CVRx (CVRX) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Investor Relations - Michael Vallie
• President and Chief Executive Officer - Kevin Hykes
• Chief Financial Officer - Jared Oasheim
• Incoming Chief Financial Officer - John Landry

TAKEAWAYS

• Total Revenue -- $13.8 million, representing a 6.1% decrease compared to the third quarter of 2025.
• U.S. Revenue -- $13 million, a decline of 4% year over year driven by reimbursement headwinds and sales force productivity challenges.
• European Revenue -- $900,000, a decrease of 27% from the prior year period reflecting lower procedure volumes.
• U.S. Commercial Units -- 412 units, down from 420 units in the same quarter last year.
• Gross Margin -- 87%, remaining consistent with the margin reported one year ago.
• Active Implanting Centers -- 262 centers in the U.S. as of Sept. 30, 2026, an increase from 250 centers as of Sept. 30, 2025.
• Medicare Advantage Approval Rate -- 51% for 30-day approvals as of the end of the third quarter, down from 60% in the second quarter of 2026.
• Largest Payer Approval Rate -- 12% for 30-day prior authorizations with the company's largest Medicare Advantage payer, a decrease from 83.5% one year ago.
• Research and Development Expenses -- $2.7 million, a 16% decrease due to a $400,000 reduction in headcount and a $200,000 decrease in consulting expenses.
• Selling, General and Administrative Expenses -- $22.4 million, representing a 2% increase primarily driven by a $700,000 increase in legal expenses.
• Operating Expenses -- $25.1 million for the quarter and approximately $77 million year to date.
• Net Loss -- $14.2 million, or $0.52 per share, compared to a net loss of $12.9 million, or $0.49 per share, in the third quarter of 2025.
• Cash and Cash Equivalents -- $58.7 million as of Sept. 30, 2026, compared to $85.1 million as of Sept. 30, 2025.
• Full Year 2026 Revenue Guidance -- $56 million to $57 million, lowered from the previous range of $58 million to $60 million.
• Fourth Quarter 2026 Revenue Guidance -- $11.7 million to $12.7 million, reflecting the impact of reimbursement delays and a customer purchase timing shift.
• Cash Runway -- At least 18 months, based on current operating expense reductions and excluding future proceeds from the at the market facility.
• Sales Territories -- 56 territories in the U.S., an increase from 50 territories as of Sept. 30, 2025.
• Inpatient Payment Rate -- $43,000 to $45,000 national average, representing an increase effective Oct. 1, 2026.
• U.S. Patient Market -- 339,000 patients currently indicated for Barostim, representing a $10.5 billion market opportunity of which the company is less than 2% penetrated.
• REBALANCE Registry Results -- 8 percentage point increase in average left ventricular ejection fraction at 24 months in the 38-patient commercial indication subset.

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RISKS

• Hykes stated, "the change in behavior from our largest Medicare Advantage payer... further degraded over the course of the third quarter," resulting in a significant decline in 30-day prior authorization approvals.
• Hykes warned that turnover among heart failure specialists who act as program champions often leads to Barostim programs slowing or stopping, and it commonly takes three to four quarters to re-establish a program in a new practice.

SUMMARY

CVRx, Inc. (NASDAQ:CVRX) reported third quarter results that reflect challenges from reimbursement delays at a major Medicare Advantage payer and high turnover among specialized heart failure physicians. Management introduced a cost reduction plan focused on noncommercial functions and the pausing of specific marketing and research projects while maintaining investments in sales and reimbursement teams. The company is responding to execution disparities across its nine U.S. regions by implementing a standardized program selling playbook and stabilizing leadership roles, particularly in the four regions where tenure is lowest. Management lowered its full year revenue guidance to account for these persistent headwinds and the timing of inventory purchases by specific customers.

• CEO Hykes noted that five of the company's nine regions are growing procedures by more than 20% on average, whereas the remaining four regions struggle with lower leadership tenure.
• The company is pursuing a legal strategy to secure reimbursement, as Hykes stated, "we are continuing to appeal denials at every stage... pursuing approvals all the way to an administrative law judge when necessary."
• Management reported a labor shortage in the heart failure specialty, noting that more than 50% of advanced heart failure fellowship positions remained unfilled in 2026.
• The company entered discussions with the FDA regarding a potential real-world evidence based PMA supplement to explore expanding existing indications in 2027.
• Management noted that a large customer purchase originally expected for the fourth quarter occurred in the third quarter, which impacted the sequential revenue guidance.
• Two written Medicare Advantage coverage policies from major providers now represent approximately 21% of total Medicare Advantage covered lives.

INDUSTRY GLOSSARY

• Barostim: An implantable neuromodulation device that delivers electrical pulses to carotid artery baroreceptors to treat symptoms of heart failure.
• HFmrEF: Heart failure with mildly reduced ejection fraction, a clinical classification based on the heart's pumping capacity.
• LVEF: Left ventricular ejection fraction, a measurement of the percentage of blood leaving the heart each time it contracts.
• NYHA: New York Heart Association functional classification, a system used to categorize the severity of heart failure symptoms.
• PMA: Premarket approval, the FDA process for scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices.

Full Conference Call Transcript

Operator: Greetings. Welcome to the CVRx Third Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, Please note this conference is being recorded. I will now turn the conference over to Michael Vallie from ICR Healthcare. Thank you, Mark. You may begin.

Michael: Good afternoon. Thank you for joining us today. For CBRX's Third Quarter 26 Earnings Conference Call. Joining me on today's call are the company's President and Chief Executive Officer, Kevin Hykes and Jared Oasheim, our chief financial officer, who will review our financial results. We are also pleased to have with us John Landry, the company's incoming chief financial officer who joined in October and will assume the CFO role Following the filing of our Form 10-Q. The remarks today will contain forward looking statements including statements about financial guidance. These statements are based on plans and expectations as of today which may change over time.

In addition, actual results could differ materially due to a number of risks and uncertainties including those identified in the earnings release issued prior to this call and in the company's SEC filings. I would now like to turn the call over to CBRX's President and Chief Executive Officer, Kevin Hykes.

Kevin Hykes: Thanks, Mark. Good afternoon, and thank you for joining our third quarter 26 earnings call. We delivered total revenue of $13.8 million in the third quarter, within our guidance range with a steady gross margin of 87%. Revenue declined 6.1% from the same quarter last year with US revenue down 4% and Europe down 27%. We continued to stabilize our US sales organization and a second major payer added a Barostim coverage policy for its Medicare Advantage enrollees. However, the headwinds we have been working through are more impactful and more persistent than we have anticipated And while tenure is improving, the impact on performance is taking longer to materialize than we had expected. In part due to these headwinds.

I want to give you a fuller picture of what is shaping our business. I will cover 3 areas. The 3 headwinds we are facing, which are reimbursement, physician champion turnover, and field execution, and what we are doing about each. What is working in our most stable regions and how we are extending it, and the clinical evidence that is building behind Barostim. I will then introduce our incoming chief financial officer, John Landry, before Jared reviews our financial results. The first headwind is reimbursement. Specifically the change in behavior from our largest Medicare Advantage payer which further degraded over the course of the third quarter. Our reimbursement visibility is limited to prior authorizations that we are involved with.

Which likely represents less than half of all prior authorizations. For those that we handle directly, the approvals that previously occurred within days are now taking 3 months or longer. The 30 day approval rate with this particular payer has fallen to approximately 12% from a high of 83% in 2025. And the 90-day approval rate is still below 35%. Suggesting that many prior authorizations are still in the appeals process. With our team pursuing all options, including ultimately an administrative law judge hearing. Which can add 100 or more days to the approval process. For the prior authorizations associated with this payer that are handled directly by our customers, over 80% are likely abandoned upon the first denial.

As a result of this dramatic change in payer behavior, we believe that some physicians are no longer recommending Barostim therapy for patients who have coverage with this payer. Further weighing on our growth in the quarter. This decline was partially offset by an increase in approved prior authorizations for patients covered by Humana, but our overall Medicare Advantage approval rate declined to 51% at 30 days as of the end of Q3 from 60% in Q2. Longer term, we remain confident in our ability to overcome this transitory reimbursement challenge. Unfortunately, this effect goes beyond any single payer. Uncertainty around reimbursement for new therapies has caused some accounts to be more cautious about starting and scaling new programs.

