Bill Plovanic

Bill Plovanic asked if the trend of decreasing operating losses observed over the past two quarters is expected to continue throughout 2026, excluding IP litigation expenses, and sought management's thoughts on the possibility of achieving adjusted EBITDA positive in Q4 2026. He also inquired about the commercial strategy for delirium, specifically if it will primarily drive utilization or allow for increased pricing, and the implementation process for the new algorithm. Finally, he asked about any incremental internal staffing expenses for data review related to delirium.

Answer

CFO Scott Blumberg stated he wouldn't comment beyond the guidance but affirmed the existing infrastructure is sufficient for 2026, with future investments balanced against cash position and breakeven goals. CEO Jane Chao indicated it's too early to finalize delirium pricing, which is part of the commercial pilot, but confirmed the algorithm can be remotely updated for existing users. She added that while there will be marginal R&D, marketing, and clinical evidence generation investments, no major significant OpEx increase is expected for implementation or internal staffing for data review.

Bill Plovanic sought clarity on the trend of decreasing operating losses over the past two quarters and whether this trend, excluding IP litigation, would continue through 2026, aligning with a model for adjusted EBITDA positive in Q4 2026. He also asked about the delirium product's implementation, pricing strategy (more utilization vs. charging more), and any incremental internal staffing or data review expenses.

Answer

Scott Blumberg, Chief Financial Officer, refrained from specific guidance beyond the stated outlook but emphasized strategic capital deployment for long-term growth while maintaining confidence in achieving cash flow breakeven with cash on hand. Jane Chao, Co-founder and Chief Executive Officer, stated that it's too early to comment on delirium pricing, as it's part of the commercial pilot. She explained that the algorithm can be remotely updated for existing users and recorders, with no major significant OpEx increase related to its implementation, aside from marginal R&D and marketing investments.

Bill Plovanic questioned the expected incremental legal costs associated with the Natus litigation over the next couple of years. He also asked about the treatment pathway for delirium and whether Cerebell's device would alter existing clinical protocols.

Answer

CFO Scott Blumberg guided that the incremental increase in G&A expense seen in Q2 is a reasonable proxy for ongoing quarterly legal costs in 2025 and 2026. CEO Jane Chao clarified that while delirium lacks a single effective medication like seizures, a treatment pathway does exist that focuses on identifying root causes. She explained that a continuous monitoring device would be valuable for physicians to track if their management approach is effective over time.

Bill Plovanic asked about the impact of the Italian clawback on OUS vs. US revenue and specific products, its P&L flow-through, and the sell-in versus sell-through dynamics for AMDS.

Answer

COO and CFO Lance Berry clarified that the Italian payback affected OUS (EMEA) revenue, was reported in 'other revenue,' and did not skew product-specific growth rates. He noted that the tissue business was the main differentiator in Q3 to Q4 growth. Regarding AMDS, Lance Berry stated the company does not detail new account startups versus implantations but confirmed implantations are growing well.

Bill Plovanic with Canaccord Genuity asked for clarification on the Italian clawback's impact on revenue (OUS vs. US, specific product lines, P&L flow-through) and sought commentary on AMDS sell-in versus sell-through dynamics, particularly regarding US growth expectations.

Answer

Lance Berry, COO and CFO, clarified that the Italian payback was OUS, specifically in EMEA, and recorded in an 'other' revenue line item, not impacting the four main product categories. Pat Mackin, CEO, and Lance Berry stated they do not typically break out AMDS details like sell-in versus sell-through, but confirmed implantations are continuing to grow well, emphasizing the importance of positive first experiences for surgeons.

Bill Plovanic of Canaccord Genuity inquired about the progress of the AMDS launch, asking for updates on hospital onboarding metrics, the impact of cross-selling on other products, and the status of the BioGlue launch in China.

Answer

CFO Lance Berry stated that while specific non-financial metrics for the AMDS launch would not be provided quarterly, the pipeline of interested hospitals is growing. CEO J. Patrick Mackin clarified that the total addressable market includes about 1,000 centers and highlighted a significant, positive cross-selling effect, with surgeons adopting the On-X valve after attending AMDS training. He also confirmed the BioGlue launch in China is on track for the second half of 2025.

Bill Plovanic from Canaccord Genuity asked about the impact of the Level I CPT code change for NanoKnife prostate procedures, specifically how many insurers have updated their systems to prevent automatic denials. He also questioned if the strong capital sales in the quarter were a leading indicator for increased prostate procedure readiness. Additionally, he sought clarification on the directional Adjusted EBITDA for the third quarter, asking if it is expected to be negative.

