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Operator: Greetings, and welcome to the CVRx Q1 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mike Vallie. Thank you. You may begin.

Mike Vallie: Good afternoon. Thank you for joining us today for CVRx’s first quarter 2024 earnings conference call. Joining me on today’s call are the company’s President and Chief Executive Officer, Kevin Hykes; and Chief Financial Officer, Jared Oasheim. The remarks today will contain forward-looking statements, including statements about financial guidance. The statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company’s SEC filings, including the upcoming Form 10-K that will be filed with the SEC. I would now like to turn the call over to CVRx’s President and Chief Executive Officer, Kevin Hykes.

Kevin Hykes: Thanks, Mike, and thanks everyone, for joining us. I’ll begin today’s call by providing a brief overview of our first quarter performance. Then, since this is my first call as the CEO of CVRx, I’d like to share a summary of my background and tell you what I’ve been doing since joining the company in mid-February. I will then provide you with some of my initial observations on the business and a little more color on our quarterly performance. Jared will then provide a review of our financial results, and I will conclude with our thoughts for the rest of the year before turning to Q&A. Starting with an overview of our performance during the first quarter, total revenue was $10.8 million, an increase of 35% over the first quarter of 2023.

This was below our guidance of $11 million to $12 million. The lower than anticipated revenue was due primarily to the performance of our U.S. Heart Failure business, where there was some disruption within our sales organization at the time of the CEO transition, which led to decreased productivity and some sales force turnover. While stabilizing the team and returning active territories to full productivity will take some time, I’m encouraged that some of the early actions we have taken have led to solid performance in our U.S. Heart Failure business in March. In addition, as I will discuss more fully later, we have made the decision to make a change in sales leadership. By way of background, I’ve been in the medical device industry for over 30 years, and most of my focus has been spent commercializing novel therapies around the globe.

I began my career at Medtronic and spent 16 years there in commercial roles in the CRM, neuromodulation, and cardiac surgery businesses in both the U.S. and Europe. Subsequent to Medtronic, I served as President and CEO for a series of privately held, early to mid-stage, high-growth companies, several of which were in the neuromodulation and cardiovascular fields. Many of these roles, both at Medtronic and subsequently, involved the introduction of novel therapies for the treatment of chronic conditions for which there were historically limited treatment options. The ultimate goal of these efforts was to move these therapies to standard of care. I learned through these experiences that reaching standard of care requires a rigorous assessment of the specific barriers to adoption and a systematic approach to addressing and eliminating each of them.

Although I have only been in my current role for two months, many of the opportunities and challenges that I’ve observed here at CVRx are familiar to me. Later, I’ll go into more detail about some of my early observations and our initial plans for addressing them. Apart from my operating experience, I’ve also served on a number of public and private company boards, including the Board of CVRx, which I joined in December of 2022. While my time on the Board provided me with knowledge of the business and market, I needed to get a deeper understanding to effectively lead the day-to-day operations of the company and to develop our long-term strategy. Upon joining CVRx, I began a series of listening tours with our customers and our commercial teams in the U.S. and Europe in order to understand the opportunities and challenges that we face driving adoption of Barostim, as well as to gain a better understanding of future opportunities to leverage our therapy platform.

I also conducted a systematic review of the company’s operations to understand the stability and scalability of our business. My overwhelming takeaway after collecting this wide array of feedback is that Barostim is a remarkably effective and highly impactful therapy for patients suffering from heart failure, for whom there are extremely limited treatment options today. I also validated my observation that CVRx is a well-run company with a team of highly committed and patient-focused employees. My conversations with over 50 Heart Failure physicians at two recent international Heart Failure congresses and numerous visits in the field have cemented my belief that Barostim can indeed fill the gap that exists in today’s treatment continuum for Heart Failure and that we are only scratching the surface of the population of patients that we can help and the value that we can create.

My conversations with these physicians and advisors have led me to believe that in the near term, we need to more fully support our commercial efforts in our existing HFpEF indication. With last year’s label expansion for Barostim, we now have a $2.2 billion annual market opportunity in the U.S. alone, and we’ve only penetrated 2% of this market. This highlights the massive opportunity to drive increased adoption of Barostim in the HFpEF indication where we have limited device competition. Based on my initial assessment of the barriers of adoption for Barostim, I have asked our team to explore the value and potential impact of increased investment in clinical evidence, therapy awareness, and patient access initiatives. Any investment in these areas will come from a reallocation of existing resources as we remain focused on keeping overall spending in check.

