Greetings, and welcome to the CVRx Q1 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please let us know. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Vallie. Thank you. Please go ahead, sir.

Good afternoon. Thank you for joining us today for CVRx’s first quarter 2023 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. 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 several 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 thanks to everyone for joining us. I’ll begin today’s call by providing an overview of our first 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 2023 before turning to Q&A. We are thrilled with our first quarter performance, which demonstrated solid execution on multiple fronts. We are able to share the preliminary data from the BeAT-HF study during the quarter and continue to grow our U.S. heart failure business. This is a testament to our team’s ability to accelerate the adoption of Barostim through the increased capabilities of our commercial organization and our marketing and awareness efforts. At a high level, our Barostim therapy continues to gain traction. The feedback from physicians at active implanting centers is extremely positive, with many reporting meaningful impacts on the quality of life for their patients suffering from heart failure. Now let’s dive into the details of our performance. Starting with a review of the first quarter, our worldwide revenue for the quarter was $8 million, an increase of 96% over the first quarter of 2022. The U.S. heart failure business generated $6.8 million of revenue, an increase of more than 132% over the first quarter of 2022. This accelerating top-line performance in the U.S. was highlighted by March, which was by far the best single month in the company’s history. While we don’t know how much of the revenue performance in March is attributable to the announced unblinding of the BeAT-HF study in February or to our commercial execution over recent quarters, we can definitely say our strategy is working. We are also seeing these strong adoption trends continue into April. Now turning to an update on the operational progress we made during the first quarter, starting with the continued expansion of our commercial infrastructure. During the quarter, we added 3 new territories, bringing the total to 29. We remain excited about the quality of sales talent we have been able to attract and look forward to continuing to build upon that quality in 2023. During the first quarter, we made significant progress with our marketing initiatives, including our direct-to-consumer and patient education programs. We will continue to optimize these campaigns to improve cost effectiveness and evaluate the broader rollout to capitalize on the accelerating momentum in our business. Moving to our next area of focus, the expansion of our clinical body of evidence, I want to provide an update on our ongoing interaction with the FDA regarding our potential label expansion following the post-market BeAT-HF data we recently announced. We have started an interactive discussion with the FDA to ensure that our submission is designed in a way that is most effective for their review process. Based on the data collected so far and guidance from our executive steering committee, we remain optimistic that we will receive a label expansion. However, please keep in mind that our 2023 guidance showing significant growth does not assume any positive impact from a label expansion. We look forward to reporting our progress over the coming months. Wrapping up the quarter, I want to express my gratitude to our team and thank everyone for their continued support. We had a strong first quarter with impressive revenue growth, particularly in the U.S. where our heart failure business performed exceptionally well. We remain confident in our business to help bring relief to many patients suffering from heart failure. I will now turn the call over to Jared to review our financials.

