Q1 2020 Earnings Call
Ladies and gentlemen, this is the conference operator your conference is scheduled to begin momentarily.
That time Utilizable once again be placed on music cold. Thank you for your patience.
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Ladies and gentlemen, thank you for standing by and welcome to the transmitting Q1 2020 earnings conference call. At this time, all participants or and I listen only mode. After the speakers presentation. It will be a question and answer session.
To ask a question during this session you any to press start one on your telephone if you require any further assistance. Please press start zero.
Oh now like to him and the conference over to your speakers today Mister Bryant Johnston at Guilmartin groups. Thank you go ahead.
Thank you operator.
Earlier today transmit actually it's financial results for the quarter ended March 31st 2020.
A copy of the press releases available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meeting a federal securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
And he statements contains call that relate to expectations are predictions future events results or performance or forward looking statements.
All forward looking statements, including without limitation, our examination of operating trends that potential commercial opportunity for our products and are you sure financial expectations.
Which includes expectations for growth in our organization regulatory approvals and reimbursement and guidance indoor expectations for revenue gross margins, an operating expenses and 2020 are based upon our current estimates and various assumptions.
These statements involve material risk uncertainties that could cause actual results were event two materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not least undo reliance on these statements.
A list and description of the risk and uncertainties associated with our business. Please refer to the risk factors section or annual report on Wednesday filed with the security Some sheets Commission on March 17th 2020.
Transmit exclaims any intention or an obligation except as required by law upbeat order by any financial projections are overlooking statements, whether because of new information feature events or otherwise.
This conference call contains time sensitive information is accurate only adds up to like broadcast today May 620 20.
And with that on now to hold over to Huston, President and Chief Executive Officer.
Thanks, so much bright good afternoon, that'd be one and welcome to cosmetic.
Q2 thousand 20 earnings call.
Let me today, even Gordon our Chief Financial Officer.
Given d.'s unprecedented and challenging.
<unk> said circumstances I want to start our call by extending my with my well wishes and gratitude to all the healthcare and transplant professionals as well as that transmitted clinical support team, who <unk> who are on the front lines, ensuring that organ transplant procedures are continuing during gets devastating cool.
<unk>.
In response to the Colgate pandemic, we have taken extensive actions to minimize its negative impact on our team and our business.
We focus our actions on three main area.
One protecting our employees and their family.
Continuing to support our customers and transparent <unk> in three maintaining the financial help of our business to enable us to whether the pandemic and emerged out this crisis stronger.
Let me share the detail.
To protect your health and safety cosmetics employees and their families transmit it has enacted policies in line with federal local government and healthcare agencies to transition employees to our remote work combine.
With the exception of those who are deemed essential to keep business operations port transmitting.
Given the organ transplants.
Procedures are an essential non elected procedures. During this crisis <unk> has made a clear and and strong commitment to support our global customers.
With product and critical support throughout the <unk>.
<unk> clinical for your support team remained available throughout the covert crisis to support our customers either in person or virtually.
The last point is expect management.
It's nice bags has taken action.
To maintain.
Financial flexibility as the trajectory of dependent <unk>.
The company has taken preemptive measures to use near term expense.
Expenses, including reduction of nonessential, R. and D.N.S.D.N.A. expenses.
In addition would acted a small reduction in headcount.
Across the board percentage department of salaries to maintain a healthy balance sheet.
We feel strongly to detox shouldn't have been effective and working minimum closely monitored the loop that balloon version of the pandemic and its potential impact when our business.
Now, let me shift to view that Q1 results.
We started 2020 in a position of strength and they meaningful progress across Oldfield T.F. product in the U.S. and internationally.
Oh first quarter net rubbing your with 7.5 million, you're presenting 61% overall broke from the same periods in 2019.
In the wet.
Net revenue was 5.2 million, they're presenting 76% do at school.
For first quarter 2019.
Importantly in the first quarter, we recognize revenue across all three of the L.C.F. product in New York with the L.C.S. liver unknowns, yet heart programs, well contributing alongside our commercial O.C.S. long program.
