CHFS - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the CHF Solutions Earnings Conference Call for the Third Quarter ending September 30, 2019. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A replay of the call will be available approximately one hour after the call's end.

I would now like to turn the conference over to Scott Gordon, President of Core IR, the Company Investor Relations firm. sir. ahead, go Please

Scott Gordon

of Claudia results today, With and discuss time XXXX. all and September and CHF third XX, Jaramillo, for operator released the Company's John conference financial Nestor Company's the financial joining Drayton call the XXXX. September ended to Solutions quarter CHF CFO; today quarter thank you, are XX, Eastern Chairman for Erb, CEO you today's results us Thank corporate Company's X:XX Chief AM the and for ended the Commercial the Board; Officer. At Solutions developments

received If you have please Solutions not at CHF page the www.chf-solutions.com. visit Investors release, earnings

made During Act Safe forward-looking Harbor the made Securities for by Company of the the CHF statements statements call, Litigation Private pursuant Reform during except to conference historical forward-looking of XXXX. course will information that be statements the are the provisions Solutions this management are the making mentioned of of call, conference

as or information, projections or obligation information, a and beliefs, Company statements described uncertainties able management. anticipated include, Forward-looking for unknown whether limited based but no available with possibility factors any Company update caption providing are to expectations to or Those its the commercialize information to assumptions, on to risks the be this not involve currently are that By associated Commission. filings and risks known statements, successfully. Factors and risks that management's with in products new possibility company otherwise. revise to unable new the the the quarters, result commercialization the the that and not revenue to funds Company's necessary may of the the its raise that the execute in operations be be Exchange grow risk strategy, under it Company's the that may and Securities unable may unable developments future elsewhere Company Risk to And other forward-looking may the undertakes be in

included filings its that management's expectations. to cautionary under Company's Risk actual risk Company's to in And this risk risk statements for and subsequent as results issued Commission Securities incorporated and those Factors the regarding Company's could current discussion statements sections, at the discussion cause are well XX-K, review factors, on release factors as Cautionary materially other by the from in in today, factors the are discussions with of differ Statements, available additional titles readily www.chf-solutions.com. of press Forward-Looking reference or discussion well Statements Related latest of forward-looking call and such should the the Exchange You as the website reports as

With call that now of John to Officer to the the Board. like Chief said, Erb, would CHF I Executive Solutions turn and Chairman over John?

John Erb

morning good corporate everyone. and Scott, call third XXXX Welcome quarter earnings update. and to you, Thank the

and solutions expects products market the the surgery change Solutions now pediatrics. of in leader to be heart therapy forefront global the our is cardiovascular vision liver fluid including expanding management management overload. to become failure CHF suffering continuing patients in to lives fluid Our into that is with care disease, in commercializing therapies, critical from be soon of and at its fluid

in critical Throughout out, the this primary a soon care in needs therapy heart transitioning acute point call, care. on the the pediatric focus failure I how to we needs will are saving life chronic from to and and

on number update clinical care progress our an two, pediatric strategy, and the have we our and provide on fourth during Number During critical call, the I executing strategy; our the three, one following topics. vision update; made and our studies number QX will revenue. highlight

XXX(k) with collaborative to include very the to of application strategy, The supportive, pediatric with was presented. successful FDA in strategy pre-submission Regarding previously mid-May I we specifically FDA we patients. the our reported, very a our pediatric modifications as discuss meeting had and label agreed

although from XXXX. not review During submission We the of FDA QX pediatric to is patients, by early before pediatric few which marketing We recommended clearance any completed hospitals. FlexFlow FDA we XXXX. by clinical to the currently the safety at pediatrics September yet our inquiries for patients. XXX(k). physicians several unsolicited pediatric anticipate to not population months. to submitted evaluations we during XX-day XXX(k) for a system for and in by look require a the pediatric anticipated in not of complete forward tests the receiving the cleared market delayed the and it we application Aquadex pre-submission And bench the are treating meeting, continue receive confirm QX use the to end submission The FDA The additional FDA did FDA

the of these by leading capabilities United capabilities small the to available sized use the with in six patients. its because patients flow treat hospitals required rates States. of pediatric fact Aquadex and Aquadex In volume country's adjusting for children's extracorporeal low system only device is of the blood The

multiple treating result for pediatric conditions are with that organ hospitals diseases, and support, children's fluid injury, can or failure electrolyte patients transplants. kidney acute organ including abnormalities overload, These cardiac many renal