These accounts are implementing checkpoints to ensure consistent payment across their payer mix before committing to additional implants. This often means accounts will take time to assemble a group of patients with representative coverage policies treat them, then pause to confirm or challenge payment with each payer. At 1 large health system, more than a dozen patients with approved prior authorizations have been on hold for multiple quarters while the hospital completes this payment confirmation process. We are responding to these reimbursement headwinds in multiple ways with the goal of accelerating Barostim adoption. First, we are continuing to appeal denials at every stage for prior authorizations that we manage on behalf of accounts.

Pursuing approvals all the way to an administrative law judge when necessary. Our success with Humana is proof that this process ultimately leads to a written coverage policy if we can prevail with the administrative law judges. Second, in recent months, we have hired field based reimbursement managers to work directly with accounts to minimize billing and coding errors, ensure timely and accurate claims payments, and to troubleshoot with local teams when payment issues arise. Finally, we are using these same field based resources to support and reduce the impact of increasingly lengthy payment trial periods we are encountering in the market. At the same time, we continue to build a strong foundation of coverage for Barostim therapy.

Since moving to a category 1 code in January, we have secured our first 2 written Medicare Advantage coverage policies. 1 from Humana in the second quarter and from a second major payer in July. Together, these 2 policies represent 21% of Medicare Advantage covered lives. Are making progress on appeals and ALJ rulings with most payers, and each new written coverage policy strengthens our leverage with those payers that have not yet issued policies. Payment rates have also improved. Effective October 1, the national average inpatient payment rate increased $43 thousand to $45 thousand. On the outpatient front, the most recent traditional Medicare claims data shows 100% of submitted claims in Q1 of 26 being paid.

The first time we have achieved this consistency of payment. The second headwind is turnover among the heart failure specialists who are Barostim champions in our active accounts. Demand for heart failure specialists is outpacing supply. As patient volumes continue to rise fewer physicians are entering the specialty. This dynamic was a key point of discussion at the Heart Failure Society of America meeting last month. At HFSA, it was noted that more than 50% of advanced heart failure fellowship positions were unfilled in 2026. This imbalance is leading to a significant number of open roles and increasingly frequent career moves amongst practicing heart failure physicians.

When a physician who is a BarrelStim champion in an active account leaves for a new employer, the Barostim program can slow or even stop altogether. Our field teams work to mitigate this disruption in 2 ways. The first is to build sustainable resilient programs that integrate Barostim therapy into their heart failure treatment continuum. This reduces the likelihood that a single physician departure shuts a program down. The second is by supporting the physician as they move to their new practice. Providing introductions, networking support, and resources to facilitate and accelerate the establishment of a new Baraston program in the new account.

Unfortunately, we find that Barostim is not often an early priority for these physicians in their new roles. As they are often being recruited to help stabilize or accelerate highly profitable end stage heart failure therapies such as left ventricular assist devices and heart transplantation. For this reason, it commonly takes 3 to 4 quarters to get a new Barostim program up and running. The third headwind is field execution. Which is closely tied to the stability and tenure of our sales organization. Our sales transformation efforts have resulted in higher than normal levels of turnover, which has impacted our performance, and we are taking steps to address this.

First, we have appointed Paul Verrastro to the role of interim head of sales. Paul is a proven commercial leader and is highly respected by the field team. Appointment of this trusted CVRx veteran to this role has had a significant stabilizing influence on our team. Second, we have created new roles in order to optimize the span of control and bandwidth of our frontline sales leaders. And have prioritized filling these roles from within, promoting an experienced sales leader into our first area vice president position, and experienced territory managers into the area sales director roles.

Third, we have strengthened onboarding and training for new hires and have implemented a more consistent sales coaching approach across our sales director team. These steps will take time to fully manifest in our results, but we are already seeing a positive impact on stability and engagement across the team. While it is still early, we are pleased to note that turnover in Q3 decreased to the lowest level in more than 2 years and average territory manager tenure is at an all time high. However, we remain cautious about the outlook for turnover. While these results represent meaningful progress, it is still early, we expect continued turnover at normal market rates over the long term.

That brings me to the most important point about execution. There are still significant disparities in performance across our 9 US regions. As noted in our second quarter call, 5 of our regions are growing procedures by more than 20% on average. Even in the face of the reimbursement and physician champion headwinds described above. In the other 4 regions where we have the lowest tenure at both the territory manager and leadership levels, accelerating our growth has been challenging. These regions have been more affected by the headwinds discussed earlier as their teams are less experienced at working through these challenges. Those 4 regions are our priority.

