Axonics Inc

NASDAQ:AXNX

Earnings Call Transcript 2021-Q2

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Axonics Second Quarter 2021 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Neil Bhalodkar. Please go ahead.

[Neil Bhalodkar, executive]

Thank you, Jerome. Good afternoon and thank you for joining Axonics' quarterly results and update call. Presenting on today's call are Raymond Cohen, Chief Executive Officer; and Dan Dearen, President and Chief Financial Officer. Ray and Dan will provide prepared remarks on second quarter financial results, commercial progress, and a general business update, followed by a Q&A session.

Before we begin, I would like to remind listeners that statements made on 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 on this conference call. These risks and uncertainties are disclosed in more detail 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 5, 2021. Except as required by law, Axonics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances or unanticipated events that may arise.

I would now like to turn the call over to Ray for his remarks.

[Raymond Cohen, executive]

Thank you, Neil. I'd like to welcome everyone joining the conference call this afternoon. In the second quarter of 2021, I am proud to report that we exceeded our commercial objectives and made important progress on several other key initiatives. Starting off with our commercial results, Axonics generated record revenue of $45.9 million in the second quarter, representing an increase of 33% on a sequential basis and over 200% increase as compared to last year's COVID impacted second quarter.

In sacral neuromodulation, we experienced strong momentum in the United States and generated record quarterly revenue of $40.2 million, and this was up from $33 million in Q1 of this year. We continue to add new customers and we're also seeing growth within our existing base of implanting physicians who are performing more procedures than they have in the past given the return of a more normalized elective procedure environment and the overall expansion in the sacral neuromodulation market.

As we have discussed in the past, in each physician practice there are hundreds of patients that have been differentially diagnosed with urinary fecal or mixed incontinence. Many of these patients have taken prescription drugs to treat overactive bladder with limited success.

The clinical literature indicates that over 80% of patients who are prescribed drugs discontinue these medications within 6 months. Over the last 2 decades, millions of patients have been suffering in silence or simply decided not to pursue sacral neuromodulation therapy due to the shortcomings of the legacy offering. Thankfully, this is changing. Due to our presence in the market, physicians are now discussing the benefits of sacral neuromodulation with their patients more often. The discussion now is less about whether the product is rechargeable or non-rechargeable, it's more about the longevity in the body and significant symptom relief that can be expected.

The facts are that Axonics has made sacral neuromodulation an attractive therapy proposition. It is clinically proven with higher efficacy than ever seen in this category. It provides durable long-lasting relief. It's easy to use, MRI compatible, and very safe. Moreover, we are working diligently with physicians to increase awareness among patients via our DTC and marketing efforts. As a result, there is little doubt that the sacral neuromodulation market is growing and Axonics has been caused in the matter.

Turning to Bulkamid. We generated $5.7 million of revenue in the first full quarter since acquiring the product on the last day of February. Physician response to the product is overwhelmingly positive and the expanding offering has elevated Axonics' stature within the urology and urogynecology community. Clinicians are enthusiastic to offer this safe, efficacious, long-lasting, best-in-class bulking agent to the large and rather underpenetrated population of women suffering from stress and mixed urinary continence. And as hypothesized, Bulkamid is opening doors, providing Axonics with an opportunity to sell more sacral neuromodulation. We are already seeing physicians who, for one reason or another, didn't come our way in the last 18 months, now giving us a chance to demonstrate the superior clinical results of our SNM product and the mission-driven dedication and high-quality service of our field-based team.

Now during the second quarter, we trained our entire U.S. field team on Bulkamid, and we are now executing a broad rollout to physicians across the United States. We scheduled 5 regional seminars this summer to introduce physicians to Bulkamid and provide proctored wet lab training. Physician interest was such that the 5 seminars were fully booked in 1 week, and we recently added and filled a sixth seminar, all in one day. We have already hosted 2 of these seminars in July with the third program scheduled for this weekend. The excitement and positive feedback from attendees is phenomenal.

In all, we expect to train over 350 physicians on Bulkamid at these seminars. These seminars also provide us with an opportunity to introduce our sacral neuromodulation system to physicians who are less familiar with Axonics and have them hear firsthand from colleagues who have already experienced the difference of working with Axonics.

Now looking ahead, based on our strong commercial momentum, we are increasing our calendar year 2021 revenue guidance to a range of $186 million to $188 million. Compared to our prior guidance, this is a $9 million increase at the midpoint and implies growth of approximately 68% on a year-over-year basis.

Now Dan will provide further details on our updated guidance in his prepared remarks. But I'd like to talk a little bit about our clinical and regulatory situation. It's notable that we've received 2 regulatory approvals during the quarter and also made a submission to the FDA for our long-lived non-rechargeable implantable stimulator. So to provide some more details. In mid-May, we received CE Mark approval to market our second-generation rechargeable implantable device and an updated patient remote control in Europe. You may recall that we previously received FDA approval for this particular IPG and remote control during 2020. Now, this version reduces how frequently a patient needs to recharge their sacral neuromodulation device to just once a month for approximately 1 hour.

