Axonics, Inc. (AXNX) on Q1 2022 Results - Earnings Call Transcript
Operator: Good day. Thank you for standing by. And welcome to the Axonics' Q1 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Thank you. I would now like to hand the conference over to your speaker today, Mr. Neil Bhalodkar, Axonic Investor Relations. Sir, the floor is yours Neil Bhalodkar: Thank you. Good afternoon and thank you for joining Axonics' first quarter 2022 results and update call. Presenting on today's call are, Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and Chief Financial Officer. Before we begin, I would like to remind listeners that statements made on this conference call that relate to future plans, events, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in Axonics' filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, May 5th, 2022. Except as required by law, Axonics undertakes, no obligation to update or revise any forward-looking statements to reflect new information, circumstances or unanticipated events that may arise. With that, I'd like to turn the call over to Ray. Raymond Cohen: Thanks Neil. And I'd like to welcome everyone joining this afternoon's call and those of you who may be dialing in later. We're very pleased with our first quarter 2022 results, considering the significant disruption that the Omicron variant had on elective procedures and health care facilities in January and February. Sacral neuromodulation procedure volumes recovered nicely in March, and continued to trend favorably and have accelerated in April. With respect to the first quarter 2022 results, Axonics generated $48.4 million in revenue, representing an increase of 41% compared to 2021. Sacral neuromodulation revenue was $39.1 million, an increase of 19% year-over-year. We continue to expect the sacral neuromodulation market to expand at least 15% per annum for the next several years with Axonics growing its sacral neuromodulation revenue by at least 25% per year driven by market expansion and share gains. Turning to Bulkamid, which posted revenue of $9.4 million of which, $6.6 million was generated in the United States, the remainder of course in the international markets. Despite the Omicron disruption, Bulkamid generated another record quarter of revenue, driven by strong uptake in the United States from onboarding new accounts and solid reorder rates from existing accounts. In the 13 months through March 31st of this year, that we've owned this asset, Bulkamid has improved the quality of life for over 32,000 women suffering from stress urinary incontinence, outperforming all other, urethral bulking agents and propelling Axonics into the market -- into market leadership in this category. Moreover, we are just scratching the surface of what is possible, in the large and highly underserved and underpenetrated female stress urinary incontinence market. As I noted on our call in February, and similar to what you've heard from other companies, Omicron cases resulted in hundreds of canceled procedures in January and February of this year. We expect that these cases will be rescheduled throughout the balance of 2022 and we're very encouraged by the business trends that we have seen for April for both sacral neuromodulation and Bulkamid. And we are highly confident that our updated 2022 guidance which Dan will discuss in his prepared remarks will in fact come to pass. So with that, I'll turn the call over to Dan. Dan Dearen: Thank you, Ray. As Ray stated, Axonics generated net revenue of $48.4 million in the first quarter of 2022. This represents an increase of 41% compared to the prior period. Sacral neuromodulation net revenue was $39.1 million, 97% of which was generated in the United States. Bulkamid net revenue was $9.4 million of which, 70% or $6.6 million was generated in the U.S. Gross profit for the first quarter was $33.2 million, representing a gross margin of 68.7% compared to 59.3% in the prior year period. During the quarter, gross margin benefited mainly from higher sales and improved efficiencies and overhead absorption and manufacturing yield. Higher Bulkamid sales and sales of the new recharge-free system in the last days of March also contributed to a favorable gross margin compared to the prior year period. Regarding our supply chain, similar to other medical technology companies, we have experienced challenges in sourcing certain components for our sacral neuromodulation system. We've been able to manage through this by sourcing parts from new vendors and paying higher prices when necessary. Total operating expenses for the first quarter of 2022 were $56.8 million. Included in operating expenses are certain non-cash items including $7.1 million of stock-based compensation expense and $2.5 million of intangibles amortization. Operating expenses totaled $42 million in the prior year period. Net loss for the first quarter of 2022 was $22.7 million compared to a net loss of $22.5 million in the prior year period. Cash and cash equivalents were $213 million as of March 31st compared to $221 million at year-end 2021. Turning to fiscal year 2022 guidance. Our updated outlook is as follows; total company revenue of $238 million, an increase of 32% compared to fiscal year 2021; sacral neuromodulation revenue of $199 million, an increase of 26% compared to fiscal year 2021; and Bulkamid revenue of $39 million, an increase of 72% compared to fiscal year 2021. I will now turn the call back over to Ray for additional remarks. Raymond Cohen: All right. Thank you, Dan. So, now what I'd like to do is provide a few updates on product development and our sales and marketing initiatives. As most of you are aware, in early March, we received FDA approval for our newly developed truly recharge-free sacral neuromodulation system, which we've named the F15. F15 sets a new standard for what is possible in sacral neuromodulation. At over 15 years of typical stimulation settings and over 20 years at lower energy settings, this new device has the longest functional life and corresponding labeling of any non-rechargeable neurostimulator that the FDA has ever approved, regardless of the clinical application. Our engineering team was able to accomplish this by optimizing the internal circuitry and employing enhanced firmware that makes efficient use of the primary cell battery in the device. The fully recharge-free system is full-body 1.5 and 3.0T MRI compatible and employs the same stimulation engine as our rechargeable device. The implantable neurostimulator is paired with our time lead and easy-to-use fob -- excuse me, key fob size wireless patient remote control. These system elements are designed to last over two decades. Moreover, the patient remote control, unlike our competitor, does not require a communicator nor does it require