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Silk Road Medical, Inc. (NASDAQ:SILK)
Q2 2019 Earnings Call
Jul. 29, 2019, 3:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Silk Road Medical's 2019 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press *0 on your touch-tone telephone. As a reminder, this conference call is being recorded.

I would like to turn the conference over to your host, Miss Lynn Lewis from Investor Relations. Lynn, please go ahead.

Lynn Lewis -- Investor Relations

Thank you all for participating in today's call. Joining me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer. Earlier today, Silk Road Medical released financial results for the quarter ended June 30, 2019. A copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements including, without limitation, those relating to our examination of operating trends and our future financial expectations, which includes expectations for hiring, physician training, growth in our organization and reimbursement, market opportunity, guidance for revenue, gross margin, and operating expenses in 2019 are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors Section of our 424B4 filing with the Securities and Exchange Commission on April 4, 2019 in connection with our initial public offering.

This conference call contains time sensitive information and is accurate only as of the live broadcast today, July 29, 2019. Silk Road Medical disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise.

And with that I'll turn the call over to Erica.

Erica Rogers -- President and Chief Executive Officer

Thanks, Lynn. Good afternoon, everyone, and thank you for joining us for Silk Road Medical's second quarter earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer.

From the beginning, Silk Road Medical has been relentlessly focused on patient outcomes. We believe the key to successful outcomes is minimally invasive and technologically advanced intervention. As many of you know, we have pioneered a new approach for the treatment of carotid artery disease called Transcarotid Artery Revascularization, or TCAR, which we seek to establish as standard of care. I would like to begin our call today by sharing one TCAR patient's treatment journey.

Two things really matter to 72-year-old Jackie: being out on the lake fishing and spending time with his wife. Earlier this year, Jackie visited his eye doctor after experiencing fainting spells and blurry vision. After various tests, his doctors determined that he had a severe blockage in his left carotid artery. In cases like this, plaque can often embolize or break away from the arterial wall, travel toward the brain, and interrupt critical blood supply, leading to an ischemic stroke. Following his diagnosis, Jackie visited Dr. Kousta Foteh at Vital Heart & Vein in Texas, who recommended a TCAR procedure to treat the blockage. Dr. Foteh understood the importance of quality of life for Jackie and said, and I quote, "The look on his face when he talks about the lake says it all. This is why I do what I do."

The operation started with a small incision at the base of Jackie's neck to place the ENROUTE Stent. The ENROUTE Neuroprotection System then enabled blood flow reversal, directing embolic debris away from Jackie's brain. The procedure lasted about just over an hour, and Jackie was released from the hospital within 24 hours. His wife said that "improvement after this surgery was almost immediate, and all he wanted to know was when he could get back on the lake." In less than two weeks, Jackie was back on the water and able to focus on the two things that mattered to him most.

Jackie's story demonstrates the power of TCAR, specifically how this approach can safely and effectively treat carotid artery disease and reduce the risk of a potentially devastating stroke and allow patients to quickly return to a life they enjoy. This is the type of patient experience for which we strive all day, every day. At the core of Silk Road Medical is a commitment to building clinical evidence and support of TCAR. We are confident that robust clinical evidence is the key component to drive adoption, broaden our reach to more patients who can benefit from this procedure, and eventually, make TCAR the new standard of care.

During the quarter, we continued to build upon our superior evidence with our ROADSTER-2 post-market study and updated results from the TCAR Surveillance Project, both of which were presented at the Society of Vascular Surgery's Vascular Annual Meeting, or VAM. Importantly, the updated data from the TCAR Surveillance Project represents a landmark achievement, not only for Silk Road but the broader treatment of carotid artery disease. Results demonstrated for the first time significantly lower odds of composite in-hospital stroke, death, and myocardial infarction, compared to carotid endarterectomy, or CEA, which is the current standard of care.

Also in the quarter, we made excellent progress in expanding our commercial team, activating new sales territories, opening new hospital counts, and training new physicians through our flagship test drive courses. These efforts continue to gain momentum, laying the foundation for long-term growth through broad awareness and education. Marked by these significant achievements, we delivered total revenue of $14.9 million in the second quarter, up approximately 92% compared to the second quarter of 2018. Our top-line performance was driven by growing adoption of TCAR. We are raising our 2019 revenue expectations to $60 million to $62 million, representing growth of 74% to net 79% over full year 2018 revenue.

