Good day and thank you for joining us. Welcome to the CVRx Third Quarter 2021 Conference Call. All participants are in listen-only mode at this time. After the presentation, there will be a question-and-answer session. Please note that this conference call is being recorded. I will now turn the call over to Mr. Mike Vallie with ICR Westwicke. Please proceed.

Good afternoon and thank you for joining us today for CVRx's third 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. I'll begin by providing an overview of our third quarter performance, followed by an operational update. Our CFO Jared Oasheim will then review our financial results, and then I will conclude with our thoughts for the balance of 2021 before turning to the questions and answers. Starting with a review of the third quarter. Our total revenue was $3.4 million, an increase of approximately 240% over the third quarter of 2020. This growth was driven by continued strong performance in U.S. heart failure, which generated $2.5 million. Like most procedure-based companies, we were negatively impacted by the COVID-19 Delta spike experienced during the quarter. We have exposure to some of the hardest hit regions of the country, including areas like Florida, Texas, and Georgia, and as a result, we saw a meaningful dip in procedures in August. However, that dip was offset by our strong September, which we believe benefited from both the traction of our commercial strategy as well as cases being shifted into September. As the spikes receded, we were able to get out into the field and interact with both new and existing customers, leading us to deliver our highest number of U.S. implantations in a single day in our history. The strength in our U.S. heart failure business also offset headwinds seen in our European business, which proved to rebound more slowly than in the U.S. following the summer spikes. Overall, we are really excited about how the quarter ended and look forward to carrying this momentum forward. Turning to an operational update now. The expansion of our commercial infrastructure, particularly our direct sales team in the United States, is a significant component of our strategy to drive adoption. As anticipated, we added three U.S. territories in the third quarter, bringing the total to 11. We are very pleased with the level of talent we have been able to attract to the organization and continue to expect to add an additional three territories in the fourth quarter, bringing the total to 14. Another area of focus is the innovation of our product portfolio. In the last two months, we made three PMA supplement submissions with the FDA. The first was our successful testing results for better stems, MRI conditional labeling, which if approved, will allow MRI scanning with specific instructions for patients who have been implanted with Barostim. While we do not believe that the addition of MRI compatibility will materially drive implant growth, we do believe it will give confidence to physicians to practice medicine in the ways they think are best for their patients. The second PMA submission was for our new Implantable Pulse Generator, or IPG in short, which is smaller in size and has 20% longer battery life on average. The third PMA submission was for our new programmer, which is a tablet form factor with an even simpler programming software. Approval for the three PMA supplement submissions is expected in the first half of 2022. Another long-term growth driver is the expansion of the clinical body of evidence. Our post-market study of BeAT-HF and randomized control study designed to demonstrate the mortality and morbidity benefits of Barostim in the half RAF patient population remains on track. We continue to expect to accrue all the events needed for the final analysis by the end of 2022 and unblind the data in early 2023. Given some of the macro challenges experienced in the quarter, we are very pleased with where we ended up. We have continued the expansion of the commercialization of Barostim and are incredibly excited about what we will accomplish as an organization by year-end. While it is still early days, we are optimistic that we will build upon the momentum we saw late in the quarter and are confident in our ability to operate in this continually changing environment. And now, I would like to turn the call over to Jared for a financial review.

