Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the Silk Road Medicals, 2021st quarter earnings Conference call. At this time, all participants' lines Arnaud listen only mode. After the speaker presentation, there will be a question and answer session.
Asked a question during the session you need to press Star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
I don't I like to have accomplished your speaker today care Caroline Paul Investor Relations. Please go ahead now.
Thank you and thank you all are participating in todays call.
Joining me are Erika Roger Chief Executive Officer.
And look at Buchanan Chief Financial Officer.
Earlier today Silk Road medical released financial results for the quarter ended March 30, Onest 2020.
A copy of the releases are available on the company's website.
Before he began I'd like to remind you that management will make statements. During the call that 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 1995.
Any statements contained in this call that relate to expectations than predictions of future events results or performance our forward looking statement.
All forward looking statements, including without limitation, those relating to our operating trends and future financial performance.
The impact of Koby 19 on our business and prospect for recovery expense management expectations for hiring physician training growth in our organization and reimbursement market opportunity guidance for revenue growth margin operating expenses in 2020 commercial expansion label expansion and product pipeline development are based upon our current estimate.
Various assumption.
These statements involve material risks and uncertainties that could cause actual results or event to material differ materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business.
Please refer to the risk factor section of our annual report on form 10-K filed with the Securities and Exchange Commission on March Tuck in 2020.
This conference call contains time sensitive information and accurate only as of the live broadcast today April Thirtyth Twentytwenty.
Silk road medical disclaims any intention or obligation, except as required by law to update or revise any financial projection or forward looking statements, whether because of new information future events or otherwise.
And with that I'll turn the call over to Erica.
Thanks Caroline.
Good afternoon, everyone and thank you for joining us for Silk Road Medicals first quarter earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer.
Before we begin our discussion I would like to take a moment to acknowledge those in the medical community risking their own well being to care for patients not just those diagnosed with cobot 19, but also patient suffering suffering from other devastating diseases and trauma.
I would also like to take our employees and business partners, who have selflessly contributed to essential services. During this period.
I continue to feel privileged to be working alongside this team everyday and I am proud of our unwavering commitment to improving the lives of the millions of patients at risk of stroke from carotid artery disease and other vascular conditions even during.
Times such as E.
I am also amazed, but not surprised by the innovative spirit within our workforce as we adjust to new ways of working while maintaining productivity and unleashing creativity.
There will definitely be silver linings born from this crisis.
For todays call, we're going to reverse the order of our typical discussion and have our chief Financial Officer, Lucas Buchanan start off with a review of our first quarter performance I will then comment on our response to cope with 19 pandemic current trends in our business and our commitment to support our physicians. During this time I will conclude our discussion with a view on our.
This running for the long term.
With that I'll now turn the call over to Lucas to review our financial.
Thank you Erica and good afternoon, everyone.
Revenue for the three months ended March 30, Onest 2020, $18.9 million, a 48% increase from 12.8 million in the same period of the prior year.
Growth was again driven by increased adoption of T. car across and expanding base of hospital accounts trained physicians and active sales territories.
There were approximately 2700 T. car procedures performed in the first quarter of 2020, representing a 55% increase compared to the same prior year period.
Through the first half of March our business was on track to meet or exceed our expectations, but we experienced a decline in procedure in revenue trends in the second half of March as hospitals began deferring procedures.
Gross margin for the first quarter of 2020 was 72% as compared to 74% in the corresponding prior year period.
Gross margin decline was driven by investments in manufacturing engineering and infrastructure projects, which we discussed during our fourth quarter 2019 earnings call.
Total operating expenses for the first quarter of 2020 or $22.8 million, a 38% increase from 16.6 million in the first quarter of 2019.
R&D expenses for the first quarter of 2020 or $3.1 million compared to $2.7 million in the first quarter of 2019.
The increase was primarily driven by an increase in personnel related expenses.
Sales general and administrative expenses for the first quarter of 2020 or $19.7 million compared to 13.9 million in the first quarter of 2019.
The increase was primarily attributable to expenses related to growth in our commercial team and marketing efforts as well as costs associated with being a public company.
Net loss for the period was $9.9 million or a loss of 32 cents per share as compared to a net loss of 24.2 million or a loss of $20.12 per share for the same period of the prior year net loss for the first quarter of 2019 included a $15.7 million noncash charge, resulting.
From the re measurement of the fair value of our convertible preferred stock warrant liability.
We continue to record adjustments to the estimated fair value of the warrants until they were exercised in connection with our IPO offering in April 2019.
We ended the first quarter of 2020 with $97.6 million of cash cash equivalents in short term investments.