I will be working with our team over the coming quarters with this in mind as we refine our go-to-market strategy. As noted, our first quarter revenue performance was below expectations. As a high-growth commercial stage company, the effectiveness of our sales organization is critical. Based on my assessment of our sales team and the disruption that we saw in Q1, I’ve determined that a change in leadership is needed to maximize the opportunity in front of us. As a result, our Senior Vice President of Sales will be departing the company. We have initiated a thorough search to identify a candidate who can scale this business to reach its full potential. In the interim, we have asked Paul Verrastro, currently our Chief Marketing and Strategy Officer, to head up our sales efforts until the new sales leader is in place.

Paul is a highly respected medical device sales and marketing leader with over 30 years of experience, including senior leadership roles at Guidant and Medtronic. Importantly, much of Paul’s experience involved the introduction of novel therapies and technologies such as ICDs and CRT. Paul has been a key member of the CVRx leadership team for over three years and is highly respected by our sales organization and physician customers. It probably goes without saying, but I will actively support Paul in his interim role until our new sales leader is identified. In addition to my listening tour, I’ve spent significant time with the team assessing our go-to-market strategy. Based on my initial observations and my experience introducing novel therapies, we’ve identified three near-term priorities to move Barostim towards standard of care.

The first key priority is to increase awareness among clinicians and patients as to the appropriate role for Barostim in the treatment continuum for heart failure. Building this awareness through comprehensive physician outreach and education will be crucial. The second is the need to further bolster the clinical evidence supporting the efficacy and safety profile of Barostim therapy within the current indication. We are increasing our focus on the generation of robust post-market evidence within HFpEF. Finally, as with many novel therapies, we face potential hurdles related to coding, coverage, and payment, which can limit patient access in the short term. While we have been proactively addressing these issues, we will be making additional investments to facilitate patient access.

To address these market development priorities, we are actively building out the leadership team with new roles specifically designed to drive initiatives in these areas. We believe that bringing in seasoned leaders to build out these core functions will help us reach more patients who can benefit from Barostim therapy. The first of these roles is a Chief Medical Officer. This role will spearhead our efforts to drive awareness and appropriate use of our therapy among clinicians. The CMO will guide comprehensive medical education, outreach, and guideline integration to drive our therapy toward standard of care. The second is a Senior Vice President of Clinical Affairs. This position will oversee the development and execution of our clinical evidence generation strategy, including designing and optimizing a pipeline of robust post-market studies within the current indication.

As you may have noticed, subsequent to the end of the first quarter, we announced the publication of the results of the post-market phase of the BeAT-HF trial in the European Journal of Heart Failure. This long-term data set will be an important input to our future evidence development plan. Lastly, the third role is a Senior Vice President of Patient Access. This role will be important in further expanding access to Barostim therapy. You may have seen that we recently made progress in this area through the proposed inpatient DRG reassignment, which is expected to take effect on October 1, 2024. The proposal has Barostim mapped to a higher paying reimbursement code for inpatient care. The searches for these three key roles are well underway.

We’re seeking to fill these roles as soon as possible. With these leaders in place, we will be even better equipped to address the awareness, evidence, and patient access hurdles to widespread adoption. This increased near-term focus on commercialization in our core business does not mean that we will not pursue indication expansion and product optimization of the Barostim therapy platform. My conversations with clinicians have highlighted the unique platform nature of our technology and the potential to help additional patient groups. We will carefully and appropriately balance this investment in the future with the significant commercial opportunity that exists today in HFpEF. We will be conducting a thorough review of our R&D and clinical portfolios to narrow our focus on those select few high-impact projects that we believe will ultimately drive value for both the company and patients.

We look forward to sharing the findings of both our updated go-to-market strategy and our R&D portfolio review with you later in 2024. On a related note, we’ve elected to stop enrollment in the BATwire trial. This change was not due to safety concerns, but rather due to the realization that many patient candidates elected the commercially approved procedure as opposed to participating in the trial. This suggests that the current procedure is widely acceptable to patients and physicians and therefore not a barrier to adoption. We intend to continue following the patients enrolled in the BATwire trial until study completion. Overall, I’m tremendously optimistic about our technology and market opportunity and the strength of our organization. I have already started to implement changes in the business that will improve the execution in the near term.

In addition, I’m in the process of working with our leadership team to develop our long-term vision and strategy for the business, which we look forward to sharing with you when our analysis is complete. Now, I’d like to turn the call over to Jared for a financial review.

