Q4 2019 Earnings Call
Greetings and welcome to noticed <unk> fourth quarter fiscal year 29, <unk> earnings call.
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I would now like to turn the conference over to your host Paul Arch Whiteside Pfizer's. Please go ahead. Thank you operator, and thank you everyone for joining us for the modus T.I. fourth quarter 2019 update call today, representing the company, our Tim Moran Chief Executive Officer, Andrew Taylor, Chief Financial Officer, and Mark Pomerantz, President and Chief.
Operating officer of modus G.
Before turning the call over to management for their opening remarks, I would like to take a minute to remind you that this conference call and webcast will contain forward looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward looking statements reflect our opinions only as of the date of this call we will now.
Not undertake an obligation to revise or publicly released the results of any revisions to these forward looking statements in light of new information or future events.
Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward looking statements are discussed in greater detail in our most recent filings on form 10-K, and our other periodic reports on forms 10-Q, an 8-K filed with the FCC.
I'd now like turn call over to Tim Moran CEO of modus G.I. Tim.
Thank you Paul and good afternoon, everyone.
Thank you for joining us today Q4 2019 earnings call.
I would like to start by providing a business update before turning the call over to Andrew to review our financial results for the fourth quarter.
The end of our prepared remarks, we will open up the call for Q1 eight session.
My business update today will focus on three key point.
First.
The remains a substantial unmet need and large market opportunity for the pure abuse system and we're focused on what we believed to be the right initial segment critical inpatient calling out cookies.
Second, we're making solid progress with the initial stage of our commercial launch in the U.S. with the pure view system being placed in a number of leading hospitals that we intend to make our t. reference centers to support future commercial expansion.
And third the current Cobiz 19 crisis has created an unprecedented new reality in the health care and broader financial market and we're responding by significantly streamlining our organization and reducing overhead cost to more efficiently manage our capital resources.
I will elaborate on each of these key point.
In the fourth quarter 2019, we launched the initial stage of our commercial program for the pure view system in the U.S.
It's mark the key inflection point for our business and I'm pleased by the early success, we are seeing as we bring our revolutionary new technology to the market.
We expect a pure system could have a significant positive impact on patient care in the multi billion dollar Colin asking me market as awareness of its capabilities growth throughout the medical community.
In order to optimize our initial commercial focus we completed an extensive market assessment and enacted a clear go to market strategy.
We wait several factors, including clinical need economic benefit and reimbursement that ultimately focused our efforts on hospital based critical Colin as could be principally for emergent condition, such as lower G.I. bleed severe anemia infection or undiagnosed abdominal pain.
The offer greater context, let me share a few key statistics.
There are an estimated one of the half million inpatient going after these performed each year in U.S. Hospital. These are not elective nor are they screening procedures, but procedures that typically require immediate diagnosis.
In terms of the significant unmet need a new study conducted at the Cleveland Clinic that was published in 2019 demonstrated that 51% of the approximately 9000 patients included in the study experienced inadequate bell prep prior to their inpatient going out to compete.
Let me address that universal unmet need we designed our pure be system to allow the G.I. physician to rapidly and safely cleanse the Colin.
During the call enough to be procedure, thereby eliminating costly delays.
The execution of our commercial strategy supports building brand awareness, among leading physicians and hospitals generating physician to position dialogue and validating pure view as a critical tool in hospital G.I. program.
We are focused on being at the rights centers with the right position and making sure we're providing the appropriate training. So pure view is utilized but the right clinical scenarios and use cases.
During our third quarter call I said clear objectives for the fourth quarter, including.
Expand our sales pipeline and backlog of target hospital.
Gain product evaluation with the National and regional Hospital networks.
Worked through the value analysis committee or back purchasing process.
And begin to build further awareness appear view in the market.
I am pleased to share that we are executing against each of these objectives.
Sorry launched in October 2019, we've now please the pure be system in more than 15 major hospitals, including several of the top ranked G.I. centers in the United States.
These include prominent hospital system, such as the Cleveland Clinic, you see outlay.
University of Texas.
You S C enticing or medical center.
Each of these initial hospitals are moving through the sales process as expected.
Based on our current experienced timing to complete the entire sales process is ranging from approximately four to six months or possibly longer depending on the complexity of the institution.
I think about this group of hospitals as each progressing through the various stages of the continuum towards purchase including.
One the product is onsite and currently in evaluation.
To the evaluation is complete and now pending final value analysis committee approval to begin purchasing.
For three the value analysis Committee has approved purchase and the hospitals now purchasing the pure view disposable sleeve on a repeat basis.
Additionally, although early in our launch we're encouraged by the fact that we have been approved for evaluation in all of our targeted hospital and also have not been rejected by a single value analysis Committee and the hospitals that had submitted for approval.
As it relates to the capital purchase of our pure be workstation, we're working with our hospital customers around their internal capital budget cycle, which can vary widely by institution.
As I've mentioned previously we're offering a simple lease or monthly rental program as alternatives to outright purchase of the workstations.
That said, we're not delaying hospital conversions, while we work through the capital purchase process.
The long term success of our business model is built on driving repeat utilization of the pure view system, which ultimately drives repeat purchases of our disposable fleet.
In addition to our initial hospital placements our sales team has established a strong pipeline of schedule devaluation.