We are stabilizing the teams, supporting our newer leaders, and equipping their organizations to consistently run our playbook. Our approach is the same in every region. Execute our program selling strategy by building networks of aligned physicians who understand where Barostim fits in the heart failure continuum. Who can identify patients who would benefit, and who make Barostim an integral part of their disease management approach. A recent comprehensive analysis of the program selling strategy, after the first 18 months of implementation found that the key differentiator of our most productive programs is the depth and breadth of their referral network.

Our analysis indicates that they have 4 to 5 times as many referring and prescribing cardiologists as less productive nonprogram accounts. And as a result, generate referrals and implants at a significantly higher rate. Our program development work at the account level is supported through our local, regional, and national medical education and awareness efforts. Our top 5 performing regions are leveraging these resources aggressively which we believe is a key element of their success. These data suggest to us that we have the right strategy. The playbook clearly works when the right conditions are in place. Our focus is on creating these conditions for success in every region.

By ensuring there is a stabilized team an optimized onboarding curriculum, and a common coaching approach. The goal is simple. Demonstrating consistent double digit growth across all 9 regions. I want to finish on the clinical front, where the news continues to be very encouraging. We had a significant presence at HFSA in October, our largest meeting of the year with 9 podium and poster presentations, including the late breaking rebalance presentation. Rebalance is the largest reported real world Barostim cohort to date. 435 patients enrolled across 45 US centers.

In the 38-patient subset that corresponds to the current US commercial indication, The results demonstrated sustained improvements in New York Heart Association functional class over the 24 month follow-up period and a clinically meaningful and statistically significant increase in average left ventricular ejection fraction of 4.8 percentage points at 12 months and 8 percentage points at 24 months. Real world evidence like this is an important complement to data from randomized clinical trials and helps clinicians and payers understand the outcomes that they can expect from Barostim therapy in everyday clinical practice. We anticipate that much of the data from the HFSA presentations and posters will be published in the scientific literature in the near future.

Benefit HF also generated a great deal of interest at the meeting, and is driving significant visibility, credibility, and engagement with physicians. We continue to see strong demand for center activation, and are seeing an encouraging early stream of enrollments as clinical teams integrate the trial into their research offerings. 1 final update on the clinical front relates to the new FDA real world evidence pathway to expand existing indications. We are in discussions with the FDA on a potential real world evidence based PMA supplement leveraging this new pathway. We are encouraged by the collaborative nature of these discussions and are hopeful that we can agree on a protocol with the FDA in 2027.

We are successful in doing so, we will then execute the analysis on our real world dataset to explore a case for label expansion. We look forward to updating you on our progress as discussions with the FDA continue. In conclusion, we are working through the 3 discussed headwinds and responding actively to each. Our focus is on improving execution in our less tenured regions and building on the significant progress we are making in evidence and awareness. We are pleased by the increasingly consistent nature of reimbursement for traditional Medicare patients and will continue to fight for Medicare Advantage patient access through the prior authorization process.

We will also leverage our 2 written Medicare Advantage coverage policies to encourage more payers to follow suit. We are very pleased with the pace and impact of the clinical evidence that we are building and with the strong positive reaction in the heart failure community to the BENEFIT HF trial. Before I turn the call over to Jared to review our financial results, I would like to introduce John Landry, our incoming chief financial officer, who joined us in October. John brings more than 20 years of financial leadership experience in the medical device and we are delighted to have John on board.

I also wanna thank Jared who is been an important part of this company for over a decade. For his significant contributions to the company and his continued engagement and support through this transition. John, welcome. And I will turn it over to you for a few introductory remarks.

John Landry: Thank you. Thank you, Kevin. I am excited to join the CVRx team and look forward to interacting with many of you soon. These first few weeks have reinforced my conviction in the CVRx opportunity. I believe that we have a passionate, patient focused team and a great technology. With best in class gross margins, and a growing body of clinical evidence. By driving consistent revenue growth in this large multibillion dollar heart failure market, I believe that we will be able to drive significant value over time. In closing, I would like to thank Jared for his support during this transition. And I will now turn the call over to him to walk through our financial results.

