Q1 2020 Earnings Call

This time all participants are in a listen only mode. There will be a presentation for the most this management team followed by a question answer session.

Advise you all that today's conference is being recorded I'd like to turn the call over to Bob Yedid of Lifesize lifestyle Advisors. Please go ahead Sir.

Thank you operator, and thanks, everyone for joining us.

Immodesty I first quarter 2020 update call today.

Representing the company or Tim Moran, Chief Executive Officer answered Taylor, Chief Financial Officer, and Mark Pomerantz, President and Chief operating officer, a modest <unk>.

Before turning the call over to management for their opening remarks.

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.

Not undertake no obligation to revise or public we were released the results of any revisions to these forward looking statements in light of new information for future events.

Factors that can cause that could cause actual results or outcomes to differ materially from those expressed and implied by such forward looking statements are discussed in greater detail in our most recent filings on form 10-K, and our other periodic report reports on forms.

Q and 8-K filed with the FCC.

There was prepared remarks, I bike and I'll turn the call over to Tim Moran.

Oh modus GR Tim.

Thank you Bob and good afternoon, everyone. Thank you for joining us today for our Q1 2020 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 first quarter.

The end of our prepared remarks, we will open the call for acuity session.

I'd like to cover three key topics today.

Provide an update on our launch progress through the first quarter.

Share our view of the impact of Cobot 19, and how we are preparing to be successful in the new normal.

And then discuss the progress we have made with execution of the cost reduction program announced on March Thirtyth.

We ended the first quarter of 2020 with positive momentum as we built a foundational group of large influential hospitals and health system will be gone utilizing the pure be system.

The feedback from these early adopter hospital has continued to be very positive further confirming what we believe the value that our system offers do you guys in providing improved patient care, while also reducing hospital costs and increasing efficiencies as it relates to inpatient calling off compete.

Our launch of the pure do system into the U.S. market is focused on accomplishing four key objective.

Generating demand at target institutions in leading hospital networks.

Developing value an assessment committee approval for the pure abuse system at these targeted institutions.

Driving utilization at top National health system that can influence the market.

And building brand awareness of the value. The pure of you technology provides at the solution and busy hospital G.I. labs.

I'm pleased to report we are executing against each of these four objective, though at a pace that reflects the current market conditions.

As we discussed on our last call at the end of March our progress with hindered in the back half the first quarter as the cobot 19 pandemic gained momentum and severely constrained our customers' ability to perform calling off cubbies using pure view pursue new product evaluation or commit to new equipment investments.

As the threat of Cobot, 19 became a clearer and more pronounced.

And in order to ensure the health and safety of our employees and customers, we complied with CDC guidelines and enacted social distancing, thereby requiring our sales team to work from home.

Despite these challenges we have gained approval and placement of the pure be system in 19 major hospitals since our Q4 2019 launch.

These prestigious hospitals includes several of the top ranked Gee I centers in the United States, including the Cleveland Clinic.

You see away.

The University of Texas.

I think your medical center.

And Memorial Hermann Health system.

Each of these hospitals continue to move through the sales process from a valuation to approval to building utilization, which typically ranges from four to six month.

Despite losing part of the first quarter due to the covert 19 locked down I'm pleased to report that we've now trained more than 75 physician champions on the pure view system.

We believe that hospitals will begin to reactivate broader elective and non elective procedures towards the end of Q2 and that the cobot 19 crisis has the potential to amplify the important role that pure view can have on assisting site as their G.I. lab begin to ramp back up.

As it relates to the significance of the unmet need in the market for our technology, we're encouraged by our ability to gain a valuation approvals as we approach accounts on our target list.

We are batting a thousand in vac approval, so far and had been pleased by the economic clinical and overall utility acceptance of the pure view system.

Although we have implemented a targeted downsizing as part of our previously announced cost reduction program. We continue to build a strong pipeline of pending evaluation.

Of particular note are a number of significant upcoming evaluations, including the Mayo clinic.

You see Irvine.

The University of Pittsburgh Medical Center.

And northwestern University Medical Center.

We currently anticipate these evaluations to begin during June and July.

During the last few months, we've maintained a high level of communication with our G.I. champions. Despite the impact that cobot 19 has had on their departments.

Most of their hospitals had been fully dedicated to addressing cobot 19 patients limiting other activities in order to keep noncore bit 19 patients safely out of the hospital.

Well inpatient going off could be typically are not an elective procedure, we have seen a meaningful reduction cases at most sites.

It is our understanding that patient not exhibiting severe active bleeding at the hospital have had their procedures postponed as the hospitals wait for the cobot 19 cases to plateau.

With the unusual in extended low in G.I. procedures, resulting in many physicians working from home. It has afforded us the opportunity to spend more time with them discussing the advantages that the pure view system can provide when they return to some degree of normalcy in the coming month.

Do you guys have informed us that they expect at least initially to be treating a larger than usual number of sick patients as they begin to reactivate their departments.