Specifically those yes hard D.T.D. program continue to accelerate rapidly and we ended up quarter with 25, D.T.D. heart transplanted from the U.R.
Relative car Liverpool Damn, we have completed the statistical analysis of the L.C.S. Liberal protect trial and we are very excited by the final results.
We plan to submit the P.M.H.P.S.T.A. within the coming weeks.
In Europe, where to gain momentum in our heart business in the first court.
Into one we also expanded our national service collaboration initiatives, several major organ procurement organizations or <unk>.
In fact, we had few opie orders that were different from Q1, you to the covert pandemic.
We fully expect however to announce the number of new collaboration issue 'cause with leading appeals once a covert crisis is stabilized anyway.
Now let me describe discussed with you the near term covert impact and recovery expectations throughout 2020 on trying to spend it.
Overall prior to March we were on a trajectory towards significant growth in 2020.
However, the covert 19 pandemic crises has caused disruption in the late you know our progress.
In March we've seen a sharp decline in transplant procedures as as many healthcare facilities and the U.S. began shifting resources and personnel correspond to the search.
Widely in Europe.
Between Italy, U.K., France and Germany.
Shut down there clinical transparent programs in its entirety.
You would they covert pandemic.
Because if this significant disruption and uncertainty we withdrew guidance for 2020.
It is impossible to predict where the throttle transplant activity is for will.
Given many states are still grappling with the surge of covert stations or just street or just are just reaching the early page Oh stabilization.
We believe it's realistic to assume that it this disruption will continue to Q2 in both U.S. in Europe.
The disruption talk business is a big neat relative to other medical procedures, given the transplant procedures are not elective procedure.
Why we are not concerned with the demand falls, yes.
For transplantation, our ability to drive procedural broke.
Depend to some extent on the ability of hospitals to revert resources, such as I see you bad.
Clinical personnel away from the corporate response and back to immersion procedures, such as the transportation.
That that.
We are also uniquely advantage in terms of durability of our business by the nature of presentation.
That'd be highlight few examples.
As I mention Oregon transplants are lifesaving any sense essential surgical procedures, they're not lexus.
There's a well established pent up demand for organ transplant procedures for presented by the transplant waiting lists.
Which have continued to grow even threw out this pandemic.
This means that we are not relying on patients patients willing next or ability to visit their doctors with primary care physician to to get referral for elective procedures.
Even in the Kobe testing.
Situation corporate testing was prioritized 'cause queen potential donors put presentation and is now a part of the standard battery of tests.
<unk> <unk> in the United States.
We believe that organ transplantation, we'd be amongst the first procedures to resume as hospitals begin to ship from dedicating all the available resources.
[laughter] to the corporate 19 Christ.
Finally, we believed that major health care facilities may look to the high margin organ transplant procedures to meet the clinical demand for patients. While also counterings the negative financial impact related to the department electric procedures on the institution overall pronounce it.
With these points in mind.
And assuming stability the rate of infection hospitalization expanded testing capacity, we expect to see incremental improvement on a quarterly basis, beginning in the third quarter with the potential toward near normalcy toward the end of 2020 or.
For the very beginning of 2021.
Furthermore, we believe that we made benefit from potential significant that pent up demand for transplant procedure in the second half of 2020, given this destruction.
Were actively preparing for this potential search by building inventory and by expanding our clinical support team to support transplant activities.
Let me, let me and my section by just discussing transmit X. long term fundamentals put 2021 <unk>.
Despite the near term negative impact with the covert crisis, we remain bullish on the 2021 I'm beyond portends panics.
Our position is based in the falling for fundamental.
One the life saving nature of organ transplant procedure and the significant demand for all she has remained unchanged.
To the strength of the old T.S.
F.D.A. Pock fun with our imminent O.C.S. card panel meeting and and if the decision.
And our Oh C.S. delivered trial results and associated P.M. made submissions that it's targeted for to to have 2020.
Relating to the F.D.A.
Channel meeting based on our latest dialog with if you believe this decision would be expected in the second half of 2020.
Three.
You're in this crisis.
