BrainsWay Ltd.
Q3 2021 Earnings Call Transcript

Published: 17 Nov 2021

[Operator:]

Greetings and welcome to the BrainsWay Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. . As a reminder, this conference is being recorded. I’d now like to turn the call over to Bob Yedid of LifeSci Advisors. Thank you. You may begin.

[Bob Yedid:]

Thank you, all, and welcome to BrainsWay’s third quarter 2021 earnings conference call. With us today are BrainsWay’s President and Chief Executive Officer, Christopher von Jako; and Chief Financial Officer, Scott Areglado. The format of today’s call will be a discussion of third quarter results and a business update from Scott -- excuse me from Chris, followed by a detailed discussion of the financials from Scott. Then we will open up the call for your questions. Earlier this morning, BrainsWay released financial results for the three and nine months ended September 30, 2021. A copy of the press release is available on the company’s Investor Relations website. Before I turn the call over to Chris and Scott, I’d like to remind you that this conference call, including both management’s prepared remarks and the question-and-answer session, may contain projections or forward-looking statements regarding among other topics, BrainsWay’s anticipated future operating and financial performance, business plans and prospects and expectations for its products and pipeline, which are all subject to risks and uncertainties, including shifting market conditions from the COVID-19 pandemic, the global supply chain crisis, as well as the use of non-GAAP financial performance. Additional information regarding these and other risks are available in the company's earnings release and its other filings with the SEC, including the Risk Factors section contained in BrainsWay's Form 20-F. With those prepared remarks, it's my pleasure to turn the call over to Chris von Jako, CEO. Chris?

[Christopher von Jako:]

