Axonics, Inc. (NASDAQ:AXNX) Q1 2023 Earnings Call Transcript

Axonics, Inc. (NASDAQ:AXNX) Q1 2023 Earnings Call Transcript May 1, 2023

Axonics, Inc. beats earnings expectations. Reported EPS is $-0.19, expectations were $-0.29.

Operator: Thank you for standing by and welcome to the Axonics’ First Quarter 2023 Results Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session As a reminder today’s conference is being recorded. And now I would like to introduce your host for today’s program, Neil Bhalodkar. Please go ahead, sir.

Neil Bhalodkar: Thank you, Jonathan. Good afternoon and thank you for joining Axonics’ first quarter 2023 results conference 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 1, 2023. 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 now like to turn the call over to Ray.

Raymond Cohen: Thanks, Neil. And I’d like to welcome everyone who’s joining this afternoon’s call and may listen to the playback. Axonics generated revenue of $71 million in the first quarter, an increase of 46%, compared to the prior year period. More specifically, sacral neuromodulation revenue was $55.2 million, representing an increase of 41% compared to the prior year period. Revenue growth is being driven by a combination of higher utilization of our SNM systems in existing accounts and continued share gains from the addition of newly acquired competitive accounts. Bulkamid revenue was $15.5 million, an increase of 66%, compared to the prior year period. Results for Bulkamid were driven by solid reorder rates from existing accounts, the onboarding of new accounts and the addition of new sales representatives focused primarily on promoting Bulkamid.

Bulkamid continues to rapidly gain traction in the U.S. and is fast becoming first-line therapy for women with stress urinary incontinence. It’s also worth noting that despite these sequential stepdown in revenue from seasonality, we still generated positive adjusted EBITDA in the quarter. Now Dan will discuss our financial performance and outlook in further detail in his prepared remarks. So I would now like to provide some updates on other corporate initiatives. Last week, we announced the acquisition of a lead placement technology that complements Axonics existing sacral neuromodulation offering. Let me start by saying our business development strategy is to develop or acquire innovative technologies that enhance the physician and patient experience with the goal of increasing the penetration of advanced therapies for this vastly underpenetrated incontinence population.

With that as a backdrop, as many of you know, physicians determine a patient’s eligibility for long-term sacral neuromodulation therapy by performing a short two or three day external trial or Peripheral Nerve Evaluation typically referred to as a PNE. In a PNE, the temporary lead is placed – is placed, and is often done in an office setting without real-time imaging. Now, due to an anatomic variability between patients locating the appropriate sacral foramen closest to the desired root of the sacral nerve can be challenging without fluoroscopy. The acquired technology addresses this challenge with an elegant solution, comprising of a software application and a hardware tool that makes the PNE lead placement easier, faster and more accurate.

Photo by nrd on Unsplash

The technology has the potential to reduce procedure time and facilitate a more accurate placement, which in turn can increase physicians’ confidence in sacral neuromodulation procedure and drive increased therapy adoption, utilization and the permanent implant conversion rates. With a standard x-ray of the patient’s pelvis, a physician can leverage the software to determine the optimal location for needle entry and lead placement based on that patient’s specific anatomy. The technology can readily be implemented into existing clinical workflows as it takes only minutes to use and requires minimal training. Now, we believe this solution has the potential to drive increased utilization of sacral neuromodulation therapy and we’re eager to get this technology into the marketplace.

We expect the product to receive FDA clearance and to be commercially available by mid-2024. Now turning to an update on our commercial team, we now have approximately 360 field-based personnel in the United States, of which 175 are directly involved in selling or sales management. The balance of our personnel are clinical specialists and field marketing specialists. Internationally, we have a more modest footprint with 25 field-based personnel located in Europe and a handful in Australia. We are well staffed at this time and expect only a modest increase in our commercial team headcount, during the remainder of 2023. Now turning to the Axonics Find Real Relief DTC advertising campaign, many of our customers continue to tell us that patients come into their practices asking about Axonic’s therapy after seeing our ads on television or on the Internet.

The campaign continues to generate goodwill with our physician customers as they are grateful that we are helping to ensure that adults with these conditions are being seen by a clinician and advancing along the care pathway. Qualified leads are those individuals that complete a symptom questionnaire on the website. We continue to generate over 10,000 leads each month and have found that over half of those individuals filling out these questionnaires are treatment-naive underscoring the notion that people don’t know that it’s not a normal part of aging fleet urine and that advanced therapies do exist to treat incontinence. Our call center continues to work diligently to connect qualified leads with a physician specialist in their local community.