Jared Oasheim: Thanks, John, and welcome. Unless otherwise stated, year over year comparisons are for the 3 months ended September 30, 2026, compared to the 3 months ended September 30, 2020. Total revenue was $13.8 million, a decrease of $900 thousand or 6.1%. Revenue in The US was $13 million, a decrease of $500 thousand or 4%. Revenue units in The US totaled 412 compared to 420. The decreases were primarily driven by headwinds previously discussed by Kevin. Third quarter revenue also reflected higher than usual implants by centers that already had existing units to implant.

Which was more than offset by a larger annual purchase that occurred in the third quarter that we otherwise would have expected to occur in the fourth quarter and is therefore reflected in our fourth quarter guidance. We expect to continue to see quarter to quarter variations based on these timing dynamics. We ended the quarter with a total of 262 active implant centers in The US as compared to 258 as of June 30, 2026 and 250 as of September 30, 2025. The center count reflects adding new centers while some lower activity centers became inactive. Consistent with our focus on deeper adoption within active centers.

As of 09/30/2026, the number of sales territories in The US was 56 as compared to 50 as of September 30, 2025. Revenue in Europe was $900 thousand a decrease of $300 thousand or 27%. Total revenue units in Europe decreased to 38 from 50 in the prior year period. The number of sales territories in Europe remained consistent at 5. Gross profit was $12 million, a decrease of $800 thousand or 6%. Gross margin was 87%, consistent with 87% a year ago. R&D expenses decreased $500 thousand or 16% to $2.7 million.

This change was driven by a $400 thousand decrease in headcount expenses a $200 thousand decrease in consulting expenses, partially offset by a $100 thousand increase in clinical trial expenses. SG&A expenses increased $500 thousand or 2% to $22.4 million. This change was primarily driven by a $700 thousand increase in legal expenses, a $400 thousand increase in travel expenses, and a $400 thousand increase in consulting and contract labor partially offset by a $800 thousand decrease in expenses and a $100 thousand decrease in insurance Expenses. In total, operating expenses were $25.1 million for the quarter, approximately $77 million year to date. Interest expense increased $100 thousand to $1.6 million.

This increase was driven by higher interest expense resulting from increased borrowings under the term loan agreement with Innovatus Capital Partners. Other income net decreased to $400 thousand from $900 thousand. This balance came from interest income on our interest bearing accounts. Net loss was $14.2 million or $0.52 per share. Compared to a net loss of $12.9 million or $0.49 per share. Net loss per share was based on 27.2 million and 26.2 million weighted average shares outstanding, respectively. As of 09/30/2026, cash and cash equivalents were $58.7 million, compared to $64.6 million as of June 30, 2026, and $85.1 million as of September 30, 2025.

Net cash used in operating and investing activities was $11 million, compared to $10 million for the 3 months ended September 30, 2025. During the quarter, we also raised approximately $6 million through our at the market facility. Given the operating expense reductions we made, we believe we have at least 18 months of cash runway. That runway does not include any additional proceeds from the ATM. Now turning to guidance.

For the full year of 2026, we now expect total revenue between $56 million and $57 million compared with our prior range of $58 million to $60 million For the fourth quarter of 26, we expect to report total revenue between $11.7 million and $12.7 million This change reflects the continued impact of reimbursement delays with our largest Advantage payer, the impacts of physician champion turnover, and a slower than expected recovery in our less tenured regions. We continue to expect full year gross margin between 86% and 87%. In light of the revenue outlook, we have taken a comprehensive set of actions to reduce our baseline cost structure.

These included reductions in noncommercial functions while we continued to invest in our sales and reimbursement teams. We are being disciplined about filling open positions and have pulled back on marketing and research and development projects that we do not expect to impact revenue. We continue to expect operating expenses for the full year to be between $99 million and $101 million reflecting these actions, which include onetime severance charges recognized in the second half of 26. Before I close, I want to say what a privilege it has been to help build CVRx alongside this team since 2015 and to bring Barostim to more patients.

I am confident John will be a terrific partner to Kevin, the team, and all of you, and I thank you for your support over the years. With that, I will now turn the call back over to Kevin for closing remarks.

Kevin Hykes: Thanks, Jared. Before we close, would like to summarize where we are. The third quarter and our updated outlook reflect real challenges particularly the reimbursement delays with our largest Medicare Advantage payer. We are addressing each headwind directly, and we have reduced certain operating expenses while preserving investments in our growth drivers. It is going to take longer, than we would like to accelerate our growth, and we expect the benefit of these actions to build gradually. But we remain confident in the outcome and in the value of this therapy. The need has not changed. There are 6.7 million Americans living with heart failure today. Approximately 3 hundred and 39 thousand of them are indicated for Barostim.

And roughly 76 thousand new patients are diagnosed and enter our indication each year. This represents a $10.5 billion market opportunity. And we are less than 2% penetrated. With a gross margin of 87% our mindset is squarely on returning this business to a growth trajectory. Have a therapy that works. A large market with significant room to grow, and a team that is working every day to change how heart failure is treated. That is why I remain excited about what we can build together and about the value we can create for patients, physicians, payers, and our shareholders. We would now like to open the line for questions. Operator, thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. 1 moment, please, while we poll for questions. Our first question comes from Max Kruszeski with William Blair. Please go ahead.

Max: Guys, this is Max on for Brandon. Can you hear me all right? We gotcha. Yeah. Hey. Thanks, guys. So a lot of moving pieces here. Can you just. Double tap on what is assumed in the guidance for Q4 of 26? And how should we think about some of these headwinds? Again, I know it is early, but how should we think about some of these headwinds as we start to fine tune our models for 2027?

Kevin Hykes: Yes. So I will cover the headwinds first Max. Thank you. So, obviously, as we as we laid them out, the real impact here has been the continued degradation of UnitedHealth. Our largest and formerly most predictable and consistent payer. And that has just continued to decline now to a 12% level. Versus 83.5% a year ago. And so that has been, a significant headwind certainly in this quarter. The second headwind relates to this Champion turnover issue which we have been tracking for some period of time. Trying to understand if it was regional or episodic whether it was something that was kind of a summer thing.

And we have concluded, as especially coming out of the Heart Failure Society meeting last month, this is unfortunately the new reality in heart failure. There are only about 1.4 thousand heart failure specialists in The United States. Far fewer than would normally be the case given the size of the disease state. The challenge is there are very few new physicians entering the field. And from the podium, at multiple points last month, some of the leaders in the field said our specialty is challenged and potentially in a crisis. Because we are not attracting new physicians to the field. In fact, last year, only 60% of the fellowships were filled.

This year, the number I understood from the podium last month was 43% of the available heart failure specialists fellowship roles in The United States were filled. So 57% empty. So this is creating significant job hopping. And significant open roles, which causes challenges for our programs, as you can imagine. The third piece, which thankfully is more in our control, is the performance of our field teams. And we are pleased that where we have tenure and where we have teams with seasoned leaders that are running our playbook, we are seeing better than 20% growth on average.

That represents the 5 sort of most tenured regions of our 9 Again, 4 of the 9 regions do not have that level of tenure or experience in their leadership team and are struggling to deliver similar growth. That is within our control, and we are heavily focused on bringing those 4 regions up to the same level of execution. Maybe I will let Jared speak to how that plays into guidance.

Jared Oasheim: Yeah. And, Max, what we communicated was for the fourth quarter, we would expect to be between $11.7 million and $12.7 million On the year, that equates to $56 million to $57 million again, just reiterating what Kevin talked about. This, impact from, you know, the largest Medicare Advantage payer is weighing on these numbers. But based on what we have visibility to today, these are the results we are expecting here for the fourth quarter.

Max: it is helpful. And then and then, Kevin, just another 1 for you. You know, I think last quarter, and correct me if I am wrong, we had 1 major Medicare advantage payer with a coverage policy, and now we have 2. Is there anything you guys can do proactively to ensure this does not happen with a third?

Kevin Hykes: Sorry, there may be some confusion there. We indeed added a second written coverage policy in August. From a top-10 provider. So that policy, along with Humana, actually have significantly improved in terms of their approval rates. Humana is approaching 80% or 90%, as you would imagine, they have a written coverage policy, so they are covering virtually every prior authorization almost immediately. Separate from that, UnitedHealthcare, our largest payer, does not have a written coverage policy. And for that reason, and given their significant change in behavior since Q1, they are denying every single prior authorization that is submitted and denying the first, second, and third appeal in many, many cases.

