Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2021, included in our Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.
Overview
We are a medical device company with a mission to treat and transform the lives of patients suffering from venous and other diseases. Our current product offerings consist of two minimally-invasive, novel catheter-based mechanical thrombectomy systems, which are purpose-built for the specific characteristic of the venous system and the treatment of the two distinct manifestations of venous thromboembolism, or VTE - deep vein thrombosis, or DVT, and pulmonary embolism, or PE. Our ClotTriever product is FDA-cleared for the treatment of DVT. Our FlowTriever product is the first thrombectomy system FDA-cleared for the treatment of PE and is also FDA-cleared for clot in transit in the right atrium.
We believe the best way to treat VTE and improve the quality of life of patients suffering from this disease is to safely and effectively remove the blood clot. With that in mind, we designed and purpose-built our ClotTriever and FlowTriever systems. The ClotTriever is a mechanical thrombectomy system designed to core, capture and remove large clots from large vessels and is used to treat DVT. The FlowTriever is a large bore catheter-based aspiration and mechanical thrombectomy system designed to remove large clots from large vessels to treat PE. Both systems are designed to eliminate the need for thrombolytic drugs.
We believe our mission-focused and highly-trained commercial organization provides a significant competitive advantage. Our most important relationships are between our sales representatives and our treating physicians, which include interventional cardiologists, interventional radiologists and vascular surgeons. We recruit sales representatives who have substantial and applicable medical device and/or sales experience. Our front-line sales representatives typically attend procedures, which puts us at the intersection of the patients, products and physicians. We have developed systems and processes to harness the information gained from these relationships and we leverage this information to rapidly iterate products, introduce and execute physician education and training programs and scale our sales organization. We market and sell our products to hospitals, which are reimbursed by various third-party payors.
In March 2022, we completed an underwritten public offering, or the Follow-On Offering, of 2,300,000 shares of common stock, at a price of $81.00 per share. We received net proceeds of approximately $174.4 million, after deducting underwriters’ discounts and commissions and offering costs.
As of June 30, 2022, we had cash, cash equivalents, and short-term investments of $330.5 million, no long-term debt outstanding and an accumulated deficit of $30.9 million.
For the three months ended June 30, 2022, the Company generated $92.7 million in revenues with a gross margin of 88.8% and net loss of $10.2 million, as compared to revenues of $63.5 million with a gross margin of 92.4% and net income of $4.1 million for the three months ended June 30, 2021.
For the six months ended June 30, 2022, the Company generated $179.5 million in revenues with a gross margin of 88.7% and net loss of $13.3 million, as compared to revenues of $120.9 million with a gross margin of 92.2% and net income of $11.5 million for the six months ended June 30, 2021.
COVID-19
The global healthcare system continues to face an unprecedented challenge as a result of the COVID-19 situation and its impact. COVID-19 has had and may continue to have an adverse impact on aspects of our business, including the demand for our products, operations, and ability to research and develop and bring new products and services to market.
In response to the impact of COVID-19, we implemented a variety of measures to help manage through the impact and position us to keep operations running efficiently. However, with hospitals facing staff or other resource constraints, to the extent individuals and hospital systems de-prioritize, delay or cancel deferrable medical procedures, our business, cash flows, financial condition and results of operations may continue to be negatively affected.
The actual and perceived impact of COVID-19 is still evolving and cannot be predicted. As a result, we cannot assure you that our recent procedure volumes are indicative of future results or that we will not experience additional negative impacts associated with COVID-19 or staffing shortages, which could be significant. We continue to focus our efforts on the health and safety of patients, healthcare providers and employees, while executing our mission of transforming lives of patients. While we expect the COVID-19
19
pandemic may continue to negatively impact 2022 performance, we believe the long-term fundamentals remain strong and we will continue to effectively manage through these challenges.
