What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-08-03 · 80 added, 72 removed, 192 unchanged (44% of the section changed)

15 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 while simultaneously developing processes to engage commercial payors.

All Medicare Administrative Contractors have retired automatic coverage denial policies for our Current Procedural Terminology codes, thereby allowing hospitals to be paid for the Barostim procedure.

All Medicare Administrative Contractors have retired their official automatic coverage denial policies for our Current Procedural Terminology codes, thereby allowing hospitals to submit payment requests for the Barostim procedure to be reviewed on a claim-

by-claim basis.

Our reimbursement strategy involves continuing to broaden our current coverage and build our in-house market access team to obtain appropriate prior authorization approvals in advance of treatment on a case-by-case basis where positive coverage policies currently do not exist.

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

On October 31, 2022, we entered into a loan and security 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.

On October 31, 2022, we entered into a loan and security 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 condensed 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.

On March 10, 2023, we borrowed the $7.5 million remaining under the first tranche of the Loan Agreement, with $4.0 million received on March 13, 2023, and $3.5 million received on March 15, 2023 .

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

In August 2023, we delivered a presentation before the Centers for Medicare & Medicaid Services (“CMS”) Advisory Panel on Hospital Outpatient Payment, resulting in a unanimous non-binding vote in favor of mapping Barostim to the higher paying code, New Technology APC1580, which would offer an average reimbursement of $45,000 to hospitals in 2024.

If CMS instead decides to map Barostim to APC5465 without the transitional passthrough payment for 2024, which is the basis for our plans, then the average

reimbursement to hospitals will be approximately $30,000.

The final outpatient payment rule is expected to be published in late November.

Factors affecting our performance

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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.

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.

Research and development expenses

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Interest expense consists of interest on our debt and amortization of associated financing costs.

Other income (expense), net

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.

Other income, net

Other income, net consists primarily of interest income on our interest-bearing accounts, partially offset by the effect of exchange rates on our foreign currency-denominated asset and liability balances.

Provision for income taxes

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Results of operations

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

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

Three months ended

September 30,

(unaudited and in thousands)

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Interest expense

Other income (expense), net

Other income, net

Loss before income taxes

3 unchanged sentences

Three months ended

September 30,

(unaudited and in thousands)

1 unchanged sentence

Total Revenue

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 was $10.5 million for the three months ended September 30, 2023, an increase of $4.3 million, or 70%, over the three months ended September 30, 2022.

Revenue generated in the U.S.

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.

was $9.6 million for the three months ended September 30, 2023, an increase of $4.5 million, or 90%, over the three months ended September 30, 2022.

HF revenue units in the U.S.

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

totaled 303 and 167 for the three months ended September 30, 2023 and 2022, respectively.

HF revenue in the U.S.

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

totaled $9.4 million and $4.9 million for the three months ended September 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.

As of September 30, 2023, we had a total of 159 active implanting centers, as compared to 91 as of September 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 $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.

As of September 30, 2023, we had a total of 35 sales territories as compared to 23 as of September 30, 2022.

Revenue generated in Europe was $0.9 million for the three months ended September 30, 2023, a decrease of $0.2 million, or 19%, over the three months ended September 30, 2022.

Total revenue units in Europe decreased to 47 for the three months ended September 30, 2023, as compared to 61 in the prior year period.

As of both September 30, 2023 and 2022, we had six sales territories in Europe.

Cost of goods sold and gross margin

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.

Cost of goods sold increased $0.4 million, or 26%, to $1.7 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

This increase was primarily due to higher sales of Barostim.

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.

Gross profit was $8.8 million for the three months ended September 30, 2023, an increase of $4.0 million, or 82%, over the three months ended September 30, 2022.

Gross margin increased to 84% for the three months ended September 30, 2023, compared to 78% for the three months ended September 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 $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.

R&D expenses increased $0.4 million, or 18%, to $2.7 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

This change was driven by a $0.3 million increase in compensation expenses as a result of increased headcount and a $0.1 million increase in non-cash stock-based compensation expense.

Selling, general and administrative expenses

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.

SG&A expenses increased $3.0 million, or 23%, to $15.7 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

This change was primarily driven by a $1.9 million increase in compensation expenses, mainly as a result of increased headcount, a $0.5 million increase in non-cash stock-based compensation expense, a $0.3 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S.

and a $0.1 million increase in travel expenses.

Interest expense

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

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

Other income, net

Other income, net increased $0.7 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

This increase was primarily driven by higher interest rates on interest-bearing accounts partially offset by a lower cash balance.

