CVRx, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results; financial amounts below are in U.S. dollars unless noted.
Business context
CVRx is a commercial-stage medical-device company focused on Barostim, a neuromodulation device for heart failure with reduced ejection fraction (HFrEF) and resistant hypertension. Barostim is FDA-approved for HFrEF symptom improvement and CE-marked for HFrEF and resistant hypertension. The company primarily sells in the U.S. and Europe and remains dependent on one product.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $10.5m | $6.2m | $28.0m | $15.3m |
| Gross profit | $8.8m | $4.8m | $23.5m | $11.8m |
| Gross margin | 84% | 78% | 84% | 77% |
| Operating expenses | $18.3m | $15.0m | $56.9m | $42.9m |
| Operating loss | $9.5m | $10.1m | $33.4m | $31.0m |
| Net loss | $9.0m | $9.8m | $32.0m | $30.9m |
| Net loss per share | $0.43 | $0.48 | $1.55 | $1.51 |
- Q3 revenue rose 70% year over year; nine-month revenue rose 83%. U.S. revenue grew 90% in Q3 and 106% for the nine-month period. Europe revenue declined 19% in Q3 and 3% over nine months.
- U.S. HFrEF revenue units were 303 in Q3 versus 167 a year earlier, and 793 over nine months versus 394. Active implanting centers increased to 159 from 91; U.S. sales territories rose to 35 from 23.
- Higher production volume lowered cost per unit and contributed to gross-margin expansion. Operating expenses increased, primarily reflecting higher compensation and headcount, commercial marketing, travel, consulting, and stock-based compensation.
- Q3 operating loss narrowed versus the prior year, while the nine-month operating loss and net loss increased. Higher interest income partly offset operating costs; interest expense reflects the debt financing initiated in 2022.
- Cash and cash equivalents were $83.0m at September 30, 2023, down from $106.2m at December 31, 2022. Nine-month operating cash use was $31.2m; investing cash use was $0.4m; financing provided $8.4m, including $7.5m of loan proceeds.
- Long-term debt was $14.3m net of unamortized costs and discounts, against $15.0m principal outstanding. The company had $7.4m of current liabilities and $23.6m of total liabilities. No profitability or positive operating cash flow was reported.
Changes, outlook, and material items
- Management expects continued operating losses and negative operating cash flows for the foreseeable future, and significant losses for at least the next several years. It believes cash, the loan facility, and revenue will cover forecast operating liquidity, capital expenditures, and debt service for at least three years; this is management’s estimate, not a guarantee.
- No specific revenue or earnings guidance was provided. Management expects further investment in U.S. commercial infrastructure, research and development, product enhancements, and market access; it also expects SG&A to rise in absolute dollars as the company expands.
- The company has $35.0m of potential additional loan tranches, subject to timing, revenue targets, milestones, and other conditions. A $50.0m at-the-market equity program was available, but no shares had been sold through September 30, 2023. Additional financing may be needed and could dilute shareholders or impose restrictive terms.
- CMS’s advisory panel voted unanimously, non-bindingly, in favor of mapping Barostim to a higher-paying 2024 outpatient code that management estimated would reimburse hospitals about $45,000. If CMS instead uses the alternative code without transitional pass-through payment, estimated average reimbursement would be about $30,000. The final rule was pending at filing.
- BeAT-HF morbidity and mortality data did not meet the trial’s primary endpoint’s statistical-significance threshold, though management cited clinically meaningful prespecified analyses favoring Barostim. An FDA submission for expanded labeling was filed in June 2023; timing and outcome remained uncertain.
- Debt bears a floating interest rate based on the greater of prime or 5.50%, plus 2.65%; interest-only payments are initially required through November 2027, followed by principal and interest payments. The debt is secured by substantially all personal property. The company reported covenant compliance at quarter-end.
- Other risks include reimbursement and hospital adoption, competition, reliance on limited suppliers, clinical and regulatory outcomes, foreign regulatory compliance, and continued losses. Cash deposits exceeded insured limits. No material legal proceedings or contingencies requiring accrual or disclosure were reported.
Important facts for investors to verify
- CMS’s final 2024 outpatient payment rule and the reimbursement actually received by hospitals.
- FDA review and outcome of the expanded-labeling submission, considering the pivotal trial’s unmet primary endpoint.
- Revenue growth, U.S. implant adoption, European performance, and whether gross-margin gains continue as volumes and product mix change.
- Cash burn versus management’s three-year liquidity estimate, and the conditions and availability of additional debt or equity financing.
- Floating-rate debt costs, future repayment terms, and compliance with the loan’s milestones and covenants.