CVRx Inc

Previous wording

In the 2024 OPPS final rule issued in November 2023, Barostim was reassigned to New Technology APC 1580, which carries an average payment amount of $45,000. The new payment took effect January 1, 2024.

Current wording

In the 2024 final outpatient rules (“OPPS”) issued in November 2023, Barostim was reassigned to New Technology APC 1580, which carries an average payment amount of $45,000. The new payment took effect January 1, 2024. In July 2024, the Centers for Medicare and Medicaid Services (“CMS”) proposed OPPS rules for 2025, including moving Barostim procedures back to APC 5465, which would reduce the average payment amount for Barostim to $31,000. We believe the data supports creation of a Level 6 Neurostimulator APC and will work with CMS with the goal of achieving this, or alternatively, leaving Barostim in New Technology APC 1580 for another year.

Previous wording

In April 2024, we announced the termination of the employment of our Senior Vice President of U.S. Sales, effective April 29, 2024. Pursuant to his employment agreements, he is eligible for severance benefits provided that he signs a release of claims in favor of the Company and complies with certain covenants, including non-competition and non-solicitation restrictions.

Current wording

In April 2024, we announced the termination of the employment of our Senior Vice President of U.S. Sales, effective April 29, 2024. Pursuant to his employment agreements, he was eligible for severance benefits provided that he signed a release of claims in favor of the Company and complies with certain covenants, including non-competition and non-solicitation restrictions. He signed the release, and we began making severance payments to him in July 2024.

Previous wording

expenses such as logistics and shipping costs. We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows. Gross margin may also vary based on regional differences in rebates and incentives negotiated with certain customers.

Current wording

Cost of goods sold consists primarily of acquisition costs of the components and subassemblies of Barostim, allocated manufacturing overhead and scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs. We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows. Gross margin may also vary based on regional differences in rebates and incentives negotiated with certain customers.

Previous wording

We calculate gross margin as revenue less cost of goods sold divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, but is primarily driven by the average sale price of our product, the percentage of products sold that include a full system (i.e., an IPG and a stimulation lead), as compared to individual IPG sales, and the allocated manufacturing overhead. Although we sell the majority of our devices directly to hospitals, the impact of the average selling price on gross margin is driven by the percentage of products we sold to distributors as compared to those sold directly to hospitals, as our average selling price is typically higher on products we sell directly. The full system sales typically have a lower gross margin as they include the cost of an IPG and a stimulation lead whereas individual IPG sales only include the cost of an IPG. The manufacturing overhead costs of Barostim are directly aligned to our production volume and therefore the cost per product is reduced if production levels increase. While we expect our gross margin to be positively affected over time to the extent we are successful in selling more product through our direct sales force and by increasing our production volumes, it will likely fluctuate from period to period as we continue to introduce new products and adopt new manufacturing processes and technologies.

Current wording

the percentage of products we sold to distributors as compared to those sold directly to hospitals, as our average selling price is typically higher on products we sell directly. The full system sales typically have a lower gross margin as they include the cost of an IPG and a stimulation lead whereas individual IPG sales only include the cost of an IPG. The manufacturing overhead costs of Barostim are directly aligned to our production volume and therefore the cost per product is reduced if production levels increase. While we expect our gross margin to be positively affected over time to the extent we are successful in selling more product through our direct sales force and by increasing our production volumes, it will likely fluctuate from period to period as we continue to introduce new products and adopt new manufacturing processes and technologies.

Previous wording

Revenue generated in the U.S. was $9.8 million for the three months ended March 31, 2024, an increase of $2.9 million, or 42%, over the three months ended March 31, 2023. HF revenue units in the U.S. totaled 319 and 225 for the three months ended March 31, 2024 and 2023, respectively. HF revenue in the U.S. totaled $9.7 million and $6.8 million for the three months ended March 31, 2024 and 2023, respectively. The increases were primarily driven by continued growth in the U.S. HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim. These increases were partially offset by decreased productivity in February due primarily to turnover within the sales organization. We implemented actions to address these challenges in our U.S. Heart Failure business to rebuild these territories, resulting in stronger performance in March.