Revenue
We currently derive substantially all our revenue from the sale of our ClotTriever and FlowTriever systems directly to hospitals primarily in the United States. Our customers typically purchase an initial stocking order of our products and then reorder replenishment as procedures are performed. We expect our revenue to increase in absolute dollars as we expand our sales organization and sales territories, add customers, expand the base of physicians that are trained to use our products, expand awareness of our products with new and existing customers and as physicians perform more procedures using our products. Revenue for ClotTriever and FlowTriever systems as a percentage of total revenue is as follows:
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|
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|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ClotTriever |
|
|
33 |
% |
|
|
33 |
% |
|
|
32 |
% |
|
|
34 |
% |
FlowTriever |
|
|
67 |
% |
|
|
67 |
% |
|
|
68 |
% |
|
|
66 |
% |
Critical Accounting Policies and Estimates
Other than the accounting policy changes discussed in "Note 2 - Summary of Significant Accounting Policies" to our condensed consolidated financial statements, which is included in "Part I, Item 1. Condensed Consolidated Financial Statements (Unaudited)", there have been no significant changes in our critical accounting policies during the six months ended June 30, 2022, as compared to the critical accounting policies disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022.
Results of Operations
Comparison of the three months ended June 30, 2022 and 2021
The following table sets forth the components of our unaudited condensed consolidated statements of operations in dollars and as percentage of revenue for the periods presented (dollars in thousands):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
2022 |
|
|
% |
|
|
2021 |
|
|
% |
|
|
Change $ |
|
Revenue |
|
$ |
92,744 |
|
|
|
100.0 |
% |
|
$ |
63,453 |
|
|
|
100.0 |
% |
|
$ |
29,291 |
|
Cost of goods sold |
|
|
10,347 |
|
|
|
11.2 |
% |
|
|
4,814 |
|
|
|
7.6 |
% |
|
|
5,533 |
|
Gross profit |
|
|
82,397 |
|
|
|
88.8 |
% |
|
|
58,639 |
|
|
|
92.4 |
% |
|
|
23,758 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
18,569 |
|
|
|
20.0 |
% |
|
|
11,630 |
|
|
|
18.3 |
% |
|
|
6,939 |
|
Selling, general and administrative |
|
|
73,156 |
|
|
|
78.9 |
% |
|
|
42,897 |
|
|
|
67.6 |
% |
|
|
30,259 |
|
Total operating expenses |
|
|
91,725 |
|
|
|
98.9 |
% |
|
|
54,527 |
|
|
|
85.9 |
% |
|
|
37,198 |
|
Income (loss) from operations |
|
|
(9,328 |
) |
|
|
(10.1 |
%) |
|
|
4,112 |
|
|
|
6.5 |
% |
|
|
(13,440 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
214 |
|
|
|
0.2 |
% |
|
|
35 |
|
|
|
0.1 |
% |
|
|
179 |
|
Interest expense |
|
|
(73 |
) |
|
|
(0.1 |
%) |
|
|
(74 |
) |
|
|
(0.1 |
%) |
|
|
1 |
|
Other income (expense) |
|
|
252 |
|
|
|
0.3 |
% |
|
|
7 |
|
|
|
0.0 |
% |
|
|
245 |
|
Total other expenses, net |
|
|
393 |
|
|
|
0.4 |
% |
|
|
(32 |
) |
|
|
0.0 |
% |
|
|
425 |
|
Income (loss) before income taxes |
|
$ |
(8,935 |
) |
|
|
(9.7 |
%) |
|
$ |
4,080 |
|
|
|
6.5 |
% |
|
$ |
(13,015 |
) |
Revenue. Revenue increased $29.3 million, or 46.2%, to $92.7 million during the three months ended June 30, 2022, compared to $63.5 million during the three months ended June 30, 2021. The increase in revenue was due primarily to an increase in the number of product offerings and the number of units sold as we expanded our sales territories, opened new accounts and achieved deeper penetration of our products into existing accounts.