Jared Oasheim: Thanks, Kevin. In the first quarter, total revenue generated was $10.8 million, representing an increase of $2.8 million or 35% compared to the same period last year. Revenue generated in the U.S. was $9.8 million in the current quarter, reflecting growth of 42% over the same period last year. Heart Failure revenue in the U.S. totaled $9.7 million in the current quarter on a total of 319 revenue units compared to $6.8 million in the first quarter of last year on 225 revenue units. The increases were primarily driven by continued growth in the U.S. Heart Failure business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim. At the end of the current quarter, we had a total of 190 active implanting centers compared to 122 on March 31, 2023, and 178 on December 31, 2023.

We also had 39 sales territories in the U.S. at the end of the current quarter compared to 29 on March 31, 2023, and 38 on December 31, 2023. Revenue generated in Europe was $0.9 million in the current quarter, representing a decrease of 10% compared to the same period last year. Total revenue units in Europe decreased from 52 in Q1 of 2023 to 44 in the current quarter. The number of sales territories in Europe remained consistent at 6 for the three months ended March 31, 2024. Gross profit for the three months ended March 31, 2024 was $9.2 million, an increase of $2.5 million compared to the three months ended March 31, 2023. Gross margin for the current quarter increased to 85% compared to 83% for the same period last year. 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 for the current quarter were $3.1 million, reflecting a decrease of 11% compared to the same period last year. This change was driven by a $0.2 million decrease in non-cash stock-based compensation expense and a $0.2 million decrease in consulting expenses. SG&A expenses for the current quarter were $28.3 million, representing an increase of 84% compared to the same period last year. This change was primarily driven by a $9.6 million increase in non-cash stock-based compensation expense, a $2 million increase in compensation expense, and a $0.6 million increase in travel expenses. Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the previously disclosed modification of stock options held by the former CEO in connection with his retirement in the first quarter of 2024.

Interest expense increased $0.7 million for the three months ended March 31, 2024, compared to the same period last year. The increase was driven by the interest expense on borrowings under the loan agreement. Other income net decreased $18,000 for the three months ended March 31, 2024, compared to the same period last year. This decrease was primarily driven by a lower cash balance in our interest-bearing accounts. Net loss for the current quarter was $22.2 million or $1.04 per share compared to a net loss of $11.4 million or $0.55 per share for the same period last year. Net loss per share was based on 21.2 million weighted average shares outstanding for the first quarter of 2024 and 20.7 million weighted average shares outstanding for the first quarter of 2023.

As of March 31, 2024, cash and cash equivalents were $80.1 million. Net cash used in operating and investing activities was $11.8 million for the quarter ended March 31, 2024. This is compared to net cash used in operating and investing activities of $8 million for the three months ended December 31, 2023. I also wanted to note that early in the first quarter the company raised approximately $600,000 through its ATM program at an average price of $27.12 per share. Now turning to guidance. For the full year of 2024, we now expect total revenue between $50 million and $53 million. We now expect full year gross margin between 83% and 85%. And we now expect operating expenses between $92 million and $98 million. For the second quarter of 2024, we expect a report total revenue between $11.3 million and $12.3 million.

I’d now look to turn the call back over to Kevin.

Kevin Hykes: Thanks, Jared. I’m thrilled to be part of this company with our world class team and our Barostim therapy that is making a profound difference in the lives of patients with Heart Failure. A massive market opportunity with few effective device therapies. After three years of commercialization, we’re taking a thoughtful look at the current state of the therapy’s adoption and the opportunities we have to accelerate our market penetration. Our ultimate goal is to establish Barostim for HFpEF as the standard of care. Key areas of near-term focus include broadening awareness of our therapy, bolstering clinical evidence and strengthening our patient access efforts. To this end, we are actively seeking to build out our leadership in the medical affairs, clinical, reimbursement and sales areas.

These leaders will help us to better align our commercial and R&D resources to drive long-term adoption of Barostim in the HFpEF market and additional indications. I look forward to sharing more specifics on these initiatives in future calls. As a result of the sales turnover and initial changes to our go-to-market strategy, which will take time to implement, we have elected to lower our annual guidance. Despite this short-term disruption in the business, we remain very excited about the significant potential for Barostim to transform the treatment paradigm for the millions suffering from Heart Failure and other cardiovascular diseases, and our ability to drive our therapy toward standard of care. And now, I’d like to open the line for questions.

Operator?

Operator: [Operator Instructions] The first question we have is from Robbie Marcus of JPMorgan. Please go ahead.

