Silk Road Medical, Inc (NASDAQ:SILK) Q3 2022 Earnings Call Transcript

Erica Rogers: Hi, Rick. Thanks for joining us. Look, we couldn’t be more pleased with where we stand today and first of all, the label and coverage expansions around standard surgical risk giving us full access to the broader market opportunity. And as you heard in my remarks, I think where physicians are getting excited as they no longer have to think about what is the surgical risk criteria that qualifies this patient for TCAR as their first set of questions around this particular patient. And so there is significant sand being removed from the gears, if you will. That said, we’ve always said there’s a kind of gradual layering effect or a gradual crescendo and the reason for that is each individual surgeon has their own kind of inflection point.

And we said that time from training and as well age of the physician are two important pieces to adoption, and thirdly, of course the number of touch points from a still growing sales professional. So all of those things kind of add up to this what we would characterize as a layered effect rather than the entire school of fish switching all at the same time.

Rick Wise: Got you. And maybe one for you, Lucas. Maybe a little more color on gross margin. How much contribution from the inventory revaluation? I don’t know, if I should be asking about how would you see normalized gross margins in the quarter because just as a platform to frame thinking about the fourth quarter next year. How would you have us think about gross margin from here?

Lucas Buchanan: Sure. Thanks, Rick. I’ll put it in the context of kind of the gross margin throughout this calendar year. Q1 and Q3 were slightly aberrant for different reasons. Q1, we had part of our production workforce out sick with Omicron, and in Q3, we had kind of this accounting methodology where expenses that were previously going through the P&L were capitalized into inventory on the balance sheet whereas Q2 was somewhat more normalized and Q4 will be somewhat more normalized. And so I think if you looked to Q2 as a guide to Q4 and the full year, we’ll get to kind of the normalized gross margin. And obviously we’ve invested significantly in capacity and resiliency in the two facilities and now they’re up and running. And going forward as we increase unit volume into 2023 and beyond against that fixed overhead, we’ll have the opportunity to gain further assuming we can control costs on the supply chain side and control price on the customer side.

Rick Wise: If I could sneak in one more here. In announcing your recent transaction, you looked at longer not unexpected of your thoughts about proceeds and how you would use them. The first was sales force expansion, operations, increasing R&D. I’m sure you remember the list. But your new facility is in place, you’re telling us that at least for the moment your sales expansion is done. Help us think through your priorities from here, your investment priorities and sort of what’s next with this now greater financial flexibility. Thank you so much.

Lucas Buchanan: Sure. Well, it’s many of the things you touched on. It is more commercial team expansion. And on the R&D side, our focus first and foremost is to continue innovating and iterating TCAR for the core U.S. market. But obviously, we have the whole global opportunity, which is primarily a clinical and regulatory spend so it’s relatively capital efficient. And then we have the broader intellectual property portfolio and list of long-term growth drivers, leveraging transcarotid technologies and core competencies into “nearby” disease states going north of the carotid and south of the carotid. So those all continue to be areas for investment opportunity, but we’re being very deliberate about how and when and where we spend as we make progress across those dimensions.