Are strategies to lean forward.
During this crisis establish and broaden our technological and clinical service offering to facilitate organ procurement and transportation using don't you have to colleges.
During and then the post cold good era.
We believe that this crisis further underscored the need for a new model and technology to streamline Oregon to Cleveland transplantation process.
Medics is best positioned to provide solutions based on our brought technological platform.
Are clinically expertise and our existing deep relationships with the bleeding <unk> institutions and Opie olds in the U.S.
Finally, our strong balance sheet, an hour expense deduction actions that further <unk>, our our balance sheet to extend this crisis and not to lose the momentum we built over the past 12.
<unk>.
With that.
Turned the call because Stephen Board now see opposed to the good the financial results with the core.
<unk>, Oh, I will provide some additional detail and the two one results and our actions to preserve story was somewhat uncertain time.
For the first quarter of 2020 are gross revenue was 8.2 million.
And our net revenue was $7.5 million.
Net revenue grew 61% from the first quarter 2019.
In in the U.S.R. gross revenue was $5.9 million.
Revenue was $5.2 million.
The U.S. net revenue growth was 76% from the first quarter of.
The organ breakdown on the U.S. net revenue.
Was 1.9 million Oh see us money.
1.9 million also and those guys heart and 1.4 million Oh see us liver.
And outside of the U.S. a revenue was 2.3 million 2.3 million of that was all she has heart.
So that should give a good breakdown of the the product level of detail.
The key drivers of our revenue growth and you. One was continued O.C.S. adoption across all organs U.S. lung revenue was up 42% from the first quarter 2019, and R.U.S. clinical trial revenue from both closely as far to go see a sliver contributed significantly.
<unk> <unk> <unk> revenue grew by 35% from the first quarter.
Are gross margin for the first quarter of 2020, what 65% continuing to progress from the right direction, that's up from 55% for the first quarter of 2019, that's up from 62% last quarter to form.
A total operating expense was $12.9 million in the first quarter of 2020, 51% growth from the first quarter of 2019.
Operating loss was 8 million in the first quarter of 2020 compared to 6 million in the first quarter of 2019 learned that lost for the first quarter of 2020 was 8.9 million compared to 6.9 million in the first quarter of 20 like.
Finally touch in cash equivalent of marketable security for 72.6 million.
March 31st 2020, and weighted average common shares outstanding for the quarter was 21.2 million.
That was well these mentioned earlier, we have taken a very swift and strategic actions to preserve capital. During this period of uncertainty. These actions included a percentage of salary deferment across the company.
A small reduction of our workforce.
And a reduction or delay in all not a central discretionary operating and capital expenses.
What taking these steps to preserve capital. However, we do continue to hire a in certain critical areas like our commercial team to avoid losing the momentum weird gained in the first quarter.
We believe these actually will provide a reasonable level of medication to the revenue in fact that we expect to see a 2020.
And therefore, the 72.6 million in cash. We currently have should continue to give us the runway we need to weather the storm in front of us.
You may alter I've seen that we did apply for him to receive a paycheck protection loan as part of the <unk>, but ultimately decided to return that loan after the garbage changed around public companies at the end of April.
With that ultimately call back over to.
Thank Steven.
I've seen an hour. She wanted results, we began 2020 with tongue momentum and we were on crack to achieve significant growth this year.
Then the covert pandemic habit.
Why do we expect that our business would be negatively impacted in the near term <unk> Simi competent and times medics long term prospects and our boss pipeline of new clinical indications and data supporting the value for those you have to college.
In the meantime was taken extensive measures to mitigate both help and business trip, while preserving gosh, the best position transmitting as we emerged from this crisis stronger continue our mission to transform Oregon transportation.
Finally, I want to take a moment again to thank the transcend health care workers and transmit exteme on the front lines during gets pandemic, ensuring that organ transplantation are continuing to help patients you meet thank you. So much for joining us on this call now will open up the life of questions operator.
As I reminded to ask a question. Please press start one on your telephone.
The first question comes front on line of David Lewis with Morgan Stanley.