Provision for income taxes

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

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

Consolidated results of operations for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022

Nine months ended

September 30,

(unaudited and in thousands)

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Interest expense

Other income (expense), net

Other income, net

Loss before income taxes

2 unchanged sentences

The following table provides revenue by geography:

Six months ended

Nine months ended

September 30,

(unaudited and in thousands)

1 unchanged sentence

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 was $28.0 million for the nine months ended September 30, 2023, an increase of $12.7 million, or 83%, over the nine months ended September 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.

was $24.8 million for the nine months ended September 30, 2023, an increase of $12.8 million, or 106%, over the nine months ended September 30, 2022.

HF revenue units in the U.S.

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

totaled 793 and 394 for the nine months ended September 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.

totaled $24.5 million and $11.6 million for the nine months ended September 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.

As of September 30, 2023, we had a total of 159 active implanting centers, as compared to 91 as of September 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.

As of September 30, 2023, we had a total of 35 sales territories as compared to 23 as of September 30, 2022.

Revenue generated in Europe was $3.2 million for the nine months ended September 30, 2023, a decrease of $0.1 million, or 3%, over the nine months ended September 30, 2022.

Total revenue units in Europe decreased to 155 for the nine months ended September 30, 2023, as compared to 163 in the prior year period.

As of both September 30, 2023 and 2022, we had six sales territories in Europe.

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.

Cost of goods sold increased $1.0 million, or 30%, to $4.5 million for the nine months ended September 30, 2023, compared to the nine months ended September 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.

Gross profit was $23.5 million for the nine months ended September 30, 2023, an increase of $11.7 million, or 99%, over the nine months ended September 30, 2022.

Gross margin increased to 84% for the nine months ended September 30, 2023, compared to 77% for the nine months ended September 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.

R&D expenses increased $2.5 million, or 36%, to $9.4 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

This change was driven by a $1.4 million increase in compensation expenses as a result of increased headcount, a $0.6 million increase in non-cash stock-based compensation expense and a $0.4 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.

SG&A expenses increased $11.6 million, or 32%, to $47.5 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

This change was primarily driven by a $6.9 million increase in compensation expenses, mainly as a result of increased headcount, a $1.6 million increase in marketing and advertising expenses associated with the commercialization of Barostim in the U.S, a $1.3 million increase in travel expenses, a $1.3 million increase in non-cash stock-based compensation expense and a $0.6 million increase in consulting fees.

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.

Interest expense increased $1.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 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.

Other income, net

Other income, net increased $2.5 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

This increase was primarily driven by higher interest rates on interest-bearing accounts partially offset by a lower cash balance.

Provision for income taxes

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

Provision for income taxes was nominal for each of the nine months ended September 30, 2023 and September 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 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.

As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents of $83.0 million and $106.2 million, respectively.

For the three months ended September 30, 2023 and 2022, our net losses were $9.0 million and $9.8 million, respectively.

For the nine months ended September 30, 2023 and 2022, our net losses were $32.0 million and $30.9 million, respectively.

Our net cash used in operating activities for the nine months ended September 30, 2023 and 2022 was $31.2 million and $31.8 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 condensed 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.

On March 10, 2023, we borrowed the $7.5 million remaining under the first tranche of the Loan Agreement, with $4.0 million received on March 13, 2023, and $3.5 million received on March 15, 2023 .

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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 June 30, 2023, no shares have been sold.

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

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

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● the emergence of competing technologies or other adverse market developments.

We believe that our existing cash resources and Term Loan facility together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years.

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.

We believe that our existing cash resources and Loan Agreement for Term Loans together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years.

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

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

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

Six months ended

Nine months ended

September 30,

(in thousands)

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Cash used in operating activities

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 cash used in operating activities for the nine months ended September 30, 2023 was $31.2 million and consisted primarily of a net loss of $32.0 million and a change in net operating assets of $4.4 million, partially offset by a non-cash charge of $4.7 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 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 cash used in operating activities for the nine months ended September 30, 2022 was $31.8 million and consisted primarily of a net loss of $30.9 million and a change in net operating assets of $4.1 million, partially offset by a non-cash charge of $2.8 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 $0.4 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 used in investing activities was $0.4 million and $0.6 million for each of the nine months ended September 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 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.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $8.4 million and consisted of $7.5 million related to proceeds under the Loan Agreement, $0.5 million related to proceeds from the ESPP and $0.5 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 nine months ended September 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 June 30, 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 September 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 six months ended June 30, 2023.

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

JOBS Act accounting election

5 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