Now also in mid-May, we received FDA approval allowing the use of detachable extremity coils for patients undergoing 1.5T or 3T MRI scans. Now you may additionally recall that the FDA previously approved both 1.5T and 3T MRI conditional labeling for us using head and full-body transmit coils. So with this additional approval for these extremity coils, Axonics now offers the widest range of FDA-approved MRI conditions in sacral neuromodulation. Notably, we have also surpassed the MRI conditions allowed for products in the spinal cord stimulation market. And in late June, we filed a PMA supplement with the FDA for our newly developed, long-lived, non-rechargeable or recharge-free sacral neuromodulation system. Now we designed this new implantable device to replicate the key features of our currently marketed FDA-approved rechargeable system.

Once approved, the new Axonic system will be the first fully recharge free SNM system, and it will have the following attributes: one, a primary cell battery with an expected life of at least 10 years, which is approximately 2.5x longer-lived than the legacy offering from Medtronic. The device will be a relatively small and thin, and it will measure only 11 CCs in volume. It will include the benefits of constant current stimulation, and it has an intuitive easy to use recharge-free patient remote control. And lastly, it will be born with full-body MRI compatibility with both 1.5T and 3T scanners.

Now we anticipate receiving FDA approval during the first half of 2022, at which time we expect to begin shipping the new product to customers in the United States. Now we're confident that the introduction of our new non-rechargeable device will continue to drive market expansion and will also advance us on our path to sacral neuromodulation market leadership. As I trust you can tell, we've had a very busy and incredibly productive second quarter of 2021.

And with that, I'd like to turn the call over to Dan to review Axonics' second quarter 2021 financial results. Dan?

[Danny Dearen, executive]

Thank you, Ray. In the second quarter of 2021, Axonics generated net revenue of $45.9 million. This represents an increase of 202% compared to $15.2 million in the prior-year period. Sacral neuromodulation net revenue was $40.2 million, of which $39.2 million was generated in the United States and the remainder in select international markets. Bulkamid net revenue was $5.7 million, of which $2.4 million was generated in the United States and the remainder overseas.

Gross profit for the second quarter of 2021 was $28.7 million, representing gross margin of 62.6% compared to 44.4% in the prior-year period. Total operating expenses for the second quarter of 2021 were $44.7 million. Included in operating expenses are $6.3 million of stock-based compensation expense and $2.2 million of intangibles amortization. Operating expenses totaled $26.2 million in the prior-year period. Net loss for the second quarter of 2021 was $25.1 million compared to a net loss of $19.8 million in the prior year period.

Turning to the balance sheet. We completed an equity follow-on offering in mid-May that generated net proceeds of approximately $190 million. In June, we paid back in full the $75 million Silicon Valley bank term loan that we had used in February to finance the Bulkamid acquisition. Cash and cash equivalents were $231 million as of June 30, 2021. Before discussing our updated guidance, I would like to note that we're closely monitoring the impact of the COVID Delta variant on elective procedures. In the Southeast United States and a few other markets, we've had some cases canceled in July and in early August due to patient reluctance are in certain areas of Florida where facilities have temporarily restricted elective procedures. Our updated guidance incorporates what we are currently seeing in the field and assumes that the situation with COVID does not further deteriorate over the balance of the third quarter.

As Ray mentioned earlier, we are increasing our 2021 revenue guidance. We expect total net revenue to be in the range of $186 million to $188 million, representing growth of approximately 67% to 69% over fiscal year 2020 net revenue of $111.5 million. This compares to our prior net revenue guidance of $176 million to $180 million. Sacral neuromodulation net revenue is expected to be in the range of $166 million to $168 million and Bulkamid net revenue is expected to be $20 million. Gross margins are expected to improve to an average of approximately 64% in the second half of 2021 and expand further in 2022.

I will now turn the call back over to Ray for closing remarks.

[Raymond Cohen, executive]

Thanks, Dan. So in closing, we remain confident that our best-in-class incontinent solutions will continue to deliver strong clinical outcomes and high levels of patient satisfaction. We expect this to drive expansion in the highly underpenetrated sacral neuromodulation and stress urinary incontinence markets and provide durable growth for Axonics in both the near term and for many years to come. We remain grateful for the trust that physicians, patients and shareholders have placed in Axonics. We'd also like to thank our field team and our colleagues in Irvine for their diligent efforts and dedication to fulfilling our mission of changing the lives of patients suffering from bladder and bowel dysfunction.

So with all that said, at this time, we're happy to take some questions. We'll turn it to the operator.

[Operator]

[Operator Instructions] Your first question comes from Chris Pasquale with Guggenheim.

