CVRx, Inc. Q4 FY2023 Earnings Call

Greetings, and welcome to the CVRx Fourth Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mike Vallie from Investor Relations for CVRx. Thank you. You may begin.

Good afternoon. Thank you for joining us today for CVRx's fourth-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 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-K 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, everyone, for joining us. I'll begin today's call by providing an overview of our fourth-quarter performance, followed by our operational update and a review of our financial results by our CFO, Jared Oasheim. Then I will conclude with our thoughts for the rest of the year before turning to Q&A. We are immensely proud of the achievements of our team in 2023. It's been an important year for CVRx, marked by significant progress in all our strategic initiatives, which have driven increased adoption and utilization of Barostim. This is reflected in our worldwide revenue, which has shown substantial growth, primarily attributed to the impressive 97% annual expansion in our U.S. Heart Failure business. As we wrapped up 2023, we did so on a strong note, showcasing consistent and effective execution across various aspects of our business in the fourth quarter. This underscores our team's skill in accelerating the adoption of Barostim through our commercial and marketing efforts. Now let's dive into the details of our performance. Starting with the review of the quarter, worldwide revenue was $11.3 million, a 58% increase over the fourth quarter of 2022. This was primarily due to the execution within our U.S. Heart Failure business. The increase was primarily driven by continued growth as a result of the expansion into new sales territories and new accounts as well as increased physician and patient awareness of Barostim. Turning to an update on our operational progress during the fourth quarter. As a reminder, our focus areas for 2023 were the continued expansion of our commercial infrastructure and the expansion of our clinical body of evidence, starting with the expansion of our commercial infrastructure. We've grown our commercial reach by adding three new sales territories in the United States as expected, bringing our total to 38. We continue to add high-caliber talent, which we believe is due to the enthusiasm around Barostim in the market. Additionally, we've been making continued and consistent headway with our marketing efforts, including our direct-to-consumer and patient education programs. As we press forward, we continue to expect refining these initiatives to drive awareness among both patients and healthcare providers. Shifting to our second focus area, which is the growth of our clinical evidence, which has driven both reimbursement and regulatory progress. In November, the Center for Medicare and Medicaid Services (CMS) reassigned Barostim to New Technology APC 1580 with an average payment of $45,000, which went into effect on the first of January 2024. As a reminder, in 2023, Barostim was under the APC 5465 with an average payment of $29,000 plus the transitional pass-through payment. We believe that this reassignment to APC 1580 will make the Barostim therapy more accessible for Medicare patients dealing with heart failure by simplifying the reimbursement landscape and ensuring fair reimbursement for facilities offering the procedure. In late December, the FDA approved expanded labeling for Barostim by revising the instructions for use for Barostim and incorporating key long-term clinical data from the BeAT-HF randomized clinical trial. The new labeling includes the following conclusion in the clinical section. In both premarket and post-market phases, the primary safety endpoint was met and confirmed. The premarket phase showed positive results across all effectiveness endpoints, indicating 6-month improvements in the 6-Minute Hall Walk, Quality of Life, NYHA Class, and NT-proBNP. The Post-Market Phase effectiveness endpoint of cardiovascular mortality and heart failure morbidity was not met, but additional Post-Market Phase analysis, such as the win ratio and freedom from all-cause mortality analysis suggested a favorable effect of Barostim therapy. The totality of 6-, 12-, and 24-month data demonstrated symptomatic improvements for heart failure patients. All of this data is now included in the instructions for use and can be used by our sales team when educating physicians on our therapy. The updated indication statement in the instruction for use now specifies that Barostim is indicated for patients who are NYHA Class III or Class II with a recent history of Class III, despite treatment with guideline-directed medical therapies who have a ventricular ejection fraction of less than or equal to 35% and an NT-proBNP less than 1,600 picograms per milliliter. Barostim delivers baroreflex activation therapy to improve patients' heart failure functional status, 6-Minute Hall Walk, and quality of life. As a result of these changes, we estimate that the U.S. annual market opportunity for Barostim has increased to include patients considered by physicians based on this new long-term safety and efficacy data as well as our commercial experience and to account for the new reimbursement assignment for Barostim. We believe the U.S. annual market opportunity is now $2.2 billion or 76,000 new patients annually as compared to our earlier estimate of $1.4 billion or 55,000 new patients, representing increases of approximately 60% and 38%, respectively. I want to express my gratitude to all the patients, investigators, research teams, the Executive Steering Committee, and FDA personnel who have supported our efforts in conducting the study over seven years, especially considering the challenges encountered during the COVID-19 pandemic. Looking back at 2023, it was a great year for CVRx. Throughout the year, we continued to support the growth of Barostim in the United States through our commercial and marketing efforts, underscoring the benefits that Barostim can provide to healthcare professionals and patients dealing with cardiovascular disease. The year wrapped up on a positive note, including the expanded Barostim labeling and CMS's decision to reassign Barostim to a new APC code. Before turning the call over to Jared, I want to address my decision to retire from CVRx. While there is never a perfect time for a leadership transition, the recent completion of BeAT-HF, the expanded labeling, and the recent reimbursement decision provide a window that now exists before the company embarks on the next phase of growth. I believe now is the right time to bring in a CEO who can build on the achievements of the company and steer CVRx to great success. I'm confident in CVRx's future given the proven benefits of Barostim therapy, our strong commercial traction, and our outstanding leadership team. The board and I are committed to a seamless transition, and I will continue in my current role until a new CEO is appointed. The board has engaged a leading executive search firm to assist in this process. I'll now turn the call over to Jared to review our financials.

