What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-01 compared with 2022-05-02 · 97 added, 41 removed, 213 unchanged (39% of the section changed)

16 unchanged sentences

The costs for the device and implantation procedure are reimbursed through various third-party payors, such as government agencies and commercial payors.

In the U.S., we estimate that 67% of our target patient population is Medicare-eligible based on the age demographic of the HFrEF patient population indicated for

In the U.S., we estimate that 67% of our target patient population is Medicare-eligible based on the age demographic of the HFrEF patient population indicated for Barostim.

As a result, we have prioritized coverage by the Centers for Medicare and Medicaid Services (“ CMS”) while simultaneously developing processes to engage commercial payors.

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As a result, substantially all of our then-scheduled procedures were postponed, and numerous other cases could not be scheduled.

During May 2020, the widespread shutdown resulted in key

physician-society conferences being moved to a virtual setting, which directly impacted our planned commercial launch in the U.S.

During May 2020, the widespread shutdown resulted in key physician-society conferences being moved to a virtual setting, which directly impacted our planned commercial launch in the U.S.

In response to the COVID-19 pandemic, we have implemented a variety of measures intended to help us manage its impact while maintaining business continuity to support our customers and patients.

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However, procedure volumes were again negatively impacted by the Delta and Omicron variants of COVID-19 in the third and fourth quarters of 2021 and continuing into the first quarter of 2022.

By March 2022, implant centers resumed procedures at more normal levels.

By March 2022, and continuing into the second quarter of 2022, implant centers resumed procedures at more normal levels.

We believe the challenges resulting from COVID-19 will likely continue for the duration of the pandemic.

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R&D expenses also include costs associated with product design efforts, development prototypes, testing, clinical trial programs and regulatory activities, contractors and consultants, equipment and software to support our development, facilities and information technology.

We expense research and development costs as they are incurred.

We expense R&D costs as they are incurred.

We expect R&D expenses to increase in absolute dollars as we continue to develop enhancements to Barostim.

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Results of operations

Consolidated results of operations for the three months ended March 31, 2022, compared to the three months ended March 31, 2021

Consolidated results of operations for the three months ended June 30, 2022, compared to the three months ended June 30, 2021

Three months ended

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Total Revenue

Revenue was $4.1 million for the three months ended March 31, 2022, an increase of $1.2 million, or 43%, over the three months ended March 31, 2021.

Revenue was $5.0 million for the three months ended June 30, 2022, an increase of $1.9 million, or 61%, over the three months ended June 30, 2021.

Revenue generated in the U.S.

was $3.1 million for the three months ended March 31, 2022, an increase of $1.4 million, or 90%, over the three months ended March 31, 2021.

was $3.9 million for the three months ended June 30, 2022, an increase of $1.8 million, or 87%, over the three months ended June 30, 2021.

Total HF revenue units in the U.S.

totaled 99 and 44 for the three months ended March 31, 2022 and 2021, respectively.

totaled 128 and 67 for the three months ended June 30, 2022 and 2021, respectively.

HF revenue in the U.S.

totaled $2.9 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively.

totaled $3.8 million for the three months ended June 30, 2022, an increase of $1.8 million, or 90%, over the three months ended June 30, 2021.

The increase was primarily driven by continued growth as a result of the expansion into new sales territories, new accounts and increased physician and patient awareness of Barostim.

As of March 31, 2022, we had a total of 56 active implanting centers, as compared to 19 as of March 31, 2021.

As of June 30, 2022, we had a total of 71 active implanting centers as compared to 31 as of June 30, 2021.

Active implanting centers are customers that have completed at least one commercial HF implant in the last 12 months.

As of March 31, 2022, we had a total of 17 sales territories as compared to 6 as of March 31, 2021.

Revenue generated in Europe was $1.0 million for the three months ended March 31, 2022, a decrease of $0.2 million, or 18%, over the three months ended March 31, 2021.

Total revenue units in Europe were 50 for the three months ended March 31, 2022 as compared to 52 in the prior year period.

The decrease is due to reduced procedure volumes attributable to the impact of COVID-19.

As of March 31, 2022, the Company had a total of six sales territories in Europe.

As of June 30, 2022, we had a total of 20 sales territories as compared to eight as of June 30, 2021.

Revenue generated in Europe was $1.1 million for the three months ended June 30, 2022, an increase of $0.1 million, or 7%, over the three months ended June 30, 2021.

Total revenue units in Europe were 52 for the three months ended June 30, 2022 as compared to 47 in the prior year period.

The slight revenue

increase was primarily due to the lessening impact of the COVID-19 pandemic in Germany, partially offset by an unfavorable currency impact on net sales .

As of June 30, 2022, we had a total of six sales territories in Europe.

Cost of goods sold and gross margin

Cost of goods sold increased $0.1 million, or 9%, to $0.9 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Cost of goods sold increased $0.3 million, or 32%, to $1.2 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

This increase was primarily due to higher sales of Barostim.

Gross profit was $3.1 million for the three months ended March 31, 2022, an increase of $1.1 million, or 57%, over the three months ended March 31, 2021.