I will now provide a bit more detail on progress this quarter across our two strategic areas of focus: clinical evidence and U.S. commercial execution. Starting with data, clinical trials, post-market studies, and registries are continuing to generate data on the safety, effectiveness, and clinical advantages of TCAR. These data support our efforts with patients, payers, and providers, and are the tailwind for physician confidence and adoption. As I mentioned, updated results from the ongoing TCAR Surveillance Project as well as final results from our ROADSTER-2 post-marketing study were presented at VAM in June.

By way of background, the TCAR Surveillance Project was implemented in September 2016 as an initiative of the Society for Vascular Surgery Patient Safety Organization. It is an ongoing, open-ended data collection effort that was designed to monitor the safety and effectiveness of TCAR in real-world use and contemporaneously compare TCAR to CEA. In a headline presentation that served to open the plenary session of the meeting, Dr. Mahmoud Malas of the University of California San Diego School of Medicine shared updated results for the TCAR Surveillance Project, which evaluated 5,716 patients receiving TCAR compared to 44,442 patients receiving carotid endarterectomy, or CEA, between 2015 and 2018. In addition, 5,160 patients from each group were matched based on comorbidities and demographics and analyzed using propensity score matching.

The results were overwhelmingly positive and showed for the first time significantly lower odds of composite in-hospital stroke death and myocardial infarction compared to CEA. Specifically, patients receiving a TCAR procedure were 59% less likely to have an in-hospital myocardial infarction or heart attack, and 87% less likely to have an in-hospital cranial nerve injury. Cranial nerve injury is a very serious complication as damage to these nerves which control functions like speaking, swallowing, facial sensation, taste, and saliva production can result in transient and permanent quality of life issues and stroke-like symptoms. What has been most impactful in the physician community is TCAR's 34% lower odds of 30-day death. The ability of the TCAR procedure to improve the odds of patient survival is extraordinarily important for a procedure with largely prophylactic intent and we believe will drive increased momentum in physician awareness and adoption.

Additionally, final results from ROADSTER-2, our post-market study, were also presented at VAM. ROADSTER-2 evaluated real-world use of ENROUTE Neuroprotection and Stent Systems in TCAR procedures in 632 high surgical-risk patients enrolled across 42 sites. During the late breaking session, the study's co-principal investigator, Dr. Vikram Kashyap of University Hospitals Cleveland Medical Center presented data demonstrating compelling patient outcomes with low stroke and combined stroke and death rates of 0.6% and 0.8% respectively. Results from the stenting versus endarterectomy for treatment of carotid artery stenosis trial, also known as CREST, exhibited a 30-day stroke rate of 2.3% for CEA, the standard of care. The stroke rate of 0.6% seen in ROADSTER-2 validates the low stroke rate seen in ROADSTER-1 and clearly demonstrates TCAR competitiveness to CEA.

We expect the remarkable consistency and reproducibility will further encourage physicians to adopt the TCAR procedure. It is worth noting that 80% of physicians participating in ROADSTER-2 were new to the TCAR procedure, and these physicians enrolled approximately 70% of the patients, thus confirming the short learning curve and ease of use for physicians. You will recall that ROADSTER-1 had a significantly smaller group of operators, compared to the 87 physicians that participated in ROADSTER-2. We believe that the ROADSTER-2 data supports the generalizability of the TCAR procedure with consistent outcomes across physicians with little or no prior TCAR experience, which has not been seen in multiple studies of other stent-based carotid intervention modalities. This is further corroborated by the over 5,000 patients' worth of data I just referenced from the TCAR Surveillance Project where most of the physicians were just beginning their TCAR learning curve, as they reported outcomes.

The data from ROADSTER-2, taken together with the updated results from the TCAR Surveillance Project, mark a major milestone in our journey. Our team's relentless focus on successful patient outcomes each and every day has led to our market-leading clinical evidence base, and we remain committed to continuing to develop data around TCAR in order to drive the durable adoption of this procedure. Our second key priority, commercial execution, is all about driving adoption of the TCAR procedure to generate initial and repeat orders of our products by our hospital customers, while always being mindful of our focus on patient outcomes. Our two key priorities are inextricably linked in that way and reinforce our mantra of every patient, every day. Good outcomes drive repeat orders.

