Axonics Inc

NASDAQ:AXNX

Earnings Call Transcript 2020-Q2

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Axonics Q2 2020 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Neil Bhalodkar, Axonics Investor Relations. Sir, please go ahead.

[Neil Bhalodkar, executive]

Thank you. And thanks for everyone joining the Axonics quarterly results and Update call. Present on the call this afternoon are Raymond Cohen, Chief Executive Officer; and Dan Dearen, President and Chief Financial Officer. Ray and Dan will provide prepared remarks and commentary on second quarter financial results, U.S. commercial progress and a general business update, followed by a Q&A session.

Before we begin, I'd like to remind listeners that statements made in 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 in the conference call, including the risks and uncertainties disclosed 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, August 6, 2020. Except as required by law, Axonics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, unanticipated events that may arise. With that said, I'd like now to turn the call over to Ray for his remarks.

[Raymond Cohen, executive]

Thanks, Neil. I'd like to thank everyone who's dialing in for today's call and for those of you joining by webcast. Before I get started, on behalf of Axonics, I'd like to express our gratitude to the courageous and selfless health care workers providing care for those impacted by COVID-19. I would also like to recognize all of our employees and thank them for their dedication to our physician customers and patients during these extraordinary times.

Now on to the business at hand. Following the exceptional first quarter results that we reported in early May, Axonics has continued to stay focused on supporting practices during the COVID-19 pandemic, along with building finished inventory, signing agreements with national and regional hospital systems and gaining FDA approvals. We've hired dozens of new employees during the pandemic in manufacturing as well as additional U.S. field-based clinical specialists to support our growing case volume. We have now just over 400 full-time equivalents at Axonics, with approximately half of our personnel engaged in field-based commercial activities in the U.S. and select European countries.

As previously disclosed in our pre-announcement, Axonics generated $15.2 million of sales in the second quarter and as you have heard from many of our other companies in our industry, while new order flow was de minimis in April, we began to see a gradual recovery during May, as restrictions were lifted in certain states. New order flow continued to improve in June and approximated 70% of our weekly average achieved in the first quarter of 2020 prior to the COVID-19 related postponement of elective procedures in mid-March.

I will provide some additional color on July after Dan finishes his remarks. On the innovation and regulatory front, we announced 3 significant FDA approvals in the last few months that continue to enhance the patient experience. These approvals included in mid-April, the FDA approved our next-generation rechargeable implantable neurostimulator. The new INS decreases how frequently a patient needs to recharge their implanted device. The interval between the recharging is now only once a month for approximately 1 hour. And for some patients, they may be able to charge as infrequently as once every 2 months for approximately 1 hour. We began manufacturing this new implantable neurostimulator in early Q2, and we have literally just started shipping it to U.S. customers.

Now in June, the FDA-approved a new wireless patient remote control with what we have branded SmartMRI technology. The new remote control simplifies the process to confirm a full-body MRI can be safely performed. Now how it works, using the patient's remote control immediately prior to an MRI, the MRI technician can confirm that the lead and the implant are intact by performing a very simple check. This avoids the need for the patient to visit their implanting physician's office or for involving any personnel from Axonics.

Now in July, the FDA-approved our implantable device for full-body MRI scans with a 3 Tesla MRI scanner. With this incremental labeling approval, the Axonics device is MRI compatible for both 1.5T and 3T full-body scans. And our conditions for these MRI scans are the best and least burdensome of any sacral neuromodulation device.

And just last week, we announced 2 year top line results from our ARTISAN-SNM pivotal study. The clinical results underscore the durability of response and are the most efficacious ever reported in SNM clinical literature. Now as a reminder, our study design was a true intent-to-treat analysis, meaning that we did not cull the herd by doing external trials and then only implanting the folks that had responded to the trial. Every patient got the permanent implant. Now I think that's important when you take into consideration the actual clinical results, which at 2 years post implant, 88% of all implanted patients were therapy responders. Now this is consistent with the 89% therapy responder rate we reported at 1 year. In addition, 80% of patients achieved greater than a 75% reduction in the number of urinary leaks. And in fact, 37% of the patients were completely dry. Now moreover, the safety, efficacy and patient satisfaction reported in our clinical study is being replicated every day in real-world settings across the United States.

So given all that, we are confident that from a technological standpoint, Axonics has brought to sacral neuromodulation, a product that has a life-changing impact and are improving the quality of life of patients, and we are driving meaningful expansion or we believe that there will be meaningful market expansion in the days and years ahead. So with that said, I'll provide some additional business updates and some more color on today's call. But first, Dan Dearen, our President and CFO, will review the second quarter 2020 financial results. Pass it to you, Dan.

[Danny Dearen, executive]

Thank you, Ray. For the second quarter of 2020, Axonics generated net revenue of $15.2 million. This compares to $1.5 million in the second quarter of 2019. Net revenue from the United States accounted for $14.6 million with certain European markets and Canada, accounting for the balance of second quarter 2020 revenue. There were no stocking orders in the quarter. Gross profit for the second quarter of 2020 was $6.8 million, representing a gross margin of 44.4%. Gross margin in Q2 was lower than in prior quarters due primarily to lower overhead absorption related to the COVID-19 pandemic. We anticipate gross margin will return to low to mid-60s in the second half of 2020 and continue to anticipate low to mid-70s over the longer term.

Total operating expenses for the second quarter of 2020 were $26.2 million, which is an increase of $6.2 million compared to the same period in 2019. The increase was primarily due to higher personnel costs for the U.S. commercial team and in other parts of the organization. This was partially offset by temporary salary reductions in Q2 as well as reduced travel expenses. We expect quarterly operating expenses for the second half of 2020 to increase to approximately $32 million to $35 million per quarter given recent and anticipated increases to headcount, higher sales commissions as sales ramp back up and the resumption of full salaries for employees. Net loss for the second quarter of 2020 was $19.8 million as compared to a net loss of $19.1 million in the second quarter of 2019. Operating cash burn in the second quarter was $13 million. Cash and cash equivalents were approximately $288 million as of June 30, 2020. And as a reminder, Axonics raised $140 million in net proceeds from an equity offering in early May. I will now turn the call back over to Ray.

[Raymond Cohen, executive]

Thanks, Dan. So as Dan has mentioned and I've mentioned earlier on the call, it's clear that second quarter results were impacted by the coronavirus and the curtailment of elective procedures in the U.S. and in Europe. However, our sales momentum has recovered and the velocity of new orders in the United States during the month of July gives us confidence in meeting or exceeding analyst consensus estimates in the back half of 2020, despite the resurgence of COVID-19 in certain geographies. Europe continues to lag, in particular, in England, where elective procedures are not expected to begin until September. Now we are greatly encouraged by these trends and believe that Axonics is well positioned for growth in the second half of 2020, while recognizing that a sustained recovery in outpatient elective procedures is contingent upon factors that are outside of our control.

Physicians, outpatient surgery centers and hospitals are all eager to generate income for their practices and their respective institutions. Axonics is well positioned to take advantage of this opportunity, given sacral neuromodulation's short procedure time and solid reimbursement. And with respect to that, you may have read that CMS has proposed increases in reimbursement of 8% and 6%, respectively, for hospital outpatient departments and ambulatory surgery settings. If these rates hold as proposed, we think this could be an incremental tailwind for Axonics in 2021.

Now from the time of Axonics inception, we have consistently said that bladder and bowel dysfunction is underreported, underdiagnosed and significantly undertreated. Now this is particularly true when it comes to third line therapy. And we believe this is partially due to lack of patient awareness that sacral neuromodulation even exists and that many physicians have viewed sacral neuromodulation in the past as a therapy of last resort given the need for frequent replacement surgeries every few years, the lack of MRI compatibility and the less than optimal efficacy and the fussiness of the incumbents product.

Now given all of these factors, we believe that the sacral neuromodulation market is significantly underpenetrated and poised to double over the next several years based on our introduction of a bespoke fuss free long-lasting device that's MRI compatible. Patients are recharging with ease and appreciate that our device is designed to last a couple of decades in the body. Now we're pleased to report that feedback from implanting physicians in their patients continues to be overwhelmingly positive. And our 2-year therapy efficacy and responder rates demonstrated in our ARTISAN study are being replicated every day in commercial practice with our device.

Now these FDA approvals we received this quarter over these past few months, combined with the robust clinical literature we have accumulated is resulting in the Axonics system becoming the preferred therapy for urinary and bowel dysfunction. Physicians are enthusiastically recommending Axonics therapy to their patients and more of their patients are saying, yes, than ever before. Suffice it to say, we're bullish about the future and setting aside COVID-19 headwinds, we fully expect this market to expand meaningfully in both the short and long term.

Now I will now briefly address the FDA approval Medtronic received earlier this week for its rechargeable device as we can appreciate that this is a topic of interest for the investment community. Let me start by saying over the last 2 months, I have personally conducted over 100 individual video calls with physician customers of Axonics. The purpose of these calls was to express appreciation to these physicians for putting their trust in Axonics and to demonstrate our steadfast commitment to the continued innovation and support of their patients. I believe it's important and impactful that these customers hear this directly from the CEO. I asked physicians about their experience with our product and requested any constructive feedback.

Now physicians have shared with me quite a number of things, and I'm going to share a few of them here today. One, they say that the Axonics product and field support has exceeded their expectations. They say, patients are reporting very high levels of efficacy and satisfaction, consistent with what we have seen in our pivotal study. Physicians have noted that patients who received an Axonics replacement for their InterStim device are particularly effusive about the higher level of efficacy and satisfaction with the ease of use of our patient remote control and charging device. Physicians have told me that the burden on their own clinical staff has gone down significantly, as patients do not require repeat reprogramming in sharp contrast to their experience with InterStim. Physicians have also said that the Axonics field personnel are first class and they conduct themselves with integrity and dedication and are providing a level of service and support that goes above and beyond.

In a nutshell, physicians are delighted with our product. Now aside from continued product innovation, I have informed our customers that we are working on various marketing programs designed to raise patient awareness in this category. Now as you can imagine, this is resulting in strong physician loyalty and goodwill towards Axonics. Now these physicians indicated to me that the #1 reason they took a chance on Axonics is in part due to our unrivaled clinical data. We now have 4 years of European clinical data and 2 years of data from our U.S. pivotal study that is the best that has ever been reported in SNM clinical literature.

The second most cited reasons physicians have switched to Axonics are product features and the devices ease of use and lack of fussiness. We brought our sacral neuromodulation device to market as the first small, long-lived MRI compatible device. Now it's not lost on physicians that Medtronic, a company with vast resources, chose not to invest in innovation for well over a decade until Axonics came to the U.S. market in November 2019. By comparison, Medtronic is bringing their rechargeable product to market with no clinical or performance data whatsoever. Therefore, the efficacy of the InterStim Micro is a complete unknown and remains to be seen. Bottom line, marketing hype that quotes expected performance does not substitute for actual clinical and real-world data.

Okay. Now that Medtronic has FDA approval for a device that looks similar to our device on paper, the question is, how easy will it be for their patient remote to communicate with a small implantable device? What will be the patient recharging experience? How satisfied will patients be with the therapy? There are no answers to these questions since once again, there's no clinical data. One piece of feedback that has consistently come up in nearly all of my calls with physicians is that the patient-facing remote currently used with InterStim II that will also be used with InterStim Micro is not easy to use. And that patients are having difficulty getting the remote to pair and communicate with their implant. In fact, some physicians indicate it's so poorly designed that they don't even give it to the patients, therefore, adding to the burden for the office staff.