The largest concerned we've heard has been the importance of avoiding any extended hospitalizations cancelled or aborted procedures due to insufficient Dow prep.

We shared their concern and have amplified our messaging to remind them of our belief that the single largest benefit of the pure view system is to allow for a successful procedure. The first time through.

This is just one example of how we're approaching hospitals as a value added partner offering a solution with the potential for high impact as they adapt to a new normal.

I have made it a directive for our commercial team to not wait for the GE eyes and hospital to lead the way, but instead I expect the modus G.I. team to be proactive and find solutions for a hospital customers as their activities begin to ramp back up.

Let me share a few new initiatives, we've been acted and are beginning now to roll out.

As a result of access the on site visits being limited or not available we have initiated a virtual support program for inpatient procedures.

This program can become a valuable tool for us and GE eyes of expressed their appreciation for this level of flexibility as part of our virtual will support we just launched a new mobile app that is now available on both iOS and Android devices.

With that provides chapter and narrated video support that covers the set up and use of the pure be system.

As in person meetings for discussions about the pure view system with new target hospitals are currently not possible. We've established a virtual pure view training room that is man five days a week eight hours a day based in our Florida facility, where lives system demonstrations and in services are available utilizing real time bidding.

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We're also evaluating the idea of providing offsite training to GE eyes, and their staff and the pure view system with the goal to conduct this training and either an ambulatory center or a nearby hospital, where it may be a safer and more convenient environment.

We believe we have an opportunity to position pure view as an even more valuable tool in the G.I. suite as hospitals proactively consider how to improve patient flow and eliminate the costly burden of extended hospitalization.

Looking outside the U.S., we recently announced receiving CE Mark approval in Europe as well it Israeli approval for the second generation pure view system.

We're also actively evaluating potential strategic partnership opportunities with established medical device companies and distributors that have a global commercial footprint and scale.

Well Europe and Asia are both interesting markets for partnership we also continue to evaluate potential opportunities to accelerate our launch in the U.S. market should the right opportunity present itself.

In terms of the cost reduction program, we announced on March Thirtyth I'm pleased to tell you that the team has rallied together to execute this plan in rapid fashion.

We're confident that we will achieve our objective of reducing our quarterly cash burn by approximately 50% or approximately $3 million per quarter, beginning on July 1st 2020.

This program was designed to allow us to successfully navigate the uncertainties of the market. During this unprecedented time, while continuing to advance our commercial and strategic objective.

Before I turn the call over to Andrew Let me summarize our recent accomplishments.

We continue to make steady progress against our commercial objective of generating demand. Most importantly by building a solid foundation of key reference centers and KNL support across the U.S.

We have decisively adjusted to the new environment created by the Cobot 19 pandemic and are prepared to continue to access the market with an innovative approach.

And finally, we have taken the necessary steps to ensure financial stability for the company.

During these times.

I'll now turn the call over to Andrew to discuss our first quarter financials.

Andrew.

Thank you Jim.

Thank you everyone for joining us today.

We reported revenue for the first quarter of approximately $28000 from sales of the pure view single use suite.

Jim discussed we continue to gain new system placements and increase our training of GE eyes early in the quarter prior to the impact of Cobot 90.

The majority of these centers were operating under an evaluation period during which sellable, we're paying for disposables, but not the pure view workstation.

We continue to work through capital equipment purchases leases or rentals with many of these accounts.

For the three months ended March 31st 20, Twond, we reported a net loss of approximately $6.5 million were a net loss per diluted share of 23 cents.

Compared to $6.3 million or a net loss per diluted share of 29 cents for the same period last year.

First quarter up 2020 included non cash expenses of approximately $600000 principally related to stock based compensation.

Year to $1 million noncash expenses, the same period of 2019th.

I was wasn't the case in the first quarter up 29 team the company's cash flows from operating activities. This period included certain onetime annual expenditures related to personnel insurance and other complaints feet.

The amount of these specific cash outflows totaled approximately $1.6 million.

With respect to work cost cutting measures as Jim mentioned these are tracking to plan and are expected to largely be implemented by the end of the second quarter.

Resulting in a significantly reduced cash burn run rate on a go forward basis.

We continue to estimate that total onetime charges associated with this program will be in the 1 million to 1.5 million dollar range.

At the end of the first quarter, we expensed approximately $600000 as a portion of these charts.

We held approximately $21.5 million in cash and cash equivalents as of March 31st Twentytwenty.

Additionally, we recently entered into a deferral agreement with Silicon Valley Bank, whereby our term loan was extended by six months to June 2024, with the interest only period now in place through June 2022, providing additional financial flexibility to the company.

And with that I'll now turn the call back over to Tim.

Thank you Andrew.

In closing, we're pleased with how our sales team continues to find innovative ways to effectively stay engaged with our target GE eyes and hospitals during the covert 19 pandemic.