Lilia-Celine Lozada: Hi. This is actually Lilly on for Robbie. Thanks for taking the questions. Two from me. Maybe I’ll ask them both up front. I guess can you talk through a little bit more what exactly happened in the quarter, to drive the softness. It seems like demand and execution has been really strong, otherwise, you have the expanded label. So, how exactly did the change up top disrupt what’s happening on the ground with the sales force? And then part two, you lowered the guide, by more than the amount that you missed by. So how much of that is conservatism versus actual softness in the business and what you expect to see over the rest of the year? Thank you.

Kevin Hykes: Thank you, Lilly, for the question. This is Kevin. Let me give you a little bit of color on what we observed operationally in the quarter, and then I’ll have Jared discuss the impact on the metrics. In the quarter, we saw higher-than-anticipated sales force turnover, which led to a disruption in our selling efforts. There’s a few reasons I think that this occurred. The first, Nadim’s departure of CEO after 17 years may have been the trigger for a number of reps who are perhaps already on the fence about departing the company. Secondly, the sales comp plan for 2024 that was rolled out just before, I joined the company in February, was not in line with what the sales team was expecting, which contribute further to the disruption.

Lastly, these first two issues were exacerbated by the time of the year and the first quarter is often when reps seek to change roles. So in response to these factors, we quickly took action to try to solidify the sales team. We made significant changes to the comp plan, which were well received and allowed us to get the team refocused in the last month of the quarter, which was positively received. Also, as we announced today, we’re making changes in the sales leadership as well, and I believe that these actions have stabilized the team, and should allow us to regain our momentum into Q2.

Jared Oasheim: Lilly, I’ll jump in on the guidance question. So first, to just kind of close out the first point from Kevin. So impact in Q1, we believe the biggest factor was that sales force disruption that Kevin mentioned that we saw early in the first quarter. It really manifested itself in a few ways. We added fewer territories than expected. It led to us opening fewer active implanting centers than we had anticipated. And the centers that were open were actually less productive than expected, as new reps were ramping up and getting introduced, to those existing territories that they were taking over. When we think about the guidance for Q2 and the rest of 2024, I think part of this is it’s a shift, right? So in Q1, we were not able to add as many new territories or active implanting centers as we had anticipated.

And that means we’ll have a lower base from which to generate revenue for the remainder of the year. It essentially shifts our future quarterly revenue expectations back by a quarter, or about a quarter, which has the impact of lowering the midpoint of our annual revenue guidance by about $3.5 million. Obviously, our focus for the rest of the year, is going to be to work to train our newer sales reps, to build and build more in-depth programs at each of the active implanting centers. Yes. I think that puts a point on it.

Lilia-Celine Lozada: Great. That’s helpful. Thank you.

Operator: The next question we have is from Matthew O’Brien of Piper Sandler. Please go ahead.

Phillip Dantoin: Hi. This is Phil on for Matt. Thanks for taking our questions. And Kevin, congrats on the new role. Just for starters, looking at Q2 implied guidance of, call it, mid-20s growth. When I plugged it in my model, I’m getting a fairly aggressive re-acceleration in the back half of the year, what does guidance assume as far as the disruption leaking into that back half? If at all, and what gives you that confidence in that steep ramp for the second half?

Jared Oasheim: Hi Phil, this is Jared. I can take that one. So when we put the model together for the rest of the year, we did take into consideration that we had some newer reps backfilling the existing territories in Q1, and we were only able to add one additional new territory. We did really successfully bring on a bunch of new reps at the beginning of the year. We’re really happy with the level of talent that we’ve been able to attract. That’s going to allow us to continue to add more territories throughout the rest of the year. Hopefully getting us back on track to adding about three per quarter. As far as the risks or uncertainties of what could happen in the back half of the year, it really just comes down to our ability to get these reps trained up, introduced to the existing active implanting centers.

And get them really out there working to activate, some of these new active implanting centers. But we’re feeling pretty confident in our ability to do that, based on the history that we’ve been able to show.

Phillip Dantoin: That’s helpful. And just a quick follow-up on OpEx, specifically on the SG&A side of things. Even accounting for the stock option adjustment, it looks like SG&A increased fairly meaningfully, as a percent of sales? And given you’re onboarding several new roles, where do you expect this number and the spend here to go in the long-term?

Jared Oasheim: Yes, it’s a good question. It was a pretty big jump from Q4. I just want to call out that roughly $8.4 million of that was tied to that one-time non-cash, stock-based compensation expense tied to Nadim’s stock option modification. Again, that’s not for new equity that was granted. It’s just driven by accounting rules, for us to recognize those costs associated with the options that were modified. It is non-cash. It is non-recurring. I’d also like to point out that going from Q4 to Q1 in the past, we have seen an increase in SG&A that then starts to level out. Part of that is driven, by our process for doing annual reviews and giving raises to employees, but it’s also tied to our annual sales meeting, where we bring our entire sales and marketing organization together to talk about the new programs, and new data that we can go out and start marketing for our physicians.

And then, the final part is the headcount. Obviously, not tied to sales, but most of the rest of the organization will add new heads early in the year. And then we start to see those overall numbers start to flatline.

Phillip Dantoin: That’s helpful. Thank you.

Operator: Thank you. The next question is from Margaret Kaczor of William Blair. Please go ahead.

Margaret Kaczor: Hi, good afternoon, guys. Thanks for taking the questions. I guess just to put bluntly and make sure that we’re all aligned, are you continuing, to see disruption in the sales force? Or do you think you’ve stabilized at this point? And then the existing reps that you guys do have, maybe you can kind of give us some metrics to help support, how they’ve been doing, right? So if we take out the excess turnover that you had, can you give us anything around utilization growth, productivity metrics for those reps that kind of were left, I guess?

Kevin Hykes: Sure. Thanks, Margaret. I appreciate the question. I guess the short answer is yes. We believe we have stabilized the team following a bumpy February for the reasons, I described before. We’re seeing a solid performance in March, and we’re pleased with what we’ve seen going forward. So, we think we have, in fact, addressed those issues.

Jared Oasheim: Yes. Margaret, on the metrics, I’m not going to dive into the weeds for rep-by-rep productivity. But overall, we did see a solid rebound in the month of March across all of our territories. Part of this lower productivity for the entire quarter is still driven by a slower-than-expected February. But we did see a lot of that productivity come back in the month of March, allowing us to feel confident in putting together this guidance for Q2, and the rest of the year to show continued growth.

Margaret Kaczor: Okay. And you’re not going to talk about April trends? Or has that continued, I guess, through April?

Jared Oasheim: Yes, good question, Margaret. Yes, we’re not going to get into the details on April, at this point in time. But you can see from the guidance we put out for Q2 that, we are expecting to return to pretty solid growth in the U.S. Heart Failure business.

Margaret Kaczor: Okay. And then I wanted to focus a little bit on ’24 and you’re going to love me, because I’m going to ask the 2025 question as well. But what’s assumed in guidance for ASP? Is it a higher ASP similar to what we saw this quarter? Again, utilization trends, reps at year-end, new account adds per quarter. Just trying to get a sense of, again, kind of that conservatism versus the more aggressive assumptions. And then we pushed this into 2025, right? The question ultimately is that the year where we get back to those productivity and utilization levels that were assumed for this year. Or is it just going to be kind of a slow and steady progress, so trying to pinpoint that exact moment is maybe too hard today?

Jared Oasheim: Good question, Margaret. I’ll see if I can knock all of them out here. So as far as what we’re assuming in the guidance for 2024, we think of what the disruption that had occurred in Q1 is kind of shifting our expectations back a quarter. So maybe what was expected in Q1, is now kind of coming towards to Q2. To dive into the weeds a little bit on ASPs, we were able to see higher-than-expected ASPs in 2024. They are at levels in the U.S. Heart Failure business that we saw back in 2023. So, we haven’t necessarily seen a drop in that number as we move from one year to the next. The second piece is a number of territories. We were only able to add one in the first quarter versus expectations of trying to add three as we have since every quarter since the IPO.

We believe with the strong bench in the pipeline that we have built for the sales rep within the sales organization that we can give back to adding at least three territories per quarter as we march through the rest of this year. The number of AICs, I’m not going to give specific guidance as to what the expectation is there for the rest of the year. One key thing for us is, as you bring on new active implanting centers, it can be a little choppy, as far as when they actually come on board. We still feel like we have a really strong pipeline of customers that have signed contracts and gone through the value assessment committee, but it depends on patient selection. If they pick a patient that requires a prior authorization because they’re a Medicare Advantage patient, or because they are covered by a private payer, it’s going to take a little longer, because going through prior authorizations just takes time, right?