Thanks, Nadim. In the fourth quarter, total revenue generated was $11.3 million, representing an increase of $4.1 million or 58% compared to the same period last year. Revenue generated in the U.S. was $10.3 million in the current quarter, reflecting growth of 72% over the same period last year. Heart Failure revenue in the U.S. totaled $10.2 million in the current quarter on a total of 330 revenue units compared to $6 million in the fourth quarter of last year on 193 revenue units. The increase was primarily driven by continued growth as a result of the expansion into new sales territories and new accounts as well as increased physician and patient awareness of Barostim. At the end of the current quarter, we had a total of 178 active implanting centers compared to 106 on December 31, 2022, and 159 on September 30, 2023. We also had 38 sales territories in the U.S. at the end of the current quarter compared to 26 on December 31, 2022, and 35 on September 30, 2023. The revenue generated in Europe was $1 million in the current quarter, representing a decrease of 15% compared to the same period last year. Total revenue units in Europe decreased from 68 in Q4 of 2022 to 52 in the current quarter. The number of sales territories in Europe remained consistent at six for the three months ended December 31, 2023. Gross profit for the three months ended December 31, 2023, was $9.6 million, an increase of $3.9 million compared to the three months ended December 31, 2022. Gross margin for the current quarter increased to 85% compared to 79% for the same period last year. Gross margin for the three months ended December 31, 2023, was higher due to a decrease in the cost per unit and an increase in the average selling price. Research and development expenses for the current quarter were $2.2 million, reflecting a decrease of 26% compared to the same period last year. This change was primarily driven by a $0.7 million decrease in clinical study expenses and a $0.6 million decrease in consulting expenses, partially offset by a $0.3 million increase in compensation expenses, mainly as a result of increased headcount and a $0.1 million increase in noncash stock-based compensation expense. SG&A expenses for the current quarter were $17 million, representing an increase of 21% compared to the same period last year. This change was driven by a $1.7 million increase in compensation expenses, a $0.7 million increase in marketing and advertising expenses, a $0.4 million increase in noncash stock-based compensation expense, and a $0.4 million increase in consulting expenses, partially offset by a $0.1 million decrease in D&O insurance costs and a $0.1 million decrease in professional fees. Interest expense increased $0.4 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. This increase was driven by the interest expense on borrowings under the loan agreement entered into on October 31, 2022. Other income net was $1.1 million for each of the three months ended December 31, 2023 and 2022. Other income net consisted primarily of income on our interest-bearing accounts. Net loss for the current quarter was $9.2 million or $0.44 per share compared to a net loss of $10.5 million or $0.51 per share for the same period last year. Net loss per share was based on 20.8 million weighted average shares outstanding for the fourth quarter of 2023 and 20.6 million weighted average shares outstanding for the fourth quarter of 2022. At the end of the fourth quarter, cash and cash equivalents were $90.6 million. Net cash used in operating and investing activities was $39.6 million in 2023. This is compared to net cash used in operating and investing activities of $43.4 million in 2022. Now turning to guidance. For the full year of 2024, we expect total revenue between $53 million and $57 million. We expect full-year gross margin between 83% and 84%. And we continue to expect operating expenses between $86 million and $90 million. For the first quarter of 2024, we expect to report total revenue between $11 million and $12 million. I would now like to turn the call back over to Nadim.