Hi, Good afternoon. This is Calvin on for David a couple of question for me could you. Please provide some more colors on early faces you know your comment on early citizens stabilization. Just wondering if you could provide some quantitative guidance on you know what trendy or seeing April you're seeing any sort of recover.
Anybody you know end of April and you know if he could comment on just recovering three q. influencing how closely you can not approach here <unk> <unk> budget by Fort you and I had quite call up.
We're <unk>, we they'd be started seeing some early early signs of recovery towards the second half of April.
We are encouraged by it but I'd everybody in this call is aware that.
There's a lot of uncertainties remain in the system with with the social distancing ease.
Easing in some states that could result in another.
Rebounder <unk>.
I think bid transplant community is going to be more prepared this time.
But it's it's way too early to really to really.
Change our opinion that this is going to continue this destruction and we'll continue through cute too.
However, we as as I stated Calvin that as much as we see the peak stabilizing and and the number of hospitalization kind of stabilizing we are expecting to see.
Improvement in in activities in you know into three and hopefully trying <unk> getting too near normalization <unk>.
That's our expectation of peace, but again, there's a lot of uncertainty and unknowns surrounding if we're going to get hit with another p. where's it going to be how much is that going to impact the the transplant procedures et cetera.
But we're beginning to see some early signs of of of recovery in the second half a vehicle.
<unk> sorry can you quickly comment on just how important in New York in Boston Archer business.
I think yeah, you know.
There there were big Big cities from our business standpoint, I think Boston is is important.
New York is not as important as Boston.
It's not necessarily about the local geography, the the the surgeon New York Paralyze the entire east coast.
And we were shipping patients from New York City down to other states to get transplanted.
So.
So I I think I address your question. So it's not just if they even though we don't have that New York would not depend on the New York, but because of the search everybody was was staying away from New York to approach for donation so.
Got it under yeah.
Thank you that start <unk> very quick follow up on just upcoming cattle, let's see coven. It on the heart panel just curious on you know if there's any progress on confirming a virtual panel with the F.D.A. you know in the heart and then on liver any updates on you know read out war publications shot.
Genius, given time, the conference going virtual or cancellation dynamic. Thank you sure sure. So 'cause related to the heart panel. We are actively discussing this with the F.D.A. and it it appears that the F.D.A. aiming to we schedule.
Well this panel meeting sometime in the second half of this year, we think it's going to be in in the late Q. free time frame, but until we have a definitive date, where we're going to be and you know I'm sure about that the goal is to try to set a date that hopefully would enable us to be.
To have the meeting why.
With the fall back position to have it adds a virtual meeting at two webex or the like that's the strategy that the the office of cardiovascular devices want it to pursue and we're very supportive weather.
Related to deliver P.N. may the the trial results are are are known to us.
They are extremely extremely exciting to us and we cannot wait to publicly announced that results.
And as a testament to the results. The P.M. made timeline is not going to be delayed and we're submitting <unk> to 2020, we're hoping that giving the strength of the results that we actually we're going directly towards a major.
Submission manuscript to a major publication and we hope that that would happen over the next.
Several weeks the results are very very strong their first of its kind type results and where we're very excited to work with our lead investigators to support them in any way we can to get these trials published as soon as possible.
And your next question comes from the line of Robbie Marcus <unk> from J.P. Morgan.
Great. Thanks for taking a question.
I wanted to talk about as we move through their recovery how are you thinking about hospitals willingness to adopt.
The the technology here you know I don't think there's much of the capital component involved but charge the hospitals, but I imagine. It's also good or not the top of mind to bring new products into a hospital system. During the recovery So help us understand how your thing.
About the ramp up in bringing new centers on line and what you could do to help the calories that process. So for the rest of the year.
Sure.
Thank you Robby as you remember in my last call I I stress. The fact that our strategy has never been about ramping up news then we have a critical mass of centres already that already have that technology. That's already been trained on the technology. So for us is driving the volume <unk>.
Situtions. So that's one part of the answer the second part of the answer is as we broaden our service model.