Answer

Steve Trowbridge, EVP and CFO, stated that it was too early to estimate the number of insurers reflecting the CPT code change, but the team is monitoring it closely, particularly for Medicare. He confirmed strong capital sales, noting that the France distribution channel move contributed approximately $1 million to NanoKnife capital sales. He added that probe sales, driven by increased urologist awareness and enthusiasm for prostate cancer treatment, are a key indicator. Regarding Adjusted EBITDA, Steve Trowbridge clarified that while it would be lower in the second half due to planned investments in salesforce and R&D for clinical trials, it is not expected to be negative in the third quarter, just less robust than the first half.

Bill Plovanic asked about the impact of the new level one CPT code for NanoKnife prostate procedures, specifically how many insurers have updated their systems to prevent automatic denials. He also questioned if the strong capital sales for NanoKnife in the quarter were a precursor to increased prostate procedure readiness. Additionally, he sought clarification on the directional Adjusted EBITDA for the third quarter, asking if it would be negative.

Answer

Steve Trowbridge, EVP and CFO, stated that it was too early to estimate the number of insurers reflecting the CPT code change, but the team is monitoring it closely, expecting it to be a catalyst, especially for Medicare. He clarified that strong capital sales included a distribution channel move in France, but also noted general satisfaction with capital sales, emphasizing probe sales as the key indicator for prostate procedure growth. Regarding Adjusted EBITDA, he confirmed that it would not be negative in Q3 but might not be as robust as the first half due to planned investments in salesforce and R&D.

Bill Plovanic asked for further clarification on Insulet's direct-to-consumer (DTC) marketing efforts, specifically regarding the interplay between digital and mass media campaigns and their impact on both prescribers and patients.

Answer

Eric Benjamin (COO) explained that Insulet's demand generation engine produces qualified leads. These motivated customers then engage with physician offices, easing conversations for healthcare providers and demonstrating patient readiness for technology, especially in Type 2. He also noted that approximately 65% of leads in Q3 came from patients whose providers were not directly called on by the sales force, creating warm invitations for future sales engagements.

Bill Plovanic followed up on Insulet's direct-to-consumer (DTC) marketing efforts, specifically regarding digital and mass media campaigns, and asked for more color on the interplay between these efforts and prescriber/patient engagement.

Answer

Eric Benjamin, COO, explained that Insulet's demand generation engine effectively produces qualified leads. These motivated customers then engage with physician offices, easing conversations for healthcare providers and demonstrating patient readiness for technology, especially in Type 2. Additionally, approximately 65% of leads in the quarter came from patients whose providers were not directly called on by the sales force, creating new opportunities for sales team engagement.

Bill Plovanic asked about the significant operating margin leverage seen in the quarter, particularly from SG&A, and questioned if there has been a change in the company's reinvestment strategy.

Answer

Ashley McEvoy, Director, President & CEO, affirmed that the company's core strategies remain intact. She outlined four key areas for continued investment: accelerating innovation, driving market development with clinical evidence, enhancing commercial excellence and demand generation, and building global supply chain scale to maintain a cost advantage.

Bill Plovanic from Canaccord Genuity asked about the significant operating margin leverage seen in the quarter, particularly in SG&A, and whether CEO Ashley McEvoy's investment strategy has changed since she joined.

Answer

President and CEO Ashley McEvoy affirmed that the company's core strategies are intact and that the strong leverage is a result of execution, not a change in investment plans. She outlined four key areas for continued investment: accelerating innovation, market development, enhancing commercial capabilities, and building global supply chain scale, indicating a commitment to reinvesting for growth.

Speaking on behalf of Bill Plovanic, an analyst asked if Insulet has seen any benefits from Abbott's partnership with Epic RO and requested details on how that integration appears to prescribers.

Answer

Chief Product and Customer Experience Officer Eric Benjamin stated that he was not familiar with the specific details of Abbott's partnership with Epic and how it manifests in clinical workflows.

Bill Plovanek asked about the cadence of new patient starts during Q3, seeking insights into whether it was front- or back-end loaded to gauge Q4 confidence, and inquired about any trends in attrition rates amidst quality issues.

Answer

Jereme Sylvain, CFO, stated that attrition rates have been stable. Regarding new patient start cadence, he noted that while full September data isn't available, anecdotal evidence from sales leadership and the field suggests positive feedback as sensor deployment issues have waned, making them 'very encouraged' for Q4. Jake Leach, President and Interim CEO, added that prescribers confirm dramatic improvements in deployment issues.