Thanks, Jared. As we set our sights on 2024, I'm excited about the opportunities that lie ahead for CVRx and the continued expansion of Barostim. Our company is in a fantastic position to capitalize on the opportunities in front of us, thanks to our outstanding leadership team and the consistent execution of our strategic initiatives over the last two years. I believe CVRx is well prepared to continue to execute our strategic plans and drive sustained commercial growth. Reflecting on my 17 years as CEO, it has been an incredible experience and a true honor. I am proud of what we have accomplished and believe the future for CVRx holds immense promises. And now I would like to open the line for questions.

Our first question comes from Margaret Andrew with William Blair. Please proceed with your question.

Hi, good afternoon, guys. Thanks for taking the questions. Nadim, you've heard my comments at JPMorgan, but I'll just say them publicly. Obviously, it's been a pleasure to know you, and glad to have seen CVRx become what it is today. Maybe just to start out with, you guys are coming off an exceptional year of 70% plus growth overall, 95% of U.S. Heart Failure. And yet you kind of look at the first quarter and you're at $11 million to $12 million. So maybe just walk us through the assumptions within that. What are the conservative pieces that you guys use to drive to that guidance range? Thank you.

Hi Margaret, this is Jared. I'll take that one, maybe Nadim can add some color later. So when we put together our guidance, we're looking at how we've been growing the number of territories over the last few quarters and also how the additions for new active implanting centers have been coming on board. And then also taking into consideration the utilization we've seen from those centers as they get more and more experienced. So after taking all of that into consideration, we came out with the guidance for Q1 of $11 million to $12 million, again, seeing a step-up from what we delivered in the fourth quarter of 2023. The other thing I'll just talk about a little bit is seasonality. It's not something that we've seen historically at CVRx, but we have seen other companies that have gone through a similar ramp that we have that start seeing seasonality play a factor as you go into Q1. Again, I don't think we took that into consideration here for the first quarter guidance, but rather just trying to set the bar at a level that we think we can go out and deliver in this first quarter. When I think about the components of being able to hit the full-year guidance, the $53 million to $57 million that we had talked about, something we talked about at the JPMorgan conference was really towards the low end of that range, we're targeting adding about 14 new active implanting centers on a quarterly basis and at the high end, targeting adding about 18 new active implanting centers on a quarterly basis. And then from an ASP perspective, in 2023, we were seeing results of about $31,000 for an ASP in the U.S. Heart Failure side. And as we go into 2024, the range we're looking at is around $29,000 to $30,000, thinking that as we continue to see more and more volume from our implanting centers that we may see some pressure on pricing and see the request for some bigger rebates. And then from a territory perspective, we've been adding at about three per quarter since the IPO. We feel like that is a pretty good pace to continue on, and that's what was factored into that $53 million to $57 million guidance for 2024.

Okay. If we consider the context, I appreciate your insights regarding the centers. You now have a better reimbursement rate and new clinical data. I understand it’s early, and there may not have been a significant clinical conference yet for you to actively present on that. However, where do you stand regarding sales force training and the development of an educational program related to promoting the new label?