[Christopher Pasquale, analyst]

Congratulations on a nice quarter. Ray, I wanted to touch first on the comments you made about the sort of evolving COVID landscape because that is still a little bit of a concern as we look at the outlook here for the back half of the year. Can you just go in a little bit more detail on how -- what you're seeing today compares to maybe the situation late last year or at other points here? And then just how much of a variable you think that is in terms of predicting the performance of the business over the next few months here?

[Raymond Cohen, executive]

Thanks, Chris. So look, I appreciate the question. I think that this time around, it feels very different. Sure. We've had some cases canceled. We've had some patients that have some reluctance and so forth. But this is nothing as compared to what we saw back in late last year, late 2020 and then obviously, pales in comparison to what we saw this time during last year and the summer. So we're paying for contention. I think it's -- I'm sure as many other companies have stated.

This time around, the problem is really, how should we say, isolated to a large extent, to certain places in Florida and then New Orleans and a couple of other spots in the southeast. And I think that what we have seen is a reaction where there's been some reduction in access to elective procedures in certain of these markets. But this is not affecting the country or our business in a broad way. We're -- we've got good momentum in the business. We obviously are monitoring the situation every day, but we're also monitoring revenue as it's coming in every day. And so far, things continue to go well for us. So I'm hoping that we can power through this and not have the same kinds of disruptions that we've seen in the past.

[Christopher Pasquale, analyst]

And then just on Bulkamid, when we got together 3 months ago, you used a little bit of caution on the 2Q outlook for that product because reps were going to be out of the field because there was training that needed to happen. Obviously, the result there was better than expected. Can just go into what drove that? What's happening faster than maybe you might have predicted and how that colors your outlook for the product as you really scale it up across your sales organization?

[Raymond Cohen, executive]

Yes. So again, I appreciate that question as well. And the most obvious comment to make is that, yes, we were a bit surprised also by the uptake in the product in Q2. So a couple of things. One is that the facts are that the early adopters of the product who started during 2020 during the pandemic have simply used the product more often than expected. So the same-store sales, if you may, from those first 100 customers has been really positive. And there's been such demand that despite the fact that we did not unleash our entire field sales force during Q2 where we were fundamentally training, we still managed to bring on about another 100 customers.

And once again, they've taken to the product in a really big way. So I think it's always great when you're pleasantly surprised, right, that people are utilizing a product more than you would have expected and that you're gaining more customers quicker than you expected. So we were very cautious. And I think appropriately so, but once again, the ability to generate $2.4 million in the United States in our first real 3 months of having the product, we are quite impressed with that. The numbers internationally are more or less historical, right, that those are numbers that are consistent with what we had seen prior to the acquisition before we bought it. So not as much as a surprise there.

Now going forward, in Q3, I think we do have, once again, a little tempered in terms of expectations, simply because of the fact that Europe is in their traditional holiday mode. And then, of course, as you've heard from many other CEOs, there's issues, right, in certain countries, and particularly Germany and other countries in Europe, where they're just coming out of lockdown, and there's been a lot of COVID disruption. So having said that, as you have noticed, I mean, we've increased the guidance from $14 million to $20 million with that product line. So we're quite bullish about it. And it looks like our projection of $50 million in 2024 may turn out to be conservative.

[Operator]

And your next question comes from Travis Steed with Barclays.

[Travis Steed, analyst]

If you look at the SNM guidance for the second half, I know you talked about you're assuming some COVID impact. Curious if there's any other assumptions that you have baked in like summer vacations or potential for some short-term distraction as you roll out Bulkamid with the SNM sales force? Just curious if there's anything else that you're assuming in the second half on the U.S. SNM guidance?

[Raymond Cohen, executive]

Let me just say this. I know that this -- we've gotten this question numerous times about potential disruption of having Bulkamid. It's completely opposite. Bulkamid is not a distraction. It is a door opener for us and it is creating enormous amount of enthusiasm. And as I mentioned in my prepared remarks, we have over 350 physicians coming to undergo wet lab training for Bulkamid and then also hear about kind of what the latest is with respect to sacral neuromodulation. So Bulkamid is actually an accelerator for us as opposed to some sort of distraction.

We've obviously added more feet on the street and more salespeople and so forth. So we've got plenty of capacity now to be able to handle the increase in that activity. So that was -- I just wanted to make that super clear, right? This is far from a distraction. This is actually paying big dividends for the company in terms of physicians who had not done business with before, now giving us a second look for sacral neuromodulation because they're so excited that Axonics now has this Bulkamid asset, which obviously they really like. So in the second half of the year, we haven't -- we're not tempering our projections. Will it be a little choppy in this Q3? Sure. It's a little choppy, but we expect to finish sequentially up.

And we are really bullish about the potential for Q4 as we now get into the best quarter of the year in the medical device business because people have met their deductibles. And we're hopeful, of course, that this Delta variant peters itself out as opposed to becoming a major problem. So all those things taking into consideration, I want to get this point across, we are extremely bullish about our prospects in the second half of 2021 and then super excited about the potential in 2022 as our new product comes online.

