Q4 2019 Earnings Call
At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session. If you'd like to ask a question during the session you'll be to press star one on your telephone as a reminder to these programs baby recorded I would now like to introduce your host for todays program Lisa Wilson Investor Relations. Please go ahead.
Thank you Jonathan Good afternoon, and welcome to second sites fourth quarter 2019 results call. This is Lisa Wilson of insight Communications Investor Relations for second site with me on today's call our will Mcguire, President and Chief Executive Officer, Pat Ryan Chief Operating Officer.
And John Blake, Chief Financial Officer of second sight.
At the close of market the company issued a press release detailing financial results for the three in 12 months ended December 31st 2019.
The press release can be accessed through through the Investor Relations section.
The second sight web site at second sight Dot com.
You can also accessing the webcast of this call from there but.
Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance, maybe considered forward looking statement.
As as defined by the private Securities Litigation Reform Act.
These forward looking statements.
Based on information available to second site management as of today and involve risks and uncertainties, including those noted in this afternoon's press release and second sites filings with the FCC.
Such forward looking statements are not guarantees if you sure performance.
Actual results may differ materially from those projected in the forward looking statements.
Second sight, specifically disclaims any intention or obligation to update these forward looking statements, except as required by law.
Oh.
The archive webcast of this call will be available for one month on the company's website second sight dotcom.
The benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on March 19th 2019.
Since then second sight may have made announcements related to the topics discussed. So please reference the company's most recent press releases and FCC filings and with that I'll turn the call over to second sight CEO well Maguire.
Thank you Lisa and thank you all for joining our call. This afternoon.
First I'd like to address my departure from second sight.
As was stated in the press release issued last week of except at a similar position with a company that is much closer to my home and family in San Diego.
Be clear I'm, not leaving due to any disagreement with the board and very much look forward to remaining involved with second sight as a member of the board of directors.
I'm grateful for the support the board has shown me over the past four plus years and I am honored to have led such a talented team at second site.
This is a company with a sense of purpose. Unlike any often involved with and over 20 years in the medical device industry.
We'll continue to execute system, we can still goals since the last quarter, we call. It makes you must be Caldwell.
R&D efforts as well as our discussions with 58.
Six subjects in your Ryan fully feasibility study.
The important 12 months milestone.
So subject has now been implemented for over two years.
We also received CE Mark certification and conditional FDA approval for next generation Wearables August to us.
The team is now planning the limited market introduction of this key technology later this year.
I was on past calls you will hear today from John Blake our CFO.
John will review, our reimbursement efforts as well as the 20 machines on actual results.
In addition, you'll also hear from another member of our senior leadership team <unk>, Ryan or see Oh.
<unk> is a talented leader.
Enable officer before starting at 23, plus your career medical devices.
That has held several sea level positions at public medical device companies for managing organizations that approach 6000 employees.
I will provide a number of updates including their R&D progress.
I had a severe Ryan early feasibility study and our discussions with FDA.
Before turning the call over to Pat I want to say that have great confidence in the entire second section and fully expect the organization not to Miss a beat undergrad Williams strong leadership as chairman and acting CEO.
And meetings with Greg over the past few days, there's also expressed his confidence and the team and reiterated its full support for efforts moving forward.
With that I'll now turn the call over to Petrochem Pat.
Thanks will.
Today, we will mention I will share updates on our early feasibility study for Ryan.
Our ongoing discussions with the U.S. food and drug administration concerning orion's clinical regulatory path right.
Recent approvals for the Argus two at next generation Wearables, both ongoing research and development initiatives.
Let me begin with your Ryan early feasibility study.
We completed the 12 month testing for the six and last subject in February 2020, and are pleased to report the results.
As a reminder, this particular subject is the one who experienced a loss of perceptions in October 2090.
Perception is to try to put this individual but not to pre October 2019 levels.
Like the lower perception level the results from 12 month testing or positive across multiple key measures.
