CVRx, Inc. — Q1 2022 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2022. CVRx is a commercial-stage medical-device company focused on Barostim, a neuromodulation device for heart failure with reduced ejection fraction and resistant hypertension. Barostim is FDA-approved for heart-failure symptoms and CE-marked for heart failure and resistant hypertension. The company reports one operating segment.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $4.1 million | $2.9 million |
| Gross profit / margin | $3.1 million / 77% | $2.0 million / 70% |
| Operating expenses | $13.0 million | $6.2 million |
| Operating loss | $9.9 million | $4.2 million |
| Net loss | $10.0 million | $8.6 million |
| Net cash used in operating activities | $10.6 million | $5.0 million |
Revenue increased 43%. U.S. revenue rose 90% to $3.1 million; European revenue declined 18% to $1.0 million. U.S. heart-failure revenue units increased to 99 from 44. Gross-margin improvement reflected lower per-unit costs and higher average selling prices, partly offset by a greater share of full-system sales.
Cash and cash equivalents were $131.2 million at March 31, 2022, down from $142.1 million at year-end 2021. Total assets were $144.4 million and total liabilities $7.6 million; current assets were $142.2 million and current liabilities $6.6 million. The company repaid its $20.0 million Horizon loan in November 2021; no interest expense was reported in Q1 2022. Capital expenditures were $0.3 million. Management said existing cash resources and revenue should fund forecast operating, capital and debt-service requirements for at least three years.
Material changes versus the prior comparable period
- SG&A expense increased 142% to $10.8 million, mainly from higher compensation and headcount, travel, public-company insurance, and commercialization and marketing costs.
- R&D expense increased 29% to $2.3 million, reflecting increased compensation and clinical-study costs.
- Operating cash use more than doubled, while net loss increased 16%.
- Other expense declined to $0.1 million from $3.8 million, primarily because the prior-year period included a fair-value increase in preferred-stock warrants. The warrants converted in connection with the 2021 IPO.
- Q1 2022 basic and diluted loss per share was $0.49, compared with $23.92 in Q1 2021. The per-share comparison is affected by the IPO and conversion of preferred shares; weighted-average shares were 20.5 million and 0.36 million, respectively.
Outlook, commentary, and risks
- Management expects significant losses and negative operating cash flows to continue for at least several years. It plans to expand the U.S. sales force and commercial organization and continue R&D investment in product enhancements, clinical outcomes, patient access and potential additional indications. No quantified revenue or earnings guidance is provided.
- Management attributed U.S. growth to expansion into new territories and accounts and increased physician and patient awareness. Active U.S. implanting centers rose to 56 from 19 year over year; sales territories rose to 17 from six.
- COVID-19 variants continued to affect procedure volumes into Q1 2022, particularly in Europe; the company said U.S. implant centers resumed procedures at more normal levels by March. Further pandemic effects remain uncertain.
- Key risks include dependence on Barostim, adoption and reimbursement uncertainty, limited commercial history, competition, hospital access, reliance on third-party suppliers and potential supply interruptions, and the need for continued clinical evidence. The company noted that some components have long lead times and come from a limited number of suppliers.
- Additional financing may be needed if cash and revenue do not meet requirements; equity financing could dilute shareholders, and debt may impose restrictive terms. Cash equivalents were held at one U.S. financial institution and may exceed insured limits.
- The company adopted lease accounting standard Topic 842 on January 1, 2022, recording right-of-use assets of $0.6 million and lease liabilities of $0.6 million at adoption. It reported no material legal proceedings, no accrued or disclosed contingent liabilities, and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective.
Most important facts for investors to verify
- Whether U.S. procedure volumes, implanting-center growth and reimbursement support continued revenue growth, and whether European sales recover.
- Whether cash burn remains consistent with management’s stated minimum three-year liquidity outlook as commercial and operating costs rise.
- Whether gross-margin improvement is sustainable as product mix, pricing, production volumes and supplier costs change.
- Whether COVID-related disruption, supply constraints, competition or clinical evidence affect adoption and commercialization.
- Whether future financing becomes necessary and, if so, its potential dilution, cost and restrictions.