[Travis Steed, analyst]

When you look at Bulkamid, just kind of curious, as you, I think, almost doubled or more than doubled your user base. What are you seeing as these doctors get trained? Are they continuing to use the product? And the feedback that we've heard is some of these doctors are going to use this basically as frontline therapy. So curious what the rate-limiting factor is here. Do you have enough manufacturing capacity if this product really ramps up?

[Raymond Cohen, executive]

So we have capacity. We're planning for success with all of our products. And I dare say, if you look at our balance sheet, you can see we've got plenty of inventory on both sides, certainly on sacral neuromodulation as well as Bulkamid. So we're really not concerned about that. And I think I'll cut right to the chase with a question maybe that you didn't ask, which is every one of these seminars, we survey the attendees. And the fact is that 95% of the people who are coming to these seminars indicated they want to start using Bulkamid immediately.

Now immediately, means, let's just say, within another week, some weeks or a month or so, right, of when they attend the seminar, just from logistics, right? The logistics are getting back in and getting those first patients scheduled. But this is unbelievable. I mean I'll share it because it's a fact. And we're blown away by this. I mean when you run programs like this, you think, well, if we can get 70% or 80% of the people to be enthusiastic about using the product right away, then that would be fantastic. So this, once again, has exceeded our expectations.

But more importantly, and the most important message I want to get across today is there's a lot of these people that are coming to these seminars, more than half of them are not our existing customers. So this is the real big opportunity for us now to have opened up their eyes to who Axonics is, the way we go about doing business and the quality of our products. And these folks are open to giving us the opportunity to earn their business. And I think that's what's really going to move the meter for us in the years to come.

[Operator]

And your next question comes from Adam Maeder with Piper Sandler.

[Adam Maeder, analyst]

Congrats on the nice Q2 print. I wanted to start with the question on DTC. I was just hoping to kind of get an update there on the sacral side. When will you be more aggressive with campaigns? Should we expect the company to pursue PV advertisements in the near future? Just any color there would be great. And I guess a Bulkamid in here as well, given that, that's a large patient population, a lot of women who have this condition, any thoughts on direct-to-consumer for Bulkamid? And then I have a follow-up.

[Raymond Cohen, executive]

So we are increasing our spend with respect to direct-to-consumer advertising. In terms of just trying to put a number to it. We're probably increasing our spend at about 20% to 25% per quarter over the previous quarter. So we're -- once again, Dan and I are a little conservative in this regard. But we're continuing to increase spend and we are seeing really good results. The addition of Bulkamid makes our direct-to-consumer advertising a lot simpler, actually, because we don't have to then try to make a distinction between the type of incontinence that you have. And we'll -- and as you can imagine, we probably -- we won't be using that word, right? But this is for women who are leaking urine for one reason or another.

So we don't have to try to make a distinction and only look for patients who have urinary urge incontinence. So whether you have -- whether you cough or sneeze or pick up an object and leak some urine or you're exercising whatever or you have difficulty getting to the bathroom in time and you would lead your life in that way. Once again, our messages are going to be more generic, and we believe that will help to even increase the uptake and the response rate from these types of activities. So we've moved through the process, mainly focused on kind of the Facebook advertising, where we're targeting people with certain demographics and also in geographic areas where we know we have centers that we can pass along these interested people to.

Hopefully, they become patients, and hopefully, they eventually get implants. We are also now testing radio advertising. So we are literally starting that campaign in 10 markets around the country. We're in 50 markets for Facebook advertising. And eventually, we will go on television. There's no question that, that's in our future. But as you can imagine, we're in that crawl before you walk and walk before you run mode. And we want to test out the messages, make sure we're in a good position to measure responses and so from I think the radio advertising will help us in terms of refining what ultimately we'll wind up doing on television. So we won't be talking about TV ads during 2021, but hopefully, we can advance to that stage in 2022. So hopefully, that's given you a complete answer to your question, Adam.

[Adam Maeder, analyst]

And then for the follow-up, just wanted to take a pulse or ask about latest thoughts on competitive landscape and sake roll. Obviously, we see the print a really nice quarter for you guys. But just any change to dynamics or competitive narrative over the past couple of months.

[Raymond Cohen, executive]

I think the easiest and simplest thing for me to say is that it's pretty quiet out there from a competitive standpoint. And to say more, I really just don't have much to say. So things are quiet or they quieted down or however you want to look at it. But we've just got our heads down and focused on execution.

[Operator]

Your next question comes from Michael Polark from Baird.

[Michael Polark, analyst]

Just a question on Bulkamid in the U.S. here as you ramp that product really focused on fill mechanics and revenue. Do you stock customers to get them going as you bring on first-time users? Or are you -- is striving revenue kind of in line with spot demand? I'm just -- as we roll this forward over the next handful of quarters and then next year, I just want to be mindful of any kind of potential stocking impacts as you build Bulkamid?