So at this point, we’re not going to give specific guidance for how many AICs we expect to add, but we do feel like we have a really strong pipeline of customers with signed contracts at this point in time. As we think about 2025, I think a lot of the focus that Kevin is bringing towards the commercial organization is going to really help the sales reps not only be able to become more productive themselves and where they focus and where they spend their time, but also give them more tools to be able to go and have more conversations with these physicians. And I’ll just add to that, give our DTC folks a lot more information to share with prospective patients in that process. So, we’re feeling pretty bullish about how 2025 could shape out.

Margaret Kaczor: Okay. And I’ll sneak one more in, and I apologize to all my other colleagues on the line. But Kevin, you mentioned a lot of new priorities hiring. It seems like you’re trying to hit the ground running relatively quickly here. How quickly would you expect to see some of these changes, not only take effect, but really have a meaningful impact on demand? So what kind of clinical evidence are you referencing? What examples are you looking for, and kind of the same on the coding coverage and payment side? Thanks.

Kevin Hykes: Sure. Thanks, Margaret. Yes, I’ll break that perhaps into two sections. So as it relates to the new executives and the new skill sets that we’re bringing into the company, I’m pleased to report this is even in the last few days that we have actually hired Senior Vice President of Global Clinical Affairs, who will start May 1 actually this week. Over the last 48 hours, I have successfully hired a very Senior Vice President, Patient Access, reimbursement and healthcare economics. We will expect to start by the end of May. And I’ve been the last innings on the recruitment of a very qualified Chief Medical Officer candidates. So in terms of those executives joining the team, I think that will be within the next month to two months at the outside.

And I think in many cases, their impact will be felt immediately. Those are areas of great need, and their expertise is significant, and I think will really benefit from that. As it relates to the increased focus on sort of these three barriers to adoption, that being the awareness of our therapy and its appropriate role in the treatment of heart failure. Number two, the evidence we can generate. Number three, the degree to which we can accelerate or facilitate access that will take longer. But I believe we’ll start to see the impact of some of those efforts as early as next quarter or certainly by the back half of this year. And as we described in the earlier comments, that’s part of a very deliberate approach to market development, and part of an understanding of exactly what barriers we need to address in order to move this therapy, from 2% penetration towards standard of care.

So again, in each of those buckets, there are different strategies that will employ and investments that we’ll make. You asked about the clinical evidence piece. And I think an important shift here is perhaps away from, or balancing what has been a historic focus in a significant indication expansion effort, with a much more rigorous prosecution of our existing indication and trying to draw data from multiple sources, including our long-term data set. But also any one of the four registries that were running, physician-initiated research, real-world evidence, really trying to understand how we mine those data sets to create a much more intentional cadence of evidence and support for our existing therapy. And the first of those were presented at PHT.

There’ll be more presented almost each quarter going forward. That’s our intention. And so, our hope is that, that will provide our sales team on the ground, our DTC team with the ammunition they need to raise awareness, and appropriately educate physicians and patients alike on the role of this therapy and the treatment of heart failure. So, I’ll stop there. I hope we addressed your question.

Margaret Kaczor: That was great. Thank you, guys.

Operator: The next question we have is from Bill Plovanic of Canaccord. Please go ahead.

Bill Plovanic: Thanks for taking my question. Just curious, as you look at your account base, as you mentioned, it went up a little in terms of active accounts. And I think, Jared, you mentioned it would be a little choppy. I’m just with the turnover of the sales force, have you seen – first of all, I don’t know if you quantified what percentage of the sales force has turned over, how many regional managers, or just local reps or if you could quantify that, if you have? And then second is on the accounts, if you lose the rep, do you lose the account, and they stop doing it because they need somebody there to hold their hand. Just help us understand what this has done to your existing set of accounts, and maybe that’s why you have the confidence going forward?

Jared Oasheim: Yes. Good question, Bill. So when, we saw the disruption in the first quarter, I saw some turnover, I want to emphasize that this is not at the leadership level within the sales organization. This is more at the sales rep level. The ones that are out there every day talking to physicians, talking to the hospital administrators. We do see a bit of a pause, right? As you go through a transition and hand over those active implanting centers from one rep over to another rep, it does take time to rebuild those relationships, kind of work to connect the dots to make sure that this market development efforts can continue. And I just want to emphasize that piece, right the market development portion of this. It’s not us going in with a better mousetrap, swapping out for a better device.

This is us going out educating these physicians, working with the nurses, to help so that they can identify the right patients for this therapy. And so as we make transitions from one team member to another, it just takes some time to get back into the swing of things for those active centers. And I think as we saw in March, a lot of those standoffs had taken place we were able to see productivity pick back up, giving us confidence that we can continue to grow this business and see increased productivity over time.

Bill Plovanic: Okay. Thanks. And then just what’s your thoughts on the atrial chanting market, the competitors? Is that competitive to you? Is it additive? Something that people are paying a lot of attention to and obviously, some of the recent studies a bit disappointing. But I was wondering what type of effect that may have had, or may have on your business? And thanks for taking my questions?

Kevin Hykes: Sure. Thanks. I’ll take that one. We watch, like many of you probably have great interest a couple of Saturdays ago at ACCC have to RELIEVE-HF trial result release. And it was I think somewhat paradoxical. I’ve spoken to a lot of physicians about that. But intriguingly, the population that was expected to benefit actually did not. And the one that was not expected to be in as much, in fact, did. And in both cases, with placebo patients the control patients did as well or slightly better. So lots of very sort of, I guess, straight or paradoxical sort of results from that trial. I think the only thing we have discerned from lots of conversations, with physicians is that there’s a lot more work to be done. Those results I quoted, as you probably know, are not powered.

And there’s some hypothesis generation here perhaps, but significantly more work to be done on sort of the appropriate population, for intra-atrial shuts and the appropriate role in the treatment of heart failure. I think a number of physicians have suggested even as recently as this week that on some level, shunts are creating a pathophysiology to address a pathophysiology. And so, I think there’s some mechanistic question still about how they might work, and how they best fit into the treatment paradigm. But in the short term, we’re not hearing much about them. It has had no effect on our work in the market at all. But we’re watching it with interest.

Bill Plovanic: Thank you.

Operator: The next question we have is from Frank Takkinen of Lake Street Capital Markets. Please go ahead.

Frank Takkinen: Hi. Thanks for taking the question. I just want to follow up on one point. And I apologize if you said it already. I was jumping between a couple of calls. The commercial disruption, did you guys talk about the exact net number if there was the turnover in reps and then the number of reps that you’ve hired back since that turnover has occurred?

Kevin Hykes: Sure. Thanks, Frank. We did not give specifics on that number. We would prefer not to. As Jared said, we normally seek to open three new territories each quarter. And in this last quarter, we opened only one new net territory. So obviously, significantly fewer than we had hoped, largely because we were replacing backfilling territories with some of the newer reps results of the turnover instead of opening brand-new territories. So, I think we’ll hold on further detail there. But again, we’re confident that we have seen the stabilization of that dynamic and that with strong hiring in Q1, we’re able to rebuild the momentum that we lost in February briefly.

Frank Takkinen: Okay. That’s helpful. And then maybe just turning over to the label expansion late from last year. I know we’re only a quarter into it. I guess a quarter plus a month, but maybe talk about any anecdotal feedback you’re hearing in the market? Any planned changes related to some of the marketing initiatives you may put forth. Just any update related to how that label change has impacted the market dynamics?

Kevin Hykes: Sure. I’ll take that one as well. So, I think we’ve been quite pleased at the response both to the label expansion and the publication of the BeAT-HF data in the last couple of weeks. It was published, as you know, in the European Journal of Heart Failure and shown the sustained symptomatic improvement over 24 months, a 34% reduction in the likelihood of death or need for an LVAD transplant and continued very favorable sort of long-term safety profile. So overall, both as it relates to labeling and the durability of our therapy, there’s been a lot of positive response. Now I should point out a couple of instances where we are now mining that data set for additional. I spoke of the sort of cadence of evidence that we’re trying to build cost market evidence.

We presented two brand-new abstracts at the THT conference in March, one of which showed a 74% reduced risk of advanced heart failure interventions with Barostim therapy over those 24 months. And those advanced interventions would include transplant LVAD, CCM, CRT, CardioMEMS, et cetera. So really sort of compelling data that was within that data set. Secondarily, some additional interesting work on the quality of life scores over time for patients that receive this therapy. So we’re pleased with the response. We’re continuing to push that data set and the expansion of the labeling out through our sales team. And from the podium as well at the various conferences as well as through our DTC channel. So we’re, it’s still early, but there’s a rich data source there that we intend to mine for quite some time to come to build that cadence of evidence.

Frank Takkinen: Perfect. I’ll stop there. Thanks for taking the questions.

Operator: Our final question is from Chase Knickerbocker of Craig-Hallum. Please go ahead.

Chase Knickerbocker: Good to have you on board, Kevin.

Kevin Hykes: Thanks.

Chase Knickerbocker: I just want to dig in a little bit more on existing customer utilization. So it was actually down sequentially despite a better label and much better reimbursement. Should I think of the entirety, the only reason that it is down sequentially was because of the sales turnover? And then on the other side of that, just maybe speak to those sales reps in those territories that were stable, and did have the same person in that seat. Maybe speak to what utilization trends look like there, because did they see a benefit from that better reimbursement effective January 1?

Jared Oasheim: I can handle that one. I just want to make sure we’re all on the same page from some of those updates we saw towards the end of 2023. So the first one is on the reimbursement front. So as everybody remembers, we moved from being mapped to one APC plus having an add-on payment that gave total reimbursements to hospitals on average of about $45,000 in 2023 when they would do a Barostim procedure to in 2024 being mapped to a new tech APC without an add-on payment. And in that case, the hospital still receives on average about $45,000 for the procedure. So the change from ’23 to ’24 was technically net neutral, but the positive note moving into ’24 was we didn’t lose the difference of an add-on payment, right? So overall, the change was net neutral from a reimbursement perspective.

The data for those currently active implanting centers, a lot of them had seen it, right? They had an interest in Barostim. They knew the long-term data, the pulse market data was going to be coming out at THG, so a lot of them were aware of this long-term data. And so the FDA approval in December maybe didn’t affect a lot of those centers as much, because a lot of them were well educated and stayed up to speed, as we release that data back at THC. The benefit for us now is we can actually go out and proactively promote this data to those newer centers or those newer referring physicians that have not seen Barostim or seen this long-term data, because they didn’t have an interest of the year prior at THT. So I think, that’s where we’ll see some benefits, but activating those new centers, utilizing that new data is just going to take some time in 2024, and then, to get them ramped up and starting to treat patients.

As far as the territories that had stability, yes, we definitely saw a difference, right, for those folks that were here and stayed on staff in what they were able to do as far as productivity, within their territories versus those that had turned over.

Chase Knickerbocker: And is that true kind of relative to Q4 as well? And then kind of talking about that pass-through payment no longer being required? Is it not the right way for us to think about that as it is kind of a catalyst to adoption just, because they don’t have to deal with that separate payment pass-through? Or are we thinking about that incorrectly?

Jared Oasheim: Yes. So going from Q4 to Q1, again, overall utilization rates were down, right? But we did see, some of those active territories the overall utilization increase. As far as the reimbursement goes, that is a good point. So transitional pass-through or that add-on payment for the outpatient procedures is a complicated calculation. Nadim and I would previously talk, about how it was a bit of a barrier because many of the hospital administrators were not aware of that transitional pass-through or they didn’t see it very often. And so, they would often want to test out a few patients, see what reimbursement would come back at before they would start treating more and more patients. So the hope is that as we move forward, with just having one code that the hospitals need to utilize that it removes one of those barriers, for the hospital administrators to put a hold on these types of procedures.

Chase Knickerbocker: Got it. And then maybe just quickly on BATwire. Have we kind of adjusted our thinking on thinking that if we can kind of keep this with EPs that it would benefit adoption ramp? Or just kind of walk me through some of the thinking there?

Jared Oasheim: Yes, I can take that one as well, Chase. So going back to 2020 when we were initially kicking of this clinical trial, we were very early in our commercialization stage. One of the hypotheses that we had was that we would have to get an electrophysiologist involved in the program, to see this program be able to be built out more fully. As we’ve continued to develop new centers and bring on new surgeons, the referral pathway is not as complicated as we had once thought. Seeing the general cardiologists work with the vascular surgeons, it’s worked quite well. And in many of the centers, where we had both a commercial program available in the BATwire tool available, many of the patients were actually electing to go with a commercial path rather than be part of a clinical trial.

So I think the old hypothesis that we needed an electrophysiologist, to be involved to see this ramp is maybe less important to us. That being said, we do utilize, or work with some electrophysiologist champions at specific centers, and are very happy to work with them, as they’re identifying patients that could be treated with Barostim as well.

Chase Knickerbocker: Got it. Thanks, guys.

Operator: Thanks, that concludes the Q&A session. And I would like to turn the floor back over to Kevin Hykes for closing remarks.

Kevin Hykes: Thank you, operator, and thanks again to everyone for joining us for our first quarter earnings call. We appreciate your ongoing support, and we look forward to updating you on our progress on our next update. Thank you.

Operator: This concludes today’s conference. Thank you for joining us. You may now disconnect your lines.