Thanks, Nadim. Total revenue generated in the third quarter was $3.4 million, which is an increase of $2.4 million or 241% when compared to the same period last year. Revenue generated in the U.S. was $2.6 million in the current quarter, which is an increase of $2.3 million or 769% over the same period last year. Heart failure revenue in the U.S. totaled $2.5 million in the current quarter on a total of 84 revenue units compared to $140,000 in the third quarter of last year on four revenue units. The increase was primarily driven by the continued growth following the U.S. 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 38 active implanting centers compared to 31 on June 30, 2021. The number of sales territories in the U.S. increased from eight on June 30, 2021, to 11 at the end of the current quarter. Revenue generated in Europe was $823,000 in the current quarter, which is an increase of $122,000 or 17% over the same period last year. Total revenue units in Europe increased from 32 in Q3 2020 to 38 in the current quarter. The slight revenue increase was primarily due to the lessening of the impact of the COVID-19 pandemic in Germany. The number of sales territories in Europe remained consistent at six during the current quarter. Gross profit was $2.5 million for the current quarter, which is an increase of $1.7 million or 221% over the same period last year. Gross margin decreased to 74% for the current quarter compared to 79% 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. R&D expenses were $1.7 million for the current quarter, which is an increase of 13% when compared to the same period last year. SG&A expenses were $8.1 million for the current quarter which is an increase of $5.8 million or 249% 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. Other increases included more direct spending in marketing in connection with our expanding commercial launch in the U.S. and other expenditures connected with now being a public company. Stock-based compensation expense also increased from $23,000 in 2020 to $350,000 in Q3 2021. Other income net was $1.8 million for the current quarter compared to income of $455,000 for Q3 2020. This change was primarily driven by a $1.5 million decrease in the fair value of the convertible preferred stock warrant liability from June 30, 2021, to July 2, 2021, when the warrants converted to common stock warrants. Net loss was $6.1 million or $0.30 per share for the current quarter as compared to a net loss of $3.2 million or $9.56 per share for the same period last year. Net loss per share was based on approximately 20,127,000 weighted average shares outstanding for the current quarter, and approximately 360,000 weighted average shares outstanding for the third quarter of 2020. Now turning to the balance sheet update. At the end of the current quarter, cash and cash equivalents were $170.9 million compared to $47.1 million as of June 30, 2021. The cash increase was driven by the net proceeds we received from our IPO of $133.2 million on July 2. Net cash used in operating and investing activities were $9.4 million for the current quarter compared to $5.3 million for the same period last year. The primary driver was an increase in compensation as a result of increased headcount across the organization. There was also an increase in our annual payment for director and officer insurance of $2.6 million in connection with becoming a public company. On November third, we fully repaid the outstanding portion of our $20 million loan with Horizon Technology Finance Corporation, put in place in September of 2019; the agreement carried a relatively high interest rate and 30 months of interest-only payments, followed by 30 months of interest plus principal payments. The principal payments were set to begin in the first half of 2022. In an effort to be efficient stewards of capital, we looked at our various options including refinancing the loan under different terms. Ultimately we felt it prudent to pay the $20 million principal at this time. However, debt may have a role to play in financing the business needs in the future. The total cost of extinguishment was $21.3 million, the impact of which will be reflected in our fourth quarter financial statements. Following the repayment we believe we have more than three years of cash on hand. Now turning to guidance. For the full year of 2021, we continue to 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 fourth quarter of 2021, we expect to report total revenue between $3.9 million and $4.5 million. Before turning the call back to Nadim, I wanted to quickly acknowledge some changes to the reimbursement landscape in the U.S. As is typical this time of year, CMS announced that this week their final changes for outpatient reimbursement for calendar year 2022. These changes are all positive for Barostim. Additionally, CMS has previously proposed to repeal the Medicare coverage for innovative technologies. While this repeal is disappointing for the MedTech innovation ecosystem, it has no immediate impact on the current reimbursement for Barostim and it has no impact on the inpatient or outpatient add-on payments that are currently in place for Barostim. I would now like to turn the call back over to Nadim.

Thanks, Jared. Before opening the line for questions, I would like to discuss our key areas of focus for the balance of the year. First, the continued development of our commercial organization, particularly in the U.S. As mentioned, we expect to end the year with 14 sales territories. And we will continue to look to attract highly interested and talented representatives to ensure that we can continue to seamlessly add new territories as we move into 2022. Along those lines, we will remain focused on engaging with new customers, training surgeons, and bringing new active implanting centers online while also working with existing customers as they ramp up the utilization of Barostim. Outside of our commercial efforts, we are highly focused on maintaining our supply chain to ensure we can continue manufacturing devices and deliver for our customers. At this point in time, we believe we have over a year's worth of long lead time components at our disposal. We are extremely excited about the position we are in today, despite the challenging macro environment that we have had to endure early in the launch of Barostim in the U.S. As we move ahead, we're determined to leverage the foundation we have put in place to accelerate the adoption of Barostim and bring relief to as many patients as possible who are suffering from cardiovascular illnesses. Now I would like to open the line for questions.

Thank you. Our first question comes from Robby Markose with JPMorgan. Your line is open.

Hi, this is actually Lilly on for Robby. Thanks for taking the question. I was hoping you could just dive a little bit deeper into what you've been seeing on near-term COVID trends? How things tended into the fourth quarter and what's assumed in guidance in terms of the recovery?

Yes. Hi Lilly. So first, thank you for joining us today. This is Nadim Yared. Listen, we mentioned that in Q3 we were surprised by how fast the rise in the COVID cases happened in some states like Florida, Georgia, Texas, among others, where we have strongly penetrated. We expected at the time that this would be a rapid rise and a fast decrease of this Delta variant and we've seen it happen, but with a couple of weeks delay actually extended into the first week or two weeks in September. Since then we've seen some pockets of COVID rises, but nowhere near the extent that we've seen back in August. In August in Florida and Texas, we had some sites declaring codes of black meaning no elective procedures. And right now, where we are in the United States, we're not seeing that. Now granted, as you know, our product has an elevated average selling price point, which is good, but that means we have a smaller number of procedures to make a trend or any information about trend that could be telling you about the future. So with that, I would encourage you to rely more on what larger, more established cardiovascular firms such as Medtronic or Boston Scientific would say; they see a much higher volume of procedures across the board. But thank you for asking that question.

That's helpful. Thank you. And then just a quick follow-up on reimbursement in ASPs. Have you seen the implementation of the NTAP and the TPT have any meaningful tailwind to adoption recently? And how should we think about the impact that that has on ASPs over the next few months? Thanks.

So, again, great question. So this change between 2021 and 2022 is mostly related to the 2% increase in the national average payments for the code itself for the APC 5465 code, this is excluding TPT and NTAP. In our case, we have had TPT and NTAP now during calendar year 2021. So we're not expecting a major change in the ASP moving forward. That said, we continue to be cautious here about the level of average selling prices that we are seeing. And as we look forward to the future, we tend to be a little bit more careful, simply because as we grow and we go into broader geographies, we end up selling our therapy in states or zip codes where the average reimbursement is below the national average as you can see. Now the TPT and NTAP clearly help in those situations. But that's why we are being very careful here about projecting our U.S. ASP now into the future.

Got it. Thank you.

Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Good afternoon. Thanks for taking the question. So Nadim, excuse me, you're on track as far as the number of reps added and the number of centers that you're adding as well. I look into the ramp that we're expecting in '22. I'm sure you've got some COVID-related headwinds in terms of getting into centers, being able to train clinicians to really ramp things with this expanding footprint that you have. So I'm just wondering, are you seeing a lot of gating factors to getting into facilities and really trying to train them and get them up and going? And how can you kind of work around that as we head into the end of the year, and then most importantly, into next year, where you have a bigger ramp in terms of what to expect on the revenue side of things?

Yes. Hi, Matthew. Great questions. And again, thank you for inviting me to serve our stakeholders at the annual heartland summit meeting. It was really a good conversation. In regard to COVID and its implication for next year and site activation, we have to go back and maybe rehearse a little bit here how the dynamic of opening an account and training a physician happens. For the Barostim therapy, the gating item is not training the implant. That is, overall in the entire scheme of things, one of the simplest aspects of the deployment of our therapy. Clearly, our procedure starts like a basic carotid endarterectomy and ends like a pacemaker procedure, two medical acts very well understood. However, the activation of a center requires having a center's attention. You have to create a coalition and take this product basically through the value assessment committee, the contracting process, and everything around that. Early in Q3, we saw a bit of a slowdown, but the momentum picked up in September. We believe that what has happened here is that the excess or extra activities that we've seen in September in terms of site activation were mostly a shift from August to September. That said, and as I mentioned previously, I think in our last call, because we have a smaller number of sites overall and a smaller number of procedures, due to the elevated average selling price point of our device, we are able to shift things around when we have short-lived spikes in COVID. So as long as future COVID spikes are similar to the Delta variant—fast rise, fast decline—I think we will be able to weather it in the future.

Okay, that's helpful. And then pivoting over to Europe. So far, the U.S. has outperformed nicely, even with all the COVID headwinds and I'm a little bit surprised most companies in the space right now are talking about Europe that's kind of being a little less affected by COVID. And I understand you guys are really focused in Germany. But why is it you're seeing a little bit more headwind in your U.S. business and then how should we think about some of those pressures a beta here in Q4 and in the next year? Thanks.

Yes. Great question Matthew. So in Europe, I think the pressure is mostly specific to CVRx. We have hired Thomas Hengsteler at the beginning of the year, and he's building a very solid team in Germany. We are adding as we speak here, account managers in Germany. That said, it takes time for an account manager to become effective in owning the territory, basically, that's number one. Number two, it's a decision within CVRx. And I'm not going to ask for your opinion, but if I did, I'm sure you'd agree with me on this one. If I have $1 to spend in marketing right now, would I spend it in the United States or in Germany? At this stage of our company, right now, I would invest it in the United States of America. And that's why what we're seeing right now is CVRx being opportunistic in Germany but investing heavily in the United States. Now would things change? Of course, as we start seeing some traction in Germany post-COVID. With the new team we have in place, there will come a time when $1 invested in Germany starts becoming interesting in terms of marketing, and we will do so.