[Raymond Cohen, executive]

Yes. So Mike, thanks for the question. It's a good question and I'll answer it in the following way. We have been consistent as a style of doing business that we never sell anything to a customer that they don't anticipate implanting in a patient, and in this case, injecting in a patient. So that is not our style. We want to be easy to do business with. We see no reason why anybody needs to stock our products. We've got plenty of products in our inventory and we can get it to any customer within 24 hours. And in some cases, same day. We have a depot on the East Coast, so we ship out of Memphis for the people on the East Coast, and we ship out of California for people on the West Coast.

And we really discourage the notion of stocking customers. So if we discourage it with our sales force as opposed to many other companies which encourage it. So that's just our core philosophy. And obviously, you're not going to sell Bulkamid one kit. You're not going to just sell one kit of Bulkamid, right? So they may order it five or 10-kits at a time, but this is something that people are using on a regular basis. And I will ask and when the previous question was asked, it is -- what we're seeing is that physicians are offering Bulkamid at really right upfront as opposed to traditionally bulking has been used as a salvage product for patients that may have not had a perfect result from a sling.

And we're seeing customers who are completely flipping their sling business to Bulkamid. And we're talking about some folks who started in 2020 that are doing hundreds of patients with Bulkamid, where they were high-volume sing, surgeons doing a lot of swings before. So this thing -- this has got some legs. And it's really exciting and obviously, really great for physicians to be able to offer something very, very simple and easy that you have somebody coming in with this problem in 15 minutes, you can get them treated. It's covered by insurance and you've got to satisfy a woman who is dry when they get off the table. So that's an incredible experience for both the patient and the physician, and we feel very fortunate to be able to be participating in that kind of a therapy.

[Michael Polark, analyst]

Second, final one, annoying spreadsheet question, probably for Dan. Dan, if you said it, I missed it, but framework for OpEx in the second half of 2021?

[Danny Dearen, executive]

We're comfortable with where our consensus is. And I think in the last earnings call, we also pointed out that we do have this ongoing $2 million in change per quarter in amortization of intangibles, plus as we called out on this call, $6 million in change in non-cash stock-based compensation. So we're continuing to add to the commercial team and pushing forward, as Ray mentioned, on direct-to-consumer. So we'll see slight increases in OpEx as we grow. But no one should be looking towards any significant or adverse big jump in OpEx.

[Operator]

And your next question comes from David Rescott with Truist Securities.

[David Rescott, analyst]

Ray, I guess, first, as I look at consensus now, I think growth implied growth in 2022 is around 35%. So I mean, I know you're not going to really comment on the numbers here, but just wondering if you need go so far as to kind of peg the core SNM growth in that 25% to 30% range. And then just really interested in how you see the Bulkamid business, I guess, expanding going forward, really in light of how you've seen the transitions go far so far. I mean, is this a business that can double next year? I would just really appreciate any kind of color around how the -- how your thoughts are just shifting on the business.

[Raymond Cohen, executive]

Sure. Look, we -- I think what we've tried to do is have been realistic. I mean, now that we're in the mode of providing guidance. We've tried to be realistic. We've tried to be conservative. We try to leave a little bit of room, obviously, between what our internal expectations might be as opposed to the street. I think that's just prudent and I hope that our shareholders appreciate that approach and the analysts as well. Having said that, if we only grew 30% in sacral neuromodulation next year, then I would be severely disappointed. And Bulkamid, we should see a significant rise in growth off the $20 million base in 2022.

So we're not quite ready to change or provide additional guidance for '22. We'd really like to get through this current quarter and get through the fourth wave of COVID before we start to talk about what we think is possible. But hopefully, those remarks that I've just made, give you a sense about how really bullish we are. And I think how big our 2022 year will be dependent upon how quickly the FDA approves our recharge-free neurostimulator. If we can get a bit of a break and get that approved earlier in the year, then I think there's a lot of blue sky ahead of Axonics in that standpoint. If it comes a little bit later and it's a little slower, then obviously, that will temper the growth expectations.

But I mean, I can't be more bullish about our prospects and the number of new customers that are coming and the fact that folks who weren't giving us a look previously are now very interested in working with Axonics. So we think that given all the things that we've done and the investments we've made and facilities and internal processes and increasing the size of our field force. These and the work we've done to reduce cost of goods as well. We're going to see better margins. We're going to see significantly higher revenue. And I think Axonics is going to continue to be a really great story as we look into 2022.

[David Rescott, analyst]

I guess on the training sessions for Bulkamid, I'd love to get a sense on how the first 2 have gone so far. I mean, you mentioned you're expecting to get to 350 sessions by the -- 350 positions by the end of the seminars. I'll be interested to hear, I guess, how many -- how many prisons are kind of the first 2? How immediately you really are expecting some of these physicians to pick up use of the procedure, where you're seeing the biggest interest, whether it's in the existing bulking procedures or where they could be taking more share from sling? And then, I guess, kind of the last part of that question, are a lot of these solutions that are coming there, existing SNM physicians that you currently deal with in the SMM portfolio? Or are they new physicians for economic?

[Raymond Cohen, executive]

So I'll take it backwards and openly my colleagues will help me remember the first 2 parts of your question. So the last part is half of the participants or attendees at these seminars are not our existing customers. Okay. So that -- and we think that's fantastic, right? So that's number one. Help me with the other parts.

[Unknown Executive]

Just what's been the receptivity to the first 2 7.

[Raymond Cohen, executive]

Right. Receptivity has been great. And I would suggest that there was a really great note put out by your former colleague at Truist who attended the first seminar in the flash and wrote a very detailed note about what she observed during that session. So people are getting on the bandwagon and they want to get started immediately. The issue for us is not, oh, yes, contact me, It was really fun, thanks for the cocktail. No, they're like, how quickly can you get in my office, I've got patients stacked up. So we're all over this. And we -- they're excited. They want to get started immediately and we're having our people go out there and make sure that the first set of patients that they do go as well.

And then just to remind folks that Bulkamid is very different than sacral neuromodulation. We are in every single case for sacral neuromodulation. We're in the OR, we want to make sure the implant goes well. We're going to make sure that the programming of the patient goes well. With Bulkamid, once the first couple of patients are treated, then they're on their own. They don't need us to be there to support cases. So it's more of a recurring revenue or an annuity wherever you want to look at it with Bulkamid that has a light touch once you get somebody trained with a wet lab.

And hopefully, it's obvious to everybody in the call by doing these seminars, look at what we're doing. I mean we can train 50 to 60 physicians in one go on a Saturday. I mean this is incredible, right? Imagine the lift that it would be involved to have to go to all these practices individually 1 by 1 to do wet lab training, slept the equipment over there and go through that whole process. So this is a great way to do it. We're thrilled to death that people are willing to travel today, right, and come to a program like this. So this is a good way to go, and it's a good way to get a lot of people in the game right away. And then more importantly, once again, it's an opportunity for us to turn heads with respect to our sacral neuromodulation franchise. If I missed part of your question, I apologize.

[Operator]

Your next question comes from Bob Hopkins with Bank of America.

[Bradley Bowers, analyst]

You've Brad Bowers on for Bob today. So you kind of touched on this a little bit with Travis' question and also maybe some of the other commentary, but I'm just trying to think about what really is the bottleneck on the Bulkamid ramp? I mean, why wouldn't this product grow 50% sequentially for the rest of the year?

[Raymond Cohen, executive]

Well, in Q3, it's vacations, COVID, logistics, okay? But if you do the math, given that we're saying $20 million for the year, we're expecting a really big fourth quarter with this product. So I think maybe that's just the answer to your question. Now I want to point out one thing. If we talk about doing $7.5 million in a quarter, which if you kind of get down to it, that's what we're looking at in Q4, that's 7,500 patients. Okay, 7,500 patients in 3 months. So there's a lot of people that are going to get treated with this product. So I just think that one needs to keep that in mind, right, that if we talk about -- you talk about $20 million of revenue in 10 months, that's 20 -- that's a lot of 20,000 patients that have gotten treated.

So now that's great for us because there's 20 million out there that really could use this therapy. So it's a drop in the bucket. But think about the benefit to the practice. You've got patients coming in that have been leaking when they do normal activities, and these are vibrant, young people, right? These are women who've had children, right, who are -- most of them are not even middle-aged or they are middle age. So we're not talking about nursing home patients here. And the ability for those patients to get dry and then for them to tell their friends about this, that's great for a practice.

And so you can see why we're so excited about adding this to our product line because it makes us -- it makes Axonics that less more relevant, that much more valuable to these customers. And that level of enthusiasm obviously bleeds over to the entire product line for the company. So that's the key. We talk about -- we want physicians to get experience what it's like to work with Axonics. Because the one thing that we say, and it's true, is that they've never experienced the quality of service and support that they get from some really super high quality, highly motivated individuals who, by the way, are all shareholders and are all interested in the overall success of our enterprise.

So I think there's a method to the madness. And there was some skepticism about us doing this deal. And when we did it, but hopefully, now, we've already proven that this was a smart play for us, and it's got really good legs and it's going to help us going forward.

[Bradley Bowers, analyst]

Just one follow-up here for us. So just wanted to focus on the primary cell device. Maybe I just wanted to give you a chance to talk about how -- maybe what the ramp looks like, what accounts you might be looking at first for that product? Or maybe what your sense is for the excitement of that among doctors who you might not already be working with today?

