What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-01 · 53 added, 128 removed, 140 unchanged (56% of the section changed)

15 unchanged sentences

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

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 Barostim.

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

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We seek to maintain higher levels of inventory to protect ourselves from supply interruptions and continue to seek to broaden and strengthen our supply chain through additional sourcing channels.

From our inception until the IPO, we financed our operations primarily through preferred stock financings, and additionally, from sales of our Barostim products and amounts borrowed under our credit facilities.

We then devoted substantially all of our resources to research and development activities related to Barostim Therapy, including clinical and regulatory initiatives to obtain marketing approval and sales and marketing activities.

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 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.

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.

On December 15, 2023, we borrowed $15.0 million under the second tranche of the Loan Agreement.

On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement.

W e had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 2024.

On October 31, 2022, we entered into the Loan Agreement allowing borrowing, 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.

W e had $50.0 million in outstanding Term Loans under the Loan Agreement as of March 31, 2025.

As a result of these investments and our commercialization efforts, we expect to continue to incur net losses for the next several years, which may require additional funding and could include future equity and debt financing.

Recent developments

In the 2024 final outpatient rules (“OPPS”) issued in November 2023, Barostim was reassigned to New Technology APC 1580, which carries an average payment amount of $45,000.

The new payment took effect January 1, 2024.

In July 2024, the Centers for Medicare and Medicaid Services (“CMS”) proposed OPPS rules for 2025, including moving Barostim procedures back to APC 5465, which would reduce the average payment amount for Barostim to $31,000.

We believe the data supports creation of a Level 6 Neurostimulator

APC and will work with CMS with the goal of achieving this, or alternatively, leaving Barostim in New Technology APC 1580 for another year.

In August 2024, we announced that CMS has reassigned the Barostim implant procedure for the inpatient setting as part of the Medicare Hospital Inpatient Prospective Payment System (“IPPS”) final rule for CMS’ Fiscal Year 2025, which began on October 1, 2024.

On that date, Barostim was reassigned to MS-DRG 276, which carries a national average payment of approximately $43,000, a significant increase from the previous payment range of $17,000-$23,000, which is expected to facilitate increased access to the therapy for patients with heart failure.

The American Medical Association's CPT Editorial Panel approved new Category I codes for Barostim therapy, effective January 1, 2026.

Led by the Society for Vascular Surgery with support from the American College of Cardiology, this advancement from Category III to Category I status reflects Barostim's growing adoption and established clinical evidence in treating heart failure symptoms.

The new designation is expected to streamline reimbursement processes and expand access to this important therapy for heart failure patients.

Factors affecting our performance

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commercial organization;

● Seeking expanded labeling for Barostim and promoting awareness among physicians, hospitals and patients to accelerate adoption of Barostim;

● Promoting awareness among physicians, hospitals, and patients to accelerate adoption of Barostim;

● Continuing to develop and disseminate clinical evidence supporting the benefits of Barostim;

● Raising awareness among payers to build upon reimbursement for Barostim;

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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 payers, and by the expansion of our U.S.

We expect to continue to drive increases in revenue through our efforts to increase awareness of Barostim among physicians, patients and payers, and

by the expansion of our U.S.

sales force, as well as by seeking expanded labeling for Barostim.

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Cost of goods sold consists primarily of acquisition costs of the components and subassemblies of Barostim, allocated manufacturing overhead and scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs.

We expect cost of goods sold to increase in absolute dollars

primarily as, and to the extent, our revenue grows.

We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows.

Gross margin may also vary based on regional differences in rebates and incentives negotiated with certain customers.

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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.

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 or modified products and adopt new manufacturing processes and technologies.

Research and development expenses

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Results of operations

Consolidated results of operations for the three months ended September 30, 2024, compared to the three months ended September 30, 2023

Consolidated results of operations for the three months ended March 31, 2025, compared to the three months ended March 31, 2024

Three months ended

September 30,

(unaudited and in thousands)

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Loss before income taxes

Provision for income taxes

Benefit (provision) for income taxes

The following table provides revenue by geography:

Three months ended

September 30,

(unaudited and in thousands)

1 unchanged sentence

Total Revenue

Revenue was $13.4 million for the three months ended September 30, 2024, an increase of $2.9 million, or 27%, over the three months ended September 30, 2023.

Revenue was $12.3 million for the three months ended March 31, 2025, an increase of $1.6 million, or 15%, over the three months ended March 31, 2024.

Revenue generated in the U.S.

was $12.3 million for the three months ended September 30, 2024, an increase of $2.7 million, or 28%, over the three months ended September 30, 2023.

HF revenue units in the U.S.

totaled 391 and 303 for the three months ended September 30, 2024 and 2023, respectively.

was $11.2 million for the three months ended March 31, 2025, an increase of $1.4 million, or 14%, over the three months ended March 31, 2024.

HF revenue in the U.S.

totaled $12.2 million and $9.4 million for the three months ended September 30, 2024 and 2023, 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 September 30, 2024, we had a total of 208 active implanting centers in the U.S., as compared to 159 as of September 30, 2023.

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

As of September 30, 2024, we had a total of 45 sales territories in the U.S.

as compared to 35 sales territories as of September 30, 2023.

Revenue generated in Europe was $1.1 million for the three months ended September 30, 2024, a nominal increase compared to the three months ended September 30, 2023.

Total revenue units in Europe increased to 56 for the three months ended September 30, 2024, as compared to 47 in the prior year period.

As of both September 30, 2024 and 2023, we had six sales territories in Europe.

Cost of goods sold and gross margin

Cost of goods sold increased $0.6 million, or 33%, to $2.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This increase was driven by higher sales of Barostim.

Gross profit was $11.1 million for the three months ended September 30, 2024, an increase of $2.3 million, or 26%, over the three months ended September 30, 2023.

Gross margin was 83% and 84% for the three months ended September 30, 2024 and September 30, 2023, respectively.

Research and development expenses

R&D expenses decreased $0.2 million, or 7%, to $2.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This change was driven by a $0.2 million decrease in consulting expenses.

Selling, general and administrative expenses

SG&A expenses increased $6.0 million, or 38%, to $21.6 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This change was primarily driven by a $3.7 million increase in compensation expenses, mainly as a result of increased headcount, a $1.1 million increase in non-cash stock-based compensation expense, a $0.5 million increase in travel expenses, and a $0.4 million increase in advertising expenses.

Interest expense

Interest expense increased $0.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

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

Other income, net

Other income, net decreased $0.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This decrease was primarily driven by less interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the three months ended September 30, 2024 and September 30, 2023.

Consolidated results of operations for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023

Nine months ended

September 30,

(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, net

Loss before income taxes

Provision for income taxes

The following table provides revenue by geography:

Nine months ended

September 30,

(unaudited and in thousands)

United States

Total Revenue

Revenue was $36.0 million for the nine months ended September 30, 2024, an increase of $8.0 million, or 28%, over the nine months ended September 30, 2023.

Revenue generated in the U.S.

was $32.8 million for the nine months ended September 30, 2024, an increase of $8.0 million, or 32%, over the nine months ended September 30, 2023.

totaled $11.1 million and $9.7 million for the three months ended March 31, 2025 and 2024, respectively.

HF revenue units in the U.S.

totaled 1,049 and 793 for the nine months ended September 30, 2024 and 2023, respectively.

HF revenue in the U.S.

totaled $32.5 million and $24.5 million for the nine months ended September 30, 2024 and 2023, respectively.

totaled 353 and 319 for the three months ended March 31, 2025 and 2024, 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.

Revenue generated in Europe was $3.1 million for the nine months ended September 30, 2024, a nominal decrease compared to the nine months ended September 30, 2023.

Total revenue units in Europe increased to 163 for the nine months ended September 30, 2024, as compared to 155 in the prior year period.

As of March 31, 2025, we had a total of 227 active implanting centers in the U.S., as compared to 190 as of March 31, 2024.

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

As of March 31, 2025, we had a total of 45 sales territories in the U.S.

as compared to 39 sales territories as of March 31, 2024.

Revenue generated in Europe was $1.1 million for the three months ended March 31, 2025, a $0.2 million increase compared to the three months ended March 31, 2024.

Total revenue units in Europe increased to 59 for the three months ended March 31, 2025, as compared to 44 in the prior year period.

As of March 31, 2025 we had five sales territories in Europe as compared to six sales territories as of March 31, 2024 .

Cost of goods sold and gross margin

Cost of goods sold increased $1.2 million, or 27%, to $5.8 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Cost of goods sold increased $0.4 million, or 26%, to $2.0 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This increase was driven by higher sales of Barostim.

Gross profit was $30.2 million for the nine months ended September 30, 2024, an increase of $6.7 million, or 29%, over the nine months ended September 30, 2023.

Gross margin was 84% for each of the nine months ended September 30, 2024 and September 30, 2023.

Gross profit was $10.3 million for the three months ended March 31, 2025, an increase of $1.2 million, or 13%, over the three months ended March 31, 2024.

Gross margin was 84% and 85% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Research and development expenses

R&D expenses decreased $1.1 million, or 11%, to $8.3 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This change was driven by a $0.7 million decrease in consulting expenses, a $0.1 million decrease in travel expenses, a $0.1 million decrease in non-cash stock-based compensation expense, and a $0.1 million decrease in compensation expenses.

