CVRx, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise. CVRx is a commercial-stage medical device company marketing Barostim for heart failure and resistant hypertension in the U.S. and Europe.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $5.03 | $3.12 | $9.11 | $5.98 |
| Gross profit / margin | $3.83 / 76% | $2.21 / 71% | $6.96 / 76% | $4.20 / 70% |
| Operating expenses | $14.84 | $7.88 | $27.88 | $14.09 |
| Operating loss | $(11.01) | $(5.67) | $(20.92) | $(9.89) |
| Net loss | $(11.07) | $(17.75) | $(21.06) | $(26.38) |
- Q2 revenue rose 61% year over year, led by U.S. sales, which increased 87% to $3.94 million. U.S. heart-failure revenue units were 128 versus 67 a year earlier. Active U.S. implanting centers increased to 71 from 31, and sales territories to 20 from eight.
- Europe revenue was $1.09 million in Q2, up 7%; for the first half it was $2.11 million, down 7%, primarily reflecting unfavorable currency effects. U.S. first-half revenue increased 88% to $7.00 million.
- Gross margin improved, which management attributed to lower unit costs and higher average selling prices, partly offset by a greater share of full-system sales, which carry lower margins than battery replacements.
- SG&A increased 122% in Q2 and 131% in the first half, primarily due to increased headcount, travel, public-company costs, commercialization marketing, and stock-based compensation. R&D increased 4% in Q2 and 15% in the first half.
- Cash and cash equivalents were $121.35 million at June 30, down from $142.07 million at December 31, 2021. First-half operating cash use was $20.74 million, versus $11.50 million in the prior-year period; capital expenditures were $0.34 million. Management expects existing cash resources and revenue to fund forecast needs for at least three years.
- Total liabilities were $6.89 million, including $0.46 million of operating lease liabilities. The $20 million Horizon loan was repaid in November 2021; the filing reports no outstanding debt at June 30, 2022. Stockholders’ equity was $127.15 million.
Changes, outlook, and risks
- Operating losses remain significant and management expects losses and negative operating cash flows to continue for at least the next several years. The company reported no specific revenue or earnings guidance.
- Management plans continued investment in U.S. commercial infrastructure, physician and patient awareness, reimbursement access, and product development. Longer term, it may explore additional cardiovascular indications.
- Management said procedure volumes returned to more normal levels by March 2022 and through Q2, while warning that COVID-19 and its variants may continue to affect procedures and business performance.
- Q2 net loss narrowed versus 2021 despite a larger operating loss. The prior-year quarter included $11.4 million of other expense, mainly a fair-value increase in convertible preferred stock warrants; those warrants converted in connection with the 2021 IPO. The company also had no interest expense in 2022 following repayment of its loan.
- Key risks include dependence on Barostim and successful market adoption, reimbursement and hospital access, competition, reliance on certain third-party suppliers, manufacturing and supply interruptions, continued losses, and the need for long-term clinical evidence. Europe sales are exposed to currency movements. Cash deposits at one U.S. financial institution may exceed insured limits.
- No material changes to previously reported risk factors, material legal proceedings, or contingent liabilities requiring accrual or disclosure were reported. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether U.S. commercial growth, implanting-center expansion, and reimbursement access continue to translate into revenue growth.
- Whether gross-margin improvement is sustainable as full-system sales increase and production scales.
- Cash burn relative to management’s stated minimum three-year liquidity outlook, particularly as commercial and operating expenses rise.
- The extent of continuing COVID-19, foreign-exchange, supplier, and hospital-access effects on procedure volumes and sales.
- Comparisons of 2021 per-share results require care: the 2021 IPO and reverse stock split materially changed the share base, and 2021 results included warrant fair-value expense not recurring in 2022.