recharging or replacement batteries. Physician response to the introduction of F15 has been overwhelmingly positive. Axonics is now enjoying the benefits having a complete sacral neuromodulation portfolio. We have hundreds of accounts that have been delighted with our rechargeable device and the strong support they received from our commercial field team. However, from time-to-time those accounts implanted the Medtronic InterStim II for certain patients that for various reasons were better suited for a non-rechargeable system. With the F15 now available, we expect to capture all of the sacral neuromodulation business in these accounts going forward. The even bigger opportunity for Axonics are the competitive accounts that didn't come our way during the last two years. As we have previously discussed, many physicians have only known and implanted a non-rechargeable sacral neuromodulation system for the last two decades. Across the United States, we're selling into these accounts that are open and enthusiastic to do business with Axonics now that we have a recharge-free option to offer them. Our field team is armed with a complete portfolio of best-in-class incontinence solutions for their customers. Net-net, we are confident that the F15 will allow us to capture an even higher market share -- excuse me, I want to be specific about this statement. So, we're confident that the F15 will allow us to capture an even higher share of wallet with existing accounts and help us convert competitive accounts. Our product development initiatives didn't -- are not stopping with the F15 approval. As you know our current rechargeable system needs to be recharged only once a month for one hour. Our engineering team continues to push the limits of what is possible in this category and later this month, we plan to submit a PMA supplement to the FDA for a new fourth-generation rechargeable implantable neurostimulator. This device, which is the same small five cc form factor, will need to be recharged just once every six months for one hour. We expect this device to be approved before the year-end of 2022 and we will begin shipping to customers in the first quarter of 2023. Now, I'd like to spend a few minutes discussing our direct-to-consumer marketing initiatives. Over the years, you've heard us consistently note how underreported, underdiagnosed, and significantly undertreated adults with incontinence are in the United States with these conditions. In every urology or urogynecology or OB/GYN practice across America, there are hundreds, if not thousands of patients that have been differentially diagnosed with urinary or bowel incontinence. These adults have been suffering in silence and did not pursue sacral neuromodulation therapy due to either a lack of awareness or because of the shortcomings of the legacy offerings. To address the lack of awareness, we have been working diligently to make it clear to these adults that these conditions now have an attractive life-changing therapy or life-changing therapies available to them to take advantage of. In April, we launched our direct-to-consumer television advertising campaign. The advertisements started in April airing on television in over 40 markets across the United States and are scheduled to run through the end of this year. However, during the month of May the ads are being featured on national television during programs that rate highly with our target demographic. The Find Real Relief campaign also includes targeted advertising on YouTube, Facebook, digital radio and various other websites. So, the Find Real Relief campaign is focused on women with any form of urinary incontinence. The campaign aims to reduce the stigma associated with these conditions, raise awareness of the Axonics brand and our therapies and with our assistance help women consult with a bladder specialist. The ads encourage viewers to visit findrealrelief.com our new patient-facing landing page. This website provides information about the Axonics incontinence solutions and directs interested individuals to complete a short symptom quiz. In April, we had over 100,000 unique individuals visit our patient landing page to learn more about Axonics therapy. Qualified individuals will then be contacted by a team of nurses in an effort to connect that person to a specialist physician in their local community. Many physicians have already told us that they are seeing patients in their practice asking about Axonics therapy after seeing our commercials on television certain ads or even on Facebook. In addition, during the month of April we held three in-person physician seminars. Based on feedback from attendees, it is clear that these initiatives are resonating with the physician community. Response to the new product launch and DTC campaign, have been phenomenal and physicians can see that we are taking the actions that a market leader should. We are confident that with hard work and a keen focus on providing physicians and patients' quality products, great clinical outcomes and strong support Axonics is making significant progress on its path to market leadership. In closing, we remain grateful for the trust physicians, patients and shareholders have placed in Axonics. We would like to also thank our commercial field team and our colleagues in Irvine for their diligent efforts and dedication to fulfilling our mission of improving the lives of more adults suffering from incontinence. So at this time, we're happy to take questions. So we'll turn it over to the operator, and tee up the first participants. Thank you. Operator: You have your first question coming from the line of Adam Maeder from Piper Sandler. Your line is now open. Adam Maeder: Great. Hi, Ray. Hi, Dan. Thanks for taking my questions and congrats on the nice start to the year. I wanted to ask on the guidance first. Maybe you can just talk a little bit about the construction of the guidance and quantitatively or qualitatively. What's assumed or contemplated in the new guidance range from the DTC campaign and primary cell F15 sacral device? How do we think about that contribution? And then I had a follow-up or two. Thanks. Dan Dearen: Sure. Hi Adam, this is Dan. Great question. We haven't changed our methodology on how we look forward in prepared guidance. And so this is done on an account-by-account basis looking across each of the territory managers and how it rolls up to the area of directors. And simply stated, look with the call it the receding COVID line and patients going back to the office and having elective procedures performed, I think most companies in medical technology are seeing an increase in patient volumes as are we. In addition, with the launch of the F15 product, it's doing exactly what we expected, which is, it's in high demand. We