Now turning to product development initiatives, we recently received regulatory approval for the Axonics R20 rechargeable neurostimulator from the FDA in the month of January. The device utilizes the same small 5CC form factor as the R15 and requires recharging just once every six to ten months for one hour. The device has an expected useful life in the body of at least 20 years. Feedback from customers that have implanted device has been overwhelmingly positive. That said, the long-lived F15 recharge free system continues to represent a significant portion of SNM sales in the United States. Now, this past week, we also introduced an electronic diary called myAxonics, which is now available for download for free in the Apple and Android App Stores.

While, anyone can use the electronic diary, we developed it to move patients from paper diaries to an electronic format that allows us to upload diary results into our cloud-based patient care management portal. Since diary results are used to confirm a patient’s eligibility for sacral neuromodulation being able to store these records for our customers is a nice service, and is helpful with pre-authorization and reimbursement processes. Now in closing, we feel like we are just scratching the surface of what is possible in the large underserved underpenetrated markets in which we participate. Our mission-driven team remains committed to innovating and supporting our dedicated physician customers and their patients, as well as raising awareness of our best-in-class therapies.

So with that said, I’d like to turn the call over to my colleague Dan for his detailed remarks on financial results. Dan?

Dan Dearen: Thanks, Ray. As Ray noted, at Axonics generated net revenue of $70.7 million in the first quarter of 2023. This represented an increase of 46%, compared to the prior year period. Sacral neuromodulation revenue was $55.2 million, of which 98% was generated in the United States. Bulkamid revenue is $15.5 million, of which 75% was generated in the United States. Gross profit for the first quarter of 2023 was $52.5 million, representing a gross margin of 74.3%, compared to 68.7% in the prior year period. Higher sales, volume Bulkamid sales and a product mix weighted toward the F-15 neurostimulator contributed to a favorable gross margin, compared to the prior year period. Operating expenses in the first quarter of 2023 were $66.9 million, included in operating expenses is a $1.8 million non-cash charge for the change of a fair value contingent consideration related to the Bulkamid acquisition.

Excluding acquisition-related charges, adjusted operating expenses were $65.1 million in the first quarter of 2023, and $56.8 million in the prior year period. Net loss in the first quarter was $9.2 million, compared to a net loss in the prior year period of $22.7 million. In the first quarter, Axonics generated $900,000 of adjusted EBITDA. We are pleased to note that this marks the fourth quarter in a row that Axonics have generated positive adjusted EBITDA. The attractive financial profile of the company and the inherent operating leverage in our business model is becoming more evident in our financial results. As of March, 31st Cash Cash equivalents and short term investment totaled $357 million, which is unchanged from December 31st 2022.

On a related note, I wanted to mention one housekeeping item. Our existing shelf registration is expiring at the end of this week and so we will be filing a new shelf registration statement tomorrow. I want to be very clear, we are making this filing as a corporate finance best practice and we have no need or intent to raise equity capital for the balance sheet, going forward, considering our strong cash position and progress towards breakeven and ultimately profitability. Turning to fiscal year 2023 guidance, our updated outlook is as follows: total company revenue of $348 million, an increase of $6 million compared to prior guidance. This represents an overall revenue increase of 27%, compared to fiscal year 2022. We now anticipate sacral neuromodulation revenue of $280.5 million, an increase of 26%, compared to fiscal year 2022 and Bulkamid revenue of $67.5 million, an increase of 31% compared to fiscal year 2022.

This concludes our prepared remarks. And I will now turn the call back over to Neil.

Neil Bhalodkar: Thanks Dan. At this time, we’re ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question. So we request that you please limit yourself to one question. If you have an additional question, please reenter the queue and we will take additional questions if time permits. With that, Jonathan, please begin the Q&A session.

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Q&A Session

Operator: Certainly. One moment for our first question. And our first question comes from the line of Chris Pasquale from Nephron Research. Your question please.

Chris Pasquale: Thanks guys. Dan, maybe I’ll just start what you said on the guidance you talked about top-line, curios how you are thinking about gross margin and operating expenses for the year given the strong start you guys got off to here from a margin perspective?