Turning to our outlook for 2020 and as we stated in our April 6th the press release, we have withdrawn our guidance as it is still too early to accurately estimate the duration severity in geographic impact of the covert 19 outbreak on our operations and financial results.
We will plan to provide additional updates as they become available and AERCO will provide some color on current trends interim suing comments.
In the meantime to preserve financial flexibility, we have taken preemptive steps to curtail near term spending and maintain adequate liquidity.
We have reduced non essential as DNA expenses and slowed hiring initiatives and we have seen an expected reduction and travel trade show meetings training and other expenses as a direct result of shelter in place and other government directives.
Some expenses plan for the second quarter, including physician training courses and advertising campaigns are being deferred to later time periods.
Can continue to have a desire to maintain our incredibly valuable and talented workforce.
At this point I would like to turn the call back to Erica for additional commentary.
Thank you Lucas.
In this time of unprecedented uncertainty we are faced with the changes of a highly variable healthcare climate across our nation, among physicians hospitals, our business and overall.
The situation remains fluid with many hospitals and resources now concentrating on the treatment of those who are affected or may become affected by the covered 19 virus as a result, and as many of you are aware non emergent surgical procedures were differed in order to preserve resources for covert 19 patients.
While some t. car procedures have been insulated from this delay due to an emergent need there's too much variability on this front to be able to measure the true impact of this disruption to our business. The clinical decision to treat a carotid lesion is not entered into lightly by physicians and their patients.
And once that decision has been made it is highly unlikely the clinical need goes away carotid artery disease is a chronic progressive disease that steadily gets worse over time so.
So we believe that many of the procedures that have been deferred will be rescheduled and patients will eventually receive treatment.
Given the economic costs to hospitals have differing procedures. We are beginning to see attempts to restart elective surgeries in measured fashion in certain hospitals and region.
Our teams in the field have done a wonderful job of staying focused on our north star doing what they can to ensure the best possible patient outcomes and physician support for T. car procedures performed in the current climate, while supporting and monitoring the pipeline of patients being rescheduled all.
A while continuing to prioritize the overall safety of our employees and the providers face or.
Well the timeline for the return to a new normal remains unknown, we're confident that silk road is well positioned to whether the duration of the <unk> pandemic impact and what will likely be multiple waves and we will be well positioned for longterm success.
And this note I would like to share a brief story with you about Dr. Frank Arco of the Sangre Heart and vascular Institute in Charlotte North Carolina.
Prior to government directives, Dr. Arco and his group of vascular surgeon decided to limit Nani central procedures in order to preserve hospital resources.
Concerned that hospital beds would be scares or needed for covert patience informed if they're thinking about which procedures to perform.
For patients with severe carotid artery disease, they determined that high grades to noses and symptomatic patients need urgent treatment and other patients could reluctantly be deferred.
Prior to covet Doctor Arco in his group perform T. car about 20% of the time and C.A. about 80% of the time and their adoption of T. car, which slowly but steadily growing.
But as they thought about how best to preserve resources.
Finding themselves of the data that suggests T. car is a faster less invasive procedure uses less overall ooh, our resources and patients often get out of the hospital sooner they decided to make t. car their first choice treatment during this crisis.
Since the onset of Cove and they estimate the now perform t. car roughly 80% of the time.
And their patients have done very well, leaving the hospital within one day versus the previous mean 1.6 days when C.A. with the dominant procedure.
Dr. Erica believes this procedure mix will persist even when the return to normal practice begins.
As for the near future. He expects there will be a depth and carotid procedure volumes as primary care and vascular lab screenings have temporarily declined.
But that once the imaging labs are fully back up and running there will be a large backlog for carotid imaging.
He estimates that the degree of to notice may end up being worse overall for many patients further increasing their risk of stroke.
Dr. Arcos experience shows that the need to reduce the risk of stroke and drive toward more successful outcomes in treating carotid artery disease are unwavering.
The face of covert 19, and in fact highlight the need for safer less invasive therapy sit more efficiently utilize hospital resources.
Our strategic focus talented workforce durable platform and continued commitment to world class training and education should enable us to help many patients over the next decade.
That being said at this time or.
Are near term priorities are business continuity and the on interrupted supply a product supporting our customers in person and virtually as they perform t. car procedures and protecting the health and wellbeing of the Silk Road medical employee team their families and communities and our customers.
Well our focus is on these immediate priorities, we have not lost sight of the three priorities. We previously outlined in 2020 and our long term positioning.
I would like to touch on all of them and how are endeavors and efforts are focused in light of the current environment.
These are U.S. commercial execution.
Label expansion and coverage for the standard surgical risk patient population and further pipeline development.
