What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-11 · 106 added, 55 removed, 158 unchanged (50% of the section changed)

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Food and Drug Administration (“FDA”) to improve the symptoms of patients with HFrEF and is CE Marked for HFrEF and resistant hypertension.

Since our inception we have generated minimal revenue, as our activities have consisted primarily of developing Barostim Therapy, conducting our BeAT-HF pre-market and post-market pivotal studies in the U.S.

and filing for regulatory approvals.

Our ability to generate revenue from product sales and become profitable will depend on our ability to continue to successfully commercialize Barostim and any product enhancements we may advance in the future.

Since our inception, our activities have consisted primarily of developing Barostim Therapy, conducting our BeAT-HF pre-market and post-market pivotal studies in the U.S., and filing for regulatory approvals.

Our ability to generate significant revenue from product sales and become profitable will depend on our ability to continue to successfully commercialize Barostim and any product enhancements we may advance in the future.

We expect to derive future revenue by continuing to both expand our own dedicated salesforce and increase awareness of Barostim among payors, physicians, and patients.

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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 Barostim.

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

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

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We used a portion of the IPO proceeds to continue funding the expansion of our direct sales force and commercial organization related to Barostim in the U.S.

We continued investing in research and development in the near term to improve clinical outcomes, optimize patient adoption and comfort, increase patient access and enhance the physician and patient experience.

We have continued investing in research and development to improve clinical outcomes, optimize patient adoption and comfort, increase patient access, and enhance the physician and patient experience.

Longer term, we plan to explore Barostim’s potential to expand its indications for use to other cardiovascular diseases.

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In February 2023, we were unblinded to the morbidity and mortality data from the BeAT-HF pivotal trial.

The totality of the evidence from the trial shows long-term benefits for patients with heart failure.

The totality of the evidence from the trial shows long-term benefits for patients with HF.

While the trial did not reach statistical significance on the primary endpoint, it did contain additional clinically meaningful prespecified analyses favoring Barostim.

Accordingly, we anticipate making a regulatory submission to the FDA for expanded labeling.

We filed a regulatory submission to the FDA for expanded labeling in early June 2023.

If successful, this label expansion could expand our addressable patient population.

The COVID-19 pandemic has negatively impacted our business, financial condition and results of operations by decreasing and delaying procedures performed to implant Barostim.

Beginning in March 2020, our revenue was negatively impacted by COVID-19 as healthcare facilities and clinics began restricting in-person access to their clinicians, reducing patient consultations and treatments or temporarily closing their facilities.

While the impact of the pandemic has lessened in 2023, the extent to which the pandemic may impact our business, financial condition and results of operations remains uncertain, especially in the event of any resurgence or variants that may affect public health and the economy.

Factors affecting our performance

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Components of results of operations

sales have increased since the pre-market approval of Barostim by the FDA in August 2019, and the subsequent reimbursement changes in 2020.

sales have steadily increased since the pre-market approval of Barostim by the FDA in August 2019, and the subsequent reimbursement changes.

We expect to continue to drive increases in revenue through our efforts to increase awareness of Barostim among physicians, patients, and payors and by the expansion of our U.S.

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The manufacturing overhead costs of Barostim are directly aligned to our production volume and therefore the cost per product is reduced if production levels increase.

While we expect our gross margin to be positively affected over time to the extent we are successful in selling more product through our direct sales force and by increasing our production volumes, it will likely fluctuate from period to period as we continue to introduce new products and adopt new manufacturing processes and technologies.

period to period as we continue to introduce new products and adopt new manufacturing processes and technologies.

Research and development expenses

Research and development (“R&D”) expenses consist primarily of personnel costs, including salaries, bonuses, employee benefits and stock-based compensation expenses for our R&D employees.

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.

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 R&D costs as they are incurred.

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Other income (expense), net

Other income, net consists primarily of interest income on our interest-bearing account.

Other income, net consists primarily of interest income on our interest-bearing accounts.

Other expense, net consists primarily of the effect of exchange rates on our foreign currency-denominated asset and liability balances.

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Results of operations

Consolidated results of operations for the three months ended March 31, 2023, compared to the three months ended March 31, 2022

Consolidated results of operations for the three months ended June 30, 2023, compared to the three months ended June 30, 2022

Three months ended

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Total Revenue

Revenue was $8.0 million for the three months ended March 31, 2023, an increase of $3.9 million, or 96%, over the three months ended March 31, 2022.

Revenue was $9.5 million for the three months ended June 30, 2023, an increase of $4.5 million, or 89%, over the three months ended June 30, 2022.

Revenue generated in the U.S.

was $6.9 million for the three months ended March 31, 2023, an increase of $3.9 million, or 127%, over the three months ended March 31, 2022.

Total HF revenue units in the U.S.

totaled 225 and 99 for the three months ended March 31, 2023 and 2022, respectively.

was $8.3 million for the three months ended June 30, 2023, an increase of $4.4 million, or 111%, over the three months ended June 30, 2022.

HF revenue units in the U.S.

totaled 265 and 128 for the three months ended June 30, 2023 and 2022, respectively.