Thank you, Bob. Welcome everyone and thank you for joining us today. We are extremely pleased with the strong momentum in our business that continued during the third quarter. We expect that the current positive operating trends experienced throughout our company and driven by recent achievements on the commercial, clinical, regulatory and reimbursement fronts will lead to further growth for BrainsWay going forward. I'll discuss all this in greater detail shortly. But first, I will provide a brief overview of our key third quarter financial results. We generated $8.1 million in revenue for the third quarter 2021, which representative a substantial 34% increase over our third quarter 2020 and is indicative of the growing demand for our Deep TMS therapy in multiple indications. We have now demonstrated year-over-year growth in five consecutive quarters. We believe the progress we've achieved during this period is sustainable. In addition, our revenue for the first nine months of 2021 has nearly reached the total revenue achieved for all of 2020. We continued to shape our business practices to meet the challenges of the pandemic and the spread of the Delta variant during the third quarter, which appears to have had minimal impact on our business. As we've discussed previously, and as many of you are likely aware from the increasing significant media attention it has received in recent months, mental health and addiction issues continue to rise dramatically, especially as we all live through the impacts of the pandemic. However, it seems that the pandemic really only amplified an already growing increase in depression. According to research recently published by PharmacoEconomics, there was a dramatic rise of 13% in major depressive disorder in the U.S. during the pre-pandemic period of 2010 to 2018. During that time, the number of adults with depression grew from 15.5 million to over 17 million adults annually. The depression growth rate was even faster among adults aged 18 to 34. This study also estimates that depression carries an enormous economic burden, which now costs the U.S. $326 billion per year. Unfortunately, this trend only seems to be growing due to the pandemic. The Lancet recently shared a study on the lingering effects of COVID-19 and reported data of patient surveyed, 23% of those who contracted COVID reported feeling anxious or depressed six months after their first COVID symptoms appeared. This is an appropriate segue to the discussion of our recent FDA clearance for anxious depression, our third FDA clearance in just the past 12 months. The expanded FDA labeling now allows BrainsWay to market its Deep TMS System for the treatment of not only depressive episodes, but also for depression patients with comorbid anxiety symptoms. This makes BrainsWay the only TMS device with labeling, specifically addressing anxiety in depressed patients, further highlighting the competitive advantages of our products. In the same short treatment session BrainsWay's deeper and broader stimulation, which is unique to our Deep TMS System, allows us to therapeutically address multiple areas of the brain, which are associated with both depression and anxiety symptoms. Anxiety is the most prevalent comorbidity to a primary diagnosis of depression. In fact, between 60% to 90% of patients with depression also have moderate to severe anxiety. Anxious depression is linked to greater severity of depression symptoms, higher risk of suicide, reduced response rates to treatments, and higher risk of cardiovascular disease, and diabetes. We have already increased our direct to patient promotion of anxious depression through our marketing and advertising campaigns, and have now completed salesforce training around this new expanded indication. This clearance was achieved after we submitted comprehensive clinical data to the FDA, and has already contributed to the success achieved this quarter. This all serves to further enhance the message of our holistic approach to mental health care. Collectively, these trends and recent achievements further support our continued efforts to increase awareness among patients and clinicians. During the third quarter, we hosted five well attended webinars, including one focused on our expanded anxious depression FDA label. We also continue to promote education on the benefits of Deep TMS therapy. As in recent quarters, I'm pleased to report that our organic website traffic again increased significantly, up nearly 80% in the first nine months of 2021 as compared to the prior year period. In the third quarter, we began an overhaul of the content on our website, which we expect to complete by year-end, aimed at improving the user experience, increasing speed and building on our search engine optimization efforts to make Deep TMS therapy more visible for all at need. We also added a new chat robot, aptly named H-Coil. While this feature is currently in beta version, it's already yielded significant information on what website visitors are searching for, and how we can better serve their needs. It's also been useful in linking prospective customers with our sales team, thereby potentially serving as another important asset in our commercial toolbox. As October was depression awareness month, which also included World Mental Health Day, and OCD Awareness Week, we executed a number of patient awareness initiatives. These included posting a patient story each week via our social media channels. Each patient provided an overview of their mental health journey, what BrainsWay’s treatment means to them and where they are today because of their experience with Deep TMS therapy. We also started initiative to gather additional patient testimonials that are clinics can use on their own sites to help promote their practices. QR codes were provided for patients to load the app and tell their story. Additionally, BrainsWay has