Got it. Very helpful. Thank you so much.

Thank you, Matthew.

Thank you. Our next question comes from Margaret Kaczor with William Blair. Your line is open.

Hey, good afternoon, everyone. Thanks for taking the questions. I wanted to follow up maybe a little bit on the implantation commentary that you had particularly on the U.S. At one point, you said it was the highest number of U.S. implantations in a single day in history now. I understand some of that is probably a little bit of catch up. But what can you maybe comment on in terms of what you see in October, and then anything you can comment on as well in terms of that patient lead pipeline, which may or may not have been impacted by the Delta variant?

Yes, Margaret. Thank you. And thank you again, for joining us today. I know how busy you are. Listen as I mentioned earlier, the increased activity in September can be traced back to two components. One component is us as a company growing, and we have done a phenomenal job in here building a very solid U.S. sales force and a marketing organization. Our VP of sales in the United States is extremely charismatic. Rick Palmer has been able to attract really top-notch talent in this space. This is one component of our growth in September. The second component we believe is a shift of some of the delayed procedures from August into September. Now as we project forward to Q4, do we expect that type of strong month to continue? The answer is no. In our estimates for Q4, we're going back to the original plan. What we have seen in October is well aligned with our original estimates of this plan, but if I may here, I probably should turn to Jared to give you a little more guidance on Q4 as well. Jared?

Yes, Margaret, I think I'll just reiterate a little bit of what Nadim said here in that what we're seeing so far in Q4 is a little bit back to steady state. We saw a little bit of that funnel build up after procedures were delayed from August into September, seeing that backlog get worked through in September and then getting back to steady state. So when we look to the Q4 guidance that we provided of $3.9 million to $4.5 million, it's not continuing at the same rates that we saw in September individually, but obviously continuing to grow the business quarter-over-quarter as we move forward.

Okay, that makes sense. I wanted to discuss the PMA supplements and the subsequent approvals in the first half of 2022. While I understand we are looking ahead and I’m not requesting guidance, I’m curious about the general impact and timing of those approvals as you move forward with the launch.

Yes. Thank you, Margaret. So materiality, in terms of increased sales, due to those three PMA supplements, we do not believe they will be material. We believe those three PMA supplements are crucial to the patients and the clinicians but are not major drivers for our growth. The major drivers for our growth for 2022 will continue that buildup of territories and activations of accounts. Now, why are these three PMA supplements important? Well, the simplified programming is crucial for the ability of healthcare providers to program patients without us being there. That's particularly important after month six, where we believe some of the patients will transition from needing a CVRx representative to be on site to support the programming to allowing the healthcare providers to do the programming without us. The increased longevity of 20%, the smaller size factor of the new IPG, and the MRI conditional compatibility are very important for the patients. Now, do we see any patients today saying no, thank you? I don't want a Barostim because I do not have those? No. So that's why I would not expect those PMA supplements to have a material impact on our growth, but it's more of a material impact on the satisfaction of patients after getting the device.

Okay, great. And just the last question for me and you touched on a little bit right. So what matters for '22 is kind of that utilization and planning. I guess it's difficult to say with COVID. But to the best of your abilities, have you been able to ramp some of the new accounts as fast as you would have liked? And then as you look at some of the more historical accounts that you've had for a while, how has utilization trended there again, as best as you can, adjusting for COVID? Thanks.

Yes. So we have a handful of accounts that have achieved what we believe is our long-term goal in terms of number of implants. If you recall, we always thought that we would like to see every account doing at least one Barostim procedure per month, and we'd like one territory to have five accounts doing that type of volume. And we already have a handful of accounts at this level. That said, out of the 34 territories we have or active implanting accounts, I'm sorry, we have 38, 31 of them, or 30 of them have been activated in the last 12 months. So we don't have enough longevity of data to say for all intents and purposes that we can think of all of this active implanting accounts to date to be fresh and young, because the vast majority of them have been activated for less than 12 months. Does this make sense, Margaret?

Yes

I'm sorry. I need to correct myself. 34 or 38, not 30. Yes.

No, I appreciate the try. Thanks again, guys.

Thank you.