HF revenue in the U.S.

totaled $6.8 million for the three months ended March 31, 2023, an increase of $3.9 million, or 132%, over the three months ended March 31, 2022.

The increase was primarily driven by continued growth in the U.S.

totaled $8.3 million and $3.8 million for the three months ended June 30, 2023 and 2022, respectively.

The increases were primarily driven by continued growth in the U.S.

HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

As of March 31, 2023, we had a total of 122 active implanting centers as compared to 56 as of March 31, 2022.

As of June 30, 2023, we had a total of 140 active implanting centers, as compared to 71 as of June 30, 2022.

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

As of March 31, 2023, the Company had a total of 29 sales territories as compared to 17 as of March 31, 2022.

Revenue generated in Europe was $1.0 million for the three months ended March 31, 2023, an increase of $19,000, or 2%, over the three months ended March 31, 2022.

Total revenue units in Europe were 52 for the three months ended March 31, 2023 as compared to 50 in the prior year period.

As of March 31, 2023, we had a total of six sales territories in Europe.

As of June 30, 2023, the Company had a total of 32 sales territories as compared to 20 as of June 30, 2022.

Revenue generated in Europe was $1.2 million for the three months ended June 30, 2023, an increase of $0.1 million, or 10%, over the three months ended June 30, 2022.

Total revenue units in Europe increased to

56 for the three months ended June 30, 2023 as compared to 52 in the prior year period.

The number of sales territories in Europe remained consistent at six for the three months ended June 30, 2023.

Cost of goods sold and gross margin

Cost of goods sold increased $0.4 million, or 40%, to $1.3 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Cost of goods sold increased $0.3 million, or 26%, to $1.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

This increase was primarily due to higher sales of Barostim.

Gross profit was $6.7 million for the three months ended March 31, 2023, an increase of $3.5 million, or 113%, over the three months ended March 31, 2022.

Gross margin increased to 83% for the three months ended March 31, 2023, compared to 77% for the three months ended March 31, 2022.

Gross margin for the three months ended March 31, 2023 improved due primarily to a decrease in the cost per unit driven by an increase in the production volume.

Gross profit was $8.0 million for the three months ended June 30, 2023, an increase of $4.2 million, or 108%, over the three months ended June 30, 2022.

Gross margin increased to 84% for the three months ended June 30, 2023, compared to 76% for the three months ended June 30, 2022.

This increase was due primarily to a decrease in the cost per unit driven by an increase in the production volume.

Research and development expenses

R&D expenses increased $1.2 million, or 51%, to $3.4 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

This change was primarily driven by a $0.5 million increase in compensation expenses, mainly as a result of increased headcount, a $0.4 million increase in non-cash stock-based compensation expense and a $0.4 million increase in consulting fees.

R&D expenses increased $0.9 million, or 39%, to $3.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

This change was driven by a $0.6 million increase in compensation expenses as a result of increased headcount, a $0.1 million increase in non-cash stock-based compensation expense, and a $0.1 million increase in consulting fees.

Selling, general and administrative expenses

SG&A expenses increased $4.6 million, or 43%, to $15.4 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

This change was primarily driven by a $2.6 million increase in compensation expenses, mainly as a result of increased headcount, a $0.8 million increase in travel expenses, 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.

SG&A expenses increased $4.0 million, or 32%, to $16.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

This change was primarily driven by a $2.5 million increase in compensation expenses, mainly as a result of increased headcount, a $0.8 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S., a $0.4 million increase in travel expenses, and a $0.3 million increase in non-cash stock-based compensation expense.

Interest expense

Interest expense increased $0.2 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

This increase was driven by the interest expense on the Loan Agreement.

Interest expense increased $0.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Other income (expense), net

Other income, net was $1.1 million for the three months ended March 31, 2023, compared to other expense, net of $0.1 million for the three months ended March 31, 2022.

The income in the first quarter of 2023 was primarily driven by interest income on our interest-bearing account.

Other income, net was $0.6 million for the three months ended June 30, 2023, compared to other expense, net of $34,000 for the three months ended June 30, 2022.

The income for the three months ended June 30, 2023 was primarily driven by interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the three months ended March 31, 2023, and March 31, 2022.

Provision for income taxes was nominal for each of the three months ended June 30, 2023 and June 30, 2022.

Consolidated results of operations for the six months ended June 30, 2023, compared to the six months ended June 30, 2022

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 income (expense), net

Loss before income taxes

Provision for income taxes

NM – Not meaningful

The following table provides revenue by geography:

Six months ended

(unaudited and in thousands)

United States

Total Revenue

Revenue was $17.5 million for the six months ended June 30, 2023, an increase of $8.4 million, or 92%, over the six months ended June 30, 2022.

Revenue generated in the U.S.

was $15.2 million for the six months ended June 30, 2023, an increase of $8.2 million, or 118%, over the six months ended June 30, 2022.

HF revenue units in the U.S.

totaled 490 and 227 for the six months ended June 30, 2023 and 2022, respectively.

HF revenue in the U.S.

totaled $15.1 million and $6.7 million for the six months ended June 30, 2023 and 2022, respectively.

The increases were primarily driven by continued growth in the U.S.

HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

As of June 30, 2023, we had a total of 140 active implanting centers, as compared to 71 as of June 30, 2022.

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

As of June 30, 2023, the Company had a total of 32 sales territories as compared to 20 as of June 30, 2022.

Revenue generated in Europe was $2.2 million for the six months ended June 30, 2023, an increase of $0.1 million, or 6%, over the six months ended June 30, 2022.

Total revenue units in Europe increased to 108 for the six months ended June 30, 2023 as compared to 102 in the prior year period.

The number of sales territories in Europe remained consistent at six for the three months ended June 30, 2023.

Cost of goods sold and gross margin

Cost of goods sold increased $0.7 million, or 32%, to $2.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

This increase was primarily due to higher sales of Barostim.

Gross profit was $14.6 million for the six months ended June 30, 2023, an increase of $7.7 million, or 110%, over the six months ended June 30, 2022.

Gross margin increased to 84% for the six months ended June 30, 2023, compared to 76% for the six months ended June 30, 2022.

This increase was due primarily to a decrease in the cost per unit driven by an increase in the production volume.

Research and development expenses

R&D expenses increased $2.1 million, or 45%, to $6.7 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

This change was driven by a $1.1 million increase in compensation expenses as a result of increased headcount, a $0.5 million increase in non-cash stock-based compensation expense and a $0.5 million increase in consulting fees.

Selling, general and administrative expenses

SG&A expenses increased $8.6 million, or 37%, to $31.9 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

This change was primarily driven by a $5.0 million increase in compensation expenses, mainly as a result of increased headcount, a $1.3 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S, a $1.2 million increase in travel expenses, and a $0.8 million increase in non-cash stock-based compensation expense.

Interest expense

Interest expense increased $0.7 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Other income (expense), net

Other income, net was $1.7 million for the six months ended June 30, 2023, compared to other expense, net of $0.1 million for the six months ended June 30, 2022.

The income for the six months ended June 30, 2023 was primarily driven by interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the six months ended June 30, 2023 and June 30, 2022.

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, 2023 and December 31, 2022, we had cash and cash equivalents of $103.3 million and $106.2 million, respectively.

For the three months ended March 31, 2023 and 2022, our net losses were $11.4 million and $10.0 million, respectively.

Our net cash used in operating activities for the three months ended March 31, 2023 and 2022 was $10.2 million and $10.6 million, respectively.

As of June 30, 2023 and December 31, 2022, we had cash and cash equivalents of $90.8 million and $106.2 million, respectively.

For the three months ended June 30, 2023 and 2022, our net losses were $11.7 million and $11.1 million, respectively.

For the six months ended June 30, 2023 and 2022, our net losses were $23.0 million and $21.1 million, respectively.

Our net cash used in operating activities for the six months ended June 30, 2023 and 2022 was $23.1 million and $20.7 million, respectively.

On October 31, 2022, we entered into the Loan Agreement under which we may borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of Term Loans described in Note 4 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and we borrowed $7.5 million of such total on that date to fund our commercial and investment efforts.

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On November 4, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co., as agent, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” or ATM offering, to or through the agent.

As of March 31, 2023, no shares have been sold.

As of June 30, 2023, no shares have been sold.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

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If these sources are insufficient to satisfy our liquidity requirements, however, we may seek to sell additional equity or enter into an additional loan agreement.

If we raise additional funds by issuing equity securities, our stockholders would experience dilution.

If we were to raise additional funds by issuing equity securities, our stockholders would experience dilution.

Additional debt financing, if available, may involve covenants further restricting our operations or our ability to incur additional debt.

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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, 2023, was $10.2 million and consisted primarily of a net loss of $11.4 million and a decrease in net operating assets of $0.7 million, partially offset by a non-cash charge of $1.7 million related to stock-based compensation expense.

Net cash used in operating activities for the six months ended June 30, 2023 was $23.1 million and consisted primarily of a net loss of $23.0 million and a change in net operating assets of $3.5 million, partially offset by a non-cash charge of $3.2 million related to stock-based compensation expense.

Net operating assets consisted primarily of accounts receivable, inventory, 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 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 six months ended June 30, 2022 was $20.7 million and consisted primarily of a net loss of $21.1 million and a change 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.

Cash used in investing activities:

Cash used in investing activities was $0.2 million and $0.3 million for each of the three months ended March 31, 2023 and 2022, respectively, and consisted of purchases of property and equipment.

Cash used in investing activities was $0.4 million and $0.3 million for each of the six months ended June 30, 2023 and 2022, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities for the three months ended March 31, 2023, was $7.6 million and consisted of $7.5 million related to the proceeds under the Loan Agreement and $0.1 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

Net cash provided by financing activities was nominal for the three months ended March 31, 2022, and was 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, 2023 was $8.0 million and consisted of $7.5 million related to the proceeds under the Loan Agreement, $0.5 million related to proceeds from the ESPP and $0.2 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

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.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of March 31, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes to our contractual obligations as of June 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Critical accounting policies and estimates

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in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the three months ended March 31, 2023.

reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the six months ended June 30, 2023.

JOBS Act accounting election

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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