now have a full complement of products between F15, R15 and the Bulkamid product line and really everything is kind of going our way. And so we increased the guidance just to reflect the latest information on the ground, and it's a step forward. So we're being optimistic but we're also trying to not get over our skis and put numbers out there that we don't expect to exceed. So, hope that answers the question. Adam Maeder: Very helpful color, Dan. Appreciate that. And for the follow-up, I'll just keep it to one here and let others jump in. On the follow-up just can you talk a little bit about new account adds? Just wondering, if you're seeing an uptick in account additions or wins now that you have F15 in the marketplace. And then would also be curious just kind of to get a flavor for the mix between the systems rechargeable and non-rechargeable. Where are we today a couple of weeks or maybe even one month kind of post launch? And how do you see that trend being over the course of 2022? Thanks. Raymond Cohen: Sure, Adam. Thanks for your comments and the question. It's another good and interesting question. So thanks for that. Okay. You've asked a kind of a two-part question. So one is are we seeing competitive accounts coming our way on the basis of this new product offering? And the answer is absolutely, yes. I mean, I think, all one has to do is go look at LinkedIn to get a sense about how many of these customers are using this new product for the first time. And a high percentage of those people that are appearing in those LinkedIn posts are brand new customers to Axonics. These are folks that have been resistant all along because we only had the rechargeable system. We don't have an exact number to share with you today about how many new accounts there are. I think over time, we might be a little more comfortable sharing that maybe when the end of this quarter concludes. But it's multiple dozens. Let's just leave it at that right? This is not one or two, right? These are dozens of accounts that are coming our way now because of that. And then you asked I'm kind of smiling because you asked well what about the split. And my answer today is going to be the same answer that I gave the last 20 times that it was asked which is it's about 50-50. And on any given day it might skew slightly one way or the other, but that's about it. And I think this is really important to point out that we're able to accomplish two things with this new primary cell or recharge-free or non-rechargeable system however you like to refer to it. Most importantly, we are closing the hole in the bottom of the bucket. So for existing accounts that we've been working with who've had some patients for various reasons that are not suitable in the physician's mind for a rechargeable system, we're getting that business today. And that matters. And we're excited about that. And then, of course, new accounts coming our way, who by the way they may start working with us on the recharge-free system. But once again that rechargeable product that we have is very attractive. I mean it's nice small product 5cc. So anybody concerned about body image they're going to take advantage of that. Right now once a month for an hour is no big deal to recharge this product. It's not like a spinal cord stimulator that you got to recharge every day, right? It is a completely different kettle of fish. And then also the rechargeable product is not impacted by the quality of the implant or trying to work really diligently to get a low amplitude implant that is going to be directly correlated to the life the longevity in the body of a non-rechargeable system. So that's a guarantee. We've got labeling that says at least 15 years in the body and we've said all along and we fully expect a rechargeable simulator from Axonics are going to last over 20 years. So that's a guarantee there. We have unlimited power there, right? All that you have to do is recharge the device. Simple as that. So this is a great new addition to the product line. It's going to do wonders for us in terms of increases in revenue as a company and getting us into more accounts than we've even been before. But it's not as if all of a sudden Axonics has changed its stripes and turned into a company that is only promoting a non-rechargeable product. I think it's important to get that message across that we're real strong believers that a rechargeable neurostimulator particularly a nice small one is a very attractive product to offer to patients. Adam Maeder: That’s great, color. Thanks again for taking the questions. Raymond Cohen: You bet. Thanks. Appreciate that. Operator: Your next question is from Cecilia Furlong from Morgan Stanley. Your line is now open. Cecilia Furlong: Hi. Good afternoon, and thank you for taking the question. Ray and Dan I wanted to start with Bulkamid. Just if you could talk through really the strength that you're seeing from current account reorders versus continued new account openings. And as well as your outlook around new account contributions contemplated in your guidance. How you would really at this point frame where you are along the path to longer-term target penetration across the US accounts? Raymond Cohen: Yes. Thanks, Cecilia. That's a good question. So Bulkamid is a phenomenon on to itself. I mean it's -- I mean I've been at this I think over 40 years now in this game. And to be honest with you I've never seen a product that has moved as quickly and been adopted as quickly as Bulkamid has. So you say what are the reasons? Well women don't want slings okay? We have stress urinary incontinence okay. You cough, you sneeze, you do some exercise, you leak a little bit of urine. Does that give rise to wanting to go in and have surgery? We all know that it's not a free sling operation. It's not a free lunch. Is it effective? Yes. Are there adverse events? Yes. Do you have to take time off from work and have recovery and all that? Yes. Bulkamid is something that you -- is presented. And the vast, vast majority of women are saying, yes I'll try that. A hydrogel that's biocompatible that's going to last five, six, seven years in my body that's been clinically proven and used over a decade and so on and so forth. People are saying yes to that. So to your question, right. Once you get trained on this product and you've acquired one or two scopes, you're ready to go. We stack up some patients on the first day or the first week, so that we got -- make sure you're doing the right thing, and you're comfortable as a physician, making these injections.,and then it's -- we don't need to be there. So there's no heavy lift in terms of follow-up, or case coverage as is the case with sacral neuromodulation. So the reorder rates are strong. And we just -- once the count is open and they've