Yes. Margaret, I'll take this question. So first, thank you for your previous comments. I am going to miss these interactions for sure when I retire; I'm not there yet, committed to the transition in here as long as how long it takes. I used to remember that I resented some of the difficult questions that you guys would ask me. But for the time, I understood all of the hard work that you put into this and to understanding our business. And I end up enjoying these interactions. To answer your question, yes, now that we have in between Christmas and New Year’s, we got the approval from FDA to be able to communicate all of our efforts right now in January has been about how do we get out and educate patients and physicians. And we have our global sales meeting actually next week to make sure that all of our sales force is trained and equipped with all of these tools. So this is an ongoing process right now to get the word out to patients and providers and payers about the new data. We're very excited about this next phase.

Okay. Great. And just one last question for me. I saw the $7 million burn on a cash rate this past quarter. How should we think about that going forward? Are you guys going to step on the gas pedal in terms of expenses with the label and et cetera? Are you going to continue to try to maintain that cash burn around $7 million or better? Thank you.

Yes. Thanks for the question. We gave guidance around spend on OpEx, seeing an increase there to get us up to about $86 million to $90 million. The vast majority of that growth in spend from '23 to '24 will go into the sales and marketing organization, specifically in the U.S. So we're going to continue to be opportunistic where we can to invest in the business to be able to help more and more patients gain access to this therapy. And then I think it's a bit of a wait and see, right? Let's see how physicians, let's see how patients react to the new clinical data. If the new payment code is a little bit easier for centers to come on board at a little bit of a faster rate, then we'll consider making some additional investments. But the guidance we put out, I think, is being a little prudent in making sure that we're able to maintain that cash burn at or below the levels we've seen historically. And overall, we believe the trend will continue where that burn will come down so that we can use the cash we have on hand to get cash flow breakeven without needing to go out and raise more money.

Our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your question. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Please proceed with your question.

Can you guys hear me okay?

Yes.

Fantastic. Nadim, best of luck in your future endeavors. I hope it takes a long time to find your replacement, and I say that selfishly. I have two questions to ask together, and I hope you'll forgive the length. First, on the pricing side, Jared, are we expecting pricing to remain flat compared to 2023? Or is there potential for an increase given the health of that code? I’m not sure why pricing would decrease. Secondly, when I review the guidance and observe the stock's performance, particularly the slight decline in the aftermarket, it seems to relate to the guidance. It appears to assume a significant slowdown in unit sales growth this year. At the midpoint of the range, it looks like we're expecting about the same number of units as last year. However, with an expanded label and more centers, it seems the total number of units sold should increase compared to last year. Why is that not the case? Why isn't the growth in the U.S. more robust given the positive factors at play? Thank you.

Yes, Matt, regarding pricing, I think this aspect is a bit easier to address first. We previously mentioned that the average selling price for U.S. Heart Failure is expected to be about $31,000 in 2023, with guidance suggesting it will be between $29,000 and $30,000. Additionally, we have observed a price increase for Barostim in 2024, which presents potential for a price rise compared to 2023. However, we anticipated that as our volume increases, we would face greater pressure from customers for larger discounts and rebates. Thus, we are being cautious with our price expectations at the start of the year to see how things develop with the new coding for customers in 2024. We will be monitoring the average price closely in the first and second quarters, and will make updates if necessary for the remainder of the year. In terms of per unit guidance, we expect to see an increase in the number of patients treated from 2023 to 2024, although we have observed a slight decrease in the average selling price. When we formulated our guidance at the start of the year, we aimed for confidence in meeting our targets. We based our model on maintaining productivity since we have previously achieved approximately two revenue units per active implanting center per quarter throughout 2023. This is a figure we reached in the past and felt was a solid basis for our expectations moving into 2024. Similarly, we have successfully added about 18 new centers on a quarterly basis throughout 2023, which aligns well with our guidance for the U.S. One point to mention is Europe, where we have seen consistent quarterly revenue of around $1 million over the last four to six quarters. Consequently, this affects our overall revenue growth rate worldwide, and we are simply hoping for a stable performance from 2023 to 2024 regarding European revenue. I hope that addresses your question.