Particular note our upcoming evaluation at the Mayo clinic.
And why you and northwestern University Medical Center.
Prominent Gee I hospital.
I want to remind everyone that we're employing a thoughtful and strategic approach at each and every hospital, where pure view is being evaluated ensuring we have well trained and satisfied customers is critical to our success.
We do not see this as a numbers game in terms of rushing to as many hospitals as we can for placements.
It's all about driving utilization at these initial hospital, which includes the repeat sale of our disposable pure view sleeves.
Our goal is to establish he referenced centers, which will become a central component of our long term growth.
Creating this strong foundation is the critical first step to building this market and sustainable growth overtime.
In terms of driving utilization our strategy is to target two to three G.I. per hospital initially and then upon approval expand to additional position on a monthly basis.
To that end I am pleased to report that in Q4, we trained more than 50 GE eyes on the purity system.
More importantly, our earliest sites have now move from the initial two to Threeg eyes to upwards of 10, G.I. using the pure view system.
We believe that these are positive early signs that our strategy is working.
For modeling purposes, we expect customers overtime to initially ramp up to approximately five to 10 pure abuse system procedures per month.
What did I hear you additional commercial and product related update.
First let me share of the story of remarkable procedure that was conducted this past quarter using the pure view system.
52 year old mail with admitted to the intensive care unit.
With hemorrhagic shock caused by post polyp back to me bleeding.
In order to manage this critical situation the physician chose to utilize pure view without any pre procedural bout prep in order to expedite the case.
The procedure was conducted at the bed side in the intensive care units.
Upon entering the coal and use of the colonic mucosa, where obstructed by blood at which time the physician you'd like pure view, which he indicated work quote perfectly.
Allowing for excellent visualization.
As a result, he was able to identify the source of the bleed and therapeutically treat the patient.
The physicians conclusion was that the pure you system helps stop a massive lower G.I. bleed and avoided the extra time associated with bell prep as well as the need for and geography.
The patient was transferred out of the I see you in less than 10 hours after presenting the emergency room.
This is the value that we believe pure view brings to the market. We continue to be encouraged to see these real world used cases, where our system enabled the physician to perform critical therapeutic intervention.
Next from a product development in market expansion perspective, I have to update but I'd like to provide.
First we announced last week that we received CE Mark approval for the second generation pure view system.
Its approval means that the system and disposable sleeve meet all of the regulatory safety and performance requirements for it to be commercially launched in Europe.
This is a significant opportunity as we estimate there are approximately 1.2 million inpatient cooling off studies conducted in Europe annually, making it one of the largest potential markets for our system.
Receiving the CE Mark is an important milestone in our commercialization strategy for Europe.
This approval in hand, we're now able to further assess potential strategic partnership opportunities with established medical device companies and distributors that have commercial operation in place across Europe.
Next we are seeing a very compelling new opportunities develop as it relates to the potential future use of our pure view core technology.
Multiple positions that are using the pure view in lower G. I call enough Cubbies have repeatedly inquired about using our system during upper Gi <unk> endoscopy.
Upper Gi bleeds, which occurred in the esophagus in stomach occur at a rate of approximately 400000 cases per year in the United States.
The mortality rate of this condition is upwards of 10%.
Removing it here in blood clots from the field of view is a significant need in terms of allowing that position the ability to fine and treat the bleed.
We believe we can potentially adapt the safe and effective cleaning capabilities of the pure of you system for you staring upper Gi lead cases.
We are actively exploring the market product requirements and the regulatory pathway.
Well, we're early in our exploration, we believe this could be an opportunity to leverage our existing sales team and physician relationships.
We will provide additional updates as we continue our work in this area.
Finally, I want to address the impact of the Colgate 19 pandemic on modus G.I. as well as the proactive and aggressive response, we are implementing to allow us to continue to execute on our business plan.
Extend our cash runway.
And build long term shareholder value.
Well the majority of all hospitals have implemented rule that prohibit non essential visitors, including our sales team we have maintained continuous contact with customers.
Through the use of technology I'm pleased to say that we've successfully supported several pure view enabled Colin asking these remotely.
Additionally, we also built appropriate inventory of both workstations and disposable sleeve to support our customers for the next several months and our manufacturing partners continue to be fully operational.
In the near term, we do expect that situation will causing disruption in the flow of inpatient pulling off copies as hospitals push resources towards treating cobot 19 patients.
We anticipate device placements at new hospitals could be limited and the advancement of value analysis Committee reviews may likely be postponed on a near term basis. That's hospital purchase decisions are put on hold.
Well this disruption persist we recognize it will have an impact on our ability to begin new schedule devaluations in our pipeline.
That said it is important to remember that we believe the utilization of the pure view system provides a means to complete inpatient pulling not could be more predictably, allowing hospital patients to be discharged more quickly.
The valuable role pure view can play aside we are taking decisive action based on the assumption that the current market environment and unprecedented circumstances, taking place in hospitals across the U.S. will impact our business plan.
After careful consideration I'm announcing today a plan that we will execute upon immediately with expected completion by the end of the second quarter.
This plan will allow us to.
Continue to successfully execute our commercial strategy by driving our technology into the large national and regional Influencer Hospital.