been trained up, but we just get orders. They just send the purchase orders in and we ship the product simple as that, and post the revenue. And I might add, the margin on that product is really nice, and it's actually better than what we had even estimated. So we got at a above 70% margin here, which we even picked up as you will read in our news release and other things that we picked up even a couple of points, because of the currency exchange in this particular quarter. So, anyway, but we haven't gone into saying, well, here's how many new accounts that we have, and here is the reorder rates. And we just haven't -- we haven't disclosed those kinds of analytics, because quite frankly, it's still early in the game. We've owned this asset now for, I think, we're at 14 months. And we're just out there, doing the work every single day. So -- but it's fair to say that these are hundreds of accounts that have signed up with us during this period of time. I mean, not just one handful, multiple handful of hundreds of accounts. And we're continuing to add new Bulkamid accounts, literally every single day we're adding Bulkamid accounts. But more importantly, the level of satisfaction from the existing customers and the results that they're seeing immediately, right? Imagine a patient comes in they're leaking under those conditions, and then they get these injections, and in 15 minutes later they stand up, they do a cough test and they're dry. That's a phenomenal experience for both the physician, and of course, for the patients. So I know you'd maybe prefer if we gave you a bunch of numbers and so forth, but we're going to only give you soft comments today. Things are going ridiculously well. It continues to meet our -- to exceed our expectations. This is part of the reason we've even updated the guidance here. And I think this is a product line that has a lot of legs for us and far exceeding even the expectations that we set forth when we acquired the asset, right? So I'll leave it at that if you don't mind. Cecilia Furlong: Okay. No, I appreciate all the color, Ray. And if I could follow-up as well, just on your commentary around the supply chain. If you could just walk through a bit more what you're seeing in the field today, either any recent shifts or easing? And then as you think about just from a gross margin standpoint potential offsets you have either from the recharge-free platform launching Bulkamid contributions, just really how you're thinking about gross margin through the balance of the year across all of those factors? Raymond Cohen : Sure. I'm just going to make one or two comments and I'll pass it to Dan. Look, the good news for our company is that pricing is really stable. I mean, we've got the same ASP literally now for a couple of years since we've launched the product in the United States in 2019. So that's the good news. We get nicked up a little bit here and there, because things are coming out of stock, or you got to pay a little bit more for this component or whatever. I mean, it's a fire drill, and every single day it's a different thing that you got to try to address. So that's reality, but that's the business that we've chosen, right? And these supply chain issues are annoying, but you just got to work through them. Once again, the good news is that prices are stable. F15 has got a better cost of goods profile for us. So that contributes to increasing gross margin. And once again, Bulkamid, we got stable prices and we got really nice margins. And then we had that little pickup from the euro-dollar exchange. So with that said, I'll pass it to Dan and he can speak about what to expect going forward. Dan Dearen : Sure. So no the comment about supply chain was because we wanted to be prudent not -- just not say it. And so I think like probably most every medical device company in the industry, we've all seen certain components whether it's epoxy or a resistor a capacitor get swallowed up by some wholesaler, who then increases the price on you, but nothing what that I would deem material. I just wanted to we called out that we have addressed it by paying higher prices where we have to and in some cases placing large purchase orders where there are components that have long lead times. So we haven't had any manufacturing stock-out issues as a result of supply chain, but given everything that's happened with COVID, we felt it would be more prudent to mention it than to just say nothing about it. So that was really that. As far as Ray's commentary on the margins, he is correct, which is despite these little nicks that we get where we might have to pay more for a certain component, the reality is we're manufacturing in larger scale than we ever have before. As time goes on we get better. There are more manufacturing efficiencies better absorption of overhead. And so we have a really tight control on our cost of goods sold. And so we had solid margins for the quarter. We expect them to stay in that call it high 60s range throughout the rest of the year. I don't want to oversell it, because I want to point out that, yes, we just launched a new product the F15 that has a higher gross margin profile than the current rechargeable product. But by the end of the year, we'll also be building inventory and getting approval hopefully and launching our next rechargeable device. And so any time you have these shifts in product mix, it does tend to move your margin around a little bit a point up or down one way or the other. So we're in a very good place. It's tracking perfectly according to plan. And you've only heard me say this 250x. At scale, we expect margins to be in the mid-70s. Cecilia Furlong: Great. Thank you for taking the questions. Raymond Cohen: Thank you, Cecilia. Operator: Your next question is from the line of Larry Biegelsen from Wells Fargo. You may ask your question. Unidentified Analyst: Hi. This is Nathan on for Larry. Thanks for taking the question. My question is more around the primary cell. So you launched your device around the same time your competitor launched their next-generation primary cell device. Would you give any color in terms of what dynamic have you seen in the market given both of you have launched your products? And what have you heard from physicians regarding your product versus your competitors? Thanks. Raymond Cohen: Well, I would say they're late and a dollar short, okay? And that's how I'd sum it up in terms of our competitor's InterStim X which is basically some upgraded electronics inside the exact same form factor. So I think that's the most obvious thing. Second thing is they didn't do anything to improve the patient experience when it comes to the patient remote control system where they need a communicator. They have multiple items complicated all need to be