Thank you. And our last question comes from the line of Bill Plovanic of Canaccord. Your line is open.

Great, thanks. Good evening, and thanks for taking my questions. First off, I just like to start out is a big-picture question. You've now been commercial for a couple of years. You're kind of—you keep getting hit by COVID and all these different things. But just as you continue to expand the number of territories, have you learned or had to change or kind of implement and adjust outside of COVID as you continue to expand to a bigger footprint, if any?

Hey, good afternoon. And thank you again for joining us. I know how busy today is for you. Listen as I mentioned earlier to Margaret, we are still a young organization. Now you mentioned two years of commercialization; I don't want to be rude and correct you, but it's clearly one year. The first year of those two years was mostly us trying to get ready, and then COVID hit and shut down the entire country. But over this year, what have we learned and changed? Well, I would say it has confirmed our initial hypothesis about the importance of having solid clinical data, and a well-crafted message around this data to drive adoption. At the end of the day, adoption is driven by a simple formula: Is the procedure creating more value to the different stakeholders than the friction it is creating? And by stakeholders, you have the patients, healthcare providers, payers, and so forth. From everything that we initially did, all of the planning, so far it's working. So knock on wood, all of those hypotheses about what type of physicians, what type of clinicians, what type of centers, and the account targeting that we've done is working. So as we learned something dramatically that would make us change or shift direction right now, I would say no, Bill, we have not. But have we confirmed what we thought would be the hypothesis? And I would say yes, so far, these 12 months have been very good in terms of confirmation that the system works. By system, I don't mean the Barostim; we knew the Barostim works, but the entire setup is working and we're able to grow as expected.

Okay, good. So that means basically, as you think about it, you have the playbook and it's just kind of methodically adding territories and continuing to execute on the plan is kind of the way I would think about it. Is that a fair way to think about it?

Exactly. This is all about execution right now. I mentioned we have a very solid sales and marketing leadership team and it's all right now for the foreseeable future about execution. That's why you don't hear us talk about future indications or future R&D programs. This is all about this playbook going and repeating it and developing more and more territories and keep repeating it.

Okay, great. And then for Jared. What are the drivers for the Q4 guidance revenue in terms of high end versus low end?

Hey Bill. Yes. Happy to answer that question. So from a high-end perspective, I mean, what we're really hoping to see in the fourth quarter is to see a little bit more of returns on normalcy from the European team a little bit faster traction than what we saw here in the third quarter. But then also continuing to see the number of active implanting centers and number of territories come online as expected. For the lower end of the range for the revenue guidance, I mean, really, it's set up there so that if we do see another one of these spikes like we saw with Delta in the month of August in some high-volume regions, like in Florida, Georgia, or Texas, that a handful of procedures getting delayed from December into January could push us towards the lower end of that number.

That's helpful. Thank you. And then last question for me is just on R&D. I mean, that was a pretty low number coming back to where we were, first quarter of this year, and maybe even back even below 2020. How should we think about R&D spending, especially by the way with three PMAs filings? That's pretty amazing. How should we think about that spend considering I don't think you have any other PMAs filings in the books? Why would it tick up and what would drive a pickup in R&D as we go into the fourth quarter and next year? And that's all I have. Thanks.

Hey Bill, this is Jared. I'll address the first part of that; maybe Nadim can chime in at the end if he needs to add anything. But from an R&D perspective, it was lower in the third quarter with those three PMA supplements getting filed during the last couple of months, some of the work was being done in the month of October. But a lot of that just turns into paperwork. A lot of the actual development work and research that went into those filings was taking place in previous quarters and then it was just about getting the files together to submit to FDA. The other piece is really related to BATwire. What we're seeing for enrollments in BATwire is that physicians are being cautious with the first patients that are being selected for the implants in that trial. However, we are expecting the rest of the implants to start to pick up here in the fourth quarter and into 2022. So we will see some condensing of the spend that we had expected from the BATwire trial over the next four to five quarters.

Okay, and is it fair to say you expect enrollment to be completed in BATwire by the end of 2022?

Yes, we expect to collect all the data that's necessary by the end of 2023, which was the guidance that was expected or communicated previously related to BATwire so that we could submit for an approval in early 2024.

Great. That's all I have. Thank you very much.

Thanks, Bill.

Thank you. At this time, I'd like to hand the conference back over to Nadim Yared for closing comments.

Yes, thank you operator. And thank you, Lillian, Matthew, Margaret, and Bill for your questions today. 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 update. Bye now.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.