Thanks, Nadim. In the first quarter, total revenue generated was $8 million, representing an increase of $3.9 million or 96% compared to the same period last year. Revenue generated in the U.S. was $6.9 million in the current quarter, which is an increase of 127% over the same period last year. Heart failure revenue in the U.S. totaled $6.8 million in the current quarter on a total of 225 revenue units compared to $2.9 million in the first quarter of last year on 99 revenue units. This increase was primarily driven by the continued expansion of the U.S. heart failure business into new sales territories, new accounts, and increased awareness among physicians and patients about Barostim. At the end of the current quarter, we had a total of 122 active implanting centers compared to 56 on March 31, 2022, and 106 on December 31, 2022. We also had 29 sales territories in the U.S. at the end of the current quarter compared to 17 at the end of Q1 2022 and 26 on December 31, 2022. Revenue generated in Europe was $1 million in the current quarter, an increase of 2% compared to the same period last year. Total revenue units in Europe increased from 50% in Q1 of 2022 to 52 in the current quarter. At the end of the current quarter, we had a total of 6 sales territories in Europe. Gross profit for the three months ended March 31, 2023, was $6.7 million, an increase of $3.5 million compared to the three months ended March 31, 2022. Gross margin for the current quarter increased to 83% compared to 77% for the same period last year. This increase was primarily driven by a decrease in the cost per unit as a result of the increase in production volumes. Research and development expenses for the current quarter were $3.4 million, reflecting an increase of 51% compared to the same period last year. This change was primarily due to increased compensation expenses, non-cash stock-based compensation expenses, and consulting fees. SG&A expenses for the current quarter were $15.4 million, representing an increase of 43% compared to the same period last year. This increase was mainly driven by higher compensation expenses due to increased headcount, as well as increases in travel expenses, non-cash stock-based compensation expenses, and marketing and advertising expenses related to the commercialization of Barostim. Other income net was $1.1 million in the current quarter compared to a net expense total of $57,000 in the same period last year. The income in the first quarter of 2023 was primarily driven by interest income on our interest-bearing account. Net loss for the current quarter was $11.4 million or $0.55 per share compared to a net loss of $10 million or $0.49 per share for the same period last year. Net loss per share was based on 20.7 million weighted average shares outstanding for the current quarter and 20.4 million weighted average shares outstanding for the first quarter of 2022. At the end of the current quarter, cash and cash equivalents were $103.3 million. Net cash used in operating and investing activities was $10.5 million for the current quarter compared to $10.9 million for the same period last year. During the current quarter, we also drew down $7.5 million of debt on our current credit facility to further strengthen our financial position. Now turning to guidance. For the full year of 2023, we now expect total revenue to be between $35.5 million and $38 million. Gross margin is now expected to be between 80% and 83%. We continue to expect operating expenses to be between $76 million and $80 million. For the second quarter of 2023, we expect to report total revenue between $8.2 million and $8.8 million.

Thanks, Jared. These are very exciting times at CVRx. We continue to see exceptional execution across our business. The revenues are accelerating, our margin profile continues to improve, and our cash burn is decreasing. Simply put, our model is working as we expected it to. We have continued to see strong performance in the business through April, and as a result, are raising the low end of our full-year revenue guidance and increasing our full-year gross margin guidance. We look forward to continuing to build on the momentum we have created and successfully execute our growth strategy throughout the remainder of 2023. Now, I would like to open the line for questions.

Thank you. The first question we have is from Will Plovanic from Canaccord Genuity. Please go ahead.

Great. Thanks for taking my questions and congrats on the quarter. Just two questions on the M&M data. One is your discussion of the interactive discussion with the FDA. Can you give us your thoughts on the label – kind of how we should think about this, like what are you going for at the high end? What are you going for at the low end and frame that discussion for us, if possible? And then secondly, your commentary on a very strong March, I’m not sure if that’s commercial or the M&M data. I was just – any anecdotal feedback from the physician community would be great there? Thanks for taking my questions.

Yes. Hello, Bill. Very nice hearing from you and great questions. Let me start with the question about the interactions with the FDA. And as you know, there are two ways of filing a PMA supplement. One is the traditional approach, where you submit the clinical report and then wait for feedback from the FDA. The second is a more interactive approach. We selected the second pathway, and this interaction would allow us to optimize the clinical report to ensure that we are providing the information in a way that is the most useful for the FDA to make their assessment. The labeling we’re going after, as I’ve said previously, is a treatment effect. We would love it if the FDA agrees with the opinion of our executive steering committee, which is made of five key opinion leaders who stated that, in their opinion, the totality of evidence from BeAT-HF supports this therapy as a treatment for patients suffering from heart failure. Whether through the interaction with the FDA we could augment that labeling or decrease it is still a little bit early to assess that. So we’re at the beginning of these interactive discussions with the FDA. Regarding your second question, anecdotal evidence – we’ve had a few interactions with physicians since we unblinded the data. I just want to remind everyone here that as a company and sponsor of the trial, we are not allowed to market the data yet. All we can do is answer questions. If a physician asks a question, we can answer it. If they don’t, we cannot provide the information. From what I have in front of me, about half of the physicians that we are either working with or interacting with have not asked any questions about the M&M data; they may not be aware of the unblinding. The remaining half, those that are aware, the range of feedback varies widely. What we can say right now is that we have not seen any slowdown due to the data or any physician saying, 'Well, I’m disappointed with this data. I don’t believe anymore what I’ve seen in my own patients. Therefore, I am going to slow or stop treating patients with Barostim.' So, we have not seen that. So far, I would say I am very satisfied with the reaction that we have seen in the marketplace to the data for those physicians who have been exposed to the data.