plugged in the world to get recharged otherwise you can't communicate with the device. So when it comes to the patient experience, they've done really nothing to help that situation. They are indicating that the device will last a little bit longer in the body. So as opposed to an average four year, I mean I'll quote the exact clinical -- from clinical papers 4.4 years on an average for InterStim II. They're basically saying that on average you can double that and get eight to nine years maybe 10 years under some really great conditions. Our device, on an apples-to-apples comparison, if they can get 10 years out of that device under those conditions, we get 17.6 years. And we can get over 20 years if the physician does a good implant with low amplitude energy requirements. So we've got a significantly easier-to-use product. We also I'd there say have a validated simulation I'll call it algorithm, all right? Because it's using the same engine that we have in our validated rechargeable product which underwent a PMA IDE approved clinical study. We use constant current stimulation. We used it in our rechargeable. We're using it in our non-rechargeable or recharge-free system. It's the same engine. It's been clinically validated. And I'm going to make a strong statement. There are no products sold by our competitor today that are clinically validated. They have switched from a voltage control system to a constant current system, but there's no data out there to underscore the efficacy of these devices. So we've got a lot on our side. We got a validated product with strong efficacy longer lived and easier to use. So based on that, I can tell you that the average physician who sees these facts, I mean they're coming our way. I mean that's the bottom line. And the word is out also. You work with Axonics it's a different experience. Every case gets covered. You get phenomenal support from the company. You got patients that are completely satisfied. Our mantra is no patient left behind, right? We actually are doing things to make sure people are having a good experience. So I think it's the entire gestalt right of what we're up to. You want to do apples-to-apples comparison, we can do it. There's no question. It's a fact. Medtronic has 23, 25-year head start on Axonics. But man, we are gaining ground and I dare say because I've said it all along. We're going to be the market leader in this category. We're determined. We're focused. We got the goods and we got the people and we got the feet on the street and we've got excellent momentum. So I think that any level of investigation that anybody does surveys, individual conversations or just looking at the numbers, I think it's going to be really obvious that if any physician wants to -- how should we say attach their wagon to a certain horse, it's Axonics not the legacy provider. Unidentified Analyst: Okay. Thank you. Well, just sticking to that so I guess -- so we estimate that Axonics currently has 20% share of the SNM market and about 40% of the rechargeable market. Do you think you could capture a similar share of the primary cell market? Raymond Cohen: So I appreciate your question and I'm going to sound like a broken record because there aren't two markets here. This is a spreadsheet fantasy, okay? There is a doctor and then there is a patient. And that doctor is going to present whatever he thinks is appropriate to the patient or give the patient a choice and then they're going to choose. They're either going to use a rechargeable product or a non-rechargeable product based on a number of conditions that the patient and the doctor are going to decide amongst themselves. We have -- we're not influencing those decisions. So -- and I don't want to debate the percentages of market share because you only have one number to go by. Our competitor has not released fresh numbers in how many years now, right? So I just don't know what that answer is. I can give you our opinions. We think it might be this or that. But our objective is to be the market leader. That means we will not rest until we are shipping 51% of all the sacral neuromodulation stimulators that are being put in patients in the United States. I'll leave it at that. Unidentified Analyst: Great. Thank you so much. Operator: Next question is from Mike Matson from Needham & Company. Please go ahead. Mike Matson: Yeah, good afternoon. Thanks for taking my questions. I guess, first, Dan I appreciate your earlier comments on gross margin and maybe I've missed it but I know you don't give specific guidance. But can we expect it to stay at this 68%, 69% level for the rest of the year, or should it get even better from here over the next few quarters? Dan Dearen: I would -- here is my take on it, which is when we look at the numbers and we look at what we're expecting in terms of internal estimates on product mix and build plans. I think we had guided earlier to I think it was 66.2% with the analyst consensus. I think, it's fine to stay in the 66.2% to 67.5% for the remainder of the year, but I don't want to oversell it and have anyone push it into the 70s because we have so much going on. Mike Matson: Yeah, I understand. That's helpful. Okay. And then wanted to see if you could give us an update on your sales force. With the launch of the F15, is that an opportunity to maybe add some additional reps, or? Raymond Cohen: So Mike good question. Look, we have worked diligently in the latter part of 2021 in the early part of 2022 to let's just say complete the expansion of our field -- commercial field force. So between territory managers, sales managers and clinical specialists we have approximately 320 people in the United States that we would consider feet on the street. And it's pretty much a mix. It's almost exactly half and half in terms of quota-carrying representatives and clinical support individuals. We feel comfortable with that number. We don't believe that we need to add additional heads in 2022 to exceed the consensus. And we honestly don't believe we need many more people in 2023 even with a significant increase in the revenue. So we feel like we are fully staffed right now. And, of course, look there's going to be a little bit of turnover and all those kinds of things we have to do some backfilling. But other than that we've done the work. We -- Mike one thing you've known us from before we went public right when we hired 135 people to market our products in the United States without FDA approval. So we have always been ahead of the curve. And we think that's the right place to be, while we're in this big growth mode. But the good news is that I think we've got an excellent team. They're all well trained and I think we're really in good shape. And this is a big team now. I mean we got a big team. There is not one