[Raymond Cohen, executive]

It's a good question. The #1 target is anybody who's not doing business with us today. And the reason they're not doing business with us today is because for 23 years the only thing they knew with respect to sacral neuromodulation was a non-rechargeable primary cell device. That's what they know. That's what they think sacral neuromodulation is. They think some of those docs think that, oh, their patients are not going to be able to recharge or some other stuff that's been stuck in their head by the competition.

So these are the targets. And the good news is we're getting a chance to, as you have heard, there'll be 175 or 180 of those physicians hanging around with us spending Friday night and Saturday with us throughout this summer. So that's the target. Those are the folks that -- who have not embraced a rechargeable nor -- whether it would be from Axonics or from the competitor. So they are the #1 target. These are the ones that -- these are the folks that I think this is going to make the most impact on. And then, of course, for our existing customers, this is going to help them in the sense that if they've got a patient that's older, you've got a 75-year old patient you want to treat. Well, it makes perfect sense. Put a product in there that's going to last at least 10 years, fundamentally, the rest of their life, they don't need to do anything. Nothing that we sell needs to get plugged in, you don't need to replace batteries or any of that.

So it will be a really cool product. And I think how it's going to go is you're going to find that the older patients, the physicians will move them towards that product and then the younger patients will go with the longer-lived 15, 20 or more year rechargeable device, which now, by the way, since you only have to recharge it once a month for an hour, I mean, this is the least burdensome arrangement that you could imagine. So that's kind of how we view it. And hopefully, that's a good fulsome answer to your question.

[Operator]

Your next question comes from Larry Biegelsen with Wells Fargo.

[Lei Huang, analyst]

It's Lei Huang for Larry. You talked about Bulkamid being a door opener and accelerator. Can you talk about whether you've actually recognized pull-through revenue on the SNM side in Q3? Or if you assumed any of that in the second half of your guidance? Second half of '21 guidance?

[Raymond Cohen, executive]

The simple answer is, absolutely. We have already signed up and have started working with more than a couple of handful -- more than a couple of handfuls of accounts based upon the fact that we are now offering Bulkamid and that those physicians have embraced Bulkamid and have given us the opportunity to earn their sacral neuromodulation business. So this is not a hypothesis any longer. This is actually happening on a regular basis day-to-day right now.

[Lei Huang, analyst]

And then just staying on the topic. You've talked about $50 million sales for Bulkamid in 2025 when you announced the deal. Just given the momentum you see, would you be disappointed if that number is still $50 million in '25?

[Raymond Cohen, executive]

I think for folks who have been listening to me for a while, I've got this silly expression that I use, which is we like to earn the right to talk about future periods. And honestly, my view, as I sit here today is we haven't earned the right to be able to talk about 2024 guidance, okay? We're just not there yet. Give us a chance to get this under our belt, let's complete the year. We'll post the $20 million, it's a lot more than we thought. We'll see what we can do next year and then maybe we'll be a year sooner to get to that milestone. So you can see, we're bullish about it. I just don't have visibility like that into the future. So we'll just continue to keep our heads down, focus on process, focus on execution and the outcomes and the results will be there.

[Operator]

And our next question comes from Mike Matson with Needham & Company.

[Michael Matson, analyst]

I guess I wanted to ask one on the sales force. I didn't really hear a lot of commentary around the size there. I'd assume it's been kind of stable. But have you added to the sales force? Do you have any plans to add? When do you think that would -- when do you think your revenue would get to a level where you would need to do that?

[Raymond Cohen, executive]

So Mike, thanks for the question. So yes, now that I think about it, I didn't say we didn't add that into our remarks. We have been aggressively adding field people aggressively. And you got me a little bit off guard, so I won't give an exact number, but I would say that we probably added in the quarter in Q2, at least 10%, maybe even 15% more people. We have over 250 people now in the United States that are out there, either as a clinical specialists or as a quota-carrying salesperson. And we will continue to add more resources as we go on. So we're all about bringing new talent to the party. And we've been very fortunate that the word's out that Axonics is a great place to work and that people are making good money here and they get great support from the company and so on and so forth. So we are actively bringing new revenue-producing individuals to the party. And then as has been our custom, we're going to continue to add clinical support so that there's never ever a question of whether we can cover every single case that a physician might have.

[Michael Matson, analyst]

And then my second question would just be about the international sacral neuromodulation business. It's been kind of sticking around this $1 million number for a while. And I guess what I'm wondering is, is there anything you can do to really get that business to grow? And if not, I mean, at $1 million a quarter, does it really make sense to continue selling this product outside the U.S. or in Europe?

[Raymond Cohen, executive]

Yes. So that's an interesting question, Mike. Look, I think that what -- I think what one has to keep in their mind is that if you can't sell product when there's no or capacity because they've shut everything down due to COVID. I mean this is a completely different situation and I'll reduce the conversation about Europe, which is -- what is Europe anymore anyway these days. But the U.K., I mean, they just have not been allowing sacral neuromodulation cases in any kind of reasonable number, right? So there's a reduction in the amount of our slots that they've had available. Germany, Germany was completely shut down across the board until very recently. So -- and those were the kind of -- the Netherlands has been a great market for us.

And once again, we've been pretty well timing there because of COVID. So that's inherent in the issue. We would have expected to be doing more business in Europe even with a light footprint in the Netherlands, and Germany, and in the U.K., Switzerland, and so on and so forth. But it's really been a disaster and I don't think this is anything different than anybody else has been saying, reading remarks of other companies on these types of calls. So that's the case there. But further to that, we did pick up another 15, 16 salespeople who are on the ground in the U.K., in Germany, in the Nordic countries when we acquired Contura. We are in the process and have trained about half of those individuals on sacral neuromodulation.

So we do expect, as we look to 2022, God willing and the COVID variants and all the rest being equal, to see an increase in revenue in these markets. But I want to remind folks that when you're working in a country where it's a single-payer system, and we're selling a quality of life product, not a life-sustaining product, that there are limits to the amount of money that any of these countries are willing to spend on sacral neuromodulation. And we've said this before, in a country like the Netherlands, there's going to be maybe 350 procedures done in a whole year.

And so if Axonics, if we're getting 150 or so of that business today, it's just not worth it for us to add more resources to go after the incremental business in those countries. So we came out of the box in a couple of those markets. We picked up 25%, 30% of the business, and we've kind of maintained our footprint, and it's fine. We are not going to withdraw from Europe. That's not our plan. We're going to look to increase the business incrementally.

And it's important that we continue to provide service to those customers as well. So I understand the question. I appreciate it. Are we disappointed that the revenue is not there, yes. But on the other hand, I can't squeeze blood out of a rock. If there's no or slots and people are not doing elective procedures, is not much that we could do with our team out there.

[Michael Matson, analyst]

So you feel like there is a growth opportunity there. It's just been disrupted by ongoing shutdowns from COVID and things like that.

[Raymond Cohen, executive]

Yes. No doubt, no doubt. And historically, Mike, I think as you may remember when you did the original research into the market for -- even for Medtronic, it was only about 10% of their overall revenue in this category came out of the international markets, all international markets. So the business really for sacral neuromodulation has historically been a U.S. phenomenon. And it's just based upon the fact that we have more of a fair health care system and so on and so forth. So that -- I think we need to keep -- we are very mindful of that. Now eventually, will we look to expansion in countries like Australia, or Japan, or China and things of that nature? And the answer is, of course, we will. But once again, when you can do more business in the state of Mississippi, than you can in any one of these countries, that does help clarify one's mind.

[Operator]

And your next question comes from Rebecca Wong with SVB Leerink.

[Rebecca Wong, analyst]

This is Rebecca on for Daniel and Coffey. I'm wondering, can you give us an update on your incenting accounts. I think the last time you provided an update was that you have 600 incenting centers as of third quarter 2020. I guess those are the low-hanging fruit of the 1,000 high-volume centers that represent around 80% of the market. Now you can leverage Bulkamid and gain access to Medtronic centers. So I'm wondering, A, can you provide update on how many accounts to have now? And then B, what percentage of those 1,000 high-volume centers do you think you can eventually get now that you have opportunity to flip returning accounts?

[Danny Dearen, executive]

Sure. No, nice to hear from you, and thanks for the question. This is Dan. We used to report out specific numbers quarter by quarter because as we launched, we thought it was important for the shareholders to hear how we were doing. And so we were reporting up into the 600, 700 range. What we've gone to lately is just to say that we continue to add accounts quarter by quarter. Obviously, when we launched the product and back at the time of the IPO, we talked a lot about the 1,000 accounts that made up approximately 80% of the unit volume in the United States. Now what's happened over time is this landscape is changing and is changing rapidly.

So there's approximately 2,500 to 3,000 urologists and urogynecologists that do this procedure, and we've captured our fair share of those numbers to date, but what we're seeing real-time, and we're sure our competitors are seeing this as well, which is we've reenergized the space with innovation. And so now for the first time in over 20 years, doctors are talking to patients confidently about the reasons to have the Axonics device implanted. And as a result, you're seeing lower volume physicians doing higher volumes.

And now what we're seeing in our company is physicians that have not been implanting SNM, contacting us to learn more about it and to get trained so that they can use our product. And so it's really a moving target, which is why we moved away from reporting out on a hard number. And it's why we no longer see the universe of potential customers as the static number of 1,000, it's really 2,500 and growing, which is why we've consistently said, we see this as a $1.50 billion to $2 billion business in the next 3 to 5 years.

[Operator]

All right. I'm showing no further questions at this time. I would now like to turn the conference back to Raymond Cohen.

[Raymond Cohen, executive]

Thank you, operator. Thanks to all the analysts for your questions today. We really appreciate it. It helps us get the story out. We appreciate your support and your attention to Axonics and we look forward to speaking with you again. Have a good day.

[Operator]

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