Cost of Goods Sold. Cost of goods sold increased $5.5 million, or 114.9%, to $10.3 million during the three months ended June 30, 2022, compared to $4.8 million during the three months ended June 30, 2021. This increase was primarily due to the increase in the number of products sold and additional manufacturing overhead costs incurred as we invested significantly in our new facility and operational infrastructure to support our growth.
20
Gross Margin. Gross margin for the three months ended June 30, 2022 decreased to 88.8%, compared to 92.4% for the three months ended June 30, 2021, primarily due to a decrease in operating leverage due to the expanded footprint of our manufacturing capacity and the addition of new products to our FlowTriever per procedure pricing model.
Research and Development Expenses. R&D expenses increased $7.0 million, or 59.7%, to $18.6 million during the three months ended June 30, 2022, compared to $11.6 million during the three months ended June 30, 2021. The increase in R&D expenses was primarily due to increases of $5.1 million of personnel-related expenses, $1.0 million in materials and supplies, and $0.5 million of clinical and regulatory expenses, in support of our growth drivers to develop new products and build the clinical evidence base.
Selling, General and Administrative Expenses. SG&A expenses increased $30.3 million, or 70.5%, to $73.2 million during the three months ended June 30, 2022, compared to $42.9 million during the three months ended June 30, 2021. The increase in SG&A costs was primarily due to increases of $19.4 million in personnel-related expenses as a result of increased headcount across our organization and increased commissions due to higher revenue, $3.2 million in marketing expenses, $2.9 million in travel and related expenses, $2.3 million in professional fees, and $1.1 million in facility related expenses, particularly related to our new facility.
Interest Income. Interest income increased by $179,000 or 511.4% to $214,000 during the three months ended June 30, 2022, compared to $35,000 during the three months ended June 30, 2021. The increase in interest income was primarily due to higher average cash and short-term investments balances during the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
Interest Expense. Interest expense was relatively consistent with $73,000 during the three months ended June 30, 2022, compared to $74,000 during the three months ended June 30, 2021.
Other Income (Expense). Other income of $252,000 for the three months ended June 30, 2022 consisted primarily of foreign currency transaction gains.
Comparison of the six months ended June 30, 2022 and 2021
The following table sets forth the components of our unaudited condensed consolidated statements of operations in dollars and as percentage of revenue for the periods presented (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
2022 |
|
|
% |
|
|
2021 |
|
|
% |
|
|
Change $ |
|
Revenue |
|
$ |
179,496 |
|
|
|
100.0 |
% |
|
$ |
120,850 |
|
|
|
100.0 |
% |
|
$ |
58,646 |
|
Cost of goods sold |
|
|
20,314 |
|
|
|
11.3 |
% |
|
|
9,437 |
|
|
|
7.8 |
% |
|
|
10,877 |
|
Gross profit |
|
|
159,182 |
|
|
|
88.7 |
% |
|
|
111,413 |
|
|
|
92.2 |
% |
|
|
47,769 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
34,704 |
|
|
|
19.3 |
% |
|
|
19,793 |
|
|
|
16.4 |
% |
|
|
14,911 |
|
Selling, general and administrative |
|
|
136,888 |
|
|
|
76.3 |
% |
|
|
79,795 |
|
|
|
66.0 |
% |
|
|
57,093 |
|
Total operating expenses |
|
|
171,592 |
|
|
|
95.6 |
% |
|
|
99,588 |
|
|
|
82.4 |
% |
|
|
72,004 |
|
Income from operations |
|
|
(12,410 |
) |
|
|
(6.9 |
%) |
|
|
11,825 |
|
|
|
9.8 |
% |
|
|
(24,235 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
264 |
|
|
|
0.1 |
% |
|
|
103 |
|
|
|
0.1 |
% |
|
|
161 |
|
Interest expense |
|
|
(146 |
) |
|
|
(0.1 |
%) |
|
|
(147 |
) |
|
|
(0.1 |
%) |
|
|
1 |
|
Other income (expense) |
|
|
228 |
|
|
|
0.1 |
% |
|
|
(34 |
) |
|
|
0.0 |
% |
|
|
262 |
|
Total other expenses, net |
|
|
346 |
|
|
|
0.1 |
% |
|
|
(78 |
) |
|
|
0.0 |
% |
|
|
424 |
|
Income (loss) before income taxes |
|
$ |
(12,064 |
) |
|
|
(6.8 |
%) |
|
$ |
11,747 |
|
|
|
9.8 |
% |
|
$ |
(23,811 |
) |
Revenue. Revenue increased $58.6 million, or 48.5%, to $179.5 million during the six months ended June 30, 2022, compared to $120.9 million during the six months ended June 30, 2021. The increase in revenue was due primarily to an increase in the number of product offerings and the number of units sold as we expanded our sales territories, opened new accounts and achieved deeper penetration of our products into existing accounts.