Dan Dearen: No, great, great question. So from a revenue standpoint, what we did is, we guided up. If you break it down by SNM and Bulkamid, what you can see is, we increased the SNM number by $3 million or 1% total and in Bulkamid 3% or 4.6%. And so in aggregate, that represents a 1.7% increase in the revenue guidance for 2023. The gross margin for the quarter came in, in accordance with plan, we’ve been talking for a long time about mid-70s margin, $74.3 million is slightly ahead of what we projected for the quarter as we ramp through the rest of the year, since we’re bringing new products online, we don’t want to change that guidance. And OpEx remains unchanged for the remainder of the year for the next three quarters.

Chris Pasquale: Okay, that’s helpful. And then, Ray, I would just love your latest thoughts on what you’re seeing out there in the market. You guys continue to do a lot of work on market development. You feel like that’s starting to pay dividends and you’re seeing some of these patients come through that funnel that you’re starting them on the journey towards.

Raymond Cohen: No doubt. So our DTC efforts are continuing to yield dividends. I think the difference today, May the 1st as compared to where we were a year ago when we started this, is that now patients have had an opportunity to kind of work through the care pathway and still we’re starting to see and yield a lot more procedures as a result of the advertising. So, what we had hoped for is actually happening and is measurable now, in terms of us getting a return on the investment dollars that we put forth. We don’t track the Bulkamid names as we do the sacral neuromodulation names because there is so many patients coming through the process on Bulkamid. But we’re getting a lot of Bulkamid procedures as a result of the DTC advertising also, because just to remind people, our ads are not specific.

We’re not selling products in our in our ads either on Facebook or on television. We’re just saying that if you have this problem, then we can get you with a physician and get your console. So that’s the game for us to just get these patients in with that and put them more from up and figure out what the appropriate therapy is. But it but it’s working really, really well and we’re going to continue to invest in this activity.

Chris Pasquale: Great thanks. Thank you.

Raymond Cohen: Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Richard Newitter from Truist Securities. Your question, please.

Richard Newitter : All right. Thanks for taking the questions. Maybe just the start on Bulkamid, you think performance there, you’ve owned this product for a few years now. I’m curious where you are on the kind of a – getting deeper into your existing accounts there versus, going how many more your guys are to go after? And I’m just curious have you or when do you plan to start targeting gynecologists?

Raymond Cohen : So, thanks for your question. So, we have some GYN that are customers of ours but it’s not been a main target and we have talked about it that that this is an area that we’d like to put more energy behind. And this year, we do anticipate to focus a bit more if you may on calling on and marketing to GYN practices. I mean, let’s face it. They should be doing Bulkamid and women are coming into the practices and that that be a great place for them to get treated. Having said that, Bulkamid is been an incredible product for us and is really capturing the imagination of any physician who treats women. We have over 1500 physicians now injecting Bulkamid across the United States, this is over and above what the base kind of international business that we inherited.

So, it’s going well and we expected this will continue to grow. And what’s most important is that the existing customers that we have seem to be doing more and increasing, cup, quote-unquote, “same-store sales”. So this thing is going great and we don’t see anything at this point it’s going to slow the adoption of this product down.

Richard Newitter : Great. And if I could on the SNM, over the next few quarters or the next year, or even what’s contemplated in your updated guide, what do you expect more growth to come from share capture or the market expansion side? I know you have both levers to kind of get to your forecast over the long run?

Raymond Cohen : It’s interesting, we understand the comment around share capture, but in our business, it’s a little bit different because it’s not like there’s budgets and we are selling capital equipment, and so forth. So people are just walking through the door every day that are candidates for therapy and every physician practice that we work with has literally hundreds, if not thousands of patients that could benefit from sacral neuromodulation. So, here’s what I would say. We’re just coming right out of the American Urological Association Meeting where there were 18,000 urologists that went to that particular Congress. And what I can tell you is that, when the word is out that Axonics has got the goods. We’ve got great products.

We got great people. And there’s a lot of buzz around folks who have tried our product that might have been working with our competitor previously and the great experience they’re having. There’s a lot of discussion going around amongst and between these physicians. So we fully expect that more and more physicians will be coming our way in 2023 and adding to these kind of bucket of newly acquired competitive accounts. So, we look at it that way, right? When we talk about market share, we’re talking about, wanting to get the maximum amount of money or excuse me – a maximum amount of procedures that are our existing accounts. We’ve subsequently kind of mitigated this whole concept that docs are working with both customers. We see more and more docs coming our way and giving us absolutely the lion’s share if not all of their procedural volume.