place in the United States in the -- on the continental United States or even in places like Hawaii and Alaska that we're not present and that we can't support cases. So sorry for the long-winded answer, but I wanted to give you a little color about how did we get to where we are today and anticipate the question about what about the next the rest of the year. So we're in good shape and we feel good about the quality and the size of the commercial team in the United States. Mike Matson: Okay, got it. That was very helpful. Thank you. Raymond Cohen: You're welcome. Thanks Mike. Operator: Next question is from David Rescott from Truist Securities. Your line is now open. David Rescott: Hey guys, thanks for taking the question and congrats on the quarter. First, I guess for me in the past I think you've talked about how Bulkamid was potentially a door opener to some of these SNM accounts. And you've provided some updates on that in the past. But you posted I guess two or three seminars so far with the new recharge-free device launch. And so, I guess, do you get a sense at this point whether or not maybe some of these seminars would be SNM accounts or even starting to bring in some new Bulkamid accounts? Raymond Cohen: Yeah. Look it works both -- this is the beautiful part about it right? These products are totally synergistic even from the patients -- just look at it from the patient standpoint. The stats that we have suggest that somewhere between 20% and 25% of all patients who present with urge urinary incontinence also have stress urinary incontinence. So that's a big percentage of our patients who have what is referred to by the clinicians as mixed incontinence. Not to be confused with dual incontinence, which is a fecal incontinence and urge urinary incontinence together. So the point is, that this is not -- it's like the question about the notion of a rechargeable market and a nonrechargeable market. I mean, this is very holistic, right? These are people walking in the door who've got these problems. And the beautiful part is that Axonics has the ability and the therapies, to treat these patients, no matter what their condition is. So that's the beautiful part. So it's very synergistic and it's symbiotic, right? So of course, we have seen accounts that have never done Sacral Neuromodulation business with Axonics, adopt to Bulkamid get going with us, realize wow this is a good company to work with. I mean they got some really good people and these products are great. You know what I'm going to give them a chance, on Sacral Neuromodulation. And then on the other side, it's like a lay down, right? I mean, we got an existing customer who has been working with us and now we have a product to treat stress urinary incontinence patients. They are like it -- we already know what it's like to work with Axonics, and we're happy to bring that new product in. So it's been working both ways for us. Existing customers adopting Bulkamid. Customers that never work with us, adopting Bulkamid as a door opener and then ultimately coming our way with Sacral Neuromodulation. So it's done. When we first acquired it, we made certain statements about what we believed, right? We thought we were optimistic. We anticipated right that this might have this effect. Well, the reality is the effect has been significantly better and more advantageous to Axonics, than we could have imagined. And look we do the best that we can, right? You acquire a good asset, you integrate it, you can get it out to your customers as efficiently as possible. But in the end of the day, if the product is not great, the people are not going to use it. In this case, our product has exceeded people's expectations. And we're seeing Bulkamid now become a first-line therapy, for patients who have stress urinary incontinence. And what we're hopeful is now that with these long-lived MRI-compatible highly efficacious Sacral Neuromodulation products that Sacral Neuromodulation. will quickly move from a therapy of last resort to something that a doc is comfortable with and he wants to pull it out of the bag early. Now obviously. we're not going to depend just on physicians to do this. That's why we're going directly to the consumers and we're letting them know leak in your end, is not normal. And if you've got this problem, we can help you. And if you have noticed, if you happen to see the ads or have any sense about what we're doing this is a branded campaign. This is about Axonics therapy. We don't talk About Sacral Neuromodulation. We don't talk about Bulkamid. We don't talk about stress urinary continence. We just -- the ads are from a real patient saying "Hey if you've got this problem, I had it. I was just like you. I found Axonics and now my life is significantly better. I encourage you to go to findrealrelief.com and go from there." So that's the whole stick. David Rescott: Okay. That's, helpful. I guess just a second one, from us. I appreciate the commentary provided just around the recharge-free launch, so far. But I guess, could you maybe provide some color around maybe what a typical account or where you're seeing some of the implants coming in from -- is a lot of this coming into maybe some Axonics typically heavy accounts that we're waiting for a recharge-free product, or are you even -- are you seeing any kind of some share gains within accounts that maybe are heavy, from the competitor that you're now able to offer the recharge-free product and then therefore even pulling some of the rechargeable products as well? Raymond Cohen: Yes. It's a good question. We may not have answered it explicitly, but I'll say the following. When I refer to closing the hole in the bottom of the bucket, I'm talking about 10% or 15% of the procedures, right, or you know, what I mean, a relatively modest amount of business that we just weren't getting from our existing accounts. Some accounts that we have had a good majority of them. They are 100%. They are 100% Axonics. They had no interest in ever working with the legacy provider ever again. But in some instances, some of those accounts still gave some business to our competitor just because the patient may have had one in their body before, and it was working okay and -- or maybe the patient gained an extra 150 pounds and they didn't think that rechargeable was a good idea because they couldn't reach around, or any one of a number of things. Okay. But that's a measurable kind of a uptick. Getting a brand-new account that we've got zero business out of before, I mean that's a whole new ball game for us, right? And that's really exciting and we have literally dozens and dozens of those accounts that have come our way literally in the first what six weeks of launch of the product. And we expect that to continue, because a, we have