Its individual sward significantly better with the device.
And all on all three visual function measures square localization directional motion and Grady visual acuity.
On the functional loan vision Observer raised assessment for Florida impact, you're writing system on the patients will be functional vision was readers neutral which is unchanged from the six month time point before the change in perception.
Now that the city subject is cross the 12 month milestone we can share overall results for the group.
On square localization, 83% for five or six individuals sports significantly better with the device on and off.
On direction of motion, 100% or six of six individuals scored significantly better with the device on didnt off.
On great visual acuity, 50% for three of six individuals Stuart on skill at 2.9 lot more or better vision.
On flora.
80% for five or six individuals were rated as receiving a positive or mild positive benefit of your Ryan system on wellbeing and functional vision.
From a safety perspective as previously share there was one serious adverse events and seven non serious adverse events over the same time period.
These results are extremely encouraging and we believe sufficient to support moving forward with the pivotal study in the U.S.
As noted last quarter.
Randy with the FDA regarding the primary efficacy endpoint for the pivotal trial, which will be floor 20.
Update to the original floor using the Argus two clinical trial.
As a reminder, floors isn't assessment performed by independent third party low vision orientation, and mobility specialists, who spends time each subject in their home after the procedure.
Specialist at each subject a series of questions and observe some performing daily living tasks, such as fighting like sources falling as sidewalk, we're sorting laundry.
Especially ascend determines that the system is providing a benefit if it is neutral for if it actually is hurting their ability to perform these tasks.
Validation for floor 20 is underway.
As part of the process, we're taking all the learning that we've accumulated over the years and focusing on the observer related functional vision task section.
Sales a certain number of tasked with your Ryan user would be required to perform.
The independent observer within observed and perform these tasks and provide a radio as to how difficult. The task was perform with and without the system.
The differences score with the system on versus all reflects the level of benefit the system provides on these functional vision test.
We believe floor 20, that's the most appropriate way to measure the impact of our technology on how someone functions in their daily life.
The validation is very important to the FDA because among other things it ensures that multiple independent experts can administer the tool and then provide consistent measurement orion's impact.
Through the validation process, we believed that we can prove that multiple observe is formed this assessment with consistent results.
On the floor 20, because the appropriate tool for demonstrating the world the real world impacted the Ryan technology.
To date, three or 15 subjects had begun participation in the floor 20 validation.
However, due to coded 19, social distancing protocols, we have suspended validation efforts until further notice.
We continue to actively engaged.
About the primary safety endpoints to the pivotal trial.
Well, we had hoped to resolve the safety endpoint by the end of last year, our discussions with the agency or ongoing I want to emphasize here that this delay does not reflect any concerns relative to the early feasibility studies safety data rather.
You see we're working through is determining the parameters around what an acceptable serious adverse event rate should be for a first in class technology like a Ryan.
We now expect to have alignment on this by the ended the third quarter of this year.
Turning now to research and development for Orion.
We are continuing to work on the next generation or Ryan implant and Wearables.
Our schedule has shifted out somewhat reflecting additional work that we've identified as necessary.
Does not result in any technical issues.
It's in our current internal project schedules, we now expect an E filing to occur in the first half of 2021 versus our previous targets at year end 2020.
We will continue to update you as we progress through the year.
As a reminder, improvements to the implant include reducing to pick up you electronic series and improving impact resistance.
The Wearables improvements include ergonomics, acetic and robustness, none of the proposed changes to the implant or wearables affect functionality.
Turning to Argus U.S. I'm pleased to share that as announced earlier this week.
I have received conditional approval from the FDA for our next generation of what we are now calling wearables.
The conditional approval requires us to make some relatively straight forward changes in the product labeling and submit to FDA before we can receive a full approval and start marketing the product.
We also received the CE mark for the artist to us.
That's a new Wearables conformed with health safety and environmental protection standards for products sold within the European Union you could therefore be market really in that part of the world.