Cost of Goods Sold. Cost of goods sold increased $10.9 million, or 115.3%, to $20.3 million during the six months ended June 30, 2022, compared to $9.4 million during the six months ended June 30, 2021. This increase was primarily due to the increase in the number of products sold and additional manufacturing overhead costs incurred as we invested significantly in our new facility and operational infrastructure to support our growth.
Gross Margin. Gross margin for the six months ended June 30, 2022 decreased to 88.7%, compared to 92.2% for the six months ended June 30, 2021, primarily due to a decrease in operating leverage due to the expanded footprint of our manufacturing capacity and the addition of new products to our FlowTriever per procedure pricing model.
Research and Development Expenses. R&D expenses increased $14.9 million, or 75.3%, to $34.7 million during the six months ended June 30, 2022, compared to $19.8 million during the six months ended June 30, 2021. The increase in R&D expenses was
21
primarily due to increases of $10.1 million of personnel-related expenses, $2.8 million in materials and supplies, $0.7 million of clinical and regulatory expenses, and $0.7 million in software costs and depreciation expenses, in support of our growth drivers to develop new products and build the clinical evidence base.
Selling, General and Administrative Expenses. SG&A expenses increased $57.1 million, or 71.5%, to $136.9 million during the six months ended June 30, 2022, compared to $79.8 million during the six months ended June 30, 2021. The increase in SG&A costs was primarily due to increases of $38.6 million in personnel-related expenses as a result of increased headcount across our organization and increased commissions due to higher revenue, $4.8 million in travel and related expenses, $4.8 million in marketing expenses, $4.0 million in professional fees, and $2.3 million in facility related expenses, particularly related to our new facility.
Interest Income. Interest income increased by $161,000 or 156.3% to $264,000 during the six months ended June 30, 2022, compared to $103,000 during the six months ended June 30, 2021. The increase in interest income was primarily due to higher average cash and short-term investments balances during the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Interest Expense. Interest expense was relatively consistent with $146,000 during the six months ended June 30, 2022, compared to $147,000 during the six months ended June 30, 2021.
Other income (Expenses) Other income of $228,000 for the six months ended June 30, 2022 consisted primarily of foreign currency transaction gains.
Liquidity and Capital Resources
To date, our primary sources of capital have been the net proceeds we received through private placements of preferred stock, debt financing agreements, the sale of common stock in our IPO and Follow-On Offering, and revenue from the sale of our products. On May 27, 2020, we completed our IPO, including the underwriters full exercise of their over-allotment option, selling 9,432,949 shares of our common stock at $19.00 per share. Upon completion of our IPO, we received net proceeds of approximately $163.0 million, after deducting underwriting discounts and commissions and offering expenses. In March 2022, we completed a Follow-On Offering by issuing 2,300,000 shares of common stock, at an offering price of $81.00 per share, for net proceeds to us of approximately $174.4 million after deducting underwriting discounts and commissions and offering expenses. As of June 30, 2022, we had cash and cash equivalents of $79.7 million, short-term investments of $250.8 million and an accumulated deficit of $30.9 million. In September 2020, we entered into a revolving Credit Agreement with Bank of America which provides for loans up to a maximum of $30 million. As of June 30, 2022, we had no principal outstanding under the Credit Agreement and the amount available to borrow was approximately $28.2 million.