Current wording

Revenue generated in the U.S. was $10.7 million for the three months ended June 30, 2024, an increase of $2.4 million, or 29%, over the three months ended June 30, 2023. HF revenue units in the U.S. totaled 339 and 265 for the three months ended June 30, 2024 and 2023, respectively. HF revenue in the U.S. totaled $10.5 million and $8.3 million for the three months ended June 30, 2024 and 2023, respectively. The increases were primarily driven by continued growth in the U.S. HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

Previous wording

As of March 31, 2024, we had a total of 190 active implanting centers, as compared to 122 as of March 31, 2023. Active implanting centers are customers that have completed at least one commercial HF implant in the

Current wording

As of June 30, 2024, we had a total of 189 active implanting centers in the U.S., as compared to 140 as of June 30, 2023. Active implanting centers are customers that have completed at least one commercial HF implant in the last 12 months. As of June 30, 2024, we had a total of 42 sales territories in the U.S. as compared to 32 sales territories as of June 30, 2023.

Previous wording

Revenue generated in Europe was $0.9 million for the three months ended March 31, 2024, a decrease of $0.1 million, or 10%, over the three months ended March 31, 2023. Total revenue units in Europe decreased to 44 for the three months ended March 31, 2024, as compared to 52 in the prior year period. As of both March 31, 2024 and 2023, we had six sales territories in Europe.

Current wording

Revenue generated in Europe was $1.1 million for the three months ended June 30, 2024, a decrease of $0.1 million, or 6%, over the three months ended June 30, 2023. Total revenue units in Europe increased to 63 for the three months ended June 30, 2024, as compared to 56 in the prior year period. As of both June 30, 2024 and 2023, we had six sales territories in Europe.

Previous wording

Cost of goods sold increased $0.3 million, or 22%, to $1.6 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This increase was driven by higher sales of Barostim.

Current wording

Cost of goods sold increased $0.4 million, or 25%, to $1.9 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This increase was driven by higher sales of Barostim.

Previous wording

Gross profit was $9.2 million for the three months ended March 31, 2024, an increase of $2.5 million, or 38%, over the three months ended March 31, 2023. Gross margin increased to 85% for the three months ended March 31, 2024, compared to 83% for the three months ended March 31, 2023. This increase was due primarily to a decrease in the cost per unit driven by an increase in the production volume.

Current wording

Gross profit was $9.9 million for the three months ended June 30, 2024, an increase of $1.9 million, or 24%, over the three months ended June 30, 2023. Gross margin was 84% for each of the three months ended June 30, 2024 and June 30, 2023.

Previous wording

R&D expenses decreased $0.4 million, or 11%, to $3.1 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This change was driven by a $0.2 million decrease in non-cash stock-based compensation expense, and a $0.2 million decrease in consulting expenses.

Current wording

R&D expenses decreased $0.5 million, or 16%, to $2.8 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This change was driven by a $0.4 million decrease in consulting expenses and a $0.1 million decrease in compensation expenses.

Previous wording

Interest expense increased $0.7 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Current wording

Interest expense increased $0.5 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Previous wording

SG&A expenses increased $12.9 million, or 84%, to $28.3 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This change was primarily driven by a $9.6 million increase in non-cash stock-based compensation expense, a $2.0 million increase in compensation expenses, mainly as a result of increased headcount, and a $0.6 million increase in travel expenses. Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the modification of stock options held by the former CEO in connection with his retirement in the first quarter of 2024 described in Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

SG&A expenses increased $17.6 million, or 55%, to $49.4 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This change was primarily driven by a $10.6 million increase in non-cash stock-based compensation expense, a $4.6 million increase in compensation expenses, mainly as a result of increased headcount, a $0.6 million increase in advertising expenses, a $0.5 million increase in travel expenses, and a $0.5 million increase in consulting expenses. Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the modification of stock options held by the former CEO in connection with his retirement in the first quarter of 2024 described in Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years. As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $80.1 million and $90.6 million, respectively. For the three months ended March 31, 2024 and 2023, our net losses were $22.2 million and $11.4 million, respectively. Our net cash used in operating activities for the three months ended March 31, 2024 and 2023 was $10.9 million and $10.2 million, respectively.