R&D expenses decreased $0.5 million, or 18%, to $2.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This change was driven by a $0.4 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 $23.6 million, or 50%, to $71.1 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This change was primarily driven by an $11.7 million increase in non-cash stock-based compensation expense, an $8.2 million increase in compensation expenses, mainly as a result of increased headcount, a $1.2 million increase in travel expenses, a $0.9 million increase in advertising expenses, and a $0.5 million increase in consulting expenses.

Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the modification of stock options held by the former CEO in connection with his retirement in the first quarter of 2024 described in Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

SG&A expenses decreased $7.1 million, or 25%, to $21.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This change was primarily driven by an $8.6 million decrease in non-cash stock-based compensation expense, partially offset by a $1.6 million increase in compensation expenses, mainly as a result of increased headcount.

Approximately $8.4 million of the decrease in non-cash stock-based compensation expense is related to the modification of stock options held by our former Chief Executive Officer in connection with his retirement in the first quarter of 2024 described in Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense

Interest expense increased $1.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

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

Interest expense increased $0.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement.

Other income, net

Other income, net increased $0.2 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This increase was primarily driven by greater interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the nine months ended September 30, 2024 and September 30, 2023.

Other income, net increased $0.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This increase was primarily driven by more interest income on our interest-bearing accounts.

Benefit (provision) for income taxes

Benefit (provision) for income taxes was nominal for each of the three months ended March 31, 2025 and March 31, 2024.

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 September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $100.2 million and $90.6 million, respectively.

For the three months ended September 30, 2024 and 2023, our net losses were $13.1 million and $9.0 million, respectively.

For the nine months ended September 30, 2024 and 2023, our net losses were $49.3 million and $32.0 million, respectively.

Our net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $31.1 million and $31.2 million, respectively.

On March 10, 2023, we borrowed the $7.5 million remaining under the first tranche of the Loan Agreement.

On December 15, 2023, we borrowed $15.0 million under the second tranche of the Loan Agreement.

On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement.

We had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 2024.

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.

In January 2024, we commenced this ATM offering and issued 2,382,139 shares of common stock for gross proceeds of $21.0 million under the ATM offering during the nine months ended September 30, 2024.

As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $102.7 million and $105.9 million, respectively.

For the three months ended March 31, 2025 and 2024, our net losses were $13.8 million and $22.2 million, respectively.

Our net cash used in operating activities for the three months ended March 31, 2025 and 2024 was $12.8 million and $10.9 million, respectively.

We had $50.0 million in outstanding Term Loans under the Loan Agreement as of March 31, 2025.

In January 2024, we commenced this ATM offering and issued 543,462 shares of common stock for gross proceeds of $9.5 million under the ATM offering during the three months ended March 31, 2025.

We have remaining capacity to issue and sell up to $6.7 million of additional shares of common stock under this ATM offering.

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

Nine months ended

September 30,

Three months ended

(in thousands)

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Cash used in operating activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $31.1 million and consisted primarily of a net loss of $49.3 million, partially offset by a non-cash charge of $16.4 million related to stock-based compensation expense and a change in net operating assets of $1.2 million.

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 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 three months ended March 31, 2025 was $12.8 million and consisted primarily of a net loss of $13.8 million and a change in net operating assets of $1.7 million, partially offset by a non-cash charge of $2.5 million related to stock-based compensation expense.

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

Net cash used in operating activities for the three months ended March 31, 2024 was $10.9 million and consisted primarily of a net loss of $22.2 million, partially offset by a non-cash charge of $11.1 million related to stock-based compensation expense.

Cash used in investing activities:

Cash used in investing activities was $1.3 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively, and consisted of purchases of property and equipment.

Cash used in investing activities was $0.1 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities for the nine months ended September 30, 2024 was $42.0 million and consisted of $20.2 million related to proceeds from the issuance of common stock through the ATM offering, $20.0 million related to proceeds under the Loan Agreement, $1.6 million related to proceeds from the exercise of common stock options, and $0.4 million related to proceeds from the ESPP, partially offset by $0.2 million related to debt financing costs.

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 three months ended March 31, 2025 was $9.6 million and consisted of $9.2 million related to net proceeds from the issuance of common stock through the ATM offering and $0.4 million related to proceeds from the exercise of common stock options.

Net cash provided by financing activities for the three months ended March 31, 2024 was $1.4 million and consisted of $0.8 million related to proceeds from the exercise of common stock options and $0.5 million related to net proceeds from the issuance of common stock through the ATM offering.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of September 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes to our contractual obligations as of March 31, 2025, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical accounting policies and estimates

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“Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies and estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

We have 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, 2024.

We have 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, 2025.

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