Based on our current planned operations, we expect that our cash and cash equivalents, short-term investments and available borrowings will enable us to fund our operating expenses for at least 12 months from the date hereof.
If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products as a result of the risks described in this Quarterly Report, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us. Additional capital may not be available on reasonable terms, or at all.
Cash Flows
The following table summarizes our cash flows for each of the periods indicated (in thousands):
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|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
Net cash provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
$ |
(12,161 |
) |
|
$ |
16,068 |
|
Investing activities |
|
|
(175,371 |
) |
|
|
(40,937 |
) |
Financing activities |
|
|
174,947 |
|
|
|
1,700 |
|
Effect of foreign exchange rate on cash and cash equivalents |
|
|
(443 |
) |
|
|
(126 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
(13,028 |
) |
|
$ |
(23,295 |
) |
22
Net Cash (Used in) Provided by Operating Activities
Net cash used in operating activities for the six months ended June 30, 2022 was $12.2 million, consisting primarily of net loss of $13.3 million and a decrease in net operating assets of $16.2 million, offset by non-cash charges of $17.3 million. The decrease in net operating assets was primarily due to decreases in accounts payable and accrued liabilities of $2.2 million due to timing of payments and growth of our operations, lease prepayments for lessor's owned leasehold improvements of $3.0 million and a decrease in operating lease liabilities of $0.5 million, coupled with increases in inventories of $5.7 million and accounts receivable of $7.0 million, offset by a decrease in prepaid and other assets of $1.0 million. The non-cash charges primarily consisted of $13.7 million in stock-based compensation expense, $2.3 million in depreciation, and $1.2 million in amortization of the right-of-use assets.
Net cash provided by operating activities for the six months ended June 30, 2021 was $16.1 million, consisting primarily of net income of $11.5 million and non-cash charges of $10.1 million, offset by an increase in net operating assets of $5.6 million. The increase in net operating assets was primarily due to increases in accounts receivable of $3.5 million and inventories of $7.5 million to support the growth of our operations, an increase in prepaid and other assets of $11.3 million primarily from deposits related to Oak Canyon and prepaid insurance, which were partially offset by increases in accounts payable of $7.3 million and accrued liabilities of $9.8 million due to timing of payments and growth of our operations and a decrease in operating lease liabilities of $0.4 million. The non-cash charges primarily consisted of $8.4 million in stock-based compensation, $1.3 million in depreciation, $0.4 million in amortization of the right-of-use assets.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2022 was $175.4 million, consisting of $230.8 million purchases of short-term investments, $5.7 million purchases of other investments, and $5.9 million purchases of property and equipment, offset by maturities of short-term investments of $67.0 million.
Net cash used in investing activities for the six months ended June 30, 2021 was $40.9 million consisting of $84.7 million purchases of short-term securities coupled with $6.2 million purchases of property and equipment, offset by the maturity of short-term investment of $50.0 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities in the six months ended June 30, 2022 was $174.9 million, consisting of $174.4 million net proceeds from the issuance of common stock in the public offering, net of issuance costs of $11.9 million, $3.4 million proceeds from the issuance of common stock under our employee stock purchase plan and $0.5 million of proceeds from exercise of stock options, offset by $3.4 million of tax payments related to vested RSUs.
Net cash provided by financing activities in the six months ended June 30, 2021 was $1.7 million, consisting of proceeds of $1.9 million in proceeds from the issuance of common stock under our employee stock purchase plan and $0.6 million of proceeds from exercise of stock options, offset by $0.8 million of tax payments related to vested RSUs.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable regulations of the U.S. Securities and Exchange Commission, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of business to the Company’s contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022.