These new Wearables include a significantly more powerful video processing unit or VP, you and improve camera and new glasses.
The entire system is both more ergonomically aesthetically pleasing.
This new spend approve technology will be introduced a control pace and will serve as an important based technology for the next generation Ryan system that will be used in the U.S. pivotal study.
With that I will turn the call over to John will discuss our efforts to secure reimbursement for Ryan as well as our fourth quarter 2000, Nike financial results John.
Thank you Pat before turning to the financials I have a few more business updates to share regarding our reimbursement activities. We have continued our ongoing dialogue with the centers for Medicare and Medicaid services or CMS, a few weeks ago, we went to Baltimore and had another productive meeting with the CMS national coverage team, we took the opportunity.
Yeah, I think this group on our progress with Orion, including the for 12 months early feasibility study results.
Potential clinical endpoints for the pivotal study and even introduce CMS representatives to one of our Ryan DFS subjects.
This was an excellent opportunity for CMS to hear first hand about the life changing impact of a ride.
Our main focus of CMS discussions moving forward will be determining the appropriate pathway for gaining national or widespread reimbursement coverage for the Medicare population upon Ryan regulatory approval. We also approached private payers to understand their requirements and expectations for data supporting the reimbursement of a riot.
Given the younger average age of Ryan patient candidates, we expect that a sizable portion of the Ryan population will have private insurance coverage preparing for private payers is an important aspect of how we will plan for 10 years commercialization.
Finally, before moving onto the financials as will mentioned before there are currently two pieces of legislation being proposed that would address coverage for breakthrough devices, such as a Ryan the house Bill is HR five three threethree, ensuring patient access to critical breakthrough products Act of 2019.
And the Senate Bill is S to three to six new opportunities for value that extend lives act of 2019.
We were scheduled to return to capital Hill early next month with one of our Ryan subjects to meet with various elected officials ender, where their staff to discuss the importance of reimbursement certainty when it comes to innovative breakthrough technologies, such as Orion. However, due to the Corona virus, our trip will be rescheduled to a later date.
Turning now to the financials.
In January we executed a one for eight reverse stock split to remain complaint with NASDAQ listing requirement.
Our financial results for the fourth quarter and full year are inline with our expectation net sales were a half million dollars in the fourth quarter of 2019 compared to $1.8 million in the same period in 2018.
Revenue was recognized for three and plants on a GAAP basis with an average selling price of $166000 in the fourth quarter of 2019, compared with 16 devices with an ASP of $110000 in the same period of 2018, reflecting an average higher reimbursement rates that by CMS in 2019.
In the U.S.
Research and development expense net of funding from grants was $4.1 million in the fourth quarter of 2019 compared to $2.4 million in the fourth quarter of 2018, the increased print primarily reflects cost to produce Orion prototypes.
We expect research and development expenses to increase in future periods, reflecting additional personnel and verification and validation of Ryan prototypes, including cost previously related to production activity such as facilities and personnel that up transition to a Ryan development activities.
Clinical and regulatory expense net of funding from grants to decreased slightly from $1.2 million in the fourth quarter of 2000 $18 million to $1 million in the fourth quarter of 2019. The decrease is attributable to lower cost from the Orion early feasibility study.
We expect clinical and regulatory costs to increase in the future as we conduct additional clinical trials to assess Orion and related enhancements to the user experience.
Selling and marketing expense was $1 million in the fourth quarter of 2019 compared to $2.4 million in the fourth quarter 2018.
The decrease of $1.4 million as a result of deemphasizing commercial activities for Argus too.
General and administrative expense was $2.3 million in the fourth quarter of 2019.
Compared to $2.5 million in the fourth quarter of 2018. The decrease of point 2 million is primarily due to lower noncash stock compensation costs from executive transition NRG entering expense is expected to remain flat going forward.
As of December 31, 2019, we had cash and cash equivalents of $11.3 million, our cash burn for the fourth quarter was $7.1 million and we have a cash runway into the second quarter of 2020.