Bill Plovanic asked about the cadence of new patient starts through Q3, confidence for a record Q4, and any trends in attrition rates related to quality issues.

Answer

Jereme Sylvain, CFO, stated that attrition rates have been stable. Anecdotally, positive feedback is increasing as sensor deployment issues wane, leading to encouragement for Q4 performance, though specific September data is not yet available. Jake Leach, President and Interim CEO, confirmed that prescribers and users report dramatic improvements in G7 performance.

Bill Plovanic of Canaccord Genuity asked about the market opportunity in pregnancy, including gestational diabetes, inquiring about current penetration, the impact of recent clinical data, and the size of the addressable market.

Answer

President & COO Jacob Leach noted that penetration is still early in a large market where 1 in 10 U.S. pregnancies is affected by gestational diabetes. He highlighted recent G7 product updates tailored for this population and stated that the compelling clinical data on improved birth outcomes now needs to be supported by driving awareness, prescription ease, and reimbursement.

Bill Plovanic from Canaccord Genuity asked for clarification on the sequential growth of unique ordering accounts, the sales contribution from new products like TriNav Flex, the adoption drivers for the new thyroid application, and the expected revenue cadence for the second half of the year.

Answer

CFO David Patience clarified that unique ordering accounts grew 10% sequentially and the strategy is now shifting to deeper utilization. CEO Mary Szela stated the new TriNav LV contributed 10-15% of sales and TriNav Flex is exceeding expectations. Dr. Richard Marshall added that new data on the thyroid application is creating significant physician interest. Patience expressed confidence in hitting full-year guidance with low double-digit growth in the coming quarters.

Bill Plovanic from Canaccord Genuity asked for details on new patient numbers, questioning if U.S. renewals were lower than expected and requesting color on the U.S. renewal rate and the OUS renewal mix.

Answer

EVP, CFO & Treasurer Leigh Vosseller clarified that U.S. renewals grew by double digits and represented over half of shipments, a trend expected to continue. She noted that new starts grew sequentially, with MDI conversions outpacing competitive conversions, which faced headwinds. The competitive conversion opportunity is smaller this year than in the past.

Bill Plovanic of Canaccord Genuity inquired about the dynamics behind the slower growth in the traditional NeuroStar system business compared to the strong performance of the integrated Green Brook clinics. He also asked about the long-term impact of the new physician referral strategy on marketing spend, the potential value of resubmitted insurance claims, and the company's approach to optimizing the SPRAVATO buy-and-bill model.

Answer

President and CEO Keith Sullivan explained that the company is shifting its NeuroStar marketing strategy to a 'provider connection program,' mirroring Green Brook's successful referral model. While this caused a temporary slowdown, it is expected to be more efficient long-term. EVP and CFO Steven Pfanstiel added that regarding claims, the company is improving collection times on new claims while also working through aged accounts receivable. For SPRAVATO, he clarified the focus is on ensuring the buy-and-bill model is profitable on a per-treatment dollar basis before expanding it further.

Bill Plovanic of Canaccord Genuity Group Inc. sought clarification on the FDA process, asking if the company has completed all responses and is now just awaiting a final inspection, and confirming that the Zio MCT 510(k) submission would proceed in parallel.

Answer

President and CEO Quentin Blackford confirmed the Zio MCT submission will run in parallel with the warning letter resolution. He clarified that while all formal responses to the FDA have been submitted, he does not view the issue as 'in the rearview mirror,' as the company has adopted a new, more rigorous quality system. He stated they are now awaiting an FDA inspection to formally close out the warning letter and will conduct their own third-party audit in the second half of the year.

Bill Plovanic of Canaccord Genuity asked about the drivers of the upside in International and Embolization & Access, including China's contribution, and sought more detail on the FDA process for Thunderbolt.

Answer

CEO Adam Elsesser attributed international strength to a multi-year rebuilding effort and new product launches. He confirmed a small, non-material order from China. Regarding Thunderbolt, he maintained that it is an active and expected process with the FDA and declined to provide further specifics on the interactions.

Asked if the core SCS slowdown was due to sales force distraction from the new Vyrsa product and inquired about U.S. pricing trends for neuromodulation, clarifying a comment about competitor pricing tactics.

Answer

The company stated the SCS slowdown is from competitive pressure, not sales force distraction, as selling Vyrsa is an efficient use of time and a tool to access competitive accounts. Regarding pricing, the company clarified that competitors often get a price *increase* with new products, and Nevro's own U.S. pricing held firm and even increased in Q2.