Now we're aware -- in addition, we're aware that Medtronic has stated publicly that they have "taken back" 40% of customers in Europe following an InterStim's Micro or the InterStim Micro launch in January. Now we find this offhand anecdote dubious, for the following reasons: one, the device received CE Mark on January 13. Europe went into lock down nearly a month later due to the COVID-19 pandemic. And in Medtronic's own slide deck, it says, and I quote, "InterStim Micro launch delayed due to COVID-19." Now we are not aware of any accounts that Medtronic has "taken back" in England, the Netherlands or Switzerland, which are the only markets in Europe we're working in. The centers that we are aware of that have been planted a device with Micro are centers we consider Medtronic loyalists and that we've not had much, if any, business from.

Now we would also challenge Medtronics comment that their device is "50% smaller than Axonics. " And just to state some facts, the actual dimensions of their device are as follows: it has a length of 47 millimeters, a height of 17 millimeters and a thickness of 5 millimeters. Our device is 42 by 22 and 6 millimeters thick. We cannot imagine anyone is going to choose one device over the other based on dimensions that are difficult to differentiate, particularly if you hold the products in your hand.

Now I'll conclude on this topic with the following. Physicians and patients alike have been delighted with our product. Accounts that we have converted have been sticky, and we are confident that more accounts will continue to come our way, and we expect to be the market leader in this category in not-too-distant future. Now as you all know, this is a significantly underpenetrated market that is ripe for market expansion. And there's ample opportunity for both companies to be incredibly successful in this category for years to come.

Now turning to business development. We continue to make significant progress on customer acquisition on the contracting front. So I'm going to provide some additional facts. Our manufacturing and quality team has been very productive during the second quarter or was productive during the second quarter, having built a significant quantity of finished goods inventory. We now ship product to customers the same-day an order is placed. Now given the fast-paced nature of our business and the fact that customers do not want to hold inventory, this is an important success factor for Axonics. Over 4,000 patients have been implanted with the Axonics system since our commercial launch last November. Most orders received are from no more than 2 systems, indicating that customers are consistently reordering and not stocking. Moreover, sales in the U.S. are widely distributed such that our top 20 accounts represent less than 20% of our total business in the United States.

Now our data -- moving on to some other data points. So our data continues to show that nearly 90% of patients trialed with our external trial system are implanted with a permanent device. As a reminder, this is about 10% to 15% higher than what has been historically reported in clinical literature. Now interestingly, over 20% of our implants to date have been associated with physicians replacing their InterStim devices with Axonics. Now none of these patients require an external trial. And moreover, they have a unique and powerful influence on the practice since these patients have a direct basis of comparison. So when these replacement patients come in for follow-up, praising the ease of use improved comfort and symptom relief they're getting from the Axonics system, it provides physicians and their staff with categorical firsthand validation that they have made the right choice in switching their business to Axonics.

Now as of the end of July, we have over 540 unique accounts in the United States. Now these are ambulatory surgery centers and hospitals who have implanted patients with the Axonics system. As you can imagine, some centers have multiple implanters. So we are reporting out only about the number of centers, not the number of physicians.

Over 100 new accounts implanted devices in May and June and another 60 new accounts were added in July. So these 540 accounts represent approximately 50% of the top implanting centers that practice sacral neuromodulation in the United States. And we further estimate that these accounts or these centers account for approximately 15,000 to 20,000 implants on an annualized basis. Now further, since our U.S. launch in November 2019, over 135 corporate agreements with national and regional IDNs as well as large urology groups and ambulatory surgery centers have been signed that allow us to -- allow us access to do business in these facilities. Now included in this group are 12 of the largest 17 national IDNs in the United States. We also have dozens of additional agreements currently in process and expect that the majority of these remaining agreements will be wrapped up by the end of the third quarter.

Now on the R&D front, we are working diligently on a long-lived nonrechargeable device to round out our line of sacral neuromodulation systems. Now in closing, I'd like to say that we continue to make excellent progress on our vision of being the global leader in sacral neuromodulation. We're grateful for the trust a rapidly growing number of physicians and patients have placed an Axonics. The innovation that we're bringing to sacral neuromodulation gives us confidence that Axonics therapy is on our way to becoming the preferred treatment for urinary and bowel dysfunction. We are bullish about the future prospects of Axonics. And as I said many times before, we are working diligently every day to fulfill our commitment to the implanting community and their patients. So at this point, I would say that we're happy to answer any questions that analysts may have at this time. And I'd ask the operator to queue folks up. Thank you very much.

[Operator]

[Operator Instructions] Our first question is from David Lewis from Morgan Stanley.

[Marissa Bych, analyst]

This is Marissa on for David. Can you hear me okay?

[Raymond Cohen, executive]

Perfectly.

[Marissa Bych, analyst]

Great. So the first thing I wanted to ask is just a confirmation of something you indicated on recovery. I believe you had indicated last quarter that you were tracking at around a $3 million weekly revenue run rate prior to COVID 19. Is it correct that you're indicating today that you're tracking at or above that level?

[Raymond Cohen, executive]

Pretty close.

[Marissa Bych, analyst]

Okay. Great. And then the second thing I wanted to ask is just on the lines of the 540 unique centers that you have today, can you first confirm with us just a comparable stat to the 350 centers that I believe you gave us last quarter? And then secondly, if you could help us understand how the concentration of implants is being spread across the 540? And maybe if we looked back at the 350 accounts that you had as of last quarter, help us understand kind of what percentage of your implants are coming from those centers? And if you've increased your penetration within those centers consecutively? And just how the balance of penetration is looking today?

[Raymond Cohen, executive]

Sure. Yes. That's a pretty interesting question. It's a good question. So let me just clarify a few numbers, right? So today, we have 540 unique accounts in the United States. We reported out recently in our pronouncement, the number was 485 or 486. So the delta between those 2 numbers are the number of accounts that we've added in July. And then from the pre-pandemic number, right, which -- go ahead, Neil.

[Neil Bhalodkar, executive]

375.

[Raymond Cohen, executive]

Okay, which was, I think, 375 at the end of Q1. So we went from 375 to 485. Those are the accounts we picked up in May and June. And then some additional accounts that came on board in July. Now what I tried to communicate in my prepared remarks is that these customers are not stocking, right, and that they are consistently reordering product. So what I can tell you is that we -- I don't know of any instance where a customer joined us or started with us, say, in November or December and that has not reordered from the company. People are reordering consistently from the company. Now as you know, the recovery from COVID has not been, how should I say, consistent across the board. So as I've been talking with these physicians personally, I hear a lot of different stories. Some people say, yes, they're close to back to where they were. Some people say they're at 80%, some people say less than that, some people talk about lots of procedures that had to be rescheduled or patients that have been lost now completely dropped out because they don't have a job and they don't have insurance, all kinds of other stories and reasons.

And so I think it's very, very difficult, right, to really speak about these numbers and try to come up with hard trends that are meaningful as somebody to try to predict the future just because it's scattered and it's all over the board, and there is no 2 stories that are consistent. So I hate to give a mishmash confusing answer, but I think that's as bad as authentic as I could be in terms of providing details. Now we have not yet done an analysis that is detailed enough for me to share about "same-store sales, " right? So as time goes on and we begin to normalize then this is something we'll consider reporting out on.

[Operator]

Your next question is from Bob Hopkins from Bank of America.

[Raymond Cohen, executive]

Technical difficulties apparently. Bob, if you're there, you might be on mute.

[Neil Bhalodkar, executive]

Okay. Go to the next question, operator, and we'll come back to Bob.

[Operator]

Let me just try this one. Mr. Hopkins.

[Robert Hopkins, analyst]

Can you hear me?

[Raymond Cohen, executive]

Perfectly. Thanks, Bob.

[Robert Hopkins, analyst]

Sorry. Ray, in your prepared remarks, you said that 20% of your implants has been Micro replacements -- or sorry, InterStim replacements. Did I hear that correctly?

[Raymond Cohen, executive]

Yes, sir, 100% correct.

[Robert Hopkins, analyst]

So that's an interesting statistic because I doubt a patient is going to -- that's got to be entirely physician driven at this point. And is that a significant uptick from -- because I thought that number was just a small handful in maybe the previous quarter. So just wondering if you could just sort of flesh that out a little bit.

[Raymond Cohen, executive]

No, it's been interesting. I mean, it's been one of the phenomenons that we've seen really from the introduction of our device. So this number of around 20% or above 20%, we've kind of stated it both ways. It has been pretty consistent and continues to be a trend that we're seeing. Now clearly, it's not as if we've done a bunch of DTC advertising and patients are coming in and actually asking, right, for Axonics. In the future, that might be nice if that would happen. But this is clearly a physician-driven initiative, right? They're the ones that are suggesting to the patient who are coming in for any one of a number of reasons. It could be battery depletion, it could be need for MRI, it could be that they don't want to sign up for multiple surgeries. I mean, there are many reasons that they have shared about why they're doing this.

But the facts are that this is actually what's happening. It's a positive surprise for our business. It's not something we counted on, but it's turned out to be a phenomenal, how should I say, situation for us because these patients, they're acting as their own control, right? They are able to see and feel and experience the difference in symptom relief with our device versus what they had, had historically in their body. And then -- and that is without exception. Without exception, these patients are coming back in, talking about the outstanding symptom relief that they're experiencing. And they also talk about how easy it is to be able to interface with our device with our patient remote. So I could go on and on, but give you a chance to ask a follow-up or something else.

[Robert Hopkins, analyst]

So yes. That's helpful. Just curious, given the uniqueness of the times we're in. What -- can you tell me, like, what percentage of the revenue in the second quarter happened in June? And then I was wondering if you could comment on how July compared to June.

[Raymond Cohen, executive]

July was definitely better than June. I mean, what I think Marissa may have asked this in some way. But -- so we saw in July, kind of a return, if you may, to the pace of orders that we had experienced kind of, let's say, in the February into March period of time, right? January, we were ramping. And then the third week of March, the bottom fell out, and this is not -- there's not new information for anybody here. So -- but June was the first really good month for us, and that was about 70% of kind of the historical average. Now we don't have a year-over-year comparison because, obviously, we weren't selling in the United States last year. But July was definitely better than June and by a pretty good margin. And we're -- and I can tell you that so far, August is looking really solid as well.

So we're real pleased with the pace of business right now. It's not to say, and I'm sure this had come up anyway, so I'll just answer it. It's not to say that we don't have headwinds in certain geographies. And this -- I don't want to spend a bunch of time saying the same thing that every other reporting company has talked about this week. But we all know that is difficult, slow sledding in Miami right now. Places in South Texas are difficult. There's other hotspots in Arizona and other places around the country. So we -- there are these geographies that are difficult right now and that we're starting -- that we've seen headwinds. But this is the world we're living in today, and we continue to persevere and for every area that has a bit of a slowdown, we're getting a pickup in other areas that don't have as much virus activity. So hopefully, that gives you some context, Bob, about what's happening in real time.

[Robert Hopkins, analyst]

No, it does. And I just want to ask one more question. In terms of -- when you look at the accounts where you're having success, is it the kind of situation where you're getting in the accounts that you're in a significant amount of market share? Or is it more that it's 50 -- like are you 30% share? Kind of across the board? Or is it more like 80 in some -- I just wanted to get a sense for the variability and market share in the accounts that you've penetrated?

[Raymond Cohen, executive]

Yes. Okay. Bob. So look, this is also a really good question. And as you could imagine, there is no consistency to that answer. So I have to be a little careful in the way that I state this. So what I would say to you is that for the most part, we have wholesale switching to Axonics, right? The more folks that we are working with, that's exactly what they've decided to do. I don't have exact percentages, and this is, in some respects, will always be a bit squishy as you might have been. But we have a lot of our customers that are absolutely 100% all in with Axonics. Now there are some that have been splitting the business which obviously is something we would like to change, right? And we're working diligently to get more of their business because the reason sometimes that we get as to why they might have been still splitting their business are just simply not logical, okay? They're not on the merits, okay? There may be some relationship piece, et cetera, et cetera. So -- but there's very rare do we actually have an account which is dabbling with our product, right? That's really -- we don't see that hardly at all. So that's the best way I can frame it.