Thank you for taking my questions.

Thank you, Bill.

The next question you may have is from Robbie Marcus from JPMorgan. Please go ahead.

Hi, this is Lilly for Robbie. Thanks for taking the questions. So, you take that amount and guided for the second quarter ahead of the Street, but you only raised the low end of the guidance by $0.5 million, which implies a slightly softer back half than what we had been thinking. So can you talk through your thinking there? And why isn’t the full-year range moving up more?

Hi Lilly, this is Jared. Happy to take your question. Yes, we were really happy with what we saw in the first quarter. I think Nadim mentioned it in the first part of the call, just talking about how we really saw some nice results in the month of March, allowing us to beat the top end of that range we had put out for the first quarter. And we saw some of those trends continuing into April to allow us to put out some pretty solid guidance here for the second quarter. We don’t necessarily want to move too quickly on the full-year guidance after just one quarter of results or seeing really strong March and a few positive trends into April. But if we see the trends continuing after Q2, that’s something we’d look at at that point.

Got it. That’s helpful. And maybe just a follow-up, can you talk about how you’re thinking about growth in the U.S. versus internationally? What does it take to get the international business ramping from here, or is the focus for the foreseeable future really on the U.S. and driving adoption there? Thanks so much.

Listen, great question, and we’ve asked ourselves this question almost on a quarterly basis. We have limited resources and limited capability in growing, right? So it’s not about throwing money and hoping what sticks in the world. We need to invest judiciously here. As I’ve mentioned in previous calls, the cone of possibilities that would allow us to reach cash flow breakeven without raising additional money is wide, but not too wide. We don’t have too much margin here to throw money and hope for the best outcome. In our opinion right now, the best return on investment is for us to invest in sales and marketing in the United States. The situation will change in the future as we start increasing our penetration in the United States. But right now, with the growth we’re seeing in the United States, any dollar we can spend in the U.S., we are spending there. When we talk about Europe, it’s multiple countries. Every country is different. Even within a single country like Italy, there are 13 regions, each having their own reimbursement paradigms and so forth. Right now, our focus in Europe is in Germany. We only increased the headcount in Germany to support steady slower growth because what we experienced previously about a year ago was that if we maintain our presence flat in Germany, it actually decreases and becomes an anchor around our worldwide growth. So we hit that sweet spot where we can grow it enough so that it adds value, but we don’t have the ability right now to invest faster in Germany to grow it as quickly as in the United States. So for the short term, for the foreseeable future, and as our penetration is still super low in the United States, our best return on investment is in the U.S.; we will focus on the U.S.

Great, thank you.

Thank you.

The next question we have is from Matthew O’Brien from Piper Sandler. Please go ahead.

Hi, this is Sam on for Matt. Congrats on a great quarter. I guess one question we had is about Barostim utilization since the announcement of the BeAT-HF trial. Are you seeing anything change, or is that staying mostly the same? And then also, what kind of questions are you getting from physicians since this readout? Thank you.

Yes, Sam. Great question. So in terms of utilization, I assume we mean here new patients receiving the device. So we’re not talking about programming more units or replacing batteries for patients who received the therapy five years ago. In terms of de novo patients receiving therapies, which correlates with revenue, we’ve seen significant growth, and we are very happy with it. That trend continues in April. What we don’t know yet is how much of that can be attributed to the data that we issued a press release about in mid to late February or just execution. We know we have a great team, and we’ve been growing our business in the United States approximately 100% year-over-year. That could be just the result of superb execution or a combination of both. So, all we can say at this stage is that we have not seen a slowdown in that growth.

Great. Thank you. And then just the last part on the questions you’re getting from physicians.

Thank you for bringing up the second question. The main inquiries we received at THT were focused on one aspect of the primary endpoint. I’m not sure if you’ve reviewed the data, but we had that chart presented by Dr. and I provided a summary during our press conference that evening. The chart displayed all the points supporting the device, except for one point, which was near the center but on the opposite side of that segment. This point related to heart failure morbidity. What Dr. presented at the symposium during THT was that in his analysis, 2020 was unusually different. The rate of heart failure hospitalizations in the control group was approximately one-fourth of the rates in other years, prompting us to consider what the data would look like if 2020 were excluded. That analysis indicated that all data points now supported Barostim. This directly addressed the key question we frequently encountered: how can you have such a significant impact on reducing mortality while not reducing morbidity? The analysis clarifying the situation in 2020 effectively resolved that question.