So I think there’s a lot of blue sky ahead of us and the combination of increasing procedures in existing accounts and having new accounts come our way I think will continue to fuel, not only our revenue growth that we’re predicting in 2023, but for many years to come.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Larry Biegelsen from Wells Fargo. Your question please.

Nathan Treyback: Hi, this is Nathan Treyback on for Larry. So Q1 was generally strong for medtech and your US SNM sales were down 22% sequentially which you noted it was seasonality, but this was more than decline of 14% last year. Can you just give more color on why seasonality was more pronounced this year? And any color on trends you’ve seen, mostly trends you’ve seen in Q1 and in April? Thanks.

Raymond Cohen : So, it’s kind of a late question about seasonality now that we’re already into May. What I can tell you is that, you quoted a statistic, but you quoted a decrease from our strongest quarter in the history of the company in Q4, which is the strongest quarter in generally, in Medtech as patients have met their deductible. Okay, you reset the clock and you got to start all over again. And as we’ve explained numerous times in numerous forms, the first quarter is in a highly elective procedure. Once again, this is an elective procedure that we have. We expect to and expect it to have more seasonality in Q1. And that’s what we’ve seen. Having said that, we feel very good about Q1 results. We think 46% year-over-year increase is nothing to sneeze that, whether it includes a seasonal drop from our strongest quarter of the year.

So, I’m not sure there’s much more to say about that. What I can tell you is that, things are going great. We’ve got great momentum in our business. And this quarter is looking real strong.

Nathan Treyback: Great. Thanks for that. And in terms of – can you talk about the traction you’re seeing with the R20 rechargeable system? How do you expect your mix to play out through 2023?

Raymond Cohen : So, we haven’t spent a lot of time talking about mix. I mean, I think partially because we’re agnostic. I mean, we’re happy, for our physicians implanting Axonic’s sacral neuromodulation and using Bulkamid So, whether they use the R20 or the R15 which is still being used and under contract with a lot of accounts or they go with the F15 really makes no difference stuff. We got great margins on both of these products. So, we don’t have a huge incentive one way or another as a company. Having said that, I think that R20 has really captured the imagination of these physicians and there is a patient. The idea that you can have rechargeable product and you only have to recharge once or twice in a year is incredible.

And it’s not burdensome and the advantage of the R20 is the small size. So, but – and it’s going well. I mean we’re selling I think the demand for R20 is a little more than, let’s say what we saw in 2022 with R15. Having said that, we are selling more recharge-free systems today than we – our rechargeable systems. And I think just part of that is the 20-something year legacy of physicians only having access to a non-rechargeable simulator. So they’re a little more comfortable it seems to talk about that product. But R20 has gone really well. And I think it really underscores the point, here’s Axonics. We’ve now had the fourth generation rechargeable product out in the market in three and a half years. We’ve got a great winning non-rechargeable device or recharge-free device.

So, we are – the message is out. If you want to make a bet on Axonics, we are the ones that are continuing to innovate and are committed to the space and providing the max, the best solutions that we can for these patients.

Nathan Treyback: Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Adam Maeder from Piper Sandler. Your question please.

Adam Maeder: Hi Ray, hi Dan. Good afternoon, and thank you for taking the questions. I wanted to start on the guidance. You beat Q1 I think by $6 million that the same amount that you raised the full year guide by. So, maybe just walk us through the consideration, the philosophy and maybe the decisions perhaps not get a little bit more aggressive given that you did have a nice start to the year. And perhaps it’s very well just some conservatism, but would love to hear more of there. Thanks. And I had a follow-up.

Dan Dearen : Sure. Hi, Adam. Always good to hear from you. Now, look, we’re look – we are being very measured. We’re very happy with where Q1 came in. It was perfectly consistent with the guidance. And I think as we look forward, no surprise here. And you’ve heard this from us quarter-after-quarter now, which is with both products continue to do extremely well, there’s a lot of momentum as Ray said. Bulkamid still manages to outrun even our best expectations. And look, but that’s an end we were asking on a previous question. If the growth coming from increase in utilization or capturing additional customers, you know, the answer is both, but we’re seeing an uptick in procedures curve practice. So everything’s trending the right direction. And we’re trying to be prudent. And so the $6 million increase in the guide is just, realistic layering on top of the prior guidance. And really, it’s just as straightforward as that.