We are currently in discussions around our financing strategy and expect to provide updates on that in a very near future.
With that I'll open the call the questions. Operator. Please go ahead with the instruction.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one and you touched on telephone. If your question has been answered and he'd like to a movie so from the Q. Please press the pound key.
Our first question comes from the line of permit dial from HC Wainwright. Your question. Please.
It.
I guess.
See you in a different role I guess, where the company, but with respect to.
New CEO coming what stage of the search you guys and then.
This will be filled sooner than later in the position.
I'd say, we're the board is.
Taking point on this.
Or committee within the board and this in the early stages right now so it'd be hard for me to say exactly when we would expect to have someone in that position.
But as a as I said in.
Earlier comments I feel really good about where we are with.
Greg taking over on the interim.
CEO position, but also with.
With the entire team, that's there and especially with path and and John.
In their roles. So I'm sure. The next call will have an update if not before but right now would be hard for me to predict but I do honestly believe the company's in really good hands right now.
Understood. Thank you for that and then with respect to the safety endpoints.
This will.
I guess.
Discussions with 50 et cetera have been pushed out what aspects of these safety endpoints remain to be clear could you provide any color on that.
Oh this is Pat I'll take that one.
So short list, we're trying to figure out the overall numbers subjects that'll be in the pivotal trial.
The duration of follow up.
Some of the secondary endpoints.
Confirmation that bench testing and other preclinical testing plans that we've developed are adequate.
And then some post market study requirements, including again number of subjects and points follow.
[noise] and.
Well I would I would just add to that that.
From a safety endpoint perspective.
We talked about this a little bit in the last call. We're focused on serious adverse event rates for the serious adverse event rate.
So we think the.
The safety endpoint will be.
Some form of serious adverse events.
The real.
Thing that we're trying to work through now is what is that what does an acceptable rate for this type of procedure and what type of rate with respect to patients view as being acceptable the issue we face in the issue that other people would face with any breakthrough technology. Like this is there's no comparative technology.
Out there that we could look at their rate and view that is acceptable. So it's really kind of working through to a.
Kind of get consensus with the agency on what is actually acceptable. So yes, we think we'll get there, let's just take a little more time.
Then we have thought but again, we think we'll get there and.
And be able to move forward.
Understood. Thank you for that just one final one in terms of your total cash.
Operating expenses, you know for the year.
How much do you think you will need.
For 22, Andy and then.
Getting into maybe early 2021.
Yeah, Hi, I'm at this is gone Atlanta that that so our cash burn our operating cash burn in 2019 was $27.6 million and we're on pace to go a little higher than that for 2020, given some of the.
Heavier R&D development work in clinical work that will be engaging in this year.
And then on on the financing side will be we'll be discussing those plans in the in the very near future. So I can't comment on that at this time.
Understood.
Okay. Thank you so much.
[noise]. Thank you have a Q and has.
Thank you ladies and gentlemen, if you do have a question at this time. Please press Star then one.
Our next question comes from the line of Kyle both are from Dougherty and company. Your question. Please.
Hi, good afternoon, I'm, sorry to see leave.
Well that congratulations on the new role and thank you.
Thank you Pat and John for the prepared remarks.
Just maybe first I want to be clear and correct me if I'm wrong.
But I believe you're still contemplating.
One of two pathways to either the PMA approval or.
HD pathway, which is followed up by the PM Hey process.
But since <unk> HD trial, there are typically.
Okay just on safety.
And it seems like the trial design for Ryan will largely be driven by the safety endpoint anyways.
Like in theory, you should be able to just go straight to the pivotal Pmeight trial with that breakthrough designation first is that fair and eight that'd be great.
Yeah, I mean I can take the first I think that's a very.
We have paving the way we view it car altria.
Given our continuing discussions on safety, we do think the.
Overall trial size and shall we say will be driven by the safety endpoint.