received positive media coverage through several recently highly viewed news features, including a recent appearance by Dr. Aron Tendler, our Chief Medical Officer on CBS News during national during National Suicide Prevention Week. Dr. Tendler discussed the alarming escalation in suicide trends and current treatment options, including Deep TMS therapy. Overall, our strategic investments in digital media this year have gone in an unprecedented 60 million impressions this quarter, supporting our efforts to create broad awareness of our technology and therapeutic benefits. Collectively, the goal of these initiatives is to reach any patient seeking an alternative to traditional medical management of their mental health. Of course, as important as our digital efforts are, we all know there's no substitute for in-person interactions. In this regard, I'm pleased report that our sales professionals’ in-person access to customers remained steady this quarter. Our return to live in-person conferences that began the second quarter has also continued. We recently had a significant presence at the Psych Congress in San Antonio, and the Neuroscience Education Institute in Colorado Springs, with attendance at an additional in-person conference planned for December. I will now turn to Deep TMS for the treatment of OCD. As a reminder, BrainsWay is the first TMS device to have achieved FDA clearance for this hard to treat condition and remains the only TMS company to receive this clearance based on pivotal data conducted on its own device. During the third quarter, we shipped 33 add-on helmets for OCD treatments, increasing the total number to 280. Moreover, the overwhelming majority of the system shipped in Q3 included an add-on helmet for OCD, contributing to the strong revenue achieved this quarter. We are pleased that nearly 40% of our total install base now includes OCD treatment capability. We continue to view this progress as a testament to our customers’ strong belief in the benefits of Deep TMS treatment for OCD, and early progress on the reimbursement front. As a reminder, regarding this reimbursement landscape, to-date, there are approximately 40 million covered lives eligible for reimbursement on our OCD therapy. This includes members covered by both Centene and HCSC, an independent licensee of Blue Cross Blue Shield and the fourth largest health care plan overall in the U.S. These OCD developments, both in terms of customer adoption and on reimbursement are indicative of the exciting traction we're seeing with this key indication. With that, I'd like to now provide a brief update on our commercialization plan for Deep TMS for smoking addiction. This offering the first of its kind in the medical device space, and our first addiction product is being launched in a phased rollout. We are pursuing the strategy in order to further cultivate on our messaging, develop optimized business models for customers, refine ideal addressable patient population and build post-marketing data to develop a reimbursement strategy. We previously completed the first phase, which was a controlled market release. And a limited market release is now underway. We continue to receive excellent patient feedback, including very encouraging anecdotal quit rates. We also conducted a qualitative and quantitative market research study in conjunction with our phased release strategy to better understand messaging in target markets for our smoking launch. One outcome from the market research that seems likely to have a strong traction with smokers is the finding that two out of three completing patients that had quit remained abstinent for the duration of the 16-week follow-up. We believe that this is a sign of durability which will resonate strongly with smokers. Completing our efforts on the commercialization side, we were pleased in the third quarter to have the positive data from a pivotal multicenter clinical trial supporting the use of Deep TMS therapy as a safe and effective treatment for smoking addiction, published in the renowned Journal World Psychiatry. Publishing these data in a peer reviewed medical journal allows us to both enrich the evidence around the treatment and also to further disseminate this critical information to providers who are seeking effective, non-invasive options to help their patients. Moving on, I'd like to take this opportunity to welcome Dr. Jeff Daskalakis to the BrainsWay's Scientific Advisory Board. Dr. Jeff Daskalakis is currently the Chair of the Department of Psychiatry at the University of California San Diego School of Medicine. He has been on the forefront of expanding the clinical understanding of brain stimulation, and his insight and direction will be invaluable to us as we continue to enhance our technology and grow our business. Turning to Investor Relations, we hosted a well-attended KOL event for investors and analysts in the third quarter that highlighted the OCD indication. This virtual event featured a presentation by Dr. Kimberly Cress, past President of the Clinical TMS Society and the Regional Medical Director of the Texas region for Greenbrook TMS. Dr. Cress discussed the current treatment landscape and unmet medical need in treating patients with OCD. In addition, Dr. Tendler presented Deep TMS as an effective treatment for OCD. We also presented at several healthcare investment conferences in the recent months, and conducted multiple institutional and high net worth focused virtual non-deal roadshows. Finally, as always, I would like to thank our valued customers who contribute each day to battling the mental health crisis, as well as to the entire BrainsWay team for their better, stronger and bolder dedication to our mission of advancing neuroscience to improve health and transform lives. With that, I will now pass the call to Scott for his review of our third quarter 2021 financial results. Scott?

[Scott Areglado:]

Thank you, Chris. BrainsWay had another strong quarter of revenue growth, and as Chris mentioned, it is the fifth consecutive quarter of growth versus the prior year period. For the third quarter of 2021, revenue was $8.1 million, a 34% increase compared to third quarter 2020 revenue of $6 million. As I've noted previously, sequentially, third quarter revenue of 2021 grew $1.1 million, or 15% over the second quarter of 2021. We believe this growth demonstrates the continued value of the BrainsWay solution given typical third quarter seasonality and the uncertainty of the ongoing pandemic. For the first nine months of 2021, revenues were $21.2 million, representing a 41% or $6.2 million increase compared to revenue of $15 million for the first nine months of 2020. As of September 30, 2021, BrainsWay's installed base totaled 717 Deep TMS systems, which reflects an increase of 35 net systems on a sequential basis, an increase of 124 net systems or 21%, as compared to the end of third quarter of 2020. Gross profit for the third quarter of 2021 was $6.1 million, compared to $4.5 million during the prior year period. Gross margin for the quarter was 76%, as compared to 75% in the third quarter of 2020. Gross profit for the first nine months of 2021 was approximately $16.5 million, or a 78% margin, compared to $11.5 million gross profit or a 77% margin during the prior year period. Margins can fluctuate slightly. However, we expect margins to stay within this range in the fourth quarter. Moving on to operating expenses. For the third quarter of 2021, research and Development expenses were $1.8 million as compared to $1.4 million in the third quarter of 2020. Research and development expenses for the first nine months of 2021 were $4.4 million as compared to $4.2 million in the prior year period. We expect our investments in R&D to increase as we continue to invest in our current indications, depression, OCD, and smoking addiction, as well as some additional future indications. Sales and marketing expenses for the third quarter of 2021 were $4 million compared to $2.4 million for the third quarter of 2020. This increase reflects our continued investments in the commercial activities to drive future growth. For the first nine months of 2021, sales and marketing expenses were $11.4 million as compared to $8.3 million in the prior year period. Moving on to G&A. Expenses for the third quarter of 2021 were $1.5 million, compared to $1.3 million for the third quarter of 2020 and $4.3 million for the first nine months of 2021 as compared to $3.4 million in the prior year period. Total operating expenses was $7.4 million for the third quarter of 2021, compared to $5.1 million for the same period in 2020. Total operating expenses for the first nine months of 2021 totaled $20 million as compared to $15.9 million in the prior year period. As I mentioned last quarter, the increase in operating expenses on a year-over-year basis is reflective of cash preservation efforts to mitigate the effects of the pandemic in 2020. Operating loss for the third quarter was $1.2 million, compared to an operating loss of $600,000 for the same period in 2020. Operating loss for the first nine months of 2021 totaled $3.5 million as compared to $4.4 million in the prior year period. For the third quarter ended September 30, 2021, we incurred a net loss of $1.8 million, compared to a net loss of $1 million in the third quarter of 2020. For the first nine months of 2021, net loss was $5.1 million as compared to a net loss of $5 million in the prior year period. Moving on to the balance sheet, we ended the quarter with cash, cash equivalents and short-term deposits of $55.3 million compared to $17.2 million as of December 31, 2020. We believe that our strong balance sheet allows us to continue our sales and marketing efforts to drive additional adoption of our multi-indication Deep TMS System, as well as invest further in R&D in order to commercialize additional potential indications of our differentiated innovative technology. We are confident that these initiatives and investments will support long-term shareholder value. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator?

[Operator:]

Our first questions come from the line of Steven Lichtman with Oppenheimer.

[Steven Lichtman:]

Chris, you obviously saw a clear step up in OCD helmets again here this quarter. Are you seeing the pickup in areas where reimbursement coverage by Centene and HCSC is stronger? Or is it broader than that because of the halo effect of the positive reimbursement used earlier this year? Any more color on that would be great.

[Christopher von Jako:]

Thanks, Steven. Good morning and thank you for your comments about the quarter. Yes, we're really excited about the quarters as you could possibly tell. Regarding OCD, yes, I would say it's more of a halo effect. Most of the systems that we shipped this quarter came within OCD helmet. So we're very pleased. And as I mentioned that, in the comments that we prepared, we really feel that people are getting on board, because we're getting some gains and traction with reimbursements.

[Steven Lichtman:]

And then going on the next steps in the smoking addiction launch, I think you were at 10 centers initially. Are you moving that up now to another tranche before going full? And when do you expect to move to a full launch?

[Christopher von Jako:]

Yes. So I think we may have mentioned in the last call, we went from the 10, the first in the controlled market release and then we went up to 15 in the controlled market release. And we're now in a limited market release phase. So we actually train the entire salesforce, I think I mentioned that on the last call. And then we started in this limit launch where we're taking orders, and we're delivering systems to particular people. And I think, Scott, what do we have now totally installed?

[Scott Areglado:]

Closer to 30.

[Christopher von Jako:]

Closer to 30, again, at this point.

[Scott Areglado:]

Including the limited controlled market release.

[Christopher von Jako:]

Yes. Controlled market release, yes.

[Steven Lichtman:]

Great. And I guess lastly for me and I'll jump back in queue. On the salesforce, I don’t know if I missed this. I know you were at 16 last quarter targeting I think to get to 18 by year-end. Is that still the case? Any update on the salesforce side?

[Christopher von Jako:]

Yes, thanks. So I think on the last call, we had 16 sales professionals, we're up to 17 sales professionals, we're still targeting that 18 before the year-end.

[Operator:]

Our next questions come from the line of Jeffrey Cohen with Ladenburg Thalmann.

[Destiny Hance:]

Good morning, Chris and Scott. This is actually Destiny on for Jeff. How are you?

[Christopher von Jako:]

Destiny, how are you? I was going to say you didn't sound like Jeff.

[Destiny Hance:]

Yes. No. A little more feminine may be but anyway. I was wondering -- I'd like to start, there was a press release regarding seizures a couple of months ago. And I was wondering if you could talk a little bit about that and what impact you think that has on the overall TMS market?

[Christopher von Jako:]

Good question. I thought this perhaps may come up on the call today. So at the outset, let me just say that TMS systems, which have been researched over many years, have a very favorable safety record, including the BrainsWay’s Deep TMS System. So my belief is that it's a mistake for the industry overall to even talk about seizure rates, as if they were an issue, and it's unfortunate that some in the industry feel they need to raise it. But as long as you brought up the topic, I want to be clear whether using traditional TMS systems or the BrainsWay Deep TMS System, seizures are an extremely rare but a well-known side effect associated brain stimulation. We regularly publish our own seizure rates, and we did so last November. BrainsWay comprehensive data involved about 95,000 Deep TMS patients and found seizure rates to be about 2 in 10,000, when following instructions for use. And this is comparable to previous published outcomes seen with other TMS studies also. As for specific claims about the document that you were talking about, in particular with the higher seizure rates, regarding Deep TMS’ H1-Coil, these were based on a questionnaire that were distributed via SurveyMonkey, which is both I think, misleadingly -- was misleadingly presented, and worse, the analysis was based on really shoddy science. Specifically, the survey claims to have resulted from outcomes of 25,000 TMS patients, less than 2,000 of which have been treated with Deep TMS. Our publication is more comprehensive, again, with 95,000 Deep TMS patients, which is a vastly larger sample size than the dataset used in that misleading survey. And I just want to point out as a comparative reference, the most popular anti-depressants and anti-psychotic medications show significantly higher seizure rates, ranging between 1 to 6 out of 1,000 patients, not 10,000 patients. And finally, Destiny I just wanted to add, I think it's worth noting that BrainsWay systems are used in some of the top psychiatric hospitals in the country, like Johns Hopkins; McLean Hospital, which is the largest psychiatric teaching hospital, part of medical school here in Boston; Stanford University Medical Center; UC San Diego Health Center, among others. And this is not to mention the largest TMS provider in the country Greenbrook, who also uses BrainsWay. So I don't think any of these centers would be using the BrainsWay Deep TMS System, if they felt there was any type of safety issue. Hopefully that addresses your question there.

[Destiny Hance:]

Yes, that’s super helpful. Thank you for all that color. And then I'm curious, if you could just maybe remind investors and whoever else may be new to the story, about the importance of having this dual-pronged strategy, where you not only are driving commercial expansion, but also providing your psychiatrist with other indications of use. Could you just help us -- expand a bit more on that and how it impacts the company in the longer term?

[Christopher von Jako:]

Yes. That’s a great question. I think one of the things that we've seen since I joined, is really the overall, I would say, market, about our platform and why people are choosing our technology. And I think obviously depression, OCD has been a big and we've seen it now, especially with reimbursement coming on. Smoking addiction, we're just early into. And then I think with our latest FDA clearance on anxious depression which I think is really, really important for not only the providers to be able to talk about anxiety within depression patients, but also to be able to talk to the patients about it. And I think it really makes a real good thing for our platform. Does that help?