Adam Maeder: Okay. Thank you for the color there, Dan. And maybe just one quick follow-up if I may. Wanted to actually ask about the evolution of sacral neuromodulation therapy. Clearly, you guys have been very active from an innovation standpoint. You just announced its lead placement acquisition. Are there other ways to further streamline the procedure or the technology? And one question that often I get asked is, do you think over time that sacral neuromodulation could be moved to local anesthetic? Thanks so much for taking the questions.

Raymond Cohen : Thanks, Adam. This is Ray. Well, I think there’s a big – when you say local anesthetic, you mean, just like lidocaine injection in the upper buttocks maybe when somebody, let you can you respond, can you respond to Adam?

Dan Dearen : Yes, sorry maybe just a change from kind of general anesthesia and just maybe as conscious sedation or just something that’s where the patients are fully under.

Raymond Cohen : Okay, understood. So, the patients aren’t really fully under for our procedure. I think this is a misconception. This is not, we use the word procedure room, hospital, outpatient procedure room, ambulatory surgery center, that’s where these procedures are done. This is like a colonoscopy. Patients are getting propofol. I mean, that’s basically it. It’s not a big deal. Nobody is going under a major anesthetic, so on and so forth for these procedures. These are fast procedures. I know, you know this Adam, this is a day case. I mean, and we talk about a day case certain people go in. They get the procedures on there out. It’s like the whole thing is two hours. So this is not a big deal. And it’s the appropriate – doing it in these outpatient procedure room is the appropriate place to do it.

You’ve got fluoroscopy there, so on and so forth. So, are there some doc’s who inject a little lidocaine and when they do the tunneling of the creating the pocket or doing the tunneling of the needle, yes, some do it that way. But I think that most people would prefer just to get some propofol, a good sleep, nice little rest. You wake up. You don’t remember much and you’re on your way. So, I understand why you’re asking this question. But I think that you, if this notion of somehow people are wanted to have things done in an office. I mean, as if that’s going to make it easier for patients or somehow more open to getting something done. I mean, I don’t know. I don’t think that the average person wants to do something in an exam room. Okay, I think you’re a lot more comfortable going through a procedure room in the hospital outpatient or an ASE.

So, I don’t think that’s a big deal. It’s not something that we’re being discussed or being requested. So I appreciate the question. But I think there’s a big difference between the fantasy or perception that something is quick and easy versus doing something that is safe and that you’re going to get great outcomes. So but I appreciate the question.

Adam Maeder: Thanks for the color Ray.

Raymond Cohen : Yes, you bet.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Michael Polark from Wolfe Research. Your question please.

Michael Polark: Hey, good afternoon. I just want to be clear on the model like you didn’t mention the 2Q revenue target. Want to make sure the street is thinking about the sequential phasing correctly. So, anything that you disagree with on the street’s build prior to this update. I think 86 or so million dollars for 2Q. Is that a fair starting point?

Dan Dearen : Yes.

Raymond Cohen : Yes.

Dan Dearen : Yeah, yeah. That’s tentative.

Michael Polark: Clear. A follow up on the lead placement technology. This, how impactful is this going to be in mid ‘24 and beyond? And is this something that would kind of you’d use to enhance your operations? Or is this a product that you would look to commercialize and generate revenue from?

Raymond Cohen : So, I’m not really sure about the word operations, because this is something would be used by physicians. We’re obviously keen on this approach because what it does is it, it just makes – I mean, as we said in the headline of our news releases, it just makes things faster and easier for people to be able to find the S3 foramen. And get the needle placed than the lead placed easier without fluoroscopy. So, that’s really the key here. If you can do this procedure in the office, back to that comment, in the office without fluoroscopy without the physician or a nurse practitioner or RN or whatever, their title might be having to wear lead, it’s kind of a big deal. And also this is now allowing for a little bit of pre-case planning if you may.

Getting an x-ray is no big deal. It is very easily done. And then, the software will basically give you the coordinates of where the anticipated – the place to dropped your needle and the lead is. So this is about moving creating efficiency and moving things along faster, and easier and more and to be more comfortable for the patient and a quicker way to be able to get the external trial executed. So I think it’s flat-out as we stated that, right. I mean, the reason we’ve acquired this is, so, we can just make it easier for our customers to do the external file, which is required by insurance companies or private insurance companies or Medicare to be able to get paid. So, this is a necessary part of our business. And we thought this is a great opportunity for us to be able to facilitate it.