So our strategy is, in fact, to get it many payers to write policies as we possibly can. Obviously, including UnitedHealth. The way that you get that to happen is you take each and every denial, and you appeal it And you push those appeals all the way to the administrative law judge after the third denial, if necessary, and hopefully win at the ALJ level. And once you amass enough wins at that level, which are paid for by the payer, they ultimately flip over and write a policy as was the case with Humana. So sorry if I was not clear about that earlier, but we are doing that with each and every auth that is submitted.

The challenge we have is that we only have visibility to less than half, maybe about a third of the prior authorizations for Barostim. Those third of the prior authorizations run through our system, our CPaaS group, and so we know exactly what happens to them. What we can see is what is happening with roughly 2 thirds of the other prior auth in the market. And we know for a fact as is the case across the industry, only 20% of denials are ever appealed by a clinician group or a hospital system.

So if those UnitedHealth prior auths are being denied, they are likely not being appealed, and those are patients who were receiving our therapy who now are not. Hopefully, that answered your question.

Operator: Once again, if you would like to ask a question, please press 1 on your telephone keypad. Our next question comes from Chase Knickerbocker with Craig Hallum Capital Group. Please go ahead.

Nick Lanayacci: Hey, guys. This is, Chase Knickerbocker on for Chase. Thanks for taking our questions. So just on the planned cost savings, can you help us quantify the annual annualized savings and how we should think about the operating expense run rate entering 2027.

Jared Oasheim: And then just on that same topic, you guys mentioned that you are continuing to invest in sales and reimbursement while reducing spend elsewhere. Mike, how should we think about the net impact of those changes? Yeah. I can take that 1. I appreciate the questions. We are not going to get too detailed on the 2027 operating expense guidance at this point in time. But what we can see is there was a moderate level of heads that were reduced as part of this action, and there were some additional project spend that was paused for the time being that were not tied to our sales or marketing, organizations for the most part.

We are not gonna get into the details on total value of the cost savings. But our total OpEx numbers stayed roughly the same for the year that we had previously guided as we also incurred some additional severance costs in Q4 that were not in the original plan. So those 2 kind of net against each other. But as we go into 2027, we have a lower cost basis that we can then build off of into the future.

Nick Lanayacci: Got it. And then just again on the large Medicare Advantage payer that is been causing the troubles, can you just expand on what you think needs to happen for those rates to improve? And do you guys see a realistic path forward, to resolving these issues with that payer?

Kevin Hykes: Yeah. So I think that the as I mentioned, the way that would be resolved would be ultimately for this payer to write a written policy. And so as I mentioned with Humana, every ALJ loss costs these payers roughly $10 thousand. And so if they ultimately determine it, once they start losing more than 50% of the ALJ cases, and once we can push enough of those denials through to the ALJ process, ultimately, it is in their best interest to write a policy. that is exactly what happened with Humana. So that is the strategy we are pursuing with United, with our largest payer. And what that requires is time and each of these ALJ.

The ALJ process alone takes over 100 days. After the third denial. that is incremental to the first 3 cycles. So it takes time to amass those cases to push them through the ALJ and to start to win. But that is, in fact, what happened with Humana. We were winning at 57% of the time. When they finally wrote the policy. So that is the approach of the playbook it is not a BaroStim playbook. that is kind of a commonly accepted industry approach. To generating leverage and support for ultimate written coverage policies. Was there a second part to the question? Sorry if I missed that.

Nick Lanayacci: Oh, no. You covered everything there. I appreciate that. And then just on the higher than usual number of implants, from inventory at hospitals, is there any way you can quantify the impact of this dynamic and I mean, maybe give us a better sense of the underlying implant volume growth Yeah.

Jared Oasheim: I am happy to take that 1. I think the reason for pointing that out was that, you know, we did experience a larger purchase in the fourth quarter of last year, kind of a typical process end of year customers know, trying to reach their rebate levels. We actually saw that similar customer, that same customer, make that purchase in Q3 of this year. And the reason for pointing that out was more to help explain the guidance for Q4 as we are looking at that. But we are not gonna get into any more details on the details that were included in those types of deals.

Nick Lanayacci: Understood. Thanks for taking the questions.

Operator: That concludes our question and answer session. I will now turn it back over to Kevin Hykes for closing remarks.

Kevin Hykes: Thank you, operator, and thanks, everyone, for joining today. We appreciate your continued support and look forward to updating you on our progress next quarter. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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