It's no longer going to be <unk>, our rubbing your girl, if it's not going to be relying on the institutional ability to bring capital equipment, but it's really they would be good the Oregon will be delivered to any institution.
Across the U.S. score fourth of transplant procedures with us retaining the ownership of the hardware. So these are the two approaches that I'd report to in my in my on the call that you know broadening our service initiatives who's going to enable us to do with very little if any impact at all.
Capital equipment or or opening up a few centers, we expect to open up new centres, we have a robust pipeline in.
Potential new centres that we expect to open 2020, but we have a critical mass already in hand with hardware already you know available that we expect to drive our girls near term from those institutions supply that supported by the surface month.
Great and maybe just one follow you know how should we be thinking about deliver a trial here I imagine you know with things on hold there's gonna be some delay but what's your.
<unk> dot on on timing for that now thanks.
We are not pulling back on the liver trial again Dab results when when they become public they would speak for themselves. We are we have already initiated the continued access protocol for it we expect that that if you process within the F.D.A. would it be.
We'd be you know within the targets, we've set our P.M.A. filing would it be according to our original plan into too which is six months ahead of.
Or original plan. So we we're we're not expecting any reduction or pulled back on deliver the opposites true. Once these results become public we expected the cap will be rapidly and rolling and we probably going to expand the cap.
And we we leverage stared results to.
Encourage the F.D.A. to hopefully accelerate the review process.
Okay, great. Thanks.
The next question comes from the line of Josh Jennings What county.
Hi, This is Brian here for Josh. Thank you for taking my questions to start can you share details on the volume two experienced in March as compared to February in January our volumes down as much as 50 per cent and I guess as part of that how would you characterize April volumes and.
Maybe.
Seeing improvements regionally or stabilization, particularly in centres outside the U.S.
We never commented on on volumes per se, but I'll give you just a metric the.
We've seen in in starting to set can we can march through the first week and April transplant volume in the main reasons went down to zero.
It's public knowledge given data was in a web in r. that the donor activities in the in the New York area.
Down from 482 donors in February down to four.
To March in early April.
Oh, there's a significant <unk>.
In April we have seen in the second half of April we started seeing activities as they stated earlier, it's it's nowhere close to the you know yeah volumes in February, but definitely starting and it's starting across abroad.
Regions in the U.S. not just in the middle East with experience transplants in the Midwest South.
And and the West Coast in addition, 'cause northeast.
And mid Atlantic. So, we we feel that recoveries starting again, we're keeping our fingers crossed that we don't get another another p. somewhere that would that would that could have a negative impact on this recovery.
Understood. Thank you and maybe one for Steven you previously cited a monthly burn rate of around 2.5 million is that still where you're currently tracking would be expense controls you cited and I guess on the strategic areas for <unk>.
Increase spending will that pick up in the third quarter in anticipation of a more normal fourth quarter sex again.
So that's that's a good question I don't expect us to be able to maintain that same burn rate. We do expect to have a revenue revenue. It here, we're going to do everything we tend to to to maintain it but I do expected to to have a higher burn rate at least for the next several months maybe in the in the $3 million.
Range relevant to the huh.
However, we think we still have a a pretty good runway and we're gonna watch it closely and if we need to make some changes we can do that as far as the investment I talked about some of that is already in and Q1 <unk> I don't think it's gonna be material to the overall spending but it's already in Q1 and some of that you'll see like.
And again I didn't start wanting to ask a question.
Question comes from the line of <unk>.
And a hammer.
Oh, good afternoon, bullied <unk> good afternoon Steven.
So we'll eat three questions from my side, Oh, I just heard some commentary from your site about 400, plus Oregon's in the New York area and then it's suddenly dropped off to single digits I guess more broadly what is happening to these oregon's and maybe I missed it was just 400.
Hearts or water was across the board.
Specifically on Hearts.
These organs donor organs coins or out there just less fewer accidents and hence fuel Oregon's available. It just kind of walk us through the background what did the dynamics that are happening, especially in time sensitive organs, such as the heart.