[Destiny Hance:]

Yes, definitely. And then maybe just lastly for me. I'm curious if you could talk to maybe some of the trends for Q4, not necessarily guidance or anything, but more around what you're seeing in terms of seasonality versus COVID versus staffing disruptions, et cetera?

[Christopher von Jako:]

Yes, I think our trends that we had in Q3 were extremely powerful. We were less, I think, affected by Delta variant that maybe some of the other manufacturers and people within medical device as well. And we've seen continued positive momentum in our business. It's really tough to tell. I think I've mentioned this on previous earnings calls as well. A lot of our secret sauce happens in the last several weeks of the quarter, but it all feels really good right now, as we're heading into the later stages of the quarter.

[Operator:]

Our next questions come from the line of Jayson Bedford with Raymond James.

[Jayson Bedford:]

Just a few questions I guess for me. Just on the OCD momentum there, near 40% of your install base has helmets. Can we assume that the other 60% is just waiting for more established reimbursement coverage? Is that kind of the speed bump here?

[Christopher von Jako:]

Yes, Jayson, great question. I think I may have mentioned this in previous calls as well, but glad you brought it up. There are some practices where we have our systems in psychiatric offices, they don't really focus on OCD, and we've seen that. But I think the latest round of systems we've been selling this year, especially since we've had the momentum on reimbursement, we've seen much more people or much more of our customers taking the OCD helmet. I think we will see the install base also start to do that at some point. And probably, I guess it will get over 50% of our install base at some point, maybe even closer to 60%.

[Jayson Bedford:]

And then just on OCD reimbursement, you've got coverage for what, 40 million lives. Are there any additional reimbursement wins anticipated over the next couple of quarters?

[Christopher von Jako:]

Well, it's obviously tough to predict and I don't like giving guidance. I remember when we did the call earlier in the year, it was very hopeful, it's hoping before the end of the year we would get at least one insurance coverage before the end of the year. We got two as obviously I mentioned that Centene and HCSC. And then of course we got the positive coverage determination but it was a draft policy from Palmetto and that still has to be finalized. We have reached out to over 60 of the top insurance companies in the company -- sorry in the country. And then of course with Medicare MACs, we've reached out to all of them and talked to them. And in fact, at the end of September, there was a public call, which happened, I think it was on September 29th, it was all the Medicare MACs, excluding Palmetto, they all got together. And in this public call, they brought on six or seven experts, where there was six or seven experts actually reviewed all of BrainsWay's literature about OCD. It was really exciting to listen to the call. But in the end, it's really difficult to know whether the other MACs will all pick up coverage, some of them will pick up coverage, or maybe they'll delay it. So it's, but I was really encouraged by the call. That's what I'll say.

[Jayson Bedford:]

On the label expansion that you received mid-quarter or 3Q for decreasing anxiety symptoms, you mentioned, I think, in the call that it's already contributed to the success. Can you identify orders that you believe directly stemmed from this label. And just on the timing of the marketing and the salesforce training efforts, did this occur in September?

[Christopher von Jako:]

So the training happened early in September. We really closed after our -- I think we got the clearance in August, I believe, at the end of August. I actually remember exactly where it was. But it definitely contributed to the quarter. It's hard to put on specifically what system didn't. But hearing from the salesforce and talking to the salesforce, the ability to talk about anxiety and depression patients makes a big deal. And there's -- I can talk for hours about this really. But in a nutshell, I think it's pretty powerful to be able to have our customers be able to speak about anxiety within their depression patients, it's such a comorbid issue. And the ability to use our H1 helmets in the depression treatment, in the same setting, not only handles the depression but also anxiety, is extremely powerful. And the data was really compelling. I think it was something that we’ve known from some time, but the ability to look at it in these controlled clinical studies where we really saw the difference between the placebo or sham was just really compelling, and even actually be competitive to medication as well. But I think that differentiation really helps from a competitive sales standpoint, when we get in there as well. It's another further offering that we have.

[Jayson Bedford:]

I guess what I'm getting at is, I assume that this label will have a bigger impact in 4Q than in 3Q, just given that you'll have it for the full quarter here versus what is a partial quarter and a summer quarter at that. Okay. Maybe just for Scott -- and perhaps I missed it. What was direct versus recurring revenue in the quarter?

[Scott Areglado:]

Yes. So it was about 60% direct versus 40% recurring.

[Jayson Bedford:]

Okay. Thank you.

[Scott Areglado:]

So just back to the comments about anxious depression, look, it's just -- it becomes part of our overall toolkit for our sales team to go out and continue to market, right?

[Operator:]

Next questions come from the line of Ram Selvaraju with H.C. Wainwright.

[Boobalan Pachaiyappan:]

This is Boobalan Pachaiyappan dialing in for Ram Selvaraju. Congrats on your progress. So just couple of questions from our end with respect to OCD. So I know OCD is an umbrella disease comprising of at least four disorders. So do you think the Deep TMS System could be particularly effective against one disorder versus the other within the umbrella OCD?

[Christopher von Jako:]

Can you just expand what you mean by the four disorders?

[Boobalan Pachaiyappan:]

This was mentioned during KOL call.

[Christopher von Jako:]

Okay. Got it. Very good point. So, yes, there's sort of other deviations of OCD, right? Like, body dysmorphic disorder and things like that, yes. We're doing further studying for that. We plan to do further studying to see how it will impact those other different variations. But I think obviously, this is a big pool population, 6 million people will just get pure OCD in their lifetime. And about 3 million of those, about half of those, obviously, will not respond to medication. And as I think I probably have mentioned in the past, in depression, there are over 40 medications, and then you can do combination of medications. There are only five medications approved for OCD. So it's obviously a much more complex disorder.

[Boobalan Pachaiyappan:]

Great. So the four disorders that were mentioned during the call were body dysmorphic disorder, hoarding disorder, hair pulling disorder, and skin picking disorder, just for a reference.

[Christopher von Jako:]

Yes.

[Boobalan Pachaiyappan:]

All right. So thanks for the clarity there. And then the next, so it appears at least OCD takes 14 to 17 years to diagnose. So given BrainsWay penetrating the OCD market, what potential marketing strategies might be required to ensure patients can obtain benefits of early treatment?

[Christopher von Jako:]

So I think one of the things that we're doing -- well, let's just say first, the clinicians are completely aware of this, right? And we are working lockstep with them and obviously, the earlier diagnosis, the earlier treatment, they're going to benefit quite a bit more from it. Today, obviously, our clearance is for 18 and older and we do actually have a study going on in younger adults at the moment. It's more of a pilot study at one of the large universities in the U.S. So we're looking forward to getting those results over time. We know that patients are treated off label at a younger age. But I think you're right, the earlier we can get this diagnosed, treat it, and you've probably heard from that KOL call, the better outcomes you'll have in the patients in general. And by the way, the same thing goes for depression as well.

[Boobalan Pachaiyappan:]

Okay. And one, lastly, maybe this is for Scott. So the gross margin continues to be impressive. So just curious to hear your thoughts on whether inflation would affect your gross margins moving forward? If that's what mitigating strategies might be required, and lessen the impact?

[Scott Areglado:]

Yes, it's a great question and something we've been thinking about and watching the economic trends. I think, at least for the fourth quarter, most of our inventory is in and built and already ready to ship because we have parts with some longer lead times. And then we're just working to really manage through this and haven't really thought about our outlook too far for 2022 yet as we sort of have enough inventory for the near-term here. But if inflationary pressures continue, it will obviously have an impact on our cost of parts, and we'll have to determine how we can either pass that on or how we'll manage through it.

[Operator:]

Thank you. We have reached the end of our question-and-answer session period. I would now like to turn the call back over to Chris von Jako for any closing comments.

[Christopher von Jako:]

Thanks. I'd like to thank all the investors, analysts and other participants for their interest in BrainsWay. And with that, please enjoy the rest of your day.

[Operator:]

This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.