But just so we're clear. If you run numbers and we look at the end of third quarter and we look at our revenue, I don't know we're going to get equivalent reporting for Medtronic, likely not. But the fact is if somebody concludes that we have x percent of the market, 25%, 30%, 35%, 40%, whatever the numbers that you all conclude, the fact of the matter is like what I can tell you, that's not indicative of the share we're getting in the accounts that we're working in. That's indicative of the fact that half of the market has not come our way yet for one reason or another.

[Operator]

Our next question is from Larry Biegelsen from Wells Fargo.

[Shagun Singh Chadha, analyst]

This is Shagun in for Larry. Ray, I was wondering if you could talk a little bit more about the pace of recovery that you saw in the second half of July, going into August versus the second half of June going into July, just thinking about the trends here. And then with respect to competition, thank you for providing the color there. But I'm just wondering if there's any change to your strategy given that Medtronic will clearly look to bundle their 2 SNM devices, the primary cell and the rechargeable device as well as their broader product portfolio. And then I have a follow-up.

[Raymond Cohen, executive]

So I think your question was, were there distinctions between the beginning of July versus the end of July, and the answer is no. The July start the velocity -- or exit velocity of June was very good. It continued that way through the entire month of July. I do not have a -- I track these numbers very closely, literally every single day. And the fact is there wasn't like a lower volume in the beginning of July, followed by much higher volume in the end of July. It's been pretty consistent, and that level of new orders coming in has been consistent, from the beginning of July through the end of July, into the first 3 business days of August. So really not much to report about that.

This concept of bundling, I would completely disagree with the way you framed it. The fact of the matter is, a patient needs either. They need a sacral neuromodulation device. There -- it's either Axonics or Medtronic. And what you don't see is a lot of these customers who want to carry a bunch of different products, right? That's not what they want to do. So they're typically going to go with either us or they're going to go with Medtronic. That's just the reality of the situation. And there is no bundling of anything else with sacral neuromodulation, let's be clear about that. In Urology and urogynecology, Medtronic doesn't sell other products. They're not -- there's nothing for them to bundle together, and you're not going to bundle the old InterStim II with their new product, right? They're just going to offer what they offer and patients are going to make their selections, however it might be.

And what we have not found is that somehow mother Medtronic has been able to bundle all their other products that they sell and somehow keep us out of the supply chain arrangements in hospitals. So that's just not something we've seen. And it may have been the fact that they had a monopoly, and they never thought about it or wasn't -- weren't concerned about it. I don't know what their strategy might have been or whatever. But I think I'll just add -- finish by saying customers appreciate competition, right? They get it. They understand it. They think it's good as we do. So we think it's great. And by the way, congratulations to Medtronic for stepping up and developing a small rechargeable device that's MRI compatible. That's fantastic. And the rising tide is going to float everybody's boat in this market. So we applaud them for making that investment. We believe we've got a better product. We believe we will prevail in the end. And we're going to match them clearly, and we're going to continue to innovate and do things that will delight our customers.

[Shagun Singh Chadha, analyst]

That's really helpful color. If I could just ask a question on pipeline. You plan to file your prime resell device in early 2021. What percentage of patients prefer primary cell and then how are you thinking about the pipeline beyond your primary cell devices?

[Raymond Cohen, executive]

And so I'm not going to answer the second part of the question, right? I think we probably disclosed way too much to begin with. So we'll leave it at that. We have said that we do intend to introduce a primary cell device. I can tell you that, that device is well down the path, and we're entering into our validation and verification testing and that we fully expect to be able to get that file into the FDA in the early part of 2021. Now one can't rush these things because if you want to claim long life in the body, you have to do accelerated life testing, and there's a lot of other work that needs to be done to provide the test data so that it can get into the FDA with a good file and not to get bogged down in back and forth with the FDA with technical questions and so forth. So we've been pretty good about putting really solid files in front of the FDA. As you've seen, we know how to do that. And we've been very successful, particularly of late in 2020 and getting things approved by the FDA. So we're going to continue on that streak. So thank you very much for those questions.

[Operator]

Our next question is from Adam Maeder from Piper Sandler.

[Adam Maeder, analyst]

Congrats on all the success thus far. Maybe just to start on new accounts. You've obviously made a lot of progress thus far into launch. You talked about being in more than 540 accounts to the end of July, and we can see the strong sales numbers. And sorry if I missed this in the prepared remarks, but just it would be helpful to get a better sense for how you're thinking about the pace of new account adds going forward. And then I think you said that you're in 12 of the 17 largest IDNs. Do you have visibility or line of sight on the remaining 5? And then I have a follow-up.

[Raymond Cohen, executive]

Sure. So thanks, Adam. So I'll take it backwards. Yes, of course, we have line of sight on the other 5 because we're working on them. And what I indicated is I would expect that we would have those agreements wrapped up by the end of this quarter. Nothing of this is controversial. It just takes time, and some of them have been faster and more attentive to this than others. Some of these large hospital systems have indicated, well gee, we got COVID, and we're not taking on new things at this time. They all have their stories that they like to tell. And we just have to kind of work through that.

So will we get every single one of these, I don't know, right? I mean that would -- that's a pretty high bar, right, to have a full suite across the board. But we're working on them, and we've been really successful. I mean, we have -- I think the number I indicated was 135 or so now. So this is a normal course of doing business for us. And it's necessary, as you know, Adam, unless you get the green card from these hospital institutions or these large institutions, you can't go in there and sell the product. Have there been a couple across the country that have been very, very difficult because they fall into the loyalist camp and they put up these fake barriers? Sure. There's been some like that, and we just need to keep moving on. Now I'm going to ask Neil to help me repeat your first part of the question.

[Neil Bhalodkar, executive]

Pace of customer adds for...