Significantly extend our financial runway by reducing operational expenses through a material reduction in departmental and project related spending.
This program is expected to reduce our 2020 internally forecasted cash burn by approximately 50%.
We will make material labor and non labor related expense reduction in both our Israel and U.S. operation.
We will also be reducing headcount by approximately 50% with reductions across all departments, including a significant reduction in our sales and marketing organization.
These are very difficult decisions, but also necessary to ensure that we protect our business our customers and our shareholders.
By reducing our cash burn and extending our runway. We believe we will gain the time needed for our hospital customers to come back online, helping us to continue to build a foothold with pure view in this very large market.
Well, our organization will be leaner, our commercial focus developing reference centers that major national and regional Influencer hospitals will not change we will continue to focus on driving demand generation and pure view procedural volume, which is our top priority.
The more experienced the physician gas with pure view and the more clinical cases that they're exposed to the better they are able to see the true value of our technology.
In addition, we will strategically work through our pipeline of targets and seek to complete the sales process in accounts, where we are already engaged.
A key metrics will be monitoring closely will be vac approvals.
Leave utilization.
And the number of physicians trained and performing repeat procedures.
Finally, as we look ahead, we believe this approach will enable us to continue to build the necessary foundation of account and validation of our technology to allow for an array of strategic alternative overtime.
I will now turn the call over to Andrew to discuss our fourth quarter financial.
Andrew.
Thank you Tim and thank you everyone for joining us today.
We reported revenue for the fourth quarter of approximately $100000 from sales related to the pure view system, which first became available for sale in October 2019.
As Jim mentioned earlier, we continue to gain new system placements at leading hospitals across the U.S. and are ramping up the training of Josh.
However, the majority of these centers were operating under an evaluation period and working through the elements of the hospital back purchase process at year end.
For the three months ended December 31st 2019, we reported a net loss of approximately $5.9 million, where net loss per diluted share up 21 cents compared to $5.6 million or a net loss per diluted share of 34 cents for the same period last year.
The fourth quarter of 29 team included noncash expenses of approximately $727000.
Sensibly related to stock based compensation.
Compared to $623000 noncash expenses for the same period up 2018.
For the year ended December 31st 2019, we reported a net loss of approximately $23.1 million or a net loss per diluted share of 92 cents.
Compared to $22.3 million or a net loss per diluted share of $1.47 cents for the same period last year.
The year ended December 31st 2019 included noncash expenses of approximately $3.6 million principally related to stock based compensation compared to $6.8 million of noncash expenses, principally related to stock based compensation and warrant expense.
For 2018.
During the quarter, we entered into an $8 million secured term loan with Silicon Valley Bank. The term loan requires monthly interest only payments through December 31st 2021.
Followed by monthly payments of principal and interest until December 1st Twentytwenty Threeq.
Additional material terms related to the loan can be found in our 8-K filed with the Securities and Exchange Commission.
We reported approximately $28.7 million in cash cash equivalents and investments as of December 31st 2019th.
As Tim noted, we are taking important strategic action across the organization to reduce costs with minimal impact to our commercial business objectives.
This plan is expected to be implemented during the second quarter.
With our new normalized quarterly cash burn taking effect as of the beginning of the third quarter, which is anticipated to be approximately 50% less than our previously internally forecasted rate.
Once this cost reduction plan is in place, we believe our cash cash equivalents and investments will be sufficient to ensure compliance with our silicon Valley Bank liquidity covenant into late fourth quarter, 2020, and meet our anticipated cash requirements into 2021.
And with that I'll now turn the call back over to Tim.
Thank you Andrew.
I want to conclude where I began my business update reiterating threeq key takeaways.
It remains a substantial unmet need and large market opportunity for the pure be system.
We're making solid progress with the initial stage of our commercial launch in the U.S.
And we are responding to the current cobot 19 crisis by streamlining our organization and overhead costs to more efficiently manage our capital resources.
In closing we are receiving positive response from GE eyes at some of the leading hospitals in the world.
We believe that this speaks volumes about the opportunity for the pure view system in the market.
We remain bullish about the compelling technology, we created a substantial first mover advantage.
The significant positive impact we can have in terms of improve patient care health economics and hospital resource utilization.
We believe these metrics have become even more critical with the cobot 19 pandemic.
Well, we're faced with an unprecedented external situation that requires immediate intervention and leadership, we are acting with urgency to adapt to the circumstances, while remaining steadfast in our commitment towards creating long term shareholder value.
I would now like to open up the call for questions.
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Our first question today comes from Matthew O'brien of Piper Jaffray. Please go ahead.
Afternoon. Thanks, so much for taking my questions. You know 10, just for starters. The Q4 result was good I think you know we were expecting a little bit more I know your end capital purchases tend to be a little bit stronger, which it sounds like you've got caught up in some back analysis.
Yes, just some other processes. There can you talk about you know what was some of the some of the gating factor that you saw in Q4, specifically.
As far as close placing purity.
Yeah. Thanks, Matt.
You know if I looked on a whole at the work that we did in Q4 I would say that the progress. We've made is is really in line with you know what we see from the typical value analysis Committee process and you know the internal processes that these hospital go through to make final purchase thing to.