Current wording

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $70.4 million and $90.6 million, respectively. For the three months ended June 30, 2024 and 2023, our net losses were $14.0 million and $11.7 million, respectively. For the six months ended June 30, 2024 and 2023, our net losses were $36.2 million and $23.0 million, respectively. Our net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $20.7 million and $23.1 million, respectively.

Previous wording

On November 4, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co., as agent, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” or ATM offering, to or through the agent. In January 2024, we commenced this ATM offering and issued 23,364 shares of common stock for gross proceeds of $0.6 million under the ATM offering during the three months ended March 31, 2024. We have remaining capacity to issue and sell up to approximately $49.4 million of additional shares of common stock under this ATM offering.

Current wording

On November 4, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co., as agent, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” or ATM offering, to or through the agent. In January 2024, we commenced this ATM offering and issued 23,364 shares of common stock for gross proceeds of $0.6 million under the ATM offering during the six months ended June 30, 2024. We have remaining capacity to issue and sell up to approximately $49.4 million of additional shares of common stock under this ATM offering.

Previous wording

We believe that our existing cash resources and Loan Agreement for Term Loans together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years. If these sources are insufficient to satisfy our liquidity requirements, or provide funding to execute or accelerate our growth strategies, however, we may seek to sell additional equity or enter into an additional loan agreement. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants further

Current wording

We believe that our existing cash resources and Loan Agreement for Term Loans together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years. If these sources are insufficient to satisfy our liquidity requirements, or provide funding to execute or accelerate our growth strategies, however, we may seek to sell additional equity or enter into an additional loan agreement. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants further restricting our operations or our ability to incur additional debt. Any such debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $10.9 million and consisted primarily of a net loss of $22.2 million, partially offset by a non-cash charge of $11.1 million related to stock-based compensation expense.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $20.7 million and consisted primarily of a net loss of $36.2 million, partially offset by a non-cash charge of $13.7 million related to stock-based compensation expense and an increase in net operating assets of $1.4 million. Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $10.2 million and consisted primarily of a net loss of $11.4 million and a decrease in net operating assets of $0.7 million, partially offset by a non-cash charge of $1.7 million related to stock-based compensation expense. Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was $23.1 million and consisted primarily of a net loss of $23.0 million and a decrease in net operating assets of $3.5 million, partially offset by a non-cash charge of $3.2 million related to stock-based compensation expense. Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Previous wording

Cash used in investing activities was $0.9 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively, and consisted of purchases of property and equipment.

Current wording

Cash used in investing activities was $1.3 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively, and consisted of purchases of property and equipment.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 was $1.4 million and consisted of $0.8 million related to proceeds from the exercise of common stock options and $0.5 million related to proceeds from the issuance of common stock through the ATM offering.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $1.8 million and consisted of $0.9 million related to proceeds from the exercise of common stock options, $0.5 million related to proceeds from the issuance of common stock through the ATM offering, and $0.4 million related to proceeds from the ESPP.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2023 was $7.6 million and consisted of $7.5 million related to the proceeds under the Loan Agreement and $0.1 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2023 was $8.0 million and consisted of $7.5 million related to the proceeds under the Loan Agreement, $0.5 million related to proceeds from the ESPP, and $0.2 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

Previous wording

For a discussion of our potential risks and uncertainties, see the information in Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies and estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the three months ended March 31, 2024.

Current wording

estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the six months ended June 30, 2024.