Thank you <unk>, so hmm I want to be specific the the the the web in R. from day, New York area was talking about donors in general It was not you don't or a donor availability in general it was.
Not about a specific Oregon.
And to answer the question, where do these Oregon go there was not there were not donate they were not <unk>. They were no donor <unk> <unk> or process. He's in that New York area throughout the <unk> the month of second half of marching to the first half the people so there.
No transplant activities whatsoever, there was no retrieval process the whole thing came into a screeching halt it it does it it didn't it you know I.
I don't want you to misunderstand, the D.'s, Oregon's where what transplanted somewhere else that there was no donation process at all so where did these oregon when he's Oregon.
Stayed with the with the body of deceased and they were buried and they were not retreat. There were not used to be for transplantation at all what God. It creates however, it's a pent up demand on the waiting for your heart patients were waiting in New York lung patients deliver <unk>, everybody who's waiting for an organ transplant.
So that's what it creates that's what I referred to in my statements about the pent up demand because the waiting list continued to grow throughout the covert endemic it didn't stop the need for organ transplantation continues to grow into waiting let's continue to grow up throughout the throughout this time.
Tearing up very clear <unk>, yeah, obviously, the ultra concentrated nature of these transplant centers, especially in the U.S.
Would you care to catch phrase the current state of capitalization of these centres and the reason I asked says you know it's no secret to it it's all over the news how financially devastated hospitals are looks like they were going to be you know seeking another 100 $200 billion just in general.
Transplant centers, obviously, a relatively much more profitable given lucrative reimbursement, but in this current environment.
Is that a dynamic that you'll have to worry about for me at the centers, let's say, it's it gets prolonged took into Q3 God forbid.
Just give us some color on your assessment of the current state of capitalization of these 50 or 70 key centres in the U.S.
Sure.
<unk>. So let me address that question in two different two different level.
Let's talk about the transplant centers that are that already.
We have 18 lung center 17 Heart Center.
About 17 liver sensors that are already equipped with L.C.S. is today. We then these institutions they drive a significant portion of the falling. So these institutions are not going to be looking to make any more capital equipment budget for for their programs.
Which is the risk that I think you're asking and Robbie mentioned in his question as well.
Let's look at it from the other side, which you're hinting too and I hinted to in my in my presentation.
Everybody knows that centers in hospitals across the U.S. and across the world that losing significant amount of revenue and significant amount of.
Yes games could amount of <unk>. When you look at the transplant procedure is one thing high margin procedure. It's a non elected procedure, it's an immersion procedure.
So definitely we expect those procedures to be privatized within these centers.
Now.
Question. The other layer of the question is why would <unk> well because what we're working on <unk> is not to make that a.
A question anymore.
We are going to be leaning forward into this storm into this crisis without technology with <unk> with our service model without relationship with appeals to make sure that if there is an Oregon somewhere out there that we are going to retrieve it.
Access it optimize it and and work with the opium <unk> I located and deliver it to the transplant center. That's what I was praying to that this is <unk>. This is the area that our strategies to lean into this storm not to lean back lean forward and really establish ourselves as D.T. partner.
Two that transcend paradigm in the U.S.
During and post the <unk>.
Got it and believe quickly find me and I'll hop back and Q. deliver data to be released in a few months I presume eat is going to be <unk>. It would allow was comparison to static cold storage, specifically, we would get informed graphs graphs survival and causes a failure and so on until.
<unk>.
Absolutely. This is that randomized controlled study compared to cold storage and it would show US results significant results of difference is showing significant differences on the L.C.S. arm compared to hold scorch on many key clinical clinically important endpoints effectiveness endpoints safety endpoints and.
Long term signal.
<unk> critical for the long term successive liver transplantation and D.C.D. transplants.
Got it gentlemen, thank you.
And again I start one to ask a question.
<unk> session and I would like to turn the call back overturned.
<unk>.
Great. Thank you. So much. We appreciate you taking the time to be in on the call and we hope all of you are safe and healthy and stay safe. Thank you so much of a great up too.
<unk> conference call. Thank you for participating you may know disconnect presenters. Please hold.
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