As a reminder, the structure of the market is such that there is a concentrated base of physicians in hospitals performing carotid revascularization procedures, which allows us to deploy an efficient commercial coverage model. Over the last couple of years, we have been methodically hiring and training a world-class field team as we have carefully rolled out TCAR. We believe it is our people and programs combined with our technology that has led to our physician's success in driving excellent patient outcomes through TCAR and our commercial progress to date.

In the second quarter, there were approximately 2,000 TCAR procedures performed. These procedures were performed by both new and experienced physicians in new and established hospital accounts and in new and established sales territories. In short, we remain on track toward our commitment to deliver in excess of 8,000 procedures in 2019 as we continue to expand our commercial footprint and train new physicians while at the same time support our established based of physicians to further influence their adoption curve.

With that said, we are well aware that we are challenging the standard of care and changing physician behavior, which takes time, experience, and relentless effort. As we cross the 10,000 cumulative worldwide procedure milestone earlier in Q2, followed by the excellent clinical outcomes reported at the Vascular Annual Meeting in June, we continue to feel that TCAR has found its place prominently in the carotid treatment continuum, yet we are still just at the beginning of our journey to become the standard of care. Building the clinical evidence base and focusing on commercial execution one patient at a time every day has served us well to date, and we remain well positioned to maintain and build upon our competitive lead.

With that, I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, then we'll return with some closing comments.

Lucas Buchanan -- Chief Financial Officer

Thank you, Erica. Revenue for the three months ended June 30, 2019 was $14.9 million, a 92% increase from $7.8 million in the same period of the prior year. Growth was driven by the growing adoption of TCAR across an expanding base of hospital accounts, trained physicians, and active sales territories. Gross margin for the second quarter of 2019 was 75% as compared to 69% in the corresponding prior year period. Gross margin improvement was driven primarily by leveraging manufacturing overhead costs across higher revenue, as well as manufacturing efficiencies and the delayed timing of certain manufacturing engineering projects. We expect gross margins to be flat in the second half of the year as compared to the first half, due primarily to planned investments in manufacturing engineering initiatives to support our long-term growth.

Total operating expenses for the second quarter of 2019 were $17.2 million, a 70% increase from $10.1 million in the second quarter of 2018. R&D expenses for the second quarter of 2019 were $3.1 million, compared to $2.3 million in the second quarter of 2018. The increase was primarily driven by an increase in personnel-related expenses as we continue to support product development in clinical study programs. Sales, general, and administrative expenses for the second quarter of 2019 were $14.1 million, compared to $7.8 million in the second quarter of 2018. The increase was primarily attributable to expenses related to growth in our commercial team and marketing efforts, as well as costs of being a public company.

Net loss for the period was $12.0 million, or a loss of $0.42 per share as compared to a net loss of $7.7 million, or a loss of $8.16 per share for the same period of the prior year. Net loss for the second quarter of 2019 and 2018 included a $5.3 million and $1.9 million non-cash charge, respectively, resulting from the remeasurement of the fair value of our convertible preferred stock warrant liability at each balance sheet date. We continued to record adjustments to the estimated fair value of the convertible preferred stock warrants until they were exercised in connection with our IPO in April 2019. We ended the second quarter of 2019 with $118.2 million of cash and cash equivalents. Turning to our outlook for 2019, and as Erica mentioned, we are raising our 2019 revenue guidance to $60 million to $62 million from $59 million to $61 million, representing growth of 74% to 79% over full year 2018 revenue of $34.6 million.

As we look toward the second half of the year, we remain on track for our full year guidance to train approximately 500 new physicians, which would bring our cumulative trained physician base to approximately 1,250 by year end. We are also on track to end 2019 with approximately 35 sales territories. At the core of our commercial strategy is our focus on driving procedure volumes. This is predicated primarily on conversion from CEA to TCAR for each individual physician we train and support. While we continue to expand our sales territories and train physicians in new hospital accounts, we are also finding efficiencies in established territories. To that end, we are successfully driving growth by training new physicians in existing hospital accounts and by augmenting these more established territories by adding additional therapy development specialists to support the growing procedure volume and market development efforts.

At this point, I would like to turn the call back to Erica for closing comments.

Erica Rogers -- President and Chief Executive Officer

Thank you, Lucas. At Silk Road, we have one overarching theme, which is a relentless focus on successful patient outcomes -- every patient, every day. Everything we do at Silk Road is designed to further our goal to protect the brain. I am very pleased by our performance in the second quarter as we made headway on both clinical and commercial fronts, further validating our position as the market leader in the treatment of carotid artery disease. Looking ahead to the remainder of 2019, we remain focused on continuing to build our clinical evidence base and U.S. commercial execution. With a great team assembled as well as the breadth of expansion opportunities, we are well positioned for continued growth.

Before closing, I would like to acknowledge and thank our physician partners. They work tirelessly to ensure their patients are treated in the safest and most efficacious way possible. I feel very privileged to work alongside a group of physicians this skilled and passionate about their patients and about reducing the devastating burden of stroke.

...

With that, we will now open it up to questions. Operator?

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press *1 on your touch-tone telephone, and if your question has been answered or you wish to remove yourself from the queue, please press #. Again, to ask a question, *1.

Your first question comes from the line of Robbie Marcus from JP Morgan. Your line is open.

Robbie Marcus -- JP Morgan -- Medtech Senior Analyst

Great. And congrats on a really nice quarter.

Erica Rogers -- President and Chief Executive Officer

Thanks, Robbie.

Robbie Marcus -- JP Morgan -- Medtech Senior Analyst

Maybe I could start it off, you touched on some of the commentary coming out of SVS and the trials you presented there and how you're going deeper in accounts and also finding new accounts. I think it'd be great if you could give us a little more color on what you're really seeing on the ground in terms of the interest from doctors following the data presentation throughout the quarter. Has the backlog of doctors who want to get trained on the procedures stepped up since then? Has the data helped encourage even more desire on the physician community to start getting trained here? And then, also, maybe if you could touch on some of the pushback you're getting, if any, from doctors and why they don't wanna start getting trained on TCAR?

Erica Rogers -- President and Chief Executive Officer

Sure, Robbie. Thank you for the question and let me take those in order. First, as it relates to the data that were presented at VAM, first, I think let's recognize that the Vascular Annual Meeting was in this second week of June, and so it's really pretty early to tell what the overall impact of those data will be. As you probably can imagine, while the room was fairly full and the attendants at the Vascular Annual Meeting was quite good, certainly not every vascular surgeon in America was in attendance. So, it is really now the job of the therapy development specialists as well as the area managers out in the field to disseminate this information, and we do that through education of our physician customers kind of one at a time, one-on-one.

As well, there are many physicians who will want to wait until these data are published in a peer-reviewed journal, and that typical cadence is six to 12 months typically from a meeting like the Vascular Annual Meeting. And so, in short, Robbie, it's a little too early to tell overall what the impact of these data will be.

That said, the enthusiasm certainly at VAM and since from the physicians who were in the audience or who are paying attention is quite good, and we think that overall, the impact of the data serves as the tailwind in two ways. One is in driving physician adoption in physicians who are already trained and coming up their adoption curve for TCAR. So, in other words, if you can imagine that physician sitting in front of their patient, and they're talking about the alternatives, they now have a very different kind of conversation they can have with that patient when they're talking about TCAR, for example, versus CEA. So, we think it'll be a tailwind on adoption. And also, to address your point, for physicians that are sitting on the sideline or have been sitting on the sideline, certainly when they become aware of these data, it is a bit eye opening, and so we do believe it will drive additional physician interest.

We've said this before, Robbie, there are numerous levers that we can pull on commercially, one of which is the training of physicians, and we do have the ability to respond to incremental interest in being trained in TCAR, and we will certainly do that in the back half of the year when required.

Now, let me take the last half of your question there, Robbie, which is when we do get pushback, what are we getting pushback on, and I think this is a really good time to remind about some of the things I said in my prepared remarks, Robbie, which is that we are well aware that we are really challenging the standard of care here. And carotid endarterectomy is really considered the last bastion of the kind of cut-and-sew traditional vascular surgery and that it's a lot to ask physicians to change their behavior. And so, that's really what we're up against, and that requires one-on-one conversation and careful and methodical commercial execution.

Robbie Marcus -- JP Morgan -- Medtech Senior Analyst

Great. And maybe just one follow-up either for you, Erica, or Lucas. I was hoping you could just qualitatively discuss same-store sales versus new sales, any color you could give us in terms of percentages or maybe how you mentioned in the script about how you're seeing greater adoption within existing accounts? Any sort of color you could give around the growth rates of the existing accounts maybe relative to the new accounts would be helpful. Thanks a lot.

Lucas Buchanan -- Chief Financial Officer

Robbie, I'll take that one. So, one of the metrics we stare closely at are the procedures per trained physicians per period of time -- per month, per quarter, per year. And we fully burden that metric, meaning that as we're scaling these training courses, it takes a period of time for them to do their first case, so at any given period of time, there's a group of physicians who've done zero cases because they just got trained, and they're working toward their first case. And so, that gets to some of the metrics that you think about and we think about. When you dissect that to kind of the experienced physicians, whether you define them by six months from training or one year from training, we do continue to see strong growth in those more and more experienced cohorts.

And the really good news is we see very little attrition. Sometimes it takes time to get them to their first case, or their fifth case, or their 10th case, but we rarely have a physicians try, tweak, and abandon the procedure. So, overall, we're kind of in a continuous phase of growth, looking at each individual physician, and that's what our sales team really focuses on is how do I move my surgeon who's done 50 cases toward 100, and how do I move the physician who just got trained toward their first case, but we're seeing good growth both at the hospital level and the physician level as they get more and more tenure.

Robbie Marcus -- JP Morgan -- Medtech Senior Analyst

Great. Congrats on the good quarter again.

Lucas Buchanan -- Chief Financial Officer

Thank you so much.

Operator

Your next question comes from the line of Bob Hopkins from Bank of America. Your line is open.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Great, thank you. And good afternoon and congrats on the momentum. Just to follow up on that last point, just curious, you mentioned your experienced surgeons. Can you give us a sense for where you stand right now in terms of how many surgeries per quarter or per period your "experienced" surgeons are now doing?

Lucas Buchanan -- Chief Financial Officer

Well, it's been roughly about 1.9 procedures per trained physician per quarter. We're constantly diluting the denominator with brand new physicians as we scale training. We're getting the benefit of the experienced. But I think, again, the way to dissect that is that 1.9 is burdened by some zeroes in every given quarter, so that means the folks that are actually doing procedures are doing more than that.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Right, no, but the question was if you look at those experienced surgeons you're talking about, roughly how many are they doing per quarter?

Lucas Buchanan -- Chief Financial Officer

Of TCAR or of carotid procedures overall?

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Of TCAR. I'm just curious. I mean, the average, I realize, is diluted by a lot of zeroes. I'm just curious when you get that surgeon base that's nice experienced, as you referenced, how many TCARs are they doing per period, if the average is that 1.9?

Lucas Buchanan -- Chief Financial Officer

Some of our top folks are doing between six and seven procedures per quarter, so if you annualize that, you'll get up into those numbers. And again, if you remember, when we characterize the overall market opportunity as a function of procedures, 168,000 procedures in 2018, 80% of those were driven by 2,750 docs, which is roughly 50 procedures per doc per year for kind of the average target physician going out.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

That's helpful. Just curious as to how that number's changing over time. And then, two other quick things to follow up on. I just wanted to get a sense for your 2019 guidance that you increased by roughly a million dollars. I mean, obviously, there's a lot going on at your company right now. You're growing very rapidly, you've got these great data presentations, expanding the sales force. I was wondering could you give us a sense if the demand is there, is there an ability to go beyond the $60 million to $61 million this year? It's just a pure capacity question, given how much you've got going on as a question. If the demand is there, could you do better, or is the capacity of the company when you think about everything going on with the company kind of really limiting you to those numbers?

Erica Rogers -- President and Chief Executive Officer

Good question, Bob. Hi. Nice to talk with you today and thanks for joining us, first of all. I'll take a little bit of that, and then Lucas can follow up if we need more detail, but I think you said it exactly right, which is what we're doing is working and we are growing rapidly -- very rapidly, right? And so, we, in general, feel the best course of action is to stay the course because what we're doing is working. So, maintaining that operational excellence and obviously pristine patient outcomes is the overarching goal here because, as I've said before, this is a long-term goal of getting to the standard of care. And so, there are multiple levers that we can and could pull on for the year and respond to various demand, but for now, it's stay the course.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

And then, just the last thing I wanted to touch on real quickly, and I hesitate to ask this because I know you guys have so much going on right now, and you certainly don't need this anytime soon, but I'm always just so curious about the process with standard risk, Erica, in terms of are there any kind of milestones that we should be aware of as we look at the rest of this year, and do you have any incremental clarity in what that process might look like relative to the last time we spoke?

Erica Rogers -- President and Chief Executive Officer

Thanks, Bob. I really appreciate the way that you ask that question because you're right. There is recognition that we have a huge unmet and uncapped market in front of us just in the high surgical risk indicated in covered market opportunity, and we're just getting started there sitting here today at less than 5% penetrated overall in the treated patient population. So, I'm glad that you recognize there's lots of room to run. That said, answering your question, the short answer is no, we have no additional clarity to offer on this particular call. We continue to look at the standard risk opportunity for both labeling and coverage, and as soon as we have more details on that front, we will let you know.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Terrific. Thank you.

Operator

Your next question comes from the line of Rick Wise from Stifel. Your line is open.

Rick Wise -- Stifel Nicolaus -- Managing Director

Good afternoon. Good afternoon, Erica and Lucas. Maybe I will start off with a larger topic question. Just when we were looking at this excellent quarter and this excellent performance, Erica, are you still "just" cannibalizing carotid endarterectomy or are we seeing any market expansion as well? Are we expanding the market, basically, at all yet?

Lucas Buchanan -- Chief Financial Officer

So, Rick, I'll take that one. This is Lucas, obviously. We continue to see anecdotal evidence of bringing patients off the bench, so to say, that otherwise might not get a surgery or a transfemoral carotid stent. It is still hard to quantify that. We're getting a base of data, and procedures, and trained physicians that we can now go back and do more sophisticated market research to answer that question, and we will do so.

But what we do know is we're taking share from both transfemoral carotid artery stenting and carotid endarterectomy, and there we have harder data to point to, looking at some data that we buy, looking at stent units, whether they come from TCAR or they come from transfemoral CAS. And what you see in that data is the competitors unit volumes coming down as Silk Road's stent unit volumes go up but the overall number of stent units sold of all market participants increasing faster than historical growth rates, which means TCAR is expanding the stent market, namely by converting patients that otherwise would've had carotid endarterectomy.

Rick Wise -- Stifel Nicolaus -- Managing Director

That's great. I'm gonna ask Lucas, but maybe Erica wants to answer this one. Lucas, maybe expand a little bit on your gross margin comments. You highlighted the leveraging that manufacturing overhead costs, but you really soared through our lower 70s projection, which is how we thought about the rest of the year. I hear you as you talk about the delayed timing and you gave us some specifics on second-half gross margin equal to the first, but are we now more consistently at a mid-70s range in general going forward? Is that the way we're thinking about the future?

Lucas Buchanan -- Chief Financial Officer

The short answer is yes. Obviously, it all starts with pricing discipline, which our team has done a fantastic job defending value. That can't persist forevermore, but so far, so good. And obviously, we have the benefit of pumping more units out of the factory, namely on the neuroprotection side, which we manufacture here at headquarters in Sunnyvale, and there's some timing differences, as I alluded to, relative to some longer-term manufacturing engineering initiatives. Just as an example, those are things like optimizing our sterilization options and efficiency, investing in automation, investing in shelf life, things like that that are important for the longer term productivity of the organization. And as well, Erica talked a lot about how well the team is doing in the field, but the team here at the home office in terms of manufacturing product and having very high yields and low scrap, that they've just done a really fantastic job.

Rick Wise -- Stifel Nicolaus -- Managing Director

That's great. And just one last one from me if I could ask about another P&L item, SG&A. You really did a great job this quarter with the smallest sequential dollar increase that I've seen from you in recent quarters, so highly efficient I'm guessing. Maybe, again, Lucas, if you could give us a little bit more color there, how are you able to do it? Does this suggest a step up in spending is coming, or needed, or required as you penetrate the market? And maybe just in sum, how much of the market can you address with your current footprint and how much more expansion is needed? But again, any more color on SG&A would be great.

Lucas Buchanan -- Chief Financial Officer

Sure. Well, I think, again, a lot of credit goes to our sales team and our sales and marketing leadership because when we planned at the beginning of the year, we're really on plan, as we talked about, and it's all in the pursuit of driving procedure volumes, and as we said, we're building out a commercial coverage model that ultimately will be efficient. During the IPO, we talked about building toward roughly 40 sales territories and kind of a two-to-one ratio of therapy development specialists to area managers, and we continue to build toward that at a slower and slower rate, just given that, again, we ended the year with 25 active sales territories, and we've guided toward roughly 35 at the end of this year, so we're getting closer to building out that coverage model in terms of feet on the street. Same thing on the hospital account base and trained physician base, making good progress there. And ultimately, it will be about driving the adoption curve on each individual physician to drive our growth in the long-term, so it's less and less about the new folks getting involved in TCAR over the long term and more and more about established, seasoned physicians and sales territories increasing procedure volumes to drive revenue.

Rick Wise -- Stifel Nicolaus -- Managing Director

Appreciate that. Thank you.

Operator

Your next question comes from the line of Joanne Wuensch from BMO Capital Markets. Your line is open.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Good afternoon, everybody. How are you?

Erica Rogers -- President and Chief Executive Officer

We're well. How are you?

Lucas Buchanan -- Chief Financial Officer

Hi, Joanne.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Excellent. I wanted to talk about two things. One is to take off on the previous question on the sales force and the hiring of the territory managers. Can you give us a little bit of an update on how that is proceeding?

Erica Rogers -- President and Chief Executive Officer

So, we are on track for the number that we guided toward earlier in the year, which is namely, roughly 35 by the end of the year. We continue to believe that the business can be addressed with that number. And as Lucas mentioned earlier, we continue to find efficiencies in the territories that already exist, in the hospitals that already exist, in the physicians that are already trained and moving all of that toward deeper and deeper penetration, namely the conversion of carotid endarterectomy to TCAR. So, the short answer is we're on track there, Joanne.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

That's helpful. My second question has to do with seasonality. Since it's your first third quarter as a publicly traded company and the third quarter tends to be difficult for med tech, can you just give us an idea of how you plan on thinking about the summer months for the business?

Lucas Buchanan -- Chief Financial Officer

So, we are certainly not immune to summer seasonality. It has been obviously baked into our own modeling and obviously the updated guidance for the year. With TCAR as a schedule procedure, it's really subject in the summer to physicians and patients taking vacations, and when you have a bigger and bigger footprint of trained physicians, you're kind of more sensitive to that seasonality, and we're right in the thick of it right now. It's generally most of July into the first two weeks of August, so that has been built into our thinking and into our revised guidance for the year.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

And then, my last question has to do -- not to dismiss the clinical data that's already been presented this year, but is there anything upcoming at VIS?

Erica Rogers -- President and Chief Executive Officer

So, we expect there will be some updated cuts of the TCAR Surveillance Project data at VIS. The program is essentially published and online now, and there are several TCAR talks, some of which are kind of a reanalysis or a relook at some of the data that have already been presented, but we believe there will be yet again another slice of the TCAR Surveillance Project.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Thank you very much.

Erica Rogers -- President and Chief Executive Officer

Thank you.

Operator

I am showing no further questions at this time. I would now like to turn the conference back to you, Erica Rogers, Chief Executive Officer.

Erica Rogers -- President and Chief Executive Officer

Thank you very much to all of you for joining us today. We really appreciate your time and attention. Goodbye.

...

Operator

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

Duration: 44 minutes

Call participants:

Lynn Lewis -- Investor Relations

Erica Rogers -- President and Chief Executive Officer

Lucas Buchanan -- Chief Financial Officer

Robbie Marcus -- JP Morgan -- Medtech Senior Analyst

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Rick Wise -- Stifel Nicolaus -- Managing Director

Joanne Wuensch -- BMO Capital Markets -- Managing Director

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