CVRx, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the filing text does not provide a clear standalone fourth-quarter financial result.
Business context
CVRx is a commercial-stage medical-device company whose business is primarily dependent on Barostim, an implantable neuromodulation system indicated in the U.S. to improve symptoms for certain patients with heart failure with reduced ejection fraction (HFrEF). The company sells mainly to hospitals, using a direct sales force in the U.S. and Germany and distributors in other European markets. The U.S. commercial launch began in 2020.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $13.0 million | $6.1 million |
| Gross profit / margin | $9.4 million / 72% | $4.6 million / 76% |
| Operating expenses | $35.4 million | $16.1 million |
| Operating loss | $26.0 million | $11.5 million |
| Net loss | $43.1 million | $14.1 million |
| Net cash used in operating activities | $27.7 million | $16.1 million |
| Cash and cash equivalents at year-end | $142.1 million | $59.1 million |
| Debt at year-end | None | $19.3 million long-term debt |
- Revenue rose 115%. U.S. revenue increased 428% to $9.1 million; Europe revenue declined 10% to $3.9 million. U.S. HFrEF units increased to 290 from 32, while European units declined to 176 from 193.
- Gross margin fell four percentage points, primarily because a greater share of sales comprised full systems rather than battery replacements, partly offset by a higher average selling price.
- Research and development expense increased 17% to $7.5 million. Selling, general and administrative expense rose 187% to $27.9 million, reflecting commercial expansion, higher headcount, marketing, public-company costs and other expenses.
- Other expense was $14.8 million, largely due to a $13.7 million noncash increase in the fair value of preferred-stock warrants before their conversion at the IPO, plus a $1.3 million debt-extinguishment loss.
- The company raised $133.2 million net in its July 2021 IPO and repaid its Horizon loan in November 2021, including fees. Financing cash flow was $111.9 million for the year.
- Year-end current assets were $151.1 million and current liabilities $5.9 million. Accumulated deficit was $394.8 million. Management stated existing cash resources and revenue were expected to fund operations for at least three years, based on its assumptions.
Material changes and outlook
- Commercial reach expanded: active U.S. implanting centers increased to 46 from 11, and U.S. sales territories increased to 14.
- COVID-19 disrupted procedures and patient access. Procedures recovered from the initial 2020 shutdown, but Delta and Omicron variants again reduced volumes in the third and fourth quarters of 2021; management expected pandemic-related challenges to continue.
- Management expected continuing losses for the next several years while it expands U.S. sales and marketing and invests in research and development. It expects U.S. sales to account for most future revenue.
- For 2022, the company expected to launch an enhanced pulse generator, described as about 10% smaller with average battery life increasing from five to six years. It was also developing BATwire, a toolkit intended to simplify implantation; timing and commercial impact are not assured.
- The post-market stage of the BeAT-HF trial is evaluating morbidity and mortality outcomes. Follow-up data were expected to accrue by the end of 2022; a broader indication depends on favorable results and FDA action.
- The company began the EU MDR certification process for Barostim in December 2021. Continued European commercialization depends on successfully completing the conformity assessment and quality-system audit.
Risks, contingencies and notable disclosures
- CVRx has a history of significant losses, negative operating cash flow and a substantial accumulated deficit; profitability is uncertain. Revenue is highly dependent on a single product and its U.S. market acceptance.
- Adoption depends on physician and patient awareness, hospital access and adequate reimbursement. Medicare transitional and add-on payments are time-limited, and commercial payor coverage may require case-by-case authorization.
- The company relies on a limited number of suppliers for certain components and operates its principal offices and sole manufacturing facility in Minneapolis, creating supply and operational concentration risks.
- Clinical outcomes for the pending broader HFrEF indication, future regulatory approvals, reimbursement changes, competition, product safety, and COVID-19 effects could materially affect results.
- The company reported no material legal proceedings and no contingent liabilities requiring accrual or disclosure. The independent auditor issued an unqualified opinion on the financial statements; auditor attestation of internal control was not required under the company’s transition status. Management concluded disclosure controls were effective.
Investor facts to verify
- Whether procedure volumes, active implanting centers and U.S. revenue continue to grow, and whether European sales stabilize.
- BeAT-HF post-market morbidity and mortality results, follow-up timing, and any resulting FDA indication changes.
- Actual reimbursement coverage and hospital economics, including the effect of expiring Medicare payments and progress with commercial payors.
- Cash burn relative to management’s stated liquidity runway, including the pace of sales-force and R&D spending.
- Launch timing and regulatory status of the enhanced pulse generator, BATwire toolkit and EU MDR certification.
- Supplier continuity, manufacturing capacity, and any renewed effects of COVID-19 or other disruptions on procedures and supply.