The efficacy endpoint so by remaining on a P M a track.
And realizing the advantages of the breakthrough devices program.
We don't we see that is the is the best track for Us and.
Kind of eliminates any of the potential advantages time advantages or other advantages we would have had.
Hi, deciding to go down the H.D. truck so for US we think.
Breakthrough pure may makes all the sense in the world right now.
Got it okay and.
Yes.
You mentioned you for each day green on efficacy endpoint and negotiate on the safety here, but also you'll need to work through the trial size in the post market.
Going to end points and secondary endpoints, but once you agree on on the safety endpoint do you do you think the remaining items that I just mentioned should be able to follow rather quickly.
Yes, because.
Once we once we once we've locked in on kind of the safety endpoints, which will be some sort of looks like from some sort of serious adverse event rate.
In the statistics will.
We're kind of guide what the overall trial prize needs to be and then also to be there will be a negotiation with of theory about some what portion of the total number is.
Pre market and which portion is post market, but our belief is that.
Majority of the patients enrolled would be post market and we would have some sort of performance goal for the with the pre market that kind of assures us of meeting the overall goal from a serious adverse event rate. So.
Yes, once once we kinda decide that rate everything will fall into place after that we should be able to.
I mean things forward quite quickly.
Okay.
And.
And Pat you mentioned in the in the <unk> prepared remarks that you'll be able to read.
Submit that I'd application the first half of next year.
Is it safe to say that the change in timeline.
Slight push out is purely just a function of coveted 19 kind of slowing things down across the board.
Not quite at 19 isn't really impacting it yet.
This is just due to the ongoing negotiations with the agency over what their requirements are going to be so.
We are still working those those technicalities out and as as each diego's bias is costing us a little more time. So we're just trying to be conservative in our estimate.
Sure Yeah.
It sounds like I mean, even if it was ready to go there would be Atlantic ways for Cold 19.
So I'd be pushed out inevitably.
Okay. So.
Got it and then just lastly, some some nice updates on externals, the CE Mark can conditionally FDA approval.
Which is which is great and still be used in the Ryan trial.
Well, you kind of mentioned it but we'd be rolling Argus to ask out to the current installed base in Europe in the U.S. or is the key takeaway here that now you have approval to add in can kind of move forward in discussions.
With the FDA on the trial design for Ryan which includes two.
Yeah. This is will I can take part of that I think I think the one of the most important things is that we've got it completed we've got an approval.
It won't be exactly the the wearables that we use for a Ryan but it's the based technology. So it will certainly make I think it would make the FDA review of our submission at least that portion of the submission for Orion.
It should give us more confidence and that being positive.
A lot of what they see on the on the Wearables will be familiar with them. So it's it's great from that point as far as.
How we rolled it out it's going to be a pretty limited release here in the beginning.
I think one just probably from a supply perspective, but also.
So pretty complex product.
Very good about all the work and all the testing, but my experience is usually you want to go pretty slow with something like this get it into some users hands than get some feedback on it before you before you go wide with our partnership with it. So so yeah I would expect it to the fairly limited.
But we will be doing it could get some feedback and identifying the areas that need to be improved or interest.
Okay that makes sense okay.
Okay, great well, thanks for the uptake here for taking my questions.
Thank you.
Thanks can you.
This does conclude question answer session of today's program I'd like to hand, the program back to will Mcguire for any further remarks.
Yes, thanks, all for joining our call today.
Let me close by thanking all investors for their support and the team its second sight for their continued hard work and dedication.
I also want to reiterate.
As a company for bringing this breakthrough technology to the large patient population of profoundly blind individuals.
I would give us great satisfaction from Wilkinson subject skiing independence and confidence when using the alone device finally.
Awesome payers are with everyone around the globe as we navigate these uncertain times.
Thank you, ladies and gentlemen few participation in todays conference. This does conclude the program you may now disconnect good day.
Okay.
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