Particularly now as more ATP’s more of the advanced nursing practitioners are starting to do these procedures themselves as opposed to physicians. So, this is one more example of Axonics being innovative of looking at ways to be able to make this a much more efficient and effective, not necessarily effective, but more efficient procedure and therapy for patients and for our customers. So, we’re excited about it and I can tell you that, man, this is a big discussion at AUA, I mean, doc’s are over the moon about what we’ve done here and appreciate that we’re continuing to innovate. I mean, there’s been more changes and I know it’s unfortunate that this is seems to have escaped a lot of folks, but we’ve created more changes in the three and a half years that we’ve been in this market than the previous twenty something years.

So, I can tell you that the customers, the physicians themselves really appreciate the fact that Axonics is committed to continually looking at ways to make things faster and easier for them.

Michael Polark: Thanks, Ray.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Shagun Singh from RBC Capital Markets. Your question, please.

Shagun Singh: Great. Thank you so much for taking the question and congratulations on a strong quarter. Just a couple of questions from me. You did note that SNM sales were driven by high utilization in existing accounts, as well as continued share gains. Can you elaborate or provide any quantification there? And then, as we look at the beats in the past couple of quarters, it seems like it’s more driven by Bulkamid and less by SNM. I’m just wondering if there is anything to read into that or not? Any commentary on competition or PDMS products? And then, I guess, on Medi-Cal, we were just hearing that they’re not reimbursing two procedures the trial of the implant. Is that true? And just any response there would be great. Thank you so much.

Raymond Cohen : Okay. So – I – you asked about five or six questions, this on – I got – we’re going to have to go one-by-one. Let’s take the last comment that you made. What was the last comment?

Shagun Singh: Yeah. So what we were hearing is that Medi-Cal may not be reimbursing to procedures the tile and the implant, is that correct? And how is it being? And if there’s anything inputs there that would be helpful.

Raymond Cohen : So, okay, so Medi-Cal, which is Medicaid California, Medicaid. They don’t pay for sacral neuromodulation at all. So we don’t have any customers that are using Medicare or Medi-Cal. So, I don’t know where that came from. But there is no reimbursement today. It’s a non-issue. Okay. There were a few others, Neil help me.

Neil Bhalodkar : Yes. Sure, if we had any additional color on share gains or end-utilization increase in that accounts.

Raymond Cohen : Look, we have not been that prescriptive. And – this is not a really good time for us to start that. I don’t believe. What I can say is that, there – I think we mentioned the last time, we’re up to a little over 1,000, SNM customers now and they’re not all created equal. There’s a whole group of legacy folks who’ve dabbled in sacral neuromodulation because the product that came before us was fussy and, was bit of a hassled and it had this reputation of being a therapy of last resort. I’ve said this before, this is actually what has – without there when we entered the market. And so, we’ve slowly, but surely now changing that perception. And as physicians that we work with find it easier, better results, better support, not to mention DTC and the other things that we’re doing to normalize, you know, SNM technology or get people into these therapies.

People are doing more procedures. I mean, it’s flat up. So, same-store sales are increasing. And that’s happening and at the same time, the docs who’ve been resistant to us for sacral neuromodulation, we’ve penetrated a lot of these accounts with Bulkamid. They get to know Axonics. They realize, wow, these guys got a great product here. This is fantastic. Look at the quality of their people and so on, so forth. Why am I resisting? Sure, I’ll give you a try on sacral neuromodulation. I can tell you, once they start working with us for SNM, they are never going back. And a lot of this has been about rep relationships. Oh I really like my rep and blah, blah, blah. Okay, well fine, but eventually, their eyes open up and go we’ll, wait a minute, all the other physicians I know have already switched to Axonics and they’re talking about what a great experience that their patients are having.

And that they’re having working with Axonics. So that’s what’s going on. And it’s not as spirit. Right this is just flat-out execution, blocking and tackling and doing the right things for customers. So that’s in terms of the dynamics. And I’ll tell you, I’ve been saying one more comment. I’ve been saying all along. Our objective is to be the market leader in sacral neuromodulation. And that’s exactly what’s happening. And it’s just a matter of time before we can statistically point to that and so forth. So, so we’re seeing market expansion. We’re, Axonics is a cause in the matter of market expansion. We’re seeing more customers come our way and we’re seeing increases in procedure of volume from our customers. And now Dan has a couple comments he’d like to make.

Dan Dearen: Hi, Shagun. I apologize for saying this as you heard us say it a thousand times. But, the market expanded based on third-party data by at 14% per year from 2019 through ‘22, And so, what you’re hearing from us and from Ray is that, look, we are capturing market share and we’re capturing customers. But the same-store sales is also increasing. And so, this is playing out, like we’ve projected going back to the time of the IPO, which is, we’re still forecasting 15% year-over-year market expansion. And then some points of market share captured to hit the numbers. And it’s working on both fronts.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Mike Matson from Needham. Your question please.

Mike Matson : Yeah. Thanks. I just wanted to ask for an update on the patent trial. Is it still put to happen in August?And then, just wanted to gauge your ability or your comfort level with kind of, if you were to be – being purchasing any of the claims, any of those patents, your ability to sort of redesign around that, sell a product that’s not pressing. Again all hypothetical.

Dan Dearen: Hi, Mike. This is Dan. As we’ve always said, we don’t believe we’re infringing any of the patent claims that have been asserted against us. The trial is scheduled for mid-August. And the second part of your question is correct, which is, there are ways to make other designs. If somehow we were found to be infringing any of the claims, which we continue to maintain, we are not.

Mike Matson : Okay, understand. And then, I think, Ray, early in the call mentioned that you were adding reps that were dedicated or to Bulkamid. So, maybe talk about in the past, it’s first that I recall hearing that. So can you just talk about that decision? And why you’re doing that versus having one sales force focused on SNM and Bulkamid?

Raymond Cohen: So, Mike, it’s not different. I mean, so let me let me try to explain. We have a total around – I’m going to round down to about 150. We’ve got 150 people that are not sales managers that are that are quota-carrying. Okay? And there – you can imagine we started with sacral neuromodulation, right? So some of the folks, some of the folks have been all in on sacral neuromodulation since day one. And when we brought on Bulkamid, they offered Bulkamid to their existing accounts, okay? Simple as that. But at the time of the acquisition we also inherited a number of people that were focused on selling Bulkamid. So what we’ve done is, we’ve enhanced that group of individuals and we facilitate a lot of cross-selling between, the teams.

So there really is one team of individuals is just that some of them lead with Bulkamid. Others lead with sacral neuromodulation and then they cross-collaborate or there is cross-selling involved, right? So – and what’s the reason? If I’m interested customer for Bulkamid and I haven’t used Bulkamid before, I need to get trained. So we want to be able to have those individuals go in and do the wet lab training, right? We bring in a pig bladders and a setup. And we get them trained. And then, hopefully, at the end of an hour or so then we’ve got some live patients that they’ve scheduled, which is the optimal way to do this. And then we can move from the pig bladder to the actual human urethra and observe to make sure that they’re executing on the injections and the appropriate technique because this is technique-dependent.

You put the material in the right place. Use the proper amount of material. People have phenomenal results when they get off the table dry. I mean, that’s why this is such an amazing product. So nothing different in our strategy. It’s just that, we have more products to sell and a lot more revenue needs to be generated. So we just got more people. And once again some people start with the bias towards Bulkamid. Do the heavy lifting there. Others are biased towards sacral neuromodulation.

Mike Matson : Okay, got it. Thank you.

Operator: Thank you, one moment for our next question. And our next question comes from the line of Anthony Petrone from Mizuho Securities. Your question, please.

Anthony Petrone : Thanks for fitting us in. A couple questions here. First one, Ray, would just be on Radian, thinking about the peripheral nerve evaluation to the lead here. Just maybe, what is the synergy expectations in the core SNM US business, just after this acquisition? And then I’ll have one quick follow-up. Thanks.

Raymond Cohen: So Anthony, I have read your note and the comments that you’ve made. I think you’re right on the money. I mean, I think you understand perfectly that this is going to help us. And it further differentiates us from our competition in anything that that does that is a good thing for Axonics and allowing these – the – our customers to do things faster, easier and more accurate. That’s the goal. Simple as that. So, it’s, I mean, – I can tell you, as you’ll talk to doc’s out there, I mean, even they haven’t used it yet, right? Doesn’t exist yet for them to go to use commercially. But they understand perfectly what this is about. And the typical reaction is, oh! Man! this is this is great. I know, I’ve been thinking about something like this.

I’m really glad to see that you guys have got this technology now. This is going to really help and even the most experienced docs say, oh yeah, I’ve got some cases. I wish I had this for those cases where had a strange, anatomy or I had a very large, a plus-size patient, because when you have a plus-size patient, it does change the angle and it just change the parameters. So we’re excited about this. And we’re anxious to get this approved in and out in the marketplace as soon as we can. And I think it’s going to it’s going to further help us. And in the mean time, I got to tell you, we’re getting a lot of credit just for doing it, right and for having it and being committed to making this available. So, I know, it might be a longer wind answer than what you were expecting.

But I appreciate that question.

Anthony Petrone : No, no. Perfect. And the fall offs here one would just be on raining and would it slot into the existing lead placement codes that you have in place? Is that the expectation? And, this was another tuck-in M&A by Axonics? Just maybe the updated views on M&A and how you’re thinking about transactions going forward within this space? Thanks.

Raymond Cohen: Okay. Alright. Thanks for that question. So, look, I think that we’re less concerned about a separate billing code or I mean, like, generating a bunch more money because of this. This is directly related if we can get more PNEs done and they can get done more efficiently and people have a better experience and it’s more accurate, well then people are going to respond to the therapy and we’re going to get more procedures done. So, this is a game about getting permanent procedures done. Right the external trials, this is not a money maker for the companies. This is just a necessary evil that we need to do. We’ll be able to get a little – a few more dollars, sure. Okay. But once again, this is not like a separate product. This is just part of the workflow of doing an external trial and we’re making this easier for folks. So I think that’s the direct answer to the question Help me Neil with their second part.

Neil Bhalodkar : No.

Raymond Cohen: No. Okay. All right. So, so, thanks Anthony. I appreciate those questions about this. I think did you have a second. There was a second.

Neil Bhalodkar : Thoughts on M&A

Raymond Cohen: Oh, thoughts on M&A. Thank you. Thank you. So, look, we’re – as you might imagine, the words out that Axonics is inquisitive, okay, so we have a lot of folks pitching up at all kinds of very interesting things, but we’re going to be very disciplined. And if we’re going to acquire something, it have to fit perfectly in our strategy. We’ve gotten this question many, many times in different forms. We’re focused on the incontinence business. And that’s where we’re focused. That’s such an underserved population that we don’t want to go off into adjacent markets and pick up other products. We’re obviously biased towards women just as a general sense, not to say that we’re, if men have incontinence, we want to treat them, as well.

But you’re going to see an approach where we’ll tuck some stuff in if it makes sense. And if there’s a bigger idea out we are not going to be afraid to pull the trigger, but we’re being very disciplined about this. We’re constantly looking at what’s out there. And people are approaching us in the same way. So I don’t think we’re going to surprise anybody with something, like buying a stereo company or something like that.

Anthony Petrone : Very helpful. Thank you.

Raymond Cohen: Thanks Anthony.

Operator: Thank you. Our next question comes from the line of Michael Sarcone from Jefferies. Your question please.

Michael Sarcone : Hey, good afternoon, Ray, Dan and Neil. First question, I just have one or two on the lead placement. technology acquisition. Are there any next milestones before getting to FDA approval? Have you already submitted its development already complete?

Raymond Cohen: So, we haven’t submitted, of course not. We just acquired the technology a week ago. We have to do the validation verification testing and have the product “manufacturable”. Those are the things that we’re now starting to work on and we’re going to look to get a filing to the FDA as fast as possible. So we’re anxious to get this done and we will do it, with our standard velocity and care, right. But we don’t want to give a specific timeline. I mean, we said, certainly by sometime next year. Obviously, we’re going to work hard to go as fast as we can and get it done as quickly as we can, because there’s a lot of interest in that product.

Michael Sarcone : Understood and one just one last one. Do you have any color on the economics of the device and the potential margin impact for Axonics?

Dan Dearen: Well, look, let’s just say this. The margin won’t go down because of this acquisition.

Michael Sarcone : Okay. That’s correct

Dan Dearen: Well it’s slippy, but think, that’s the right answer.

Operator: Thank you. This does conclude the question and answer session of today’s program. I’d like to hand the program back to Raymond Cohen for any further remarks.

Raymond Cohen : Alright. Well, thank you, operator. We appreciate that. So in closing, I just like to say that, we remain grateful for the trust the physicians, patients and shareholders have placed in Axonics. And as always, I’d like to thank my colleagues in Irvine and our team in the field for their diligent efforts and dedication to the fulfilling Axonic’s mission of improving the lives of adults with incontinence. And, I would just finish by saying, look, we really appreciate the continued interest in Axonics. We appreciate everybody’s questions for today. And we look forward to having a strong Q2 and speaking with you after the dust settles. Thank you so much.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.