[Raymond Cohen, executive]

Okay. Got it. What I would say is this, it's difficult for me to predict this, right? I don't have visibility, right, to how many new customers are coming on board. I would just say to you that we, as a company, are absolutely thrilled with the pace of customer acquisition, and it exceeded and has exceeded and continues to exceed our own expectations. I mean that is the fairest way to say it. I think, Adam, if I had told you or any of the analysts on the call today, that we would have in the middle of a pandemic, over 500 customer accounts which have come our way and ordering product from Axonics. If I've said that to you 6 months ago, you'd have said, man, you got to go get one of those tests done, right? Make sure that you still got all your faculties, right? I mean, it has far exceeded our expectation. And I think it's testament to the fact that, a, we've got a great product. We've got great people in the field. But moreover, the word is out right? We got the goods. Product -- patients are doing really well with our device. And I've said many times, and we say it to these customers, for Axonics, it starts with the patient experience that's what we're focused on.

We're not focused on marketing propaganda, making up stories. We're focused on making sure that our patients get good implants because we have confident people in the field, and that they get programmed well and they don't need reprogramming. So let me address that one in advance, right, and that these patients do well and they come back in and they tell the physicians how well they're doing. And they talk about how easy it is for them to communicate with our -- with their implanted device because of our patient remote control system. And a characterization that we have this plastic thing in a jig with one program, that's just really inappropriate, right? I mean that's the star of our show. People love that. Patients love it because it's easy to use. And by the way, looks like an Audi key fob, goes on your key chain, fits nicely in a woman's purse, and it doesn't look like a medical device, full stop. So thank you for those questions.

[Adam Maeder, analyst]

And just maybe for my follow-up, if I may. I know market awareness, therapy awareness is an important part of the strategy. So just would love to get your latest thoughts around DTC initiatives. I thought that you maybe potentially had pulled forward those timetables, just given a strong start. Is that correct? And maybe just help us think through time lines and kind of give us a better sense for what those will entail.

[Raymond Cohen, executive]

Sure. Adam. Look, I think that we -- we're in a kind of difficult position because we have only one thing to talk about, right? We're not a $30 billion revenue company. And so we want to be -- we want to keep some stuff in our back pocket here and not just lay out the entire strategy with tactics so that our friends in Minneapolis can replicate what we're doing. So what I will tell you is that we fully intend and we are working on dipping our toes into the DTC waters. We're going to do it responsibly. We're going to measure it, and we're going to make sure what we're doing makes sense. So we are engaged on working on content. We're looking at doing stuff in the digital world and in the real world. And I'll just leave it at that for now. And I will tell you that when we have things to report about, we will, right? When we have some actual stuff.

The fact of the matter is there are predicates here, or analogous companies to look at. We know and you know directly. Inspire Medical has done a really nice job in creating awareness for their neuromodulation device for sleep apnea. And UroLift, which is now, we all know, owned by Teleflex has done an excellent job as well in this area. So the notion that device companies can't do DTC and can't get results has already been debunked and proven that companies can generate additional interest in their product beyond just what physicians can do across the table from a patient. And so obviously, we're paying close attention. And whatever we can do to create some more awareness in this category, I think, is the responsible thing to do. And I think it's the position that a company that intends to be the market leader should be doing.

[Operator]

Your next question is from Kristen Stewart from Barclays.

[Kristen Stewart, analyst]

I was just wondering if you could maybe help me reconcile just the added number of accounts that you guys are making great progress on just with the run rate of sales. And not to kind of nip pick by any means, but I'm just trying to reconcile how you've added the great number of accounts at this point, but you're still kind of running at a run rate that's pre-pandemic levels and maybe just more of a leading indicator rather than a backward-looking number. I should be thinking about ...

[Raymond Cohen, executive]

Let me stop you there, just to address that, Kristen, and that's a really good question. And maybe I should have said it because it is a leading indicator. It is a leading -- you've got to get the account and they need to order a system or 2 to get started first before you're going to start to see the revenue follow. So it is absolutely a leading indicator to the tip of the spear. And that's the reality. Now the other part is that we are in a pandemic, okay? I mean this is not normal times, and you cannot measure these things kind of in the normal kind of way because each practice has got their own challenges, right?

I mean, as I've been speaking directly to these accounts, I'm really surprised that the variability. You got somebody who did -- came out of the box really fast with us, did a bunch of procedures in November and December and January, and then things started to go downhill. Obviously, in March and then their business just stopped and then it took them a while to get back, right? We've even had some physicians who've got coronavirus. So we just need to all be a little bit patient, I think, and so forth. And -- but we're not making apologies on the fact that 60-something new accounts decided to give us orders in July. And that 110 or 100, whatever the number was that came onboard in May and June. And we need those accounts. If we don't have those accounts, we're not going to get -- put the numbers on the Board.

So it just -- I think you correctly have made this assumption that it's more of a leading indicator, and that's the reason that we're sharing that information, right? We want to give some insights into the direction that our business is going and that this gives us -- and this is what gives us the confidence, right, that the business will continue to increase over the short and longer term.

[Kristen Stewart, analyst]

Okay. And then I guess on that note, how confident do you feel with where kind of consensus numbers are, just given what you've seen so far with July trends consensus numbers, I guess, out there would indicate kind of, call it, this kind of $50-ish million spread out between the third and fourth quarter of the year. Just kind of get in that $15 million, I don't think you quantified exactly how much of the revenue was kind of out in June and all that, but it certainly sounds like it was perhaps a fair chunk, but seems like you're running at a pretty good clip to be able to do that.

[Raymond Cohen, executive]

Yes, sure. I think what we've said without -- we've been consistent this year. We may change our tune for next year because we'll have some comparison. But what I said in my remarks were that we are fully confident that we will meet or exceed analyst consensus in the second half of the year. And that, by the way, includes Q3, okay. So this is not a backloaded tricky comment that I'm making. So things are going quite well for the company, and we're highly confident about this. And honestly, unless -- once again, unless other factors conspire against us that we are unaware of at this time, i.e., the pesky virus gets in our way, then we're highly confident that this $50 million in the second half of the year should not be a problem for us.