Vision. So there's always you know a handful of priorities that these hospitals are dealing with in addition to you know modus g. I am getting getting the approvals done so I would say, there's nothing out of the ordinary Matt I feel like we've made very good progress. The earliest accounts that we started with back in October have.
I've been able to move through that process and call. It roughly that 90 day period and the others. You know are now continuing and are getting close here to being across the goal on if you will and becoming full purchasing customer. So you know really the guidance that we gave around the sales process timing of roughly four to six month I think is is it.
Pretty much nailing it in terms of accuracy you know some of the larger.
Most by hospital, a I'd ends or can be a little bit more complex from a bureaucracy perspective, but I think the way to think about this probably four to six months roughly the kind of work through from from the beginning of the process till ultimate purchase.
Okay, and those 50 hospitals that you pointed out last quarter on certain days you asked I mean again sounds like none of those have fallen off as far as being in the funnel.
No. That's it's a really good point actually as a matter of fact, so so we've had really none of them fall off the final and quite frankly on the front end in terms of generating leads we've been able to generate a backlog of leads you know well beyond what are what the size of organization could could immediately follow up with.
So from the standpoint of activity in account targets you know the funnel has been built very nicely Matt.
Okay, and then two more for me.
First one thing I don't know how much you want to actually get into <unk>, but I think it's probably be helpful. Given how far we are in the into Q1 here just to talk to provide any kinda commentary that you can as far as as you know how things are trending maybe in January or even want to go into February pretty cold, David just to help.
Let's get a sense for the demand that you're seeing I know, it's you know she was softer quarter chop. It all back how things are trending before all this you know that's really broke out because we're trying to get a sense for you know, but demand side of things for pure bid.
Yeah, I'm, absolutely. So I would maybe give me a couple examples so as I said earlier I'm very pleased with the progress you're making and we continue to set up new installations and evaluations and in all of really the accounts that we've targeted and we feel are the right facilities.
Be and to build this you know foundational Om group of facilities that will become our reference sites. So you know that has continued on track in January and February and you know for the most part even early part of March and then obviously given the situation things came to a pretty abrupt halt as as hospitals started to become over.
Well with the with the current environment of Cold bid, but you know what we've seen in those earliest accounts, where we started a with a couple of physicians, we've been able to expand that and multiply from call. It two to three docs to upwards of 10 or more in some cases or 14 or 15.
Additions that we've trained that if now done procedures. So when I look at that I you know to me those are the the metrics that you want to see happening in accounts that you've converted have have gotten approval or buying the sleeves and you've been able to expand to more docs and what the what that's led to and those accounts is repeat orders so.
Our intention now is to continue to focus on this group of accounts that are in the pipeline and get them all to that place, but but really leading into the cobot situation everything was moving along you know as expected.
Okay. Thanks, one last one for me is just on the financing side. So I just want to make sure I'm summing up everything, but I'd love. Some some comments as far as they go forward strategy, but you know $20 million of cash exiting.
2019, a with the Silicon Valley Bank loan included in there gets you through to the end of this year, roughly where you know enough cash to to make sure that you don't shouldn't be any covenants I'm, assuming STB will be pretty pretty lenient as far as covenants go with with you and everybody and then.
You have enough cash to get you in the 2021, probably something like the first half is that fair and then more importantly, you know I'm sure you're not sitting sitting idly by but can you you don't have to get into details, but just give us a sense of some of the options that you're potentially pursuing be a strategic Ics other other options.
You may be pursuing on the financing side could give investors.
Competence that you'll be able to come through this you come out of it and then get back to their growth trajectory that we all think you'll you'll deliver I'm going forward. Thank you.
Sure Yeah. Thanks, Matt Yeah. So let me start by saying you know the what we've announced today in terms of this cost reduction program first of all you know we felt as I said it. They did it was very critical that we were decisive and we took immediate action here.
To make sure that we protect our business our shareholders our customers, which is why you heard you know me layout that plan and you know part of it is the current environment as you know I'm with hospitals, obviously, there's disruption and there's a degree of uncertainty about you know when when things start to come back to you know any degree of normalcy.
But the other part of that as the financial markets and I think the way. We're thinking about this is we've now taken the action to give ourselves more time to gain that clarity and hopefully for the market to come back a bit and for us to be able to get right back on our trajectory in terms of you know the progress that we're making.
And be able to show you know the validation of pure view being utilized in these major centers that they the types of facilities that I commented on earlier I think what that does is it allows us to continue to consider a variety of different strategic options and I think those include you know and these are things that weve.
Actively been discussing in working prior to Covidien will continue moving forward you know obviously, there's the potential for strategic partnerships not necessarily even financial but strategic partnerships for commercialization and that could include obviously O U S territories.
And that's an opportunity to potentially bring cash infusion into the company will continue to explore that you know I think this device is of interest to two folks that we've been speaking with but then on the other side you know listen we've shown that we can raise money in the a in the equity market through a you know publicly marketed deal.
But you know given where our stock is trading right now and given the current environment that is that is not a top priority or for us as the leadership team or the board. So we'll continue to engage with large potential financial partners as well you know of which there are many that we've we've been speaking with that see the value of the market that we're building.
And where they were the only one in the space. Its a multibillion dollar market. We've got an incredible technology and then on that and unmet need quite frankly that resonates you know in every hospital small and large and whatever geography, you're talking about the U.S. or abroad. So I think we'll continue to explore that and make the right decisions when the time.
