Vapotherm(VAPO) - 2022 Q4 - Annual Report

Revenue Performance - Revenue decreased to $66.8 million for the year ended December 31, 2022, down from $113.3 million in 2021, primarily due to lower hospitalizations from COVID-19[27] - Revenue from single-use disposables represented approximately 69.4% of total revenues for 2022, a decrease of 30.4% year-over-year[27] - The company had 67 full-time employees in the U.S. market and 27 in international markets as of December 31, 2022, with 78.7% of revenue derived from the U.S.[82] Market Potential and Product Adoption - The annual total addressable market for High Velocity Therapy technology is now estimated to exceed $8.3 billion, reflecting growth in patient numbers and expanded product use[21] - More than 3.8 million patients have been treated with High Velocity Therapy systems, with a global installed base of over 36,700 units, an increase of 4.4% from 2021[16] - The company has sold High Velocity Therapy systems to over 2,400 hospitals in the U.S. and over 50 countries globally[26] Cost Savings and Efficiency - The average cost for a stay in the ICU in the United States is $21,547 per week, highlighting potential cost savings by reducing ICU transfers[18] - A multicenter utilization study indicated that 54% of patients treated with High Velocity Therapy could be transferred to general care floors instead of being admitted to the ICU, potentially reducing ICU costs averaging $21,547 per week[43] - The use of High Velocity Therapy technology resulted in an estimated savings of $3,750 per patient by avoiding ICU admission[79] Product Development and Regulatory Approvals - The HVT 2.0 platform received FDA clearance for expanded respiratory distress indications in December 2022, enhancing its market position[25] - The next generation HVT 2.0 system received FDA clearance in 2021 and supports patients outside of hospital settings, enhancing market reach[52] - The company is seeking FDA approval for the Oxygen Assist Module, which has received Breakthrough Device Designation for on-demand titration of oxygen[56] Compliance and Regulatory Environment - The company’s products are subject to extensive regulation by the FDA and other authorities, ensuring safety and effectiveness for intended uses[100] - Compliance with federal, state, and foreign laws is essential to avoid fraud and abuse allegations, which could affect business practices[124] - The company is subject to U.S. federal healthcare fraud and abuse laws, including the Anti-Kickback Statute and the False Claims Act, which could lead to severe penalties if violated[125] Financial Management and Risks - Borrowings under the Third Amended SLR Loan Agreement totaled $100.0 million, with an interest rate of 12.58% as of December 31, 2022[171] - A 100 basis point increase in the annual interest rate on outstanding borrowings would result in a $1.0 million increase in annual interest expense[171] - Third-party payors are increasingly reducing reimbursements, which may negatively affect product demand and pricing, impacting the company's financial condition[123] Employee Engagement and Company Culture - Approximately 76% of the company's team has equity in the company, promoting an ownership culture[166] - The company has implemented various employee development programs, including mentorship and leadership development initiatives[164] - The company has received recognition as "Best Company to Work For" every year through 2021 since 2016[160] International Expansion and Market Strategy - As of December 31, 2022, the company partnered with 42 distributors in 44 countries to expand its international business, focusing on established markets with growth potential[87] - The company utilizes a digital marketing platform to educate international clinicians, focusing primarily on the United Kingdom[87] - The sales strategy focuses on increasing the utilization of High Velocity Therapy systems through direct sales and building relationships with clinicians across various care settings[83] Inflation and External Factors - The company experienced inflationary pressures on transportation and commodities costs during the year ended December 31, 2022, which are expected to continue into 2023[481] - External factors such as adverse weather conditions, supply chain disruptions, and labor shortages have impacted transportation and commodities costs[481] - There is uncertainty regarding the ability to pass on increased costs to customers without affecting volume, revenue, margins, and operating results[481]