Yes, understood. Thank you so much.

Our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your question.

Great. Thanks. This time, I won't hit the hangup button instead of the talk button. First off, Nadim, congratulations on your retirement. We'll miss you. For my question, could you walk us through any changes in hospitals since the reimbursement was finalized at the end of last year? Have you noticed it becoming easier to engage with hospitals, discuss reimbursement, get doctors excited, or initiate potential new programs? Just any shift in sentiment out there?

Thank you, Robbie, for your kind words and for your great question. At this point, I can provide a qualitative answer since the code was just implemented on January 1, and we are only a couple of weeks in. We are not ready to comment on the January results yet. However, we anticipate that it will help, especially with site activation, possibly leading to less delay between the first two patients at a site and subsequent patients. After our IPO, we discussed a phenomenon we've been observing for the past two years, where a site becomes an actively implanting center after their first one or two implants. We noticed that there was often a three to four-month pause before they begin considering additional patients. This pause was influenced by two factors: the desire to see the device's effect on their own patients and, more importantly, the complexity of the payment process for hospitals. The calculation for transitional pass-through payments is quite complicated, and very few hospital administrators fully understand how it works. After treating a couple of patients, they wanted to wait to see the payments before moving forward. We believe that having a simple code, which is easily understood and just adjusted for the ZIP code, will help alleviate at least one of these concerns. So, while I cannot provide a quantitative answer at this time, I can say that we are focusing on the qualitative aspects, Robbie.

Great. No, that's helpful. And maybe as you think about balancing, as you talked about in prior questions, balancing your cash burn with now the updated label and the finalized reimbursement. How are you thinking about balancing OpEx spend to drive sales rather than just cash preservation? What goes into the decisions? Why is the amount of OpEx you're spending the right amount? If you spent double it, do you think you'd be able to double your sales? Thanks.

Good question, Robbie, right? I mean the simple question is, have we proven the model, right? And I think we have two more years of experience after the IPO, showing that we've been able to add three territories on a quarterly basis while continuing to see that overall productivity per territory increase as that number continues to grow. And as we see more feedback from customers after the new label from FDA, and after the new code has come out, we're going to continue those conversations as we see the results of those conversations and reactions from physicians and patients through our DTC campaigns, I think that's where we will continue to make some tests, right? And I think some of those investments are baked into the guidance that we gave of the $86 million to $90 million to start, seeing if there are opportunities to continue to spend a little bit more because the goal at the end of the day for us is to help more and more patients. And if we can do that at a faster pace while not diminishing our cash balance too quickly, I think we'll take advantage of it. But that's something that we'll continue to work on throughout 2024.

Our next question comes from the line of Bill Plovanic with Canaccord. Please proceed with your question.

Thank you. Good evening, and I appreciate the chance to ask my questions. To begin, you mentioned the list price increase for 2024. I'm curious about the difference between the list price and the average selling price and if you could provide some quantification on that. Additionally, we were somewhat surprised to see a significant decrease in your R&D expenses. How should we approach OpEx spending in 2024 compared to 2023, particularly in terms of SG&A versus R&D? In R&D, are there any major new projects launching that we should be aware of, or is this more about maintaining the current pace going forward?

Yes, good questions, Bill. Thanks for the question. Regarding the list price, there was a 10% increase for the U.S. business, with the price rising from $35,000 to $38,500. This will serve as the starting point for our contracting discussions as we move into 2024. Concerning the operating expense guidance, the majority of the increase is allocated to selling, general, and administrative expenses. As we have noted, we experienced a reduction in spending due to the conclusion of the BeAT-HF clinical trial throughout 2023. This has resulted in a decrease in overall research and development expenditures, especially in the fourth quarter as we wrap up those trial-related expenses. Currently, we have smaller projects in research and development, such as our post-market registry and ongoing investigator-initiated research programs proposed through our website. We are also in the early stages of designing the next clinical trial. Nadim has previously discussed our admission into an FDA advisory program related to one of our breakthrough device designations, specifically for patients with an ejection fraction above 35%. We will continue to refine that trial design, considering costs and the likelihood of success before deciding to proceed. However, this trial is not included in our 2024 spending guidance at this time.

Okay. And then if I could also ask since we're working the P&L here, just on the gross margin. I'm trying to understand the guide on the gross margin is 83% to 84%. You've been solidly at 84% or above for the past three quarters. What are the dynamics that would cause the gross margin to go down next year, especially considering you're likely to have stable to increasing ASPs and higher volumes.

Yes. Good question. So as we set the guide for 2024, we're looking at the two different components, right, the ASPs and the costs. First, on the ASPs, we've mentioned that the guide is assuming a reduction in that overall U.S. Heart Failure ASP from $31,000 down to closer to that $29,500 at the midpoint. So that can have an impact on the overall gross margin results for '24. And then the second component is the cost. We've talked a lot about as we see the volume increase, we shouldn't see an overall trend of seeing that cost come down. So as we see production go up, the cost should come down. However, if we continue to buy components for these devices, we're going to have to go out and negotiate new contracts with new vendors at different times. And at those points in time, we may see a price increase for the components themselves, not necessarily as much focused on the labor and overhead pieces of that. So both of those factored into our decision to guide us at the 83% to 84% for '24.

Okay. Great. Thanks for taking my questions.

Our next question comes from the line of Alex Nowak with Craig-Hallum. Please proceed with your question.

Okay, great. Good afternoon, everyone. Now with BeAT-HF done, FDA approval in hand, that's all wrapped up. Just holistically, where is Barostim going to go next? There's a ton of potential, as you know, in the baroreceptor stimulation. Does it make sense to spend clinical study dollars to go deeper into the left side of the indication, the increase in the ejection fraction or change in the BNP requirements? Or does it make more sense to really go after a completely new indication?

Alex, excellent question. So we spoke in the past that we believe from the mechanism of action and some previous experiments that the device could have applicability beyond heart failure, particularly we spoke about hypertension, chronic kidney disease, and arrhythmias. And in the past, FDA has granted us, based on previous clinical data that we submitted to FDA two device breakthroughs, breakthrough device designation (BDD), one in heart failure with preserved ejection fraction and one in resistant hypertension. So when we considered both of those two indications, there's just hypertension and HFpEF, it was probably or likely that one of these two will be the second indication we go after. Then when we got invited to be one of the 15 initial pilots that FDA started this year with a new program called the TAP, Total Life Cycle Advisory program, T-A-P, that was limited only to breakthrough designated device indications for new products. We started working with FDA about the HFpEF indication. So this is the heart failure indication with ejection fraction above 35%. For us, it would make more sense to go after this indication for multiple reasons. One of them is the synergy in the sales and marketing efforts. The physicians will be the same. The call points will be the same. Even some of the direct-to-consumer marketing campaigns would be the same. Most of the education will be the same and so forth. Is it a new indication? I would say, yes, because those two diseases are different. And if we are approved in EF above 35%, that would significantly and substantially increase the total addressable market of our therapy. So while we are excited about this opportunity, we are in the early phase of the design of the study. Part of the TAP program is the requirement to collect stakeholder input before we start the enrollment of the trial. So we need to collect it, but not only from the regulators and physicians, but also from patients, payers, guideline committees, and so forth, and we are in this process. We actually had a very constructive meeting last week during the Heart Failure Collaboratory with regulators, payers, patients, and key opinion leaders and medical societies as well in one single meeting. So this is where we are right now. On the question of when do we start this program? It's early to know how long it will take to design or finalize the design of the trial? And then the second question will be the question of spending that Jared was talking about for the previous question.

That's very helpful. Nadim, congratulations on your retirement and on getting to this point. You're still on the board. In your discussions with them about the upcoming transition, is there a plan for you to continue serving on the board? Do you have any insights on that?

Thank you for your question, Alex. Ultimately, I will do everything necessary to ensure that CVRx has the most effective and smooth transition possible between me and the next CEO. I am actively assisting the board with the search process, meeting with the search committee daily to evaluate all candidates, both internal and external. Whether I remain on the board is secondary; the main concern is how I can be most supportive during and after the transition, depending on the needs of the board and the new CEO. This company has been my passion for 17 years, and I am committed to dedicating the necessary time to ensure a seamless transition. Whatever the new CEO and board require, I will do it.

That's good to hear. And then maybe just a quick question for Jared. Whenever we get a new code, hospitals always go through a transition process. For the Q1 guidance, can we assume that there's a little bit of conservatism built in for hospitals going through that transition where they might be a little more hesitant to buy just because they got to figure out the reimbursement dynamics again?

Yes, that’s a good question. When we provide guidance, we consider many different factors and ensure that we are being prudent in setting targets that we can realistically achieve. So, we take all of these aspects into account when establishing the guidance of $11 million to $12 million for the first quarter.

Our final question comes from the line of Frank Takkinen with Lake Street. Please proceed with your question.

Thank you for the questions. I want to add to the comments regarding your succession plans, Nadim. Following up on the discussion about balancing growth ambitions and cash burn, there was a mention at the end about considering a strategy for more aggressive growth if we choose to pursue that. Could you outline some of the key areas you would prioritize if you did decide to invest more aggressively? Would it involve increasing headcount, enhancing AIC activation, or focusing on direct-to-consumer approaches? Please help us understand how you would prioritize these areas if you aimed for faster growth.

Frank, to reiterate, our objective is to treat as many patients as we can. We currently have a strong team in the field across various territories, which allows us to assist more patients. We anticipate continued growth from our existing team. If given the opportunity to invest more rapidly, there are numerous possibilities. Nadim discussed the new indications and emphasized that this is a platform technology. If we successfully conduct clinical trials and secure FDA approvals, it could provide access to a significant number of new patients who would benefit from this therapy. In the short term, we are considering different areas for investment, such as increasing the number of sales representatives in the field or enhancing direct-to-consumer efforts. Our priority is to make these investments thoughtfully; we aim to avoid indiscriminate spending and ensure we’re managing our cash wisely. This approach allows us to operate independently without the need for additional funding. If we choose to raise more capital in the future, it will be a strategic decision based on our success in executing certain business initiatives.

Okay. That's helpful. And then maybe just one more, sticking with the commercial organization. As companies progress through this model, there's always an initial influx of onboarding new centers that are implanting this technology. And then as utilization catches up, sometimes you see a shift to incentivizing the sales force to more aggressively go after improving utilization, just given the leverage effects of doing that once you have a large network of active implanting centers. My assumption is you're still focused probably more on the activation of implanting centers, but maybe talk to how you think about that progression versus new centers versus eventually being more aggressive on pulling the utilization lever.

Frank, that's a great question. In our situation, it's somewhat different because when we activate a center, that is the implanting center, while the referral network supports that center. We must ensure that our sales team is dedicated to training and educating cardiologists in the community to refer patients to that implanting center. This is part of our market development efforts. I won't provide specifics about the incentive plans since we have our global sales meeting next week and our sales team hasn’t received their incentive plan yet. However, I've given you some insights regarding it. The focus is not just on activating the implanting centers but also on building the surrounding referral network. After we activate a center and they perform their initial implants, the goal is to encourage as many referring cardiologists in the area to send their patients to that hospital.

Yes. Frank, I'll also add that as I mentioned in the guidance, we expect to continue adding new centers quarterly at a pace similar to what we've experienced historically. We anticipate growth in two areas: first, the onboarding of new centers, and second, the increased experience of those centers. Historically, we've seen that the more experience they gain, the more patients they treat on average, leading to higher productivity.

Thank you, operator, and thanks to everyone for joining us for our fourth-quarter earnings call. We appreciate your ongoing support, and we look forward to providing you with updates during our next call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.