a number of these institutions that since we never did business with them before, we don't have a contract yet with that institution. So we're still in the process of getting contracts with some of these institutions that we've never worked with before. So, yes, there's interest and there's demand but we haven't even been able to fulfill it, yet. We also have to have an addendum added to the existing agreements that we do have with our own customers. Well, once again, it takes time to work through this kind of paperwork process. So these are the -- that's kind of like the operationalized side of this business that there is always a bit of a time line or a time lag before you can fully appreciate the benefit of a new product launch like we have. So we're working through all those details. And I think people are -- will be, I dare say, impressed with what we post in Q2 and going forward, because it's just -- I mean, it's a funny thing. We've had success, clearly. Being ranked the number one fastest-growing company in the Americas is no small feat, right? We're proud of that. But our view and the management's view here and our employees of the company is, we're just getting started. And now for the first time in two years, we actually have kind of a open playing field in terms of elective procedures. So this is -- this feels really good to us that we're not having to compete against COVID. And I've said it before COVID has been the hardest competitor than anybody could ever imagine. So when we get elective procedures back on and things, when people are comfortable to go in and get procedures done again and all the rest of it, it really gives our people an opportunity to go out there and show what we can do. So we're, obviously, quite optimistic and bullish about the prospects. And now we actually are able to actually go out in the field without one hand tied behind our back, because of COVID and the other hand tied behind our back, because we didn't have a recharge -- a non-rechargeable system. So we're feeling pretty good. And if you get the sense for me, hopefully, I'm not overstating it. I mean we're bullish. And we're really excited about what we can do now in the next three quarters of 2022. And, obviously, and then in 2023 with now -- I mean, it's a funny statement. We're going to have a rechargeable product that you hardly ever need to recharge. So that should be one hell of an attractive product for the marketplace in 2023 as well. David Rescott: Very helpful. Thanks, again. Raymond Cohen: Thank you. Operator: Next is from the line of Michael Polark from Wolfe Research. Your line is now open. Michael Polark: Hi. Good afternoon. A lot of color. I only have one question. It sounds like a yes, but consensus 2Q revenue, $59 million, give or take, is that a appropriate framework sequentially? Raymond Cohen: I almost want to ask a question to your question. I mean, it's what the analyst consensus is. Are you asking me to confirm Q2 numbers, Mike? Michael Polark: Yes. I haven't heard any specific sequential commentary about revenue aside from the prior reply, which, there we think we’ll be impressed by the numbers that I'm just trying to ensure we have the -- Raymond Cohen: Yes. Let me make sure -- yes. You're asking about timing and all the rest. Like, look, I think what we did is we basically have just reiterated the earlier guidance we added just a little bit to it and the pace at which the analyst community had assumed, I think, is fine going forward. Our objective is to beat -- I'm going to round your number up to $60 million, right? Its $59 million and change. Our objective is to beat that number. I mean, that's our objective every quarter. Now, Q1 was obviously challenging quarter, because we had external factors that nobody could have predicted in terms of the COVID wave that hit us all in January and hung around through February. So unless something weird happens now, I mean -- and God knows, there's been a lot of weird things happening in the world. So -- but in terms of the business, we feel really good about it. And our objective is to beat those numbers in Q2. And so, we're not moving things around in terms of the cadence for the balance of the year. Michael Polark: Sounds good. Thank you so much. Raymond Cohen: No. Thanks Mike. Appreciate it. Operator: Your last question is from Danielle Antalffy from SVB Securities. Your line is now open. Priya Sachdeva: Hi, guys. This is Priya on for Danielle. Thanks for taking the questions. I guess, if I could ask one. As you guys continue to make investments on the DTC front, do you have any sense of how many of those patients -- appreciate the color of 100,000 new patients in April who visited your patient landing website. But those who are contacted by those nurses, do you have any sense on how many you're actually getting SNM? And is there any other metrics that you guys can track to see how those DTC efforts are going? And, I guess, a little bit of a follow-up. For those patients who are interested but aren't getting implanted, what are some of the barriers still there to implantation? Thanks. Raymond Cohen: Okay. Well, that's an interesting question. Thank you for the question. So let me push aside the -- what are the barriers, okay, just for a moment. In terms of the response to direct-to-consumer advertising, you have to start with how many people are actually going to findrealrelief.com, that's the point number one. I didn't talk about impressions, probably because I'm from a different generation. So I don't know how to count impressions and I don't know what they mean, okay? So -- because that's in the millions. But what I do know is 100,000 people took the time to go to the website and to register themselves so to speak, right? The key thing is that, we want those individuals to fill out the survey and then we can contact them and then, we can understand where are they. Are they early in the care pathway? Are they late in the care pathway? And can we get them dropped in for a consult with one of our providers, okay? So that's the game that we're up to right now. There is a lot of ways in which we'll be able to measure the results of this campaign beyond the kind of fufu stuff about unique visitors', impressions, unique visitors', survey responders and all that other stuff, which is ultimately how many of those patients wind up getting an implant, right? That's the business that we're in or injection of Bulkamid. And the way we'll fundamentally do that in particular for sacral neuromodulation is when patients enroll in the process doing external trial, they give permission for their data to be put in what we call our patient care manager. So the fact is that that data is going to sit up there in the cloud. And then what we do is we basically match the