Thank you so much.

Thank you.

The next question we have is from Margaret Kao from William Blair. Please go ahead.

This is Malgorzata for Margaret. Thanks for taking our questions, and congratulations on the strong quarter. I have a question regarding the DTC campaigns. You've mentioned that you're monitoring and testing a variety of channels. I’m curious about what you’ve observed from those efforts and whether there have been significant increases in awareness following those results and the readout.

Yes. Excellent question. It was great seeing you last month. Listen, in our opinion, based on the data we’re looking at, our direct-to-consumer efforts appear to be paying off. We started expanding to new geographies, but only to areas where we have active implanting centers. We are very happy with the results we saw in the first quarter. We are super happy with the results we saw in April in regard to the effect of DTC campaigns to drive utilization. In terms of different channels, we will keep testing new avenues. Right now, we are present on Facebook, Google AdWords, and some TV channels. Many people, if they are in this area and possibly suffering from symptoms similar to heart failure, may have seen our ads.

Awesome. Thanks. And then just a quick follow-up on the BATwire trial, is there any more color you could give there on adding more sites and patients? Just wondering if we could get a bit more detail on how that’s progressing and potentially how many of the estimated 400 patients have been enrolled? Thanks for taking my question.

Yes. I will not comment on the sites that we are adding at this stage. All I can say is my colleagues and I are a very small team at CVRx, particularly our clinical team. Right now, at this stage, our focus is the analysis of BeAT-HF data, the mortality and morbidity data, and the discussions with the FDA and the filing of the PMA supplement. This takes precedence over anything else we are doing. BATwire is continuing in the background, but that has not been our focus in the past couple of months. If we have any update to provide, we will do our best to include it in the next quarterly release.

Great. Thanks again.

Thank you. Have a good night.

The next question we have is from Alex Nowak from Craig-Hallum Capital Group. Please go ahead.

Okay. Great. Good afternoon everyone. I want to continue off that last question there. Now, with BeAT-HF being read out, the FDA is going to do what it wants to do there. Obviously, your team is focusing on getting BeAT-HF ready to submit to the FDA. But I guess what other studies, small or big, do you want to green-light here in the upcoming quarters? What’s next?

Hey Alex, great question. Here is what we have disclosed in the past. We do have the post-market study that just completed with BeAT-HF. Right now, unless the FDA asks us to perform another post-market study, it will be our own initiative. We currently have a large registry that is enrolling in the United States, called rebalance. Our objective is to collect as much data as possible within reason. Obviously, we don’t want to create an additional burden on hospitals, where we know they still have staffing shortages. That’s number one, and number two, we don’t want the cost for CVRx to be overly burdensome. So, the rebalance registry is ongoing as we speak. The second element is we have opened the door to academic investigators at institutions with experience in Barostim to submit requests for studies to CVRx. We have an independent adjudication committee that looks at the scientific merits of the study, and if it’s positive, then we help with some of the funding of these studies. We call this program BIIR, Barostim Investigative Initiated Research. So those are the ongoing elements. And of course, we still have BATwire. I answered a previous question on this topic. Finally, we have been accepted into a new program at the FDA, called TLAP, the Total Life Cycle Advisory Program. This program is in a pilot phase; they have accepted up to 15 projects this year only in cardiovascular. I am happy to say that our project proposal was accepted by the FDA on January 6th. We are looking at the expansion of the market we are targeting. This will, of course, require new trials. It’s a bit early in the analysis phase; we are working with the FDA. The essence of the TLAP program is very intriguing and exciting. It is only for programs that have a breakthrough designation, which we have for hypertension and preserved ejection fraction heart failure. The essence or promise of the TLAP program is for the FDA to work with the sponsor and include other stakeholders such as payers, patients, patient advocacy groups, physician groups, and societies, to ensure that the future trial answers all of the requirements of all stakeholders. It’s still early, and we don’t have any plans for trials yet, as it will take months of work with all of these stakeholders to design a trial.