But it's important that the take away from this is the reason we backed it. So quickly is to allow for you know the world to get back to you know little bit more of a normal place and not be up against having to make a decision in the short run. So you know we we'd like to think that we have kind of put the control back you know what our court.
To make those decisions down the road.
I hope that helps Matt.
[noise]. The next question is from Kyle balls are of Dougherty and company. Please go ahead.
Hi, good evening, thanks for taking the questions here.
Just a follow up on unmatched fans question and just to be clear sight I think.
Run rate previously it was about 6 million a corridor.
And so did so are we looking at it fine this 50% reduction at about 3 million per quarter on after able to complete this and this next month going forward.
Yeah. So Kyle that's that's the right way to think about it. So obviously, we haven't put you know specific burn rate guidance out, but if you look at our history and what we've talked about for 2020. This will be approximately a 55 zero percent reduction you know off of what we were expecting the quarterly burn.
To be throughout 2020 and to your last comment yes. The plan is underway, we fully expect a that this will be completed by the end of Q2. So when we come out of Q2, we will be looking out a new normalized run rate in Q3 in terms of cash burn Okay got it and.
Can you highlight a little bit about what the departmental and projects related spending cuts encompass and specifically and how you mentioned there'll be some cuts in sales and marketing how are we still looking at 10 territories or.
Are we treat me that back until things normalize in the market and then ramping back up.
Yes, so listen I mean this decision to do this does not come easily and you know a lot of time and careful thought was put into a into doing this with both the leadership team and our board.
And a you know it when we're faced with really an unprecedented situation such as this pandemic you know we had to take action. So as we looked at the departments. You know we did as we went back to what's our strategy and what are the key priorities for this business the need to have happening.
The number one thing by far is continuing demand generation and validation of our technology in the market with pure view, so from a commercial perspective and what we've said you know for the last year is we believe that the first step in that process is getting this core group of a large national regional Influencer hospitals.
The Cleveland clinic, so the world you know as our customers and references so as we went through the process of looking at the various reductions you know we kept that as our guide post in terms of making these decisions. So you know things that yeah without getting into granular detail things that we're you know not a key priority to allow.
I was to do that are things that we're going to you know put on hold for now, but we don't believe it impacts you know the the most important objective, which is validating the commercial viability and scalability of this business, which then I think you know as we do that leads to a variety of different strategic options that we can take later in the year.
So specifically from a commercial perspective, what I want to comment on their it's the way I would think about it is roughly about a 50% reduction in terms of the fields are facing organization and part of the way we looked at that tile is as I was saying earlier to Matt.
We have been able to generate a significant pipeline of opportunities. So you know the places that we couldn't go is not something that we need to focus on right. Now we've got a very very large backlog of a of sites of scheduled evaluations. So basically with a leaner team. We believe that we can still.
Penetrate these large facilities, we've obviously, you're making decisions, where we have the appropriate geographic coverage the relationships in place with the key centers that are in the works are ready already customers of ours, and where we can continue to expand but I would think about it a similarly across the departments and in sales and marketing roughly 50% reduction.
And.
The other point I would make is you know.
We think it's important that we take this decisive measure now you know it allows us to pull our head up 90 days from now or or six months from now and if we need to add back in certain areas, where we will absolutely do that but you know we're confident this is absolutely the right decision.
For for the current environment that we're working within in the uncertainty that is still out there with our customers.
Sure No I mean, Kobe is unprecedented I think the spending cuts as wise.
Certainly having 29 million on the balance sheet as an enviable position for small cap Med Tech company early and commercialization. So I think that makes sense, maybe just one more.
From your early commercial efforts in the U.S. can you talk a little bit.
I'm more about when that docs are using gen. Two when they're deploying it I mean are there any trends you're seeing is it primarily in g. I believe it or is it in other conditions like Leidos and and do you have a sense for how frequently these operators are utilizing pure view in their poorly Pratt.
Cases in general.
Yes, sure. So you know listen broadly speaking the value prop that we provide is a the ability to control delays, writing and give predictability to the procedure that you know is clearly not a predictable procedure for you for hospitals and it was you know I mentioned earlier the the news.
Study that was a it was done this past year by clean at Cleveland Clinic, you know again showed very stem similar numbers within their system, 51% of the patients that were poorly perhaps after going through 24 hours clear liquid diet and bow prep right. So where pure view comes in is having the ability to impact that entire population that said.
What I think resonates immediately or is the ability to get after the most difficult clinical cases, which is absolutely Gi bleeds right and Gi bleeds make up about 60% of the procedures you know with what we're seeing in in the real world than what we saw an eye reduce study so.
So I'm getting after a G.I. bleed immediately where you want to get in and get diagnosis, where if you don't get their quick enough oftentimes they couldn't quite over and then you can identify the bleed, which obviously could potentially lead to a re bleed something that you absolutely don't want to have occur. So I think the clinical conviction in the the excitement comes around.
Since comes around being able to treat a patient that they otherwise couldn't treat and then as the devices on site and they get more comfortable more used with it you know it starts to expand to more and more patients, but I would say that's the that's probably the largest trend that we've seen you know and the other piece too is you know we don't really an enabling technology so were.
