CVRx, Inc. — Q2 2023 Form 10-Q
Business context and period. CVRx is a commercial-stage medical-device company focused on Barostim, a neuromodulation device marketed for heart failure and resistant hypertension. This unaudited filing covers the quarter and six months ended June 30, 2023, compared with the corresponding 2022 periods.
Financial performance
| Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 |
|---|---|---|---|---|
| Revenue | $9.5 million | $5.0 million | $17.5 million | $9.1 million |
| Gross profit / margin | $8.0 million / 84% | $3.8 million / 76% | $14.6 million / 84% | $7.0 million / 76% |
| Operating expenses | $19.7 million | $14.8 million | $38.5 million | $27.9 million |
| Operating loss | $11.8 million | $11.0 million | $23.9 million | $20.9 million |
| Net loss | $11.7 million | $11.1 million | $23.0 million | $21.1 million |
| Basic and diluted loss per share | $0.56 | $0.54 | $1.11 | $1.03 |
U.S. revenue was $8.3 million in Q2, up 111%; European revenue was $1.2 million, up 10%. U.S. growth was attributed to expanded sales territories and accounts and greater physician and patient awareness. Active U.S. implanting centers increased to 140 from 71 a year earlier, and U.S. sales territories rose to 32 from 20.
For the first half, operating cash outflow was $23.1 million, versus $20.7 million a year earlier; investing outflow was $0.4 million. Financing provided $8.0 million, including $7.5 million in loan proceeds. Cash and cash equivalents declined to $90.8 million at June 30 from $106.2 million at December 31, 2022.
Liquidity, debt and balance sheet
- Current assets were $112.0 million and current liabilities $8.9 million at June 30, 2023.
- Long-term debt was $14.3 million net of unamortized costs and discounts; the company had drawn $15.0 million under its loan agreement. Interest is floating-rate, and principal payments are scheduled to begin in 2027. The company reported covenant compliance at quarter-end.
- The loan agreement offers up to $35.0 million in additional tranches, subject to timing, revenue milestones and other conditions. CVRx achieved the revenue milestone for the next borrowing option.
- Management believes existing cash, the term-loan facility and revenue will meet forecast operating, capital and debt-service needs for at least three years. It expects continued losses for several years and says further financing may be needed if resources prove insufficient.
Material changes and management commentary
- Revenue grew 89% in Q2 and 92% in H1 year over year, primarily on U.S. heart-failure sales. Gross margin improved by eight percentage points in both periods, which management attributed mainly to lower unit costs as production volume increased.
- Operating expenses rose substantially as the company expanded headcount, sales and marketing, and research and development. The higher expense base left operating and net losses wider year over year.
- In February 2023, CVRx received unblinded morbidity and mortality data from the BeAT-HF pivotal trial. The trial did not meet its primary endpoint’s statistical-significance threshold, although management cited prespecified analyses it considered clinically meaningful and favorable to Barostim. The company submitted an FDA application for expanded labeling in early June; timing and scope remain uncertain.
- The Minneapolis lease was extended through August 2028. A $50 million at-the-market equity offering facility was available, but no shares had been sold as of June 30, 2023.
Outlook, risks and contingencies
- Key risks include continued losses, dependence on Barostim, uncertain market adoption and reimbursement, competition, reliance on third-party suppliers, and the need to build commercial capabilities.
- Medicare’s temporary pass-through payment for outpatient procedures was scheduled to remain in place through 2023. The proposed 2024 Medicare outpatient payment package did not address CVRx’s request for assignment to a New Technology APC code; the company said it planned to comment and advocate for inclusion in the final rule. Better reimbursement is not assured.
- FDA expanded labeling depends on regulatory review and clinical evidence. The filing highlights the BeAT-HF primary-endpoint result and the possibility of additional clinical or regulatory requirements.
- In Europe, the company’s Medical Devices Regulation application was under review. It said it met conditions permitting continued distribution under qualifying prior certificates through December 2027, but ongoing compliance remains necessary.
- Cash deposits exceeded insured limits. The company reported no material legal proceedings and no contingent liabilities requiring accrual or disclosure at quarter-end.
Investor facts to verify
- Whether U.S. commercial growth and implant-center expansion continue, and whether European sales remain comparatively modest.
- The final 2024 Medicare reimbursement decision and the resulting effect on hospital economics, adoption and pricing.
- The FDA’s response to the expanded-label submission, including how it weighs the pivotal trial’s primary endpoint and additional analyses.
- Cash burn, cash runway and progress toward any additional loan tranches, including their revenue conditions and debt costs.
- Whether higher production volumes sustain gross-margin improvement as sales grow.