Okay. Very exciting to hear what comes of that. With regards to BeAT-HF being submitted to the FDA, I know the discussions are underway now regarding the breakthrough designation. What is the latest timing internally for submitting that package for label expansion?

It will depend. Typically, one would say, if it’s the classical road we are following, it usually takes a company about three months to assemble the PMA submission and submit it to the FDA. I have seen companies taking a year or 15 months to do this. In our case, since it is a PMA supplement, the product is already approved. So it’s more focused on the clinical report of the post-market phase. The three months seems to be a good approximation. If we are following the traditional way, the FDA would have six months to provide their feedback on it. So think of it, Alex, as being at the end of the year for submission. In our case, we may take more time upfront as we work interactively with the FDA, with the hope that the review process by the FDA will be faster and more predictable.

Okay. Understood. That makes sense. And then just one more clarification for Jared. The step up in inventory, did you mention what that was for? It looks like you may be worried about supply chain issues or getting ready for some pretty big demand. So, just a step up of the inventory and what could cause that?

Yes. Hey Alex. Thanks for the question. So, we did see that jump in inventory from the end of the year. Part of this was us building up some finished goods towards the end of 2022 and getting that finished up here in early 2023. Part of that was trying to get more inventory over into Europe with a lot of question marks around MDR. We were able to kick the can on that MDR deadline with some updates that came through in the industry over the last couple of months. So, it’s less of a concern there. And also part of it is just supply chain. We had a lot of supply on the shelf and were able to build out that finished goods inventory. So, it doesn’t hurt to have more goods available to sell if the demand is there.

Yes. 100% makes sense. Thanks for the update. Appreciate it.

Thank you, Alex.

Thank you. The final question we have is from Frank Takkinen from Lake Street Capital Markets. Please go ahead.

Hey. Thanks for taking the questions. I wanted to follow-up with one more on the utilization question. In the past, you guys have spoken about how, in the first couple of months, a facility may treat one or two patients, and they may wait three months to six months before reinitiating treatment for additional patients beyond there. Did that dynamic play out at all in the strong March and April months that you called out, maybe where you have a bolus of clinics going from post that three-month to six-month evaluation period, getting comfortable with the technology and then accelerating use within their patient pools?

Hi Frank, this is Jared. I will take that one. Yes. I think what we have seen is a lot more of the same from those same types of groups. We have more centers that are now reaching the point of being active for more than 24 months. As they cross that threshold, we are seeing them treating almost one patient a month on average. That long-term goal is what we are pushing all of these sites to reach. So, the growth we saw in March and continuing into April is due to new sites being activated and treating first patients, but also seeing all of those other sites continuing to treat more and more the longer they are with us.

Okay. That’s helpful. And then maybe just for my second one. As it relates to the BeAT-HF data, my assumption is it’s going to go into the process of FDA communications, submission, and hopefully, label expansion. Is there anything you can be doing with the guidelines to start having conversations about how you could be positioned within the guidelines once we get through the FDA communications and hopefully label expansion?

Yes. Frank, this is an excellent question. In my understanding, companies have very little influence with the guideline committees. The guideline committee, in general, prides itself on being super independent without any conflict of interest. Therefore, the only thing that sponsors of trials can do is provide the peer-reviewed manuscript with the data and ensure that the guideline committee sees it. There is no lobbying that is allowed before that, and we are limited to just sending them an email with the manuscript when it gets published. I want to reiterate one point: our model that has this path to getting us to profitability without raising additional cash is based on the current labeling we have. This is not a lack of confidence in getting additional labels, but rather us being super confident in our model based on what we have today in our hands and not needing anything else to get to the cash flow breakeven point. The same can be said about payment levels and reimbursement. Based on what we have today in our hands, we have a clear path to profitability. Anything above this, and we believe we will get the label expansion, will be an upside, enabling us to reach cash flow breakeven earlier or allowing us more flexibility in terms of investments in our future.

Yes. That’s perfect. Good context. I appreciate you taking the questions.

Fantastic. Thank you so much.

Thank you, operator, and thanks everyone for joining us for our first-quarter earnings call. We appreciate your ongoing support, and we look forward to updating you on our progress at our next update. Good night. Thank you, sir. Ladies and gentlemen, that concludes today’s conference. Thank you for joining us. You may now disconnect your lines.