XXX stage or system Children XX XX kidney pediatric kilograms -- three FlexFlow from than weight in patients. less kilograms clinical an to above Aquadex of disease. During included published results was the with a and an American Device, categories, and use treating using Aquadex The with patients overload, study evaluate very Journal suffering XX study titled, study system. therapy the end citing QX, hemofiltration the pediatric to physician kidney of acute Society very XX Company's the FlexFlow patients for injury Clinical of intended Support positive independent Ultrafiltration ultrafiltration in the kilograms initiated impactful was in in Nephrology, multi-center retrospective fluid Kidney This

can alternative -- David Children's and offer Cincinnati I Center, of treatment. from XX, Aquadex were is XX And a weighing outcome Menon of Children's In patients the Dr. total rate XX% kilograms, of across FlexFlow to earlier, the which XX three XX are Stuart that we Goldstein, Askenazi into patients it. On Medical to therapy, therapy the sorry treated Shina we and with life Dr. XX of a weight This September kilograms Seattle survive Children's XX% there saving Hospital patients a of of patients company and the with The these from mentioned of the therapy. XX three total survived categories kidney die patients, offer therapy, MD, Aquadex paper's but only Children's the call of the patient an uses results the Medical system. FlexFlow. discussion. FlexFlow provide transition XXX% from the of under All primary weighing weighing survive Alabama Cohen, a Ladenburg to to support the the survival Hospital of webcast utilize end because & between participated segments, the XX kilograms, Healthcare XX end one the total patients and moderated to end Jeff and all at under overview who Thalmann high the Aquadex And end of the multi-center and XX Director, retrospective therapy. need in is system. was do that pediatric Company in the clinical Technologies involve XX% kilograms, according authors of conference not of no is to Company's There study patients, receive therapy. children a & study. mortality a Managing other This patients, Research, Aquadex Equity

of the that Pediatrics therapy Dr. Alabama, Birmingham. David experience ultrafiltration of younger at is patients. report this Alabama device multicenter to and clinical in University Children's the Askenazi, in provide of which reported was support used first pediatrics, to an Professor study kidney

be in able challenging patients of study, extracorporeal types of this with therapy very excellent low-flow small the stability. For aquapheresis blood the many were with volume and with of initiate use hemodynamic relative high therapies which require investigators to volumes, our the can device available rates, a blood

any that anesthesiologist, specialty our On of growth including surgeon can because cardiovascular the FlexFlow opportunity using by pulmonologist, and is simple overload Aquadex is front, for cardiovascular treatment intensivist, significant, in pediatrician system be physician's patients prescribed volume form a critical the assistant. the post-surgery, the care surgery of medical ultrafiltration,

heart-lung need put marketing method simple surgery are and four the fluid We post to to the patient a ventilator. focus needs fluid vital six additional remove predictable immediately cardiac and rapidly in is of through continuing to acute our from on where extubated blood It the be patient the the the the can surgical remove excess compensate this to flowing before surgery to liters for physicians sales machine.

Taken out managed the cardiac of after properly and hospital. ICU leaving the

potential as And a categorized the patient hospital hospital, days the Fluid is to after any without overload for the one surgical days prescribed first of of therapy avoiding post nephrologist a from our The reason discharge. number scores re-admitted of reason an Among hit of thus XX the XX the the be adverse be pace the care other therapy cardiac from removal can the I hospital is in of a calling surgical Aquadex potential for the third-highest use to discharge. in re-admitted patient may patient where needs transition doctors critical penalties. ease to by FlexFlow the offer for staff, need. decreased in to aquapheresis system. ventilator This where mentioned the quality and for ability utilization the both on acute hospital is personalize key surgery care, rapid based treatment resources reasons costly and and need blood efficient transfusions, in the the patient's to individual which event and physicians the the cardiac earlier, be cited involved we in use

clinical FlexFlow XX studies next there to and front, we be results three expect on the published the On months system. underway studies in several are the to Aquadex

received assess match of cardiac Aquadex to clinical the Mount patients therapy First, did cases. support total we not that Hospital with City be New associated working are XXX that and study, XXX outcomes. who use patients will in evaluated, in the of patients will XXX York retrospective surgery their in and patients that control A Sinai Aquadex underwent

FlexFlow in customers clinical to Sinai also critical transplant. liver. of using Aquadex disease Aquadex of our conducting liver physician-initiated advanced another a Mount use of is including Second, area evaluate system beginning evaluation in liver the are care, the

which the that heart aquapheresis. retrospective function post patients treated define readmission impact with is and System Aquadex, fluid announced part the amounts Philadelphia rates physician Jefferson approval removed, failure Health the has of XXX aim on with in of recently Hospital, outcomes received with a we for renal to initiated study Third, Abington

went collaboration This manage co-sponsored Corporation treatment remain Aquadex initiated to Solutions selection, to when on this appropriate Volume and status Finally, CHF patients. study volume positive refine and and Daxor's fluid researching discontinue diagnostic Daxor and clinicians synergies how informed another FlexFlow in focused block Analyzer fluid results. study our approval aimed therapy the initiate we therapy. may on how manage and Daxor We to that is believe be to clinical the assist ultrafiltration. that to of enrolling technologies evaluate BVA-XXX management Blood A with strategy feature to hermetic patient throughout which to therapy, identifying received IRB to characterize diagnostic with month achieve Aquadex on conjunction more and inform will therapy start by is building the and important between clearly to providers multiple tools, this maximize

an in we quarter QX our decline million, year-over-revenue revenue is strategy, believe Third in due X% account We to of that short-term change was versus the decline sales revenue recently impact communicated. $X.X XXXX. our managers the

pediatrics. refocusing has We in in launch for in and our the team strategy criteria the growing account managers. business in segment change address our our necessitated required and of This to are care prepare critical sales faster for experience our to expected change

open in shortfall We sales QX the believe reason that primary revenue to territories, was as the we the revamped due team. for

search We to executing and services the new in have the sales competencies help build strategies. executive out organization a our our need firm we top of retained sales

Memorial hospitals in hospitals During and Health Hermann, XX Resources Methodist opened Hospital which the Scott area; with Hospital has Texas White, in we Memphis, systems, the Texas Baylor system the XX Tennessee; area, several Northern has in XX and hospitals Dallas, in including new quarter which Houston, Texas. the Texas hospital

the Hospital pediatric In use accounts in including Wilmington, and therapy Children's addition, several Delaware. new Pennsylvania Children's began DuPont hospital of of Hospital

with Health Georgia, hospitals have Care robust a Tennessee, in pediatric of five in initiating Baptist hospital the Hospitals in the New systems QX, with hospitals York, WellStar including plus Presbyterian centers. York Memorial XX Looking System with hospitals New and XX System XX therapy, Ohio, forward we Aquadex University Corporation pipeline hospitals Hospital XX new with in to

to and can the results XXXX I will walk through Claudia turn over our you who QX financial details. call now

will call I that, we'll comments open and some the questions. provide Following closing to

Claudia Drayton

everyone. morning Good Thank you, John.

announced to the Turning a to we the P&L, revenue quarter million compared for quarter $X.X was result of of realignment $X.X third for decline quarter. as X%, the mainly the earlier this third sales of the XXXX, million

I expenses, briefly and comment will Regarding operating about our cost major drivers.

inventory. in XXXX, margins First improvements cost our continue from in-house of manufactured in third see transition of to our the to goods the resulting gross regarding sold, quarter we

Our for points points above XXXX XX% margins were QX and percentage margins XX X percentage about last the XX% -- quarter, QX year's margins. above

our specialists we existing current new increased new expenses expenses, regarding opening Second, from clinical to hired from assist in training and accounts. by last accounts administrative in and additional The users and increase year. quarter selling XX.X% train results to

better a of loss net was loss for $X.X share compared or $X.XX The the per expenses R&D last $X.X year. console quarter XXXX, provide million XX.X% The updates to was XXX(k) by experience Next, submission in to and per and third to driven improve quarter increased customer increase for pediatric adoptions. million or clearance by development versus share. the $X.XX product to our for support investments and catheter our net in

of Regarding our the versus in $X.X September our million. million. million $X.X is our the we end, quarter announced cash discussed. and $X.X an increase to R&D, two forma quarter the proceeds in mainly finance these cash an of $X.X Subsequent used cash million approximately and last liquidity in organization no quarter million result for investments which ended debt. transactions transactions Pro the approximately cash our $X.X of sales net balances to of position previously We operations, about in equivalents I financing of year, as XX, reflecting with we

that modeling we the will we double-digit in XXXX, terms growth -- year. us of prior and quarter largely the the impact the resume reorganization QX, In behind prior of will expect of that sales versus be remainder

continue will growth. hospital continue sales force, to and acceptance revenue we continue upgrade drive as that as and and our systems, therapy to expect refocus to We new and our marketing we market introduce hospitals we into

that increase. as continue gross efficiencies to volumes and Regarding margins, improve we they our expect will our

personnel see expect expenditures our investment R&D than operating Regarding replace decrease. to to and sales QX, -- marketing we we rather our remain add as expenses to in in consistent for

now call will John. the turn I over back to

John Erb

Thank you, Claudia.

needs therapy to in our transitioning cardiac and the in in chronic heart soon the from are soon We primary acute the life and to the surgery, pediatric needs in cardiac saving to on focus acute surgery needs failure, care.

cardiac sales accelerated as in and surgeons ultrafiltration growth hospitalists, to pediatricians. continuing market We position anticipate further by therapy of primary the ourselves provider the for cardiologists, intensivists,

therapy and growing major diuretic with as introducing the to awareness treatment current value healthcare opportunity We improve the of challenges days lives thereby clinical reduce in are spearheading clinical faced to expense an [indiscernible] IV of the pediatrics. system using re-hospitalization only, saving and outcomes, a reduce the

to CHF of assist Solutions fluid its treatment is to devoting in the solutions management. energy building new

We who these improve of have treat and are passion for dedicated to the life solutions clinicians patients proven bringing them. quality the to the to to

call the for questions. Operator, please open any

Operator

question comes Jeffrey of [Operator the Ladenburg with first Your Instructions] from line Thalmann. Cohen

Jeffrey Cohen

wanted in issues few a into. So, to drive

start you in also that using tell far me, amounts [indiscernible] they types you Did study and with of this XXX parameters they So, that these patients. etc. firstly, non-therapy And that and surgeries, far as could study? as prior if talk measure to the therapy could some study about as going for are as speculate Aquadex surgery to or XXX compared you to both? And surgery or will, bypasses, post of valves be and you can

John Erb

so study, cardiac details. XXX together Aquadex this initiated of don't give because a complete details you it's of I Sinai a it, study. of have can't will and Jeff, XXX as it's lot details, used as basically Mount looking they've retrospective back on, these a owned get physician lot a those is pulled I there surgery in basically which a of So, are patients,

working is together, this Sinai Dr. pull Our Senior of information Mount it's with closely at to [ph], Lala study. studies retrospective but a Director clinical

Jeffrey Cohen

be retrospective Got that and it. be at some we'll I'll able point? to will shown to public the that published presumably? see or Or

John Erb

sure it's Yes. completed. published. We're Again that's where of told the it Sinai, Mount when and or they it it's the have they under to not control get as is plan us, when

Jeffrey Cohen

Got it, okay.

us work size the about are Could talk think the little that work it do prior you And pediatric the how market population sort pediatric we've level as just far in the call what and little we far appropriate expansion? think you order XX determine amount a that U.S. in can it, as thinking to of a of to as churn more upon Thanks. U.S., label the how on the that done the about centers. the with as scale of centers Secondly, higher -- And patient you you've the bit the in this. XX expand -- do you some

John Erb

much because very about clearance we children's Once children's talk to the opportunity, we -- conservative been The I addressable our we've a what is this that have we at we about And to ourselves, at it. to able been handle hospitals. will is bit go think there really we and market a market the on point, in can million better over the have $XXX again the addressable get therapy, market hospitals opportunity revenue. think talk very market Yes, have market. potential looking conservative not and we been

So and we children's in the for really It's with pediatricians that's and think the really conservative. need the again, hospitals get and but we have clearance early dig directly. before conversations can I to

Jeffrey Cohen

change talking about it. as And And spend may as has as far that line switched? or what less in lastly Thank as that it's Would toward cardiac how percent if more heart and for how sales team, the correlates where future? it much. look for sounding as Okay, me, [indiscernible] mean how it then transition does the does strategies the from the me. failure, look the is say as got going you That's and in that correlate you or you as what the critical of far SG&A as and half you revamping care as for very spend has completed near forward? like in talk could the sales about, does focus you're two-thirds completed switching pediatrics. to that far And and far it how for siloes

Nestor Jaramillo

good Nestor Yes, is question. This Jaramillo.

the in As to competencies is surgery, growing as we the from and we reps sales heart the well failure towards one cardiac surgery the prepare having our more and the of or therapy as strategy experience cardiac which for care. needed of critical therapies, pediatric transition fastest failure and heart pediatric the on focusing introducing cardiology

probably we We're there, all to had those reps transition ones their strategy, about we some territories. in competencies. voluntarily that half with in we're So are these of the so replacing the process given left line not

have also, the We recruiter mentioned, a retained services with and help high task. us as we of John this to

believe of in In been that for. the what they to finance impact, going of neutral projected year. we be Most to territories terms the have early the we already are budgeted

going to that's we So have think our impact a significant finances. don't that on

Jeffrey Cohen

Perfect.

Okay, questions. for that me. the does taking it Thanks for

Operator

question Your next from Dougherty line with Abuser the comes & of Company. Kyle

Kyle Abuser

Nestor. the Are pediatrics? at to was the out? cardiovascular Hi thanks, we look sales able in of just and attributed percentage you surgery good tease that quarter, John, If morning kind Claudia what of to

John Erg

the Yes cardiac in that had we Kyle, QX XX%. in was percentage about the of revenue surgery

Kyle Abuser

was two of And it for the the the first quarters year same? about

John Erg

than XX%, less was little a XX%. was it that No, around --

Kyle Abuser

Okay.

surgery, And care well? going have all divided focusing pediatrics get all date going it's and initially to the you equally to clearance points so kind then forward, and once the be within their as critical reps so failure? call time the And heart there cardiovascular in of across just

John Erg

Then failure, heart the That new forgetting the market. about accounts is to strategy not heart using into failure, The we're penetrate so cardiovascular is is biggest moving strategy. correct.

we cardiac for to sales heavily approval the you through -- like And that for said, easier on focus pediatric will the However, penetrate after get in on it's then, we surgery. indication rep that a account end.

Kyle Abuser

makes Yes, Got it, that sense. okay.

And so, the stay will headcount like it sounds the same.

or replacing not what of is more territories the current You're just then, territories? adding, it's and number headcount

John Erb

territories we reps. XX have and now sales right eight have We

Kyle Bauser

Okay.

--. XX So

ahead looking the get So territories launch, more pediatric to of still reps cover to five correct? all

John Erb

Correct.

Kyle Bauser

Claudia within Okay. as bringing sequential leverage talked and in R&D, enhancements pediatric that from now some the might that we in-house, got submitted income we've seen some a we really margin look at the bucket, statement, expect are us? product this particularly behind And XXX(k) you nice that we've gross application expansion

Claudia Drayton

heavily expect we us do reasons because pediatric investing that's we ahead Yes, now. to But that behind the those as of go we spend submission. decrease for forward, R&D Yes. largely were pretty

will more to much moderately. invest, We continue in but

Kyle Bauser

it. Got

Okay.

that's Okay, for I helpful. appreciate. it me. Thanks guys. That's

Claudia Drayton

Thank you.

Operator

we [Operator Instructions] have And time. no this questions at

John Erb

Well, our you. for I I thank XXXX day. Thank and very wish quarter all third good. call, you good everybody conference a Bye. to Very want joining

Operator

you to want day. our conference just And call. quarter good for joining thank all wish XXXX you I second I a

all disconnect may your You lines.

Nuwellis (NUWE) 6 Nov 192019 Q3 Earnings call transcript