Providing visualization right. So there's so many different technologies that are now being introduced in into medicine, but any even into g. I like artificial intelligence and other things that provide you know the ability to identify pops more quickly, but the reality is without a clean coal in none of those technologies are a benefit right. So you know weve.
Also been adding to our value prop to talk about it from that perspective is we were able to enable you know a better use if somebody's other things that they've invested in.
Okay understood. That's helpful. Thanks for taking my questions and congrats on the progress, particularly given the unfortunate covance situation.
Thanks, very much Kyle.
The next question is from Steven Lichtman Open Oppenheimer and company. Please go ahead.
Thank you Hi, guys, Tim you mentioned I think the world halt it in terms of the current situation.
He also mentioned of course that near the procedures and you guys are focused on or not elective per se, but but these are unprecedented times. So can you talk maybe a little bit more about sort of what you're seeing on the ground right now in terms of new yeah. How many are what would what proportion of procedures that you thought would have gotten done or are actually still.
Well getting done or any any other color you can provide on that front.
Yes, sure Steven that you don't listen it's a bit of a moving target based on you know where the hospitals are and obviously if Britain your new Yorker.
Chicago and other parts of the country things are a bit different and I've been in contact with many of those are those G.I. physicians and you know getting their take but no. There. There's a couple of things here one I do want to comment that Gee I bleed is not a an elective procedure, obviously right, but given the.
So that did situation and these hospitals being overrun if they have the ability to delay I'm you know depending on the degree of the bleed I'm I've talked to some of the physicians you know they will actually I'm delay or the procedure. If it can be delayed obviously, they're going to provide you know care as needed but.
Certainly any of the procedures that are being done in their hospital based outpatient for the most part are not happening right. Now you know we have what we were picking up some of those procedures as well.
So you know, it's it's a bit of a mixed bag, but what we've been able to do and I think it's really important is virtually be able to support. These these accounts. So we've had you know G.I. bleed procedures, where patient didn't need care and they're using the pure view system and you know via a variety of different tools.
Zoom face time things like that we've been able to support the physician or the staff and help them get through that procedure. So we've been really happy about that and you know quite frankly, even before coated we've been thinking about just from efficiency inefficiency perspective, how do we remotely provide support I'm. So we don't have to be there each and every time and.
We've now with with the cobot situation of accelerated some of our our planning there so things like an app that would provide you know a very user friendly walk through of setup of the device and no other tips and tricks and things like that so we've accelerated that we anticipate that the ability to launch something like that here pretty soon but.
But right now you know, it's really hard Steve to get a prediction on like what percentage of of the cases are being done I know if it's a critical you know g. I believe they have to do what they're doing it but other than that really most of the resources that were hearing are being you know put towards covert patients as you to as you'd expect sure sure understood and Tim.
To a the <unk> one of your answers. It prior questions you were talking about the value proposition that physicians, who have begun to use pure of you are seeing and the breadth of uses.
Just given dad and the size of the hostels you're targeting it seemed like the per month target. I think you mentioned earlier of I think you said five to 10 per month that we should be thinking about seem conservative to me can you talk a little bit about you know so the the assumptions going into a into that utilization.
Sure lives in the best way to think about this is let's not forget that we've got a brand new technology that we've launched to the market right and despite the significant unmet need and how well the pure of your system works and it does everything that we you know expect and say that it does you know it's all around change managed.
Matt So I'm part of the reason we've taken this approach of you know targeting you know just a couple docs at the outset to get approval based on their or their support an input. It's because we've got to get you know initially that by end and support you know and then once the products been approved we would then go to work towards expanding.
Other physicians, but again, there's training a their training that has to happen we've got to get folks to get you know out of the old mindset of you know doing things they wave the way they've always done. It you know in change management is never easy and you know my experience. So many many years of the commercializing devices. When you have something new it takes it takes time, so I think we've tried.
To be you know as conservative as possible, but it's realistic as possible in the early quarters here you know.
On to the purposes, we're about you know a quarter and a half if you look at co bid into this Ah commercialization. So as we get later in the year, Steve We will absolutely you know update if those metrics are indeed to low but right now we think given the number of docs that we're we're training and the fact that weren't trying to be in there and ensure that they have.
A tremendous high quality experience and become you know proponents and we have peer to peer dialoging, they're up on you know the podium talking about pure view you know, we're putting the extra time in upfront to ensure that they're well trained so you know really that's the biggest reason why we've thought we put that number out there to start certainly over time that we anticipate that that number.
We will grow given the number procedure that these large sites are doing okay. Understood and then just lastly on data any opportunity that you see now over the next 12 months to get additional data out I know.
Expert everything started late last year, obviously, I assume that's on a whole, but I didnt.
We're not enough patients enrolled to be able to show some data at some point you anything you could talk to on that front would be helpful.
Yes, sure. So yes, I mean im in a very near term you know I think I'm just like all clinical.
Studies, you know there's been a bit of a slowdown if not stop and I think it you know expedite would fall into that realm, but but we would expect by the end of the year, we should be able to put out expedite <unk> data unless there's.
A delay longer than any of us are expecting so that is Ah that is one area. There are other conversations that we're having you know when we look at this reduction in spending there will be some investment that we will continue to do as <unk> as it relates to clinical programs you know and these will be clinical programs that allow for.