[Operator]

Our next question is from Kaila Krum from Truist Securities.

[David Rescott, analyst]

It's David Rescott in for Kaila. I appreciate the commentary around some of the expectations for the second half of the year. But as we dig a little deeper, as you think about the overall pipeline of patients who either were already engaged with physicians or those who had a scheduled procedure that was ultimately canceled. Could you kind of provide some color on the size of that backlog and maybe what portion of these procedures were performed in the second quarter? And then what the outlook for the mix of new patients versus those backlog patients would imply for the pipeline in Q3 and Q4.

[Raymond Cohen, executive]

So it's an interesting question, and I know this is a question that other companies have tried to answer and some provide more color than others. So here's my view right now on August 6, 2020. We don't have a backlog of patients. And there aren't anybody who canceled because they lost a job and don't have insurance and have no money. They're not coming back. Okay. Maybe when we have a vaccine. So we're not tracking it. We're not focused on it. It's just -- for us, it's -- we're just focused on what's happening today. We show up when we get -- our people are showing up for every procedure, we do the procedures, we program the patients. I mean, we're just -- it's a normal course of business. What any one individual physician has, if they've got a couple of patients that are needing to be rescheduled. We're not in that mix, right? So it's not something we're tracking. It's -- to me, it's historical. Whatever happened got cleaned up in May and June, and it's kind of completely irrelevant.

Now might there be a few accounts that have a few patients that are being rescheduled or whatever the case might be, sure. But that's not really in play for our company at this time. And I want to remind everybody that the way this works is that patients like they walk in the door, and they get differentially diagnosed and they're in that practice for quite some time before they actually get an implant, right. These are patients that had to get worked up and that may have happened some time ago. I won't put a number on it, but they got a drug, how did that work, et cetera, et cetera, that relieved their symptoms, 9 out of 10 times, no. Then the patients got to come back in. Then they talk with them about these are the options. We can do BOTOX, we can do sacral neuromodulation, people need time to think about it.

I mean -- but it's there's a revolving door, so to speak, right? Patients are coming in every single day, and some of them are ready for third line therapy, some are not, et cetera, et cetera. So it's a process, and it's a process that's different in every clinic, in every office, in every institution. And there's no consistency here, right? So it's not something that we have this great visibility into any individual customer's pipeline. And to be honest with you, if you ask them, they're going to give you a very similar answer that I just gave you. These are -- it's not like they're running some sophisticated metrics inside any one of these large urology groups or whatever. They're just kind of dealing with stuff as it presents. And that's just the truth.

[David Rescott, analyst]

Okay. That's helpful. Second one for me. I think we've seen some of the players across Medtech, who have a single product offering in a single market segment kind of outperforming and on a relative basis and then gaining market share from competitors who are more diverse -- offer more diverse portfolio. So in that context, I know you provide a lot of commentary around the approval of InterStim Micro. But could you provide some more color just around how if at all the pandemic has changed the views on the competitive landscape and ultimately what your overall market position next year potentially be, just like I said, given the context of kind of these single offering companies outperforming on a relative basis to some of these larger diversified portfolio companies?

[Raymond Cohen, executive]

So it's an interesting question, but I don't really think I can answer it. I'm a student of the game. I pay close attention to other companies that are in our space in medical devices. I think what inspires doing in Shockwave and Silk Medical and Inari and all these other companies, I mean, this is our kind of crop or group of companies, as you say, that are singularly focused on markets. I think it just underscores that we're in a good position to do well as companies because we're focused -- 100% focused on the price. And so I think the whole group of us I think, for the most part, has performed quite well, and you should expect Axonics as well. And I'm not sure I could really add more color than that.

[Operator]

The next question is from Mike Matson from Needham & Company.

[Michael Matson, analyst]

I guess, so I have one more kind of Medtronic related question. I'm sure you kind of heard it in news, but just based on their press release, it seems like they're talking about this choice concept of offering rechargeable and nonrechargeable versions of the product. And I understand that the -- I heard your answer on the bundling, so I'm not asking about that. But just the fact that they have 2 types of products, and you guys only have one. And look, I know you've got a nonrechargeable in development and you'll have one eventually. But in the interim period, how do you kind of counter that, I guess?

[Raymond Cohen, executive]

Look, I don't think -- okay. First of all, thanks, Mike. It's a good question. I appreciate the question. I understand that may be a thought that other people have on their mind. The fact of the matter is that there is no recharge-free system that is available in the sacral neuromodulation today. I am using those words very carefully because I'm parroting what the competition is saying about InterStim II. InterStim II is not a recharge-free system. InterStim II has 2 elements that are part of their patient remote control system that need to be recharged. They need to be plugged in the wall. So the fact of the matter is that, that is a short-lived device. And I think that the issue here is about length of time in the body, right? And also the size of the implant and so on and so forth.

So let's just go on length of time in the body. The competition has a product today that only, on average lasts 3 to 5 years, okay? You can't make up a story about it lasting longer because it doesn't, okay. Now that is not a good alternative for patients and very few patients are going to pick a product that has a short life. Now even if you're 75 years old, right, which is not the average patient, our average patient is 55 to 57 years old, and it's a woman. Now the fact is that you're just not going to choose that one, right? I mean, why would you pick a device that's only going to last 3 to 5 years in your body that is large, okay, and has been known over all these years to be really fussy when you now have a choice to pick a long-lived device. So I think you're going to see that device no matter what they say I think you're going to see sales of that device start to really go down aggressively.

And by the way, we're picking up those patients that have this device in their body in pretty big numbers as we have shared on this call today. So the focus here is not about choice. Do you want vanilla, chocolate or strawberry? I think it's about length of time in the body, and I don't think that, that is an attractive alternative for people to choose. Now I can tell you that our rechargeable device is not going to be a 3 to 5-year device, right? So you get my sense about it. So we're not going to come out with a me-too product that's short-lived. So I'd really think, Mike, if people just take a step back and think about this, I think you'll come to the same conclusion that even the older patient is not going to choose a device that is just going to last a few years in the body.

