing is wrong with the product, Bill. But yes, we have been disappointed with the rate of enrollment. Maybe we have been a little bit aggressive, assuming that now that Barostim is approved, this would go faster than traditional cardiovascular clinical trials. And at the end of the day, you know very well, that's not for the faint of heart doing clinical trials in cardiovascular space, particularly in this day and age with hospital staff shortages and previously with COVID disruption. So that's what we're paying the price for more than anything else.

Great. Thanks for taking my questions.

Thank you, Bill.

Thank you. One moment please for our next question. Our next question comes from the line of Alex Nowak with Craig-Hallum. Go ahead, your line is now open.

Great. Good afternoon, everyone. I just want to follow up to Bill's question there around the capital needs. When would you make a decision to go after an indication expansion? When the M&M study reads out and ramping up sales force, I think that's a pretty easy decision. But I guess how and when would you make a decision to go after another indication, A-fib, another form of heart failure, CKD, hypertension. When does that time come? Or is it more or less a - to be determined?

Hi Alex, thank you again for joining us today. Listen, it is going to be based on intrinsic and extrinsic parameters. So the intrinsic one relates to our readiness with a trial design to be discussed with FDA. The extrinsic factor are related to the market, the unmet need that we see out there. Let me take one specific example, but this is not an indication that this is the direction we're going. It's just an example that is easier to understand here by the audience. Hypertension, particularly resistant hypertension. We know that a technology called renal denervation has been trialed and the two trials reading out on patients without medication has shown some positive results, 5 to 7 millimeters of reduction of blood pressure. But for resistant hypertensive patients on medications, we're waiting here to see the results from Medtronic, and I understand that those results could be presented at a late-breaking clinical trial at the American Heart meeting next week, next Monday. So that's one example of an element where we say, all right, let's wait to understand what's out there and what - how do we define the eligibility of the patients who would be included in the trial. Now am I saying that the reinnervation will be a head-to-head competition with our product? Absolutely not. But if renal denervation is successful in resistant hypertension, and we would expect a fast pickup in this space, our trial would be designed to include patients who have been previously treated with renal denervation as well so that we understand how our therapy works on patients who have been treated with renal denervation but are not yet controlled in relation to their blood pressure. So that's one example out of many. This one is simple to explain. That makes us wait right now before we decide on the market we're going after. So what other indication and the time line of it.

Understood. That makes sense. And then just going back to the new center ad, again get really impressive work there. Maybe expand on some of the kind of specific reasons you're seeing that acceleration in the last two quarters. Is it as simple as just getting more reps on the street? Or is it - you're finally trying to see all the kind of the contracting and value committee work getting some leverage, Barostim gaining some more chatter on the docks, any of the new marketing campaigns that are resonating? Just trying to really dive into granular what's actually happened with new function there?

Yes, excellent question again. So listen, we have a very solid team in place, and I mentioned this in previous calls, our Senior Vice President of Sales, Craig Palmer; and our Chief Marketing and Strategy Officer, Paul Verrastro, are doing a phenomenal job with their teams in here, particularly with Craig and hiring really solid super-performing sales apps and having Paul and his team train them and make them effective faster than previously. I think that would be the most important or, I would say, the most influencing factor in here that explains our pickup in the active number of sites. Now there are some other elements to take into consideration. Number one, some of those sites, very few of them are satellite regional hospitals belonging to a large group, right? So sometimes you're having great traction with a large group. They want to open up an additional facility to do Barostim remotely, and that would be a smaller side. In some other situations, we have seen that our direct-to-consumer campaign has helped raise the awareness of physicians about the therapy. And that's hard to measure indirect benefit of doing those pilots direct-to-consumer campaigns, those are contributing as well. Now how much of that rate is sustainable in the future. We're not ready to say this is repeatable yet. So that's why Jared is still calling here for a high single digit, low double digit of new active planting centers per quarter.

That's great. Appreciate the update. Thank you.

Thank you, Alex.

Thank you. This concludes our question-and-answer session for today. I would now like to turn the call back over to Nadim Yared for closing remarks.

Thank you, operator. Great job. And thanks, again, everyone, for joining us for our third quarter earnings call. We appreciate your ongoing support, and we look forward to updating you on our progress on our next quarterly update next quarter. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.