actual patient who got an implant with the person who responded to an ad. Now you can imagine that's a process and it takes time and there's lag times and all these other kinds of things. So, it's -- I can give you anecdotal stories, where docs have even come up to me in the seminar recently in Denver last weekend and say, I got two patients already from the Find Real Relief campaign and then I have got two external trials and one is already being implanted. You hear that kind of stuff. But ultimately one-off anecdotal stories is not -- does not an ROI make, okay? And so we're going to be tracking this stuff, but it's way premature to really for us to be able to report in any meaningful way on what this is about. What we said is that, we've earmarked some pretty good dollars for this campaign. We're going to run this campaign pretty much for the balance of the year. I think the early indications are very good. I gave you a number for April. Well, it turns out that the pace of visitors in May is significantly higher than it even was in April, so maybe 100,000 last month in April. We may see 200000 people in the month of May. So these numbers are starting to increment quite nicely in terms of the response which just underscores the fact that no one knows about any of these therapies. It's a big secret, right? So we're trying to change that. And it's going to take some effort and it's going to take a bit of a lift and some money for us to invest to make that happen. But I assure you and we said this all along, in particular, Dan and myself and the rest of our senior management team, we're operators. Okay? We're not social media geeks, right? We're operators. So everything that we do, we try to operationalize on the back end, right, so that we understand what's happening, what the ROI is and where to apply our money judiciously. And that's our objective. We've got a good amount of cash. We understand that cash came from our shareholders and we're going to hug the net cash and we're going to act as responsible stewards on behalf of our shareholders. And that's really kind of the best that I really could say about that. So we're excited about the response. I mean, it really is a new day. There is a renaissance that is occurring now. And if we can get this conversation, so that it's no longer in the dark, right? That people are comfortable talking about these conditions, knowing now that there's a solution. And let's face it. People don't talk about problems, unless there is solutions to the problems and that's what we're trying to do, influencing one person at a time here and so forth. So it's really an exciting time. And I dare say this is great news for patients and for people in America who have been suffering in silence with these problems and we want to get them to come out and give us a chance to help them. All right. Now, why don't they? What happens? It's human nature. It's just the inertia, right? People have to take specific action. They have to be bothered enough to want to take the action. They need receptive caregivers on the other end, right? So there's logistics involved. We may have gotten a patient dropped into a particular physician's office. But once again, we don't run those practices. So, we work hard with them to say, if we drop a name of a person who is interested, who wants to come in for a consult, your staff has to call those people and get them on the calendar. None of this, we're busy three months from now, I can get you in for a consult, right? So you can see that there are ways and issues that you have to overcome in terms of the organization in these practices, right? Let's face it. Medical community -- no secret if I say this, the medical community is -- are they the best business persons on the planet? No. So we do what we can to help them. But in the end of the day, they got to get people scheduled. They've got to get them in the door. They got to figure out where they're at, what their problems are, how to differentially diagnose them and then ultimately offer these treatments. So it is a process and it is going to take some time for us to reap the benefits just because of logistics. So -- and then why a patient would not pursue? Once again, it just depends. Each individual is going to have to make their own decisions about their level of comfort and trust in the physician provider across the table in that conversation. So hopefully, that's enough color at least to give you a sense about how we see it and how we're thinking about it and what we're trying to do. But all in all, it's been overwhelmingly positive. And so, we're thrilled with the initial reaction to the campaign and it's giving us motivation to continue and to get more patients in. And the last thing, I'll say is, you can imagine the response from the physician community. I mean, here Axonics, the new entrant into the marketplace is actually now doing things to help them get more patients in the practice and help more of their existing patients get access to these therapies. So thank you for your question. Very much appreciated. Priya Sachdeva: Yeah, super helpful. Thanks for the color. That’s all from me. Raymond Cohen: You bet. Thank you. Operator: That ends our question-and-answer session. I'll turn the call back over to Raymond Cohen for closing remarks. Raymond Cohen: Thank you. So thanks operator. Thanks to all the analysts for your questions. We certainly appreciate it. It always gives us an opportunity to add a little more color to the prepared remarks. And so, we thank you for your continued support and we look forward to talking to you again in early August. Take care. Have a good evening. Dan Dearen: Thank you. Operator: That concludes today's conference call. Thank you all for participating. You may now disconnect.AXNX Ratings Summary
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Axonics Receives FDA Approval For F15
Axonics, Inc. (NASDAQ:AXNX) made an announcement yesterday, according to which it received FDA approval for its non-rechargeable (primary cell) SNM system called F15. According to the analysts at Needham & co, the approval closes a portfolio gap and could drive the next leg of SNM market share gains for the company. The timing is in line with the previous commentary that suggested approval during Q1/22, and management expects to begin shipping F15 units in April.
The analysts believe that the company’s revenue growth should be driven by both market expansion and market share gains from the launches of Axonics rechargeable and non-rechargeable r-SNM systems. In addition, the analysts expect Bulkamid to supplement Axonics' growth in its core SNM business. Over time, the analysts expect improvement in Axonics' gross and operating margins and for it to become profitable and cash-flow positive.