So from that standpoint, now I think now that we've debunked this notion that somehow recharging is not something that patients with urinary or bowel dysfunction are going to be willing to do mean just like the pain patients have proven that in spinal cord stimulation, they're going to choose longer-lived rechargeable devices. Now that we've debunked that, I think the game is going to blow down to which are you going to go with? Are you going to go with a small rechargeable MRI compatible device from Axonics or you're going to go with a small rechargeable device from Medtronic. And quite frankly, I think we have significant advantages over what they have at this time. And so we still feel like if there is going to be a choice, and I think that you're going to find that most customers are not going to be saying, hey, you want to buy the green one, you want to buy the blue one, you know, blah, blah, blah. I don't think it's going to go that way. These physicians don't want to carry a bunch of products. They don't want to have inventory. If they're in an ASC, it's either you can double underscore my comment and if it's in a hospital environment, they -- the supply chain people, they also don't want to stock a whole bunch of products.

So does that mean that there's some places that we may not be able to do business? Okay, fine. But there's other places that they're going to have made their decision to go with Axonics, and that's the way it's going to be. So sorry for such a long-winded answer. But on the other hand, I think it's important to provide this level of context to understand. It's not like you've got 2 fantastically great products in the Medtronic basket. You've got one product that has been proven. It just doesn't work that well and it's not that attractive. And you've got a brand-new product that -- I mean, other than the first patient who got implanted the other day in Cleveland, nobody has any information about how well this product works. So time will tell.

[Michael Matson, analyst]

No, that was very helpful and makes a lot of sense. And then my other question would just be about the reimbursement changes that you called out, 6% and 8% and what does that translate to on a dollar basis? I don't know if you have that information here, but it's a good number. And obviously, it's a good thing that it's going up. But to me, I'm not sure it doesn't really seem like it necessarily be a needle mover, but maybe give your perspective on that.

[Raymond Cohen, executive]

Mike, is it a needle mover? I don't know. But it was interesting that in some of the calls with physicians, just in the last couple of days, they pointed it out. They're like, hey, wow, I noticed that reimbursement is going to be going up. So they're paying attention. And I think you're talking about -- it's a few hundred dollars that we're talking about in terms of increase. Is it going to add a big number to the size of the market, no, but it's a lot better than moving in the other direction.

[Operator]

Your last question is from Danielle Antalffy from SVB Leerink.

[Danielle Antalffy, analyst]

Ray, just a follow-up on the commentary around Medtronic replacements and how -- that's been a sort of upside surprise for you guys and for us, I mean, we certainly weren't modeling any real revenue stream from that. Can you help frame what the opportunity is there on an annual basis going forward since that now does seem like a real area where you guys are winning? That's my first question.

[Raymond Cohen, executive]

Look, I think you just got to go back in time, right? So if you go back 4 years ago and you say, all right, how many implants did Medtronic do and the answer is, let's just pick a number, it's probably around 20,000 or 25,000, okay? So you know that, that how many patients now 5 years, hence, will be available. So I think the math is pretty straightforward. I don't have it off the top of my head, but you get the idea. There's that many patients that, in theory, should be then available for replacement. So it's a pretty good honeypot actually.

And I'll give you an inside baseball comment. Medtronic made a decision that their old product or how should I say, their new product that they've just introduced is not backwards compatible with the already implanted lead nor is the ability for anybody to use the old lead and for the device to be MRI compatible. So the fact of the matter is the decision that they've made strategically from a product development standpoint, put all of their patients in play. That's what's going on here, right? There is no -- they don't have a product that is now backwards compatible that could be MRI compatible as well. So why would anybody right, just take an old InterStim II and just plug it back in when that -- when the battery depletes of that existing product. Why would you just plug another InterStim II into the ready planted lead because now that patient, once again, if they need an MRI, they have to get a explant. And it's not going to last very long. So you can see what's happened here. And that is part of the reason why these patients are in play for us. So what's our goal? Our goal is that we want to get at least half of those patients in the Axonics camp, and that's the game.

[Danielle Antalffy, analyst]

Got it. And then one last question for you here. In the -- out of the 1,000 or so target centers, you're in over 500 at this point, but you've talked to all of them. So are there any similarities across the centers that you haven't gotten to penetrate yet? And what's the strategy to flip those centers at some point in the future?

[Raymond Cohen, executive]

It's a good question. So look, we're continuing to call on all the centers around the country. A lot of these accounts, if you may, are embedded in hospital systems. And the fact that we've just recently signed a bunch of hospital systems coming out of the dark days of the pandemic, I was going to say post COVID, but that's not true, okay? We're still dealing with this. So a lot of it is that, right? It's a lot of the remaining accounts that are out there are, most part, found in hospital systems, right? And these hospital systems, particularly these regional and national IDNs, they have a lot of tentacles, right? It's not like there's 2 hospitals here. We're talking about systems that have 20, 30, 50, 100 institutions. And so you're going to find that the new -- a lot of our new accounts are coming from hospital systems, and that is what we're seeing. We were able to get a lot of ASCs and the private docs that are doing business in ASCs, that's where the bulk of our business came from earlier, right? Let's just say, pre the pandemic because these hospital systems take longer to get these agreements done.

Now we're seeing a lot of the new accounts are coming from actually from those contracts from those hospital systems. So our business is going to start to shift also as time goes on, where it will be more 50-50, hospital outpatient procedures and ASCs, whereas before, we were more heavily weighted towards just ASC. So that's the most factual answer I can give you. And then you say, how do you going to get an account? Well, good salesmanship and sharing quality information and also leveraging the physicians and their experiences to get them to share across the board with their colleagues, how well things are going with this new entrant with this new product. So it's just -- it's one on one. It's just basic blocking and tackling and going out there and doing the work.

[Operator]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.