Gross margin increased to 77% for the three months ended March 31, 2022, compared to 70% for the three months ended March 31, 2021.

Gross margin for the three months ended March 31, 2022 was higher due to a decrease in the cost per unit and an increase in the average selling price.

Gross profit was $3.8 million for the three months ended June 30, 2022, an increase of $1.6 million, or 73%, over the three months ended June 30, 2021.

Gross margin increased to 76% for the three months ended June 30, 2022, compared to 71% for the three months ended June 30, 2021.

Gross margin for the three months ended June 30, 2022 was higher due to a decrease in the cost per unit and an increase in the average selling price.

This was partially offset by a larger percentage of our revenue units coming from full systems versus battery replacements.

1 unchanged sentence

Research and development expenses

R&D expenses increased $0.5 million, or 29%, to $2.3 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

This change was primarily driven by a $0.3 million increase in compensation expenses, mainly as a result of increased headcount, a $0.3 million increase in clinical study expenses, and a $0.1 million increase in non-cash stock-based compensation expense, partially offset by a $0.2 million decrease in consulting expenses.

R&D expenses increased $0.1 million, or 4%, to $2.4 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

This change was primarily driven by a $0.4 million increase in compensation expenses, mainly as a result of increased headcount, partially offset by a $0.2 million decrease in consulting expenses and a $0.1 million decrease in non-cash stock-based compensation expense.

Selling, general and administrative expenses

SG&A expenses increased $6.3 million, or 142%, to $10.8 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

This was primarily driven by a $3.2 million increase in compensation expenses, mainly as a result of increased headcount, a $0.7 million increase in travel expenses, a $0.7 million increase in insurance costs incurred as a result of becoming a public company, a $0.6 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S., a $0.6 million increase in non-cash stock-based compensation expense, a $0.3 million increase in consulting expenses, and a $0.2 million increase in professional fees.

SG&A expenses increased $6.9 million, or 122%, to $12.5 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

This was primarily driven by a $3.4 million increase in compensation expenses, mainly as a result of increased headcount, a $0.7 million increase in travel expenses, a $0.6 million increase in public company costs, a $0.6 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S., and a $0.5 million increase in non-cash stock-based compensation expense.

Interest expense

Interest expense decreased $0.6 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Interest expense decreased $0.6 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

This decrease was driven by the repayment of the outstanding debt under the loan agreement with Horizon Technology Finance Corporation (the “Horizon loan agreement”) in November 2021.

Other expense, net

Other expense, net was $0.1 million for the three months ended March 31, 2022, compared to $3.8 million for the three months ended March 31, 2021.

The expense in the first quarter of 2021 was primarily driven by the increase in fair value of the convertible preferred stock warrant liability from December 31, 2020 to March 31, 2021.

As these preferred stock warrants converted to common stock warrants upon the IPO, there is no longer a change in fair value recorded into other expense, net.

Other expense, net was nominal for the three months ended June 30, 2022, compared to $11.4 million for the three months ended June 30, 2021.

The expense in the second quarter of 2021 was primarily driven by the increase in fair value of the convertible preferred stock warrant liability from March 31, 2021 to June 30, 2021.

As these preferred stock warrants converted to common stock warrants upon the IPO, there is no longer a change in fair value recorded in other expense, net.

Provision for income taxes

Provision for income taxes was nominal for each of the three months ended March 31, 2022 and March 31, 2021.

Provision for income taxes was nominal for each of the three months ended June 30, 2022 and June 30, 2021.

Consolidated results of operations for the six months ended June 30, 2022, compared to the six months ended June 30, 2021

Six months ended

(unaudited and in thousands)

Cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Interest expense

Other expense, net

Loss before income taxes

Provision for income taxes

NM – Not meaningful

Revenue by Geography

Six months ended

(unaudited and in thousands)

United States

Total Revenue

Revenue was $9.1 million for the six months ended June 30, 2022, an increase of $3.1 million, or 52%, over the six months ended June 30, 2021.

Revenue generated in the U.S.

was $7.0 million for the six months ended June 30, 2022, an increase of $3.3 million, or 88%, over the six months ended June 30, 2021.

Total HF revenue units in the U.S.

totaled 227 and 111 for the six months ended June 30, 2022 and 2021, respectively.

HF revenue in the U.S.

totaled $6.7 million for the six months ended June 30, 2022, an increase of $3.5 million, or 106%, over the six months ended June 30, 2021.

The increase was primarily driven by continued growth as a result of the expansion into new sales territories, new accounts and increased physician and patient awareness of Barostim.

Revenue generated in Europe was $2.1 million for the six months ended June 30, 2022, a decrease of $0.2 million, or 7%, over the six months ended June 30, 2021.

Total revenue units in Europe were 102 for the six months ended June 30, 2022 as compared to 99 in the prior year period.

The decrease is due to an unfavorable currency impact on net sales.

As of June 30, 2022, the Company had a total of six sales territories in Europe.

Cost of goods sold and gross margin

Cost of goods sold increased $0.4 million, or 21%, to $2.2 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

This increase was primarily due to higher sales of Barostim.

Gross profit was $7.0 million for the six months ended June 30, 2022, an increase of $2.8 million, or 66%, over the six months ended June 30, 2021.

Gross margin increased to 76% for the six months ended June 30, 2022, compared to 70% for the six months ended June 30, 2021.

Gross margin for the six months ended June 30, 2022 was higher due to a decrease in the cost per unit and an increase in the average selling price.

This was partially offset by a larger percentage of our revenue units coming from full systems versus battery replacements.

Research and development expenses

R&D expenses increased $0.6 million, or 15%, to $4.6 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

This change was primarily driven by an increase in compensation expenses, mainly as a result of increased headcount.

Selling, general and administrative expenses

SG&A expenses increased $13.2 million, or 131%, to $23.3 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

This was primarily driven by a $6.7 million increase in compensation expenses, mainly as a result of increased headcount, a $1.3 million increase in travel expenses, a $1.3 million increase in public company costs, a $1.2 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S., and a $1.1 million increase in non-cash stock-based compensation expense.

Interest expense

Interest expense decreased $1.2 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

This decrease was driven by the repayment of the outstanding debt under the Horizon loan agreement in November 2021.

Other expense, net

Other expense, net was $0.1 million for the six months ended June 30, 2022, compared to $15.2 million for the six months ended June 30, 2021.

The expense for the six months ended June 30, 2021 was primarily driven by the increase in fair value of the convertible preferred stock warrant liability from December 31, 2020 to June 30, 2021.

As these preferred stock warrants converted to common stock warrants upon the IPO, there is no longer a change in fair value recorded in other expense, net.

Provision for income taxes

Provision for income taxes was nominal for each of the six months ended June 30, 2022 and June 30, 2021.

Liquidity, capital resources and plan of operations

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years.

As of March 31, 2022 and December 31, 2021, we had cash and cash equivalents of $131.2 million and $142.1 million, respectively.

For the three months ended March 31, 2022 and 2021, our net losses were $10.0 million and $8.6 million, respectively.

Our net cash used in operating activities for the three months ended March 31, 2022 and 2021 were $10.6 million and $5.0 million, respectively.

As of June 30, 2022 and December 31, 2021, we had cash and cash equivalents of $121.3 million and $142.1 million, respectively.

For the three months ended June 30, 2022 and 2021, our net losses were $11.1 million and $17.7 million, respectively.

For the six months ended June 30, 2022 and 2021, our net losses were $21.1 million and $26.4 million, respectively.

Our net cash used in operating activities for the six months ended June 30, 2022 and 2021 were $20.7 million and $11.5 million, respectively.

Prior to the IPO, our operations were financed primarily by aggregate net proceeds from the sale of our convertible preferred stock of $383.1 million, as well as debt financings.

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The following table sets forth the primary sources and uses of cash for each of the periods indicated below:

Three months ended

Six months ended

(in thousands)

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Cash used in operating activities

Net cash used in operating activities for the three months ended March 31, 2022 was $10.6 million and consisted primarily of a net loss of $10.0 million and a decrease in net operating assets of $1.5 million, partially offset by a non-cash charge of $0.8 million related to stock-based compensation expense.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses, accounts payable and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the three months ended March 31, 2021 was $5.0 million and consisted primarily of a net loss of $8.6 million and a decrease in net operating assets of $0.3 million, partially offset by non-cash charges of $3.7 million related to the fair value adjustment to our convertible preferred stock warrants.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses, accounts payable and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the six months ended June 30, 2022 was $20.7 million and consisted primarily of a net loss of $21.1 million and a decrease in net operating assets of $1.7 million, partially offset by a non-cash charge of $1.9 million related to stock-based compensation expense.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the six months ended June 30, 2021 was $11.5 million and consisted primarily of a net loss of $26.4 million and a decrease in net operating assets of $1.2 million, partially offset by non-cash charges of $15.1 million related to the fair value adjustment to our convertible preferred stock warrants and $0.7 million from non-cash stock-based compensation expense.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Cash used in investing activities:

Cash used in investing activities was $0.3 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively, and consisted of purchases of property and equipment.

Cash used in investing activities was $0.3 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities were nominal for the three months ended March 31, 2022 and 2021, and were entirely attributed to the proceeds from the exercise of common stock options.

Net cash provided by financing activities for the six months ended June 30, 2022 was $0.4 million and consisted of $0.3 million related to proceeds from the ESPP and $0.1 million related to proceeds from the exercise of common stock options.

Net cash provided by financing activities for the six months ended June 30, 2021 was nominal.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of March 31, 2022, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no material changes to our contractual obligations as of June 30, 2022, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Critical accounting policies and estimates

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We base our estimates on historical experience and on various other assumptions that we believe to be reasonable and supportable under the circumstances.

The results of this evaluation then form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The results of this evaluation then form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

Actual results may differ from these estimates under different assumptions or conditions, and such differences may be material to our condensed consolidated financial statements.

30 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis