UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                      

Commission File Number: 001-38829

Shockwave Medical, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	27-0494101
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5403 Betsy Ross Drive Santa Clara, California	95054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (510) 279-4262

Securities registered pursuant to Section 12(b) of the Act:

Title of each class of securities	Trading symbol(s)	Name of each national exchange and principal U.S. market for the securities
Shockwave Medical, Inc., common stock, par value $0.001 per share	SWAV	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No ☒

As of May 6, 2021, the registrant had 34,983,062 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		28

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements relating to our expectations, projections, beliefs, and prospects, which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “might”, “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they may relate to future expectations around growth, strategy, and anticipated trends in our business, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements are only predictions based on our current expectations, estimates, assumptions, and projections about future events and are applicable only as of the dates of such statements.  These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that might cause such a difference include, but are not limited to the following:

• the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including due to the pandemic’s impact on our sales, expenses, supply chain, manufacturing, research and development activities, clinical trials, and employees;

• our ability to design, develop, manufacture and market innovative products to treat patients with challenging medical conditions, particularly in peripheral artery disease, coronary artery disease and aortic stenosis;

• our expected future growth, including growth in international sales;

• the size and growth potential of the markets for our products, and our ability to serve those markets;

• the rate and degree of market acceptance of our products;

• coverage and reimbursement for procedures performed using our products;

• the performance of third parties in connection with the development of our products, including third-party suppliers;

• regulatory developments in the United States and foreign countries;

• our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;

• our plans to research, develop and commercialize our products and any other approved or cleared product;

• our ability to scale our organizational culture of cooperative product development and commercial execution;

• the development, regulatory approval, efficacy and commercialization of competing products;

• the loss of key scientific or management personnel;

• our ability to develop and maintain our corporate infrastructure, including our internal controls;

• our financial performance and capital requirements; and

• our expectations regarding our ability to obtain and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others.

These factors and others are discussed in more detail in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, together with any updates in the section entitled “Risk Factors” of this Quarterly Report on Form 10-Q. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. There may also be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We undertake no obligation to update any of these forward-looking statements for any reason, even if new information becomes available in the future, except as may be required by law.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

	March 31, 2021			December 31, 2020(1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	57,006		$	50,423
Short-term investments		120,422			151,931
Accounts receivable, net		19,613			11,689
Inventory		33,538			29,859
Prepaid expenses and other current assets		2,533			2,398
Total current assets		233,112			246,300
Operating lease right-of-use assets		7,211			7,568
Property and equipment, net		20,233			16,362
Equity method investment		6,750			—
Other assets		1,764			1,812
TOTAL ASSETS	$	269,070		$	272,042
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,728		$	1,466
Term notes, current portion		4,950			3,300
Accrued liabilities		23,918			19,942
Lease liability, current portion		898			873
Total current liabilities		33,494			25,581
Lease liability, noncurrent portion		7,213			7,488
Term notes, noncurrent portion		11,836			13,319
Related party contract liability, noncurrent portion		12,273			—
TOTAL LIABILITIES		64,816			46,388
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—
Common stock		35			35
Additional paid-in capital		471,477			469,283
Accumulated other comprehensive income		16			9
Accumulated deficit		(267,274	)		(243,673	)
TOTAL STOCKHOLDERS’ EQUITY		204,254			225,654
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	269,070		$	272,042

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

(1) The consolidated balance sheet as of December 31, 2020 is derived from the audited consolidated financial statements as of that date.

4

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

	Three Months Ended March 31,
	2021			2020
Revenue:
Product revenue	$	31,900		$	15,197
Cost of revenue:
Cost of product revenue		7,892			5,651
Gross profit		24,008			9,546
Operating expenses:
Research and development		10,277			11,890
Sales and marketing		23,992			10,411
General and administrative		7,226			6,224
Total operating expenses		41,495			28,525
Loss from operations		(17,487	)		(18,979	)
Share in net loss of equity method investment		(5,523	)		—
Interest expense		(312	)		(277	)
Other income (expense), net		(235	)		504
Net loss before taxes		(23,557	)		(18,752	)
Income tax provision		44			23
Net loss	$	(23,601	)	$	(18,775	)
Unrealized gain on available-for-sale securities		7			68
Total comprehensive loss	$	(23,594	)	$	(18,707	)
Net loss per share, basic and diluted	$	(0.68	)	$	(0.59	)
Shares used in computing net loss per share, basic and diluted		34,797,400			31,644,041

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

Shockwave Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)

	Common Stock					Additional Paid-In			Accumulated Other Comprehensive		Accumulated			Total Stockholders'
	Shares			Amount		Capital			Income		Deficit			Equity
Balance — December 31, 2020		34,684,337		$	35	$	469,283		$	9	$	(243,673	)	$	225,654
Exercise of stock options		159,325			—		773			—		—			773
Unrealized gain on available-for-    sale securities		—			—		—			7		—			7
Issuance of common stock under    employee stock purchase plan		20,594			—		1,141			—		—			1,141
Issuance of common stock in connection    with vesting of restricted stock units		107,237			—		—			—		—			—
Taxes withheld on net settled vesting    of restricted stock units		(42,529	)		—		(5,114	)		—		—			(5,114	)
Stock-based compensation					—		5,394			—		—			5,394
Net loss					—		—			—		(23,601	)		(23,601	)
Balance — March 31, 2021		34,928,964		$	35	$	471,477		$	16	$	(267,274	)	$	204,254
	Common Stock					Additional Paid-In			Accumulated Other Comprehensive		Accumulated			Total Stockholders'
	Shares			Amount		Capital			Income		Deficit			Equity
Balance — December 31, 2019		31,446,787		$	31	$	370,561		$	35	$	(177,974	)	$	192,653
Exercise of stock options		356,128			1		1,112			—		—			1,113
Unrealized gain on available-for-    sale securities		—			—		—			68		—			68
Issuance of common stock under    employee stock purchase plan		24,691			—		842			—		—			842
Stock-based compensation		—			—		1,871			—		—			1,871
Net loss		—			—		—			—		(18,775	)		(18,775	)
Balance — March 31, 2020		31,827,606		$	32	$	374,386		$	103	$	(196,749	)	$	177,772

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)  

	Three Months Ended March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(23,601	)	$	(18,775	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		721			426
Share in net loss of equity method investment		5,523			—
Stock-based compensation		5,139			1,871
Amortization of right-of-use assets		405			369
Accretion of discount on available-for-sale securities		379			114
Amortization of debt issuance costs		167			153
Changes in operating assets and liabilities:
Accounts receivable		(7,924	)		(434	)
Inventory		(3,308	)		(3,807	)
Prepaid expenses and other current assets		(135	)		(1,588	)
Other assets		48			(47	)
Accounts payable		1,782			(542	)
Accrued and other current liabilities		3,799			(1,855	)
Lease liabilities		(298	)		(74	)
Net cash used in operating activities		(17,303	)		(24,189	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(15,263	)		(16,020	)
Proceeds from maturities of available-for-sale securities		46,400			25,000
Purchase of property and equipment		(4,051	)		(4,655	)
Net cash provided by investing activities		27,086			4,325
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of offering costs		—			(179	)
Principal payments of term loan		—			(1,111	)
Net proceeds from term loan		—			3,265
Payments of taxes withheld on net settled vesting of restricted stock units		(5,114	)		—
Proceeds from stock option exercises		773			1,113
Proceeds from issuance of common stock under employee stock purchase plan		1,141			842
Net cash (used in) provided by financing activities		(3,200	)		3,930
Net increase (decrease) in cash, cash equivalents and restricted cash		6,583			(15,934	)
Cash, cash equivalents and restricted cash at beginning of period		51,873			140,495
Cash, cash equivalents and restricted cash equivalents at end of period	$	58,456		$	124,561
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	144		$	108
Income tax paid	$	15		$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use asset obtained in exchange for lease liability	$	48		$	39
Property and equipment purchases included in accounts payable and accrued liabilities	$	3,104		$	4,036
Equity method investment obtained in exchange for related party contract liability	$	12,273		$	—
Transfer of fixed assets to inventory	$	116		$	40

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Basis of Presentation

Shockwave Medical, Inc. (the “Company”) was incorporated on June 17, 2009. The Company is primarily engaged in the development of Intravascular Lithotripsy (“IVL”) technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular, and heart valve disease. Built on a balloon catheter platform, the IVL technology uses lithotripsy to disrupt both superficial and deep vascular calcium, while minimizing soft tissue injury, and an integrated angioplasty balloon to dilate blockages at low pressures, restoring blood flow.

In 2016, the Company began commercial and manufacturing operations, and began selling catheters based on the IVL technology. The Company’s headquarters are in Santa Clara, California. The Company is located and operates primarily in the United States and has subsidiaries in Germany, the United Kingdom, Japan and France.

Need for Additional Capital

The Company has incurred significant losses and has negative cash flows from operations. As of March 31, 2021, the Company had an accumulated deficit of $267.3 million. Management expects to continue to incur additional substantial losses for the foreseeable future.

As of March 31, 2021, the Company had cash, cash equivalents and short-term investments of $177.4 million, which are available to fund future operations. The Company believes that its cash, cash equivalents and short-term investments as of March 31, 2021, will be sufficient for the Company to continue as a going concern for at least 12 months from the date the unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”).

Risk and Uncertainties

The Company is subject to continuing risks and uncertainties as a result of the COVID-19 pandemic, and is closely monitoring the impact of the pandemic on all aspects of its business, including the impacts on its customers, patients that would benefit from procedures utilizing the Company’s products, employees, suppliers, vendors, business partners and distribution channels. Economies worldwide continue to be negatively impacted by the COVID-19 pandemic, in particular with recurrent outbreaks and mutations of the virus, despite advances in vaccines, and we anticipate these disruptions will continue. As such the Company's future results of operations and liquidity could be adversely impacted by a variety of factors related to the COVID-19 pandemic, including those discussed in the section entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations remains uncertain.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of SEC regarding interim financial reporting.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

8

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

	March 31, 2021		December 31, 2020
	(in thousands)
Cash and cash equivalents	$	57,006	$	50,423
Restricted cash		1,450		1,450
Total cash, cash equivalents, and restricted cash	$	58,456	$	51,873

Equity Method Investments

Entities which the Company has significant influence over activities of the entity, but does not control, are accounted for under the equity method of accounting in accordance with Topic 323, Investments - Equity Method and Joint Ventures. The Company’s carrying value in the equity method investment is reported as equity method investment on the Company’s consolidated balance sheet. The Company records its proportionate share of the underlying income or loss which is recognized in share in net loss of equity method investment. For the three months ended, March 31, 2021, the Company’s share in the losses incurred by the equity method investee was $5.5 million. The Company eliminates any intra-entity profits to the extent of the Company’s beneficial interest.

We assess our equity method investment for impairment when events or circumstances suggest that the carrying amount of the investment may be impaired. We consider all available evidenced in assessing whether a decline in fair value is other than temporary. If the decline in fair value is determined to be other than temporary, the difference between the carrying amount of the investment and estimated fair value is recognized as an impairment charge.

Fair Value of Financial Instruments

The Company’s cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. Management believes that its term notes bear interest at the prevailing market rates for instruments with similar characteristics; accordingly, the carrying value of this instrument approximates its fair value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Revenue

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, Revenue from Contracts with Customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Product Revenue

The Company records product revenue primarily from the sale of its IVL catheters. The Company sells its products to hospitals, primarily through direct sales representatives, as well as through distributors in selected international markets. Additionally, a

9

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

significant portion of the Company’s revenue is generated through a consignment model under which inventory is maintained at hospitals.

Product revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

For products sold through direct sales representatives, control is transferred upon delivery to customers. For products sold to distributors internationally and products sold to customers that utilize stocking orders, control is transferred upon shipment or delivery to the customer’s named location, based on the contractual shipping terms. For consignment inventory, control is transferred at the time the IVL catheters are consumed in a procedure. The Company elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfillment activity, and not a separate performance obligation.

The Company may provide for the use of an IVL generator and connector cable under an agreement to customers at no charge to facilitate use of the IVL catheters. These agreements do not contain contractually enforceable minimum commitments and are generally cancellable by either party with 30 days’ notice.

License Revenue

For arrangements that contain a license of our functional intellectual property with a customer, we consider whether the license grant is distinct from other performance obligations in the arrangement. A license grant of functional intellectual property is generally considered to be capable of being distinct if a customer can benefit from the license on its own or together with other readily available resources. License revenue for licenses of functional intellectual property is recognized at a point in time when the Company satisfies its performance obligation of transferring the license to the customer.

Consideration received in advance of the satisfaction of a performance obligation is recognized as a contract liability. No license revenues have been recognized for the three months ended March 31, 2021.

3. Financial Instruments and Fair Value Measurements

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:

	March 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
U.S. Treasury securities	$	90,974	$	—	$	—	$	90,974
Money market funds		49,008		—		—		49,008
Commercial paper		—		24,178		—		24,178
Corporate bonds		—		5,270		—		5,270
Total assets	$	139,982	$	29,448	$	—	$	169,430

	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
U.S. Treasury securities	$	126,363	$	—	$	—	$	126,363
Money market funds		35,053		—		—	$	35,053
Commercial paper		—		31,968		—	$	31,968
Total assets	$	161,416	$	31,968	$	—	$	193,384

10

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

4. Cash Equivalents and Short-Term Investments

The following is a summary of the Company’s cash equivalents and short-term investments:

	March 31, 2021
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
U.S. Treasury securities	$	90,953	$	21	$	—		$	90,974
Money market funds		49,008		—		—			49,008
Commercial paper		24,178		—		—			24,178
Corporate bonds		5,275		—		(5	)		5,270
Total	$	169,414	$	21	$	(5	)	$	169,430
Reported as:
Cash equivalents								$	49,008
Short-term investments									120,422
Total								$	169,430

	December 31, 2020
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
U.S. Treasury securities	$	126,354	$	11	$	(2	)	$	126,363
Money market funds		35,053		—		—			35,053
Commercial paper		31,968		—		—			31,968
Total	$	193,375	$	11	$	(2	)	$	193,384
Reported as: