Q3 2019 Earnings Call

Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

Thank you for standing by and welcome to the Trans Medix third quarter 2019 earnings Conference call.

At this time all participants are in listen only mode. After the speaker presentation, there will be a question answer session.

Ask a question during the session you need a press star one on your telephone if you require any further assistance. Please press star zero. Please be advised so today's conference maybe recorded Oh, no wait to hear the conference over to your Speaker today, Brian Johnston from the Gilmartin Group. Please go ahead Sir.

Thanks, operator.

Earlier today trends Medix released financial results for the quarter ended September 20 to 29 team.

Copy of the press releases available in the company's website before we begin I would like to remind you that management will make statements. During this call and include forward looking statements within the meaning of 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 or is that our examination of operating trends the potential commercial opportunity for products and our future financial expectations, which includes expectations for growth in our organization regulatory approvals and reimbursement.

I used to revenue gross margins 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 list and description of the risks and uncertainties associated with our business. Please refer to the risk factor section of the final prospectus relating to our initial public offering that we have filed with the securities and Exchange Commission.

Trends medix 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.

This call contains time sensitive information and is accurate only as of the life broadcast today November six 2019.

And with that I'll now turn the call over to I'll eat Acenine, President and Chief Executive Officer.

Thank you Brian [noise].

Good morning, everyone and welcome to transmit its third quarter 2019 earnings call.

Joining me today, even Gordon our Chief Financial Officer.

We're delighted to report our Q3 results, which demonstrated continued growth of our business.

Let me highlight the drivers for this momentum.

First we reported 7.2 million dollar net revenue for the quarter.

This is off of 7.9 million of course revenue.

The 7.2 million to present, 78% increase than growth versus the same period last year.

Our revenue growth was fueled by our U.S. programs in all three oregons long part and liver as well as our international business.

Second.

Well, if he has long commercial status.

Is on track.

On track to convert the majority of our lung trial centers to commercial sense as by year end.

Importantly were actively engaged with several strategic commercial initiatives to enable and facilitate broader adoption of the OTI has long technology.

Third our associates liver protect trial had another quarter of accelerated pace of enrollment in fact, we successfully enrolled the full 300 patients ahead of plan by at least one quarter.

<unk> for our associates Harp program is continuing to ramp nicely in the U.S. trials sensors for both the continued access protocol as well as the BCD programs.

Now I'd like to share some key highlights from the third quarters and discuss our perspective on the remainder of 2019.

This quarter results further validates our position that the strength of trends Medix business is in our diverse product and clinical market offering.

Specifically why we're continuing to ramp up our long commercial activities in the U.S. the revenue from our associates liver heart programs as well as our international business provided strong contribution to our Q3 results.

We are happy to announce.

That we have successfully completed enrollment of our pivotal associates liver protect trial ahead of plan.

We're now planning a p. a may filings in the first half of 2020, which is ahead of our original assumption, which was in the second half of 2020.

To continue the clinical momentum and access to our OTI has liver technology in the U.S., while the P. amaze being finalized and under review.

We filed two new I'd see a sliver I'd ease with the FDA.

The first I'd. He is for our continued access protocol program for the protect trial.

The second is for an L.C.S. lives or D.C.D. focused indication.

They send information we have today, we're planning to announce the final results of those yes liver protect trial at the American Transcend Congress for AGTC meeting in May 20, plenty in Philadelphia.

Regarding the OTSR Pmeight, we submitted the answers for the agencies questions back in mid August .

We continue to be in active dialogue with the FDA Review Division for review branch, while while it's under review.

We feed few interactive questions regarding the post approval registry protocol design.

We have been informed that they are reviewing our responses and that we should expect a panel meeting in the first quarter of 2020.

Although an exact date has not been scheduled yet.

We are now preparing for the panel with the expectation that we may get some additional questions.

In advance of the meeting as it is commonly done.

Regarding our de de Harp program, we have initiated several centers in the U.S.

Given that this is the first of its kind trial of BTD donor for heart transplantation into U.S.

And to maximize the probabilities for successful outcomes.

Our protocol requires that old centers should perform to trial runs with Lcs heart system in a D.C.D. don't ever three volt environment.

We did this to minimize any potential learning curve errors.

The active centers are in this period of trial runs and we expect to have a for the first clinical transplant over DCD hard in the U.S. before year end.

Our international business had a solid quarter.

We're delighted to announce the addition of three new major heart transplant centers in Q3 from France, Czech Republic, and Kingdom of Saudi Arabia to join our our associates Harp International business.

I want to conclude this section of the presentation by providing our outlook for the remainder of 2019.

For the full 20 Nike.

Given the earlier completion of those he has liver trial, which pulled some revenue from Q3 into Q fed from Q4, two Q3 and our reliance on that if de review timelines for the OTI has liver ideas, we are maintaining a guidance range of about $2 million for the year, we continue to expect.

To achieve the revenue in the range of 23.5 to 25.5 million for 2019.

With that I will turn the call over to our CFO , Stephen Gordon and I will turn back with some closing comments.

Steven [laughter]. Thank you [laughter] I'll go ahead and review the financial results for the third quarter of or 29 to fiscal year.

As I've done in the past one showing revenue results I will provide both gross revenue, which is the amount we invoice from customers as well as net revenue, which deduct certain clinical trial and data collection costs that we paid to the clinical centers involved in our trials.

For the third quarter 2019, gross revenue was 7.9 million.

A 66% increase over the third quarter 20 team and our Q3 net revenue was $7.2 million, 78% increase over the third quarter fiscal 2018.

I was already mentioned the strong increase in sales was realized across all products and geographies. The 7.2 million dollar net revenue included 2.1 million of lung 73.7 million heart revenue and 1.4 million of liver up.

And on a geographical basis 4.3 million was in the U.S. and 2.9 million was at U.S.

The gross margin for the third quarter, 2019 was 59% compared to 53% in the third quarter of 2018, improving gross margin was driven by the increased sales volumes.

Our average selling price of owes us disposable subs and improve the efficiency and productive.

Total operating expense.

Of 11.5 million in the third quarter 20, Nike grew by 89% compared to 6.1 million in the third quarter of 28.

The increase in spending was driven first by SDMA as we continue to invest to support sales growth as well as public company costs, and secondly by R&D expenses related to new product development and clinical trials.

Our operating loss was 7.2 million in the third quarter 20, Nike compared to 3.9 million in the third quarter 2080.

Our net loss for the third quarter 2019 was 8.3 million compared to 5.1 million in the third quarter of 20 feet.

Finally cash cash equivalents of marketable securities were $88.3 million as of September 20, 829 team, which equates to a reduction of 7.9 million from the belt at the end of Q2 20 Nike.

And our weighted average common shares outstanding for the quarter was 21.1 million.

With that I'll turn the call back to our lead for closing comments [noise].

Thank you Steve.

We're pleased with our results for the first three quarters of 2019.

We remain focused an exit executing our plan to drive broader adoption and go for our three well she has technology platforms in lung heart and liver transplant.

We are encouraged and excited about the future of transplants.

Where inflation, we are influencing and driving significant transformation in the global transplant field.

And the that we are confident that the Lcs will become the next standard of care for the long hard and liver transplantation.

Looking forward, we're excited about many key milestones that will become.

Major catalyst for our goal for the next several quarters.

Starting with the expansion or expanding our commercial traction for OTI has long in the U.S.

Announcing the first successful U.S.D.C.D. heart transplantation.

Achieving Lcs heart FDA approval to position the OTI has as the only cardio thoracic and the only multi organ platform approved by U.S., if the for transplantation in the U.S.

And now one thing the read out.

The Lcs live our pivotal trial and driving towards approval dose, yes liver in 2021.

And finally further developing the integrated turnkey service model to expand donor organs utilization and maximize donor organs availability using the Lcs technology.

Again, thank you so much for being on this call and now we can open for questions operator.

As a reminder to ask a question.

On your telephone to withdraw your question press the pound.

Please standby compiled acuity roster.

And our first question comes from David Lewis with Morgan Stanley . Please proceed with your question.

Hi, Good morning, just few questions well, let's just to start just picking the international dynamics in the in the third quarter actually West is very strong U.S. was somewhat flattish sequentially can you sort of walk us through two things what drove those two dynamics in the U. S and X U.S. number one number to what you're seeing from an underlying traction perspective.

And long.

Specifically on a standard versus extend the criteria and then I had a couple of follow ups.

Sure.

The driver for growth for our international business in Q3.

And what stemming from the addition of these new.

Sensors with new geographies.

That was really the that drive our for that.

Significant growth in Q3.

In the U.S., we we see we saw growth and oil.

The oregons the long was a bit flattish and we discussed this before there were some stocking orders for the long in Q2 that we we we hope that it might not impact us in Q3, but that might happen.

It did impact us in Q3.

We as we sit here today, we see.

We're not concerned about that dynamic.

We we know that the U.S.

Transplant market is moving in that direction, we we are expecting for the Lcs.

Given the scale and given the.

Magnitude of the centers and their volumes.

You know where allowing that to develop on on.

Over time, we have high degree of confidence that that will correct itself.

Over the next one or two quarters and 2020, we don't see any we don't have any concerns about that our ability to grow.

The business in the us for lung and frankly other organs as well.

The second part of the question David was can you remind me with the second part of the question. Please potato within lung specific only the you asked what you're seeing specifically on standard Red curious versus extended criteria, where the traction is is that you better or.

Yeah, I would say, it's it's approximately 60 40, 60% extended criteria and D.C.D. and 40%.

Then the criteria.

And again, we were seeing that line in this and.

Active sensors is really.

Starting to disappear.

I'd like to.

Ill wait and see more centers that line in the San starting to disappear our our vision as we discussed before David that within the next two or three quarters. It definitely in 2020.

People would not be recognizing a set of criteria and that extended criteria with Lcs.

And we're starting to see that in the in them into active centers in Europe .

Okay, and just to too far from Stephen just.

Thinking about the guidance or fourth quarter and while these comments around liver trial, finishing earlier, how should we thinking about revenue growth guidance implies obviously mid point or are up or in the range. Two different dynamic should we expect flattish or should we expect revenue to grow sequentially and just help us understand this fourth quarter dynamics and then Walid just an update on the liver interim look and are you still expecting.

Second quarter heart approval, given the FDA panel update Ah. Thanks, so much.

So let me address the.

Liver and the heart.

We have not done an interim look and deliver on given the accelerated pace of enrollment we're driving directly to that filing of the pmeight.

From everything we know today were very excited about this trial. We're looking forward at the final analysis, which we expect to have in the Q1 2020 timeframe.

As far as the hard approval.

We are.

We are anxiously waiting that schedule of the panel date in Q1, and we feel confident given.

Given our knowledge of the datasets given our knowledge of the questions that we've seen so far from FDA.

That we'd be able to address any questions and we'd be able to present.

A solid clinical robust case to the panel and we're hopeful that we will be successful in obtaining that panel support and in Q1 and hopefully March towards an approval in the Q2 s timeframe.

Obviously, all that will be.

We'll be.

Further brought into focus once we know exactly when the panel date is and we're hoping that we would have that visibility before year end, but we feel very confident David and based on the dataset based on our knowledge of all that that analyses. We performed based on all the questions. We've seen from F.D. today that we feel comp.

But in our ability to address any question that could come from panel, we feel very confident our ability to present, the trial results and and.

Support the approval decision for our heart indication and we hope that that would be in the Q2 timeframe.

So I'll turn it back Steve David So relating to the guidance so given the dynamics that while the mentioned about the about deliver trial and the FDA. We didn't feel like we could narrow the guidance. So we'd love to $2 million range and it's not with updates weighted on one end or the other we're look kind of looking at the middle Billy.

Thank you.

Ladies and gentlemen.

One.

Ask a question.

Next question comes [laughter] [noise].