Our commercialization to be bolstered so there's some you know big systems in the U.S. that we've been talking to and I fully intend that we will go forward with some clinical work there and that would be around you know economic validation in the real world setting and somebody other things I think will be helpful to bolster things for US commercially later in the year, we'll provide more updates on time.
Many of those once they're initiated I do I will ask Mark and as you know Mark as one of marks responsibilities. He heads up our clinical program I will ask mark to to comment briefly on a few of the other things that we have underway as it relates to some publications or that we would expect to become.
Through here in the near term Submarket could you add some a bit of color for steves question.
Sure.
Hi, Steve Hope you're doing well.
To add a little color to.
Tim mentioned, yeah. We do you look at that were in the works with a few publications on some some data so a more full detailed manuscript on the reduced study should be coming out that's got some interesting sub analysis that we think will help.
From a commercial standpoint also we have some health economic data.
That will be also be published in a fairly near term.
As well.
And you know to mention what Tim talked about about some studies were talking some of the major centers about as well you know really looking at some of those critical patients.
And really looking at you know those urgently to get folks out of the I see you, especially in the current environment you know as quickly as possible.
We've got some exciting things in the works around that as well.
Got it thanks, Mark Thank you Tim.
Thanks, Thanks, Steve.
The next question is from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead.
Oh, hi to manager and Mark how are you.
Hi, Jeff doing okay. So I was wondering could you give a little further clarity I guess for Andrew as far as this sharp reduction.
Was there any that's taken place a this quarter in Q1 or would you expect a ultra hit during Q2, including the one to one absolutely door charger, which corn or you'll have it.
Temporary baseline Dr. tutoring.
Yeah, Steve I'm, sorry, Jeff Let me, let me just make a quick comment at all and Andrew can add color if necessary. So we are a enacting this plan in real time. So this is this will be a enacted here I'm starting this week and we'll be taking place in in Q2.
So that's the way I would think about it. So Q2 will be the time that we will work through the entire plan you know the costs associated with with managing a the changes and then we come out of Q2 with that new reduced spend a normalized kinda run rate for Q3 that if that's your your core.
Justin hopefully that answers here.
Perfect and then as far as placements can you comment about.
First quarter beyond the a the student reference in the press release in totality by the end of last year.
Sure Yeah, So I, what I would just say maybe a.
Clearly is a we continue to place more devices in targeted accounts and the way I would think about it is a approaching 20 sites.
And a you know obviously when things come back.
Online, we will continue to work with those with those institutions. So you know literally have sites that we shipped a went in did you know complete staff in physician training and then you know a week later things got put on hold so you know we anticipate we've been in contact with those facilities, we expect to get back.
On track you know once they get back to a a bit of a normal cadence with thing. So you know things continued in Q1 on plan.
Okay got it and then lastly for me you could you talk a little bit I know, a Matt asked a bit about the backlog as far as last quarter was.
I believe 60 or so.
Oh facilities and now you're talking about a pipeline more than double that so.
What's the plan is as the market kind of pauses for who knows how long, but it's a pretty much.
The pipeline is a more of an initial pipeline that will be the first number targets say you approach where in a takes kind of free up as far as a hospital scope.
Yeah, I think that's a fair way to think about it right and the and the reality is you know as I've said, you know we're going to have a reduced footprint, but we're very comfortable with the footprint that we're gonna go with in the folks that are will be leading a these specific regions in terms of the accounts that are they're working with that wordy in accounts that will be you know move.
Moving to when things come back online, but we will continue to take a hard look because at the end of the day you know I think what's most important and I've said it you know many many times about building. This foundation of reference sites. The reality is you know we want the major G.I. centers the large national.
Influences the big I'd ends right that I think Kerry both the name recognition the physician recognition in terms of you know thought leaders in the field. So we will we will make sure as we look at that pipeline that we are focused on the facilities that we feel you know accomplish that for a so I would say you know as we look at the pipe we.
Feel like we've got a plenty you know as I mentioned earlier in the works and now it's about continuing to get those are those sites across the goal line and become you know purchasing customers and that's exactly what we'll do and we're taking this downtime to continue to engage with them. You know one thing I I'm not sure I mentioned earlier, but it's really important to to remember about pure view.
Is.
The value proposition you know the black and white value proposition of this device is we are able to help hospitals get patients out of the hospital or out of in intensive care unit more quickly right and if you think about what they're dealing with now with the pandemic you know it may be hard to focus on a new technology.
But we believe this 10 demick brings you know shines, even a brighter light on the investments that need to be made to ensure they're running as a fishing approach as possible and we don't have hop up the patients in beds longer than they need to be so you know that's something I think we really need to be focused on when we come out of this its it's absolutely a a tremendous.
Benefit and Cobot is really you know pointing that out patients need need to not be in a bad when when there's a device that gets them out more quickly.
I would concur with that and and kudos on the.
The pause as we do it depends on mix thanks for taking the questions.
Thanks, Thanks very much.
The next question is from Ben Haynor of Alliance Global Partners. Please go ahead.
Good afternoon, gentlemen, thanks for taking my questions.
First off for me you mentioned, the you've got over 50 dots trend out over 15 hospitals.
Is that and so then the 29 gene.
So my understanding that correctly or is that sounds levels today.
No that was a that's at the end of Q4. So we've continued to train more docs I'm in the early part of Q1, Ben So you know and if you hit if you do the math on that obviously you know we it's it's right in that you know target of the number of physician that we'd expect that each at each facility and with with with a others growing today.
Now you know the insights as I mentioned earlier that started with you know one or two or three and now we're doing a having more physicians trained.
[laughter] that's in logic that we will continue to focus on as well you know getting experience and giving these physicians experience with the device you know what we found is when they start to do 567 procedures, a that's when they really see the value and the clinical use case across a number.
<unk> patients of the device. So that's a that's an absolute focus for the team.
Yes, [laughter] you mentioned in the prepared remarks, the yet, but some are more doors to be saying that they use the facilities ultimately get all from the once you. It's really just mentioned.
You know should we take that to me in Oh, you can I ask facilities or your at the end of the year that somewhere in the neighborhood of 150 to little box.
But you could be trains.
So its you know I don't know if the math is that simple because obviously, there's a different number of physicians, depending on the facility and and a if you. Some sites have multiple docs. They could have you know 15, G.I. docs that rotate through and manage inpatient procedures other facilities and even some of the largest facilities.
You know dedicate the bare inpatient work to just a small number so there's four or five physicians that handle all of the you know for example, G.I. bleeds. So you know you can't extrapolate extrapolate the math that every facility will have 10 positions, but I think you're right in thinking about it that way the only caution I would put out there is and will provide further.
Updates, obviously on a quarterly basis, you know, but given the reduction in the size of the team you know that'll obviously be you know tie to the number of facilities that ultimately we are in at year end.
Okay. That's not the you know just.
[laughter]. So how do you think about the utilization Oh, you know these individual docs you know the presumably the first two or three our middle the early adopters and then I would think that they would have higher utilization going forwards and yeah.
The full out or do you expect them all so users on up pretty similar level or you don't want sort of all trained dolphin. Obviously this service institution distance.
Yeah sure well first of all I do think that as they get more experienced the number of procedures that they do will increase naturally and we've seen that where you know physician gets train. They do five procedures. You know next thing. They think about is a hospital based outpatient one of their patients that they know has had a history of poor Pratt.
Immediately start the light bulb goes off and says you know what this is a perfect use case for pure view and then you know suddenly there now doing a hospital based outpatient so just naturally as they get comfortable with the device. They start to use it more often so I would expect that to continue.
The on the other thing that I would think about is you know these physicians often have kind of sub specialties. So summer interventional GE eyes, and they may be doing other types of procedures. So depending on what their daily focus is you know kind of drives the number appear view cases that they would ultimately be doing right. So some docs are doing you know sheerly or call. It ask if he is in their problem.
The overtime going to do more PV cases, where some of the interventional guys. You know maybe doing other types of procedures and you know when they do other going off could be though then use pure view because they've been trained and they're comfortable on it. So I think it'll be it'll it'll vary depending on the actual dock and what they're they're kind of focus is.
Okay that makes sense and finally from me on the opportunity I believe the opportunity.
That's you know that sounds pretty exciting, but how those are the headcount reduction in parts of the development capabilities saw on up to all swaps.
Yeah. So great question first of all we are listening let me let me make a couple of comments one I want to make it clear that our focus is driving the U.S. inpatient Colin after the market that is prior to number one but when you hear you know time and time again voice at the customer and physicians are talking to us up.
Now an opportunity for our device to help them you know therapeutically treat patients in an area where in speaking to dock sounds like there's not been a terrific solution for them you know, it's something that we look at and take seriously. So I think you know that the the change that we've just announced in terms of.
You know, giving ourselves more runway and therefore more options over time, I'm actually coincides pretty nicely with the upper Gi I opportunity because we will continue to do the work necessary with the team that we have here and we contemplated that upper Gi I was something that we wanted to continue so there's you know there's.
Market analysis, that's underway a there's a significant amount of regulatory work that where we're doing and that obviously you know there's R&D work. So that will continue. So this is an opportunity that is not gonna be tomorrow, but I think we'll be in the you know call. It next 18 months or so so we've got the time to.
Continue the project learn the things we need to learn how to potentially entering this market and you know we believe that we'll execute on our plan and we'll have a well have the options yeah. Both financially and you know resource wise to be able to attack that market. So you know more to come on that Ben but you know we will not stop on that project in terms of.
No the upfront work that needs to be done to assess it.
Especially.
Well, thank you very much for taking my questions gentlemen.
Thank you very much thanks for the question.
I just want to say in closing first of all I. Appreciate everyone's time today I know, we provided a lot of information, but I think this was really important to not only give kind of the state of the union on the business commercially but also you know how we are.
Proactively addressing a what is just an incredible and answer real time I think it all of our lives a with a pandemic as I said multiple times today, Yeah. We are bullish about the unmet need and the opportunity or the size of this market that we are building the value of the technology that we've created and the fab.
Act that we're taking the necessary approach to a to give ourselves the ability to weather the storm and get right back on track when things start to subside. So we appreciate the support of a of of everyone who joined the call today and we'll look forward to providing further updates in the near term. So thank you very much and stay safe and healthy.
This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.
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