With respect to our first strategic priority U.S. commercial execution.
We have always been able to push and pull the key lovers of our business territory expansion, new account activation and physician training as necessary.
Our primary near term market opportunity is driving the conversion from carotid endarterectomy to T. car in high surgical risk patients and we continue to focus on moving already trained physicians up the adoption curve and training new positions in both new and established hospital accounts.
Well procedure volumes have clearly been affected by the pandemic, we have been using the time to prepare for an eventual recovery by reinforcing training revisiting marketing efforts and our value messages and enhancing the ways that we connect with our customers.
Our World Class field team remains available to support T. car procedures, both in person and virtually and recently our team has been utilizing localized and web based didactic training to drive physician education.
In many cases, our customers find themselves with more time on their hands given the overall dropping procedure volume.
Which is increasing our interactions, albeit in a virtual environment.
We are finding new ways to support and partner with our physician customers and are actively engaged in the planning and strategy surrounding the backlog of patients that eventually need to be treated.
Moving to our second key priority broadening the indication for the on roots Dent to standard surgical risk patients and expanding reimbursement.
We continue to collaborate with a key constituents F.D.A.C.M.S. and the society a vascular surgery on the optimal path forward for standard surgical risk patients.
Originally there have been a few minor delays as these stakeholders respond to the current crisis, but they are clearly open for business or.
Although we don't have details to share yet progress is being made and we are still on track for being able to outline our pathway to standard surgical risk this calendar year.
Finally, our third priority is focused on continued pipeline development.
We remain committed to the continued development of additional next generation products to support and improve T. car to meet the evolving needs of physicians and their patients.
We continue to leverage our broad intellectual property <unk> platform and core competencies in both direct carotid access and neuro protection in the development of transcriber platforms for other vascular disease. It.
Well some work has been slow due to social distancing and shelter in place directives, we continue to make good progress.
In summary, we are continuing with planned investments to drive durable long term gross across multiple initiatives.
We are confident in the strength of our business and our ability to manage through the current crisis.
Although still too early to tell if it represents a persistent trend.
We have recently seen stabilization and the decline of average daily procedures.
Whereas our Runrate was 40 to 50 procedures per business day in the first two weeks of March.
Decline began in the second half of March which persisted through the first half of April.
In the last two weeks, we have seen some stability, we're starting to see pockets of optimism and we would expect a modest improvement in may versus April, but we're not in a position to quantify this yet.
As we have previously discussed time is the enemy for carotid to notice and procedures can only be deferred for so long before they are considered an absolute necessity by both physicians and patients.
Well physicians may consider postponing certain procedures for asymptomatic carotid arteries to notice during the current pandemic the American College of Surgeons. Among other groups has specifically indicated.
That physicians should not postpone procedures to treat symptomatic carruthers to notice or rather patients experiencing transit scheme attacks amaryllises few gas or even minor strokes.
C.M.S. reaffirmed this view and it's March 18th recommendations unquote high acuity procedures that should not be postponed during the coven 19 outbreak.
As hospitals and physicians prepare to treat their current backlog of carotid artery disease patients. We believe they will increasingly look to t. car as the more efficient procedure.
As was presented at last year's Sps vascular annual meeting in a mash population with 5160 patients in each group.
T car showed 26% lower odds of a hospital stay greater than one day.
And 25% lower odds of a non home discharge for example to a skilled nursing facility compare to C.E. Bay.
In addition.
T car can be safe, we performed under local anesthesia, thus, reducing the need for airway management required with general anesthesia.
We remain optimistic in our ability to drive adoption overtime and beyond the current period as providers looked to treat more backlog patients and free up available resources.
In closing.
We are continuing with our progress on our long term initiatives and we have not lost sight of our commitment to changing the standard of care.
As we reflect on how may is national stroke awareness month, we are working with our customers and physicians to ensure that even during the pandemic people remain aware of the signs of stroke.
We are steadfast in our commitment to improve patient lives with our technology and to continue to do our part to raise stroke awareness.
This is especially poignant during the current environment amidst come at 19.
Once again, we would like to think our employees.
Customers and many other individuals many on the front lines, who are making personal sacrifices as we stand together in our response to the current pandemic.
That we will now open it up to questions.
Operator.
As a reminder to ask the question you only to press star one on your telephone.
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Mother companies gets in Colorado trends, they've been seeing in April to get a better and.
What second corn, it's going to look like so.
Month under your belt cause you give us any incremental details on the dynamics that you've been seeing a lot for weeks and.
How confident are you that you've reached about.