<unk>.

Your question.

Great. Thanks, Luis can you hear me okay. Okay here just find Jason good morning.

Good morning. Thank you for taking the question so wanted to go back to.

A couple of the points meeting in the David's question, so outside the United States.

Congrats on three new centers.

Turning to make sure we're asking about the the.

Context the revenue.

With those three new centers, bringing on board were there any what were the wisdom, where the revenue generated in the quarter procedures or were there any stocking or one time.

Revenue bumps in the quarter from are you.

There were there I would say there were mix.

Jason certainly the order came in as a stocking order, but the center has already started doing cases, but these three centers where were brand new centers. So by definition it was a stocking order.

Okay, great. So in the United States one of the.

Well were things that we spent a lot of time on with physicians during due diligence was the extended criteria, obviously and how.

They will employ this over time.

What was quite clear it or the the major long since as the United States would would like to do formula lung transplant procedures and they're doing today.

But what also is quite clear is they wanted to maintain the high level.

Accessible outcomes that they had generated here to four with standard criteria. So can you talk about the pace here.

Centers simply just doing more.

Hi, young transplantation procedures that doesn't seem to be happening yet notwithstanding.

We're now a couple quarters beyond the approved for extended criteria.

What do you think the inflection point is going to be the data will create quite clear clearly the centers can make more money if they're doing successful procedures on the other hand, if they're not doing system procedures that can be a liability. So.

They are going to be careful but what is the inflection point in your mind there when we when do we started to Seo Seo swung the United States.

So the promise or showed the results that that could really is in a encapsulated in the promise for that that extended criteria.

It's unity.

Sure.

So Jason I.

The.

The main reason why we haven't seen that inflection point, there's actually two reasons why we haven't seen that inflection point yet.

The first one is really just procedurally, which as these centers have to go through the process to convert from a trial center into our commercial center that included.

Several.

Cycles of.

Transferring from research to post market within our be approval cycle in between.

The good news as we are at the tail end of that process. The next one is is actually it's actually two parts one is.

That said that piece of Bob.

Center are getting comfortable with doing more Keith is.

During the outcomes are on hand, not being compromised and I think we're achieving that in that in active centers in Spain.

The next point is really broader dissemination of that data and addressing the logistical Pete and that's that initiatives that camera and his team has been heavily engaged with in Q3, and then well into Q4 I have high degree of confidence.

And the repeat that one more time I have high degree of confidence that.

Well she has long is going to demonstrate the promise that weve.

With weakness in the trial.

Because I'm aware of these initiatives and I'm aware of how the market is receptive to this and I suspect that by mid 2020. This is going to be obvious to everybody.

And not just transmit it but it's going to be obviously, then talk community, including our shareholder base. So.

We want to make sure that.

We proceed deliberately we wanted to make sure that we are laser focused on the outcome. We're laser focused on the quality of the outcome.

And I have no doubt that we felt we will be able to demonstrate that.

Across all stakeholders ship within the next two quarters.

So that's that's my my.

My answer I think you to that question.

Good.

Good to hear we thank you for that last question Green all when you're out of the way here.

Youre pilot program with respect to the service model.

Showed some really promising.

So events a quarter or so ago can can you update us on that program and whether or not or planned plans for additional.

Service.

This is to be done over the course next quarter. So.

Thank you.

I, usually don't like to talk about things before they actually happened, Jason as you know but.

Given given that you asked me.

I fully suspect that we'll be announcing several programs.

At our that same nature of the Hawaii programs, but in the main land use.

These are the initiatives that I was referring to earlier and I was hoping to address them hopefully in the Q1.

Paul but these are that the Hawaii program has caused a significant momentum and awareness of the capability of the Lcs technology across major us transplant stakeholder ship and opioids in the mainland use.

So these are the initiatives that Tam or and his team are heavily engaged with and I fully suspect that that will materialize within the next quarter.

Great. Thank you Pete that leading edge if that were materialized in the Q1, and then it's going to grow from there.

Thank you.

Thank you.

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Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.