Sure Lily great talking to you. So you know America. Just mentioned you know we saw the the kind of reversion from gross to decline in in the second half of March that persisted through the first two weeks of April.
But then we saw some stabilization and even just this week some signs of optimism. So we do you expect may to be you know better than than April and and we hope that the June continues that trend beyond that.
Were you know, it's so difficult to quantify just given the amount of variables that hand out there.
Yeah, and and literally just to around that out as I said my prepared remarks, you know the the run rate was about 40 to 50 procedures per business day.
The first half a march and we saw a low of about 12 cases, a day, but in the last two weeks as Lucas just said really seen some stability too soon to tell if this is a durable trent.
But I think there are some pockets of optimism.
Certainly in the stroke belt in the south Eastern United States. We've just even heard today for example that Florida is back up and running with elective procedures.
Great. Thank you know and just one more quickly on so you mentioned that asymptomatic casing is <unk> are more desirable but.
How how long can these cases <unk> isn't it weeks is it <unk> how long do you think they can be put off without experiencing any negative ratification. Thanks.
Yeah.
Interesting question you know Unfortunately this is a tough time for these patients and their families. You know they they've been diagnosed with this lesion. They know the the risk of stroke is.
Is is present and so it's a difficult time for some patients to delay and in fact, some patients may not survive that delay it may actually lead to a stroke and could even be a deadly stroke.
But as we said before carotid artery diseases or chronic progressive disease that gets worse over time.
So the key is in any patient who has been diagnosed in whom treatment was already considered the reasonable approach is to bring those patients back as soon as possible.
Right.
Thank you.
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Question and you started speaking through it.
And you're prepared remarks, you big but.
Do you think if there's actually longer term with the current code situational what the name for the future health care delivery, generally and adoption or something or T. car actually be a benefit and accelerate the conversion of Ah you data T. car.
Given the minimally invasive benefits. This shorter treat me time luxurious diversity sure hospitals, but obviously there are near term challenges, but kind of looking beyond that if this actually maybe you'd be a positive for t. car.
Yeah, I <unk> I think it's the short answer is is too soon to tell whether any of these things really mark a trend. However, as you heard from the Doctor. Arco example, there was the perfect example of them recognizing the benefits of T. car being less invasive faster or getting paid.
Out of the hospitals soon or less complications on the back end and that certainly did lead to some different clinical decision, making putting t. car as the primary treatment modality.
And so that is certainly something to for our physicians to consider all of that said, we're we're mindful in our marketing messages right now to not be tone deaf to to what's going on in the world is so certainly we will we will take the time to remind our physician customers of these advantages.
But also be mindful of the current situation.
Got it and then you talked about you know being well positioned.
For rebounded procedure recapture.
And with something like a new technology your product like G. car, especially.
And the treatment and prevention something like SRO, there's lot of those hands on training Proctor and especially you guys I know you're usually in on every single case.
As you think about changes going forward and hospitals, maybe keeping ruptured clinical specialist out I guess how are you.
Thinking about that balance or involving the strategy of how you might vehicle to yeah. Yeah. It's hands on his you usually are.
Right a good question I think there this is sort of a two part question. One is what is the what is the impact of our ability to be in hospitals and cover procedures and we continue to be available to cover procedures and to be in those operating room environments, where it's applicable and where it's allowed.
Out and certainly following all of the government and hospital local guidelines in order to do that.
So the long term interaction with our customers I think is still to be determined in terms of how much face time will we get but as I said, we are getting creative and we're learning to use new and different ways to interact with physicians both during procedures and in a normal.
Sales process.
You also touched on training.
And of course, our flagship test drive training program has typically been held in Chicago and yes, given to travel restrictions, we have had to cancel some of the training events that we would normally have conducted in Chicago. However, we are training in new and different ways, including web based died.
Kick training.
And this effort really began prior to the pandemic when we had the opportunity to trial are proprietary surgical model as well as these didactic trainings and take that on the road and so we had some experience and we knew that it works.
Don't have taken <unk> <unk> finer points on that and that we you know, we obviously have a pretty significant trained physicians bass says of the end of 2019 AD in the first quarter or you know we had a good bullous of new physicians train just giving the timing of those.
Events really before decoded impact.
And so as we think about our business, we've we've always been more and more biased on driving productivity and a trained physician days.
And certainly going forward will be will be altering the plan in Q2 and 10, even Q3 training is likely to be affected but that doesn't mean, we can you know change those lovers and Q4 and Q1 of next year for example.
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I'm not showing any further questions at this time I like you're trying to call back over to it like a Rogers C.E.O. four Nichols remarks.
Thank you all for attending this call and stay safe out there.
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