We see an opportunity to engage additional GE eyes and train them on the pure view system, while they work through this unique slowdown in their hospitals.

And we're working with hospitals and GE ice to plan for ramping up inpatient Cowen Oscar piece with an influx of at risk patients who had their procedures delayed and would benefit from the pure if you system.

We've created a compelling technology that addresses a large procedural market.

We've established first mover advantage and are pleased with the positive impact. We believe we can have as it relates to improving patient care and health economics, particularly in the wake of the cobot 19 pandemic.

I'll now ask the operator to open the call for questions.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one I knew telephone keypad a confirmation tunnel indicate your line is in the question can you maybe for start to if you'd like to remove your question from the Q for participants using speaker equipment. It may be necessary to pick up your handset.

Before pressing the star keys.

First question comes from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.

Hi, Thanks.

Can you mentioned the the emergent active bleeding patients not getting deferred certainly as much as others.

What percent of the inpatient Col. Colin Oscar These would you estimate falling into that category.

So so Steve Thanks for the question.

Let me start by just saying in general what we've seen in talking to our physician is in many cases, there overall, calling us can be volume has been down by upwards of a anywhere between 75 and 85%. During this a this period of time that said you know as you know we.

Focus on critical calling us copies, which if you look at the total calling us could be procedure for inpatient roughly about 60% of those.

Our bleed what we've seen though so you kind of scratch your head and say, okay. Well you know these patients still exist, but in talking to our physicians what they've told US is due to the redeployment of many of their units to treat cobot patients. They basically assessed these patients and if there bill.

Lead was not significant they've actually postponed them either to an outpatient center or postpone the procedure or to take place at a later date, so they've changed their protocols as it relates to managing on even these critical colonoscopies that they typically wouldn't have wouldn't have discharged.

Okay got it.

And then you a in its just the last few weeks you continue to build out the pipeline can you remind us how you define a pipeline opportunity you know as you as you put in new hospital in that bucket.

Sure Yeah. So you know in my mind. The general pipeline are you know accounts that we've targeted and we've had some degree of interaction with and if you look at that universe, Steve. It's about 150 hospitals, but then from their you know we prioritize based on the profile that we.

We think it best meets our strategic objective as well as where those hospitals are in terms of their ability to prioritize the evaluation.

Of the modus product so I would say that we probably have about 60 accounts that our in our backlog.

And we continue now to just add those as we move forward. So as I mentioned in my my earlier remarks, we've been cultivating these opportunities at places like Mayo clinic in northwestern we added a couple new ones that I don't think we've talked about before but you P.M.C., which as you know is a very large system you know that we've been in dialogue with.

And now we have approval to move forward with an evaluation as well as the Methodist system in Houston. So we continue to take them from you know initial contact discussion with GE eyes to approval actually through their back to do an evaluation and those are the ones that we really focus on as it relates to pipeline accounts.

Got it okay, and just last one I'll jump back in queue, how many of the 19 hospitals, where you. Please review.

How many of those have gone through Oh full back at this.

Yeah sure Great question. So you know what we found in most of the processes are there's an initial vac approval required to do an evaluation and bring the the equipment on site and every one obviously if those accounts have gone through that I would say generally speaking about half of those accounts have gone through the full that.

Approval and as I alluded to earlier, so far weve received that approval in each of those what I will what I will note is in most of those cases now they're starting to purchase the disposable sleeves. We are still working through the capital process. As you know you know the capital funding is not always available at the time of the.

Jack approval, but hopefully that that gives you a little bit more color Steve on the on on the conversions.

Yeah. That's helpful. Thanks Ted.

Thanks.

Thank you. Our next question comes on line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Hi, this is actually that such as thank you for taking the question I just real quick wanted to confirm that we would see approximately half a million to 1 million and onetime charges in Q2 related to the cobot expense reductions and my understanding that correctly.

So yes, so we had outlined that we expected the total charge to be anywhere between 1 million in one and a half billion I would say right now destiny that we will come in on the low end of that range.

Okay perfect. Thank you for clarifying and just to clarify that one point sorry, just a chose the loop there was about 600000.

Associated with the onetime charges that was.

Booked in Q1.

Of that range, so not incremental okay.

Just one okay got it yeah. Thank you very much and then I'll just wanted to touch on inventory level I'm wondering what they may look like for their need is a year I know you mentioned briefly in your press release. So I'm wondering if it'll be similar to Q1 or slightly above.

Sure.

Let me just make a kind of a color commentary on that first destiny you know as we looked at what was happening with the impact of Cove. It and you know the expected slow down in these facilities and as part of our cost reduction program.

You know we made sure that we were running the best the business as efficiently.

As possible and Ah, but also balancing to ensure that we have enough inventory to meet our needs I will tell you that we're very comfortable that we have the appropriate number of both work stations as well as disposables full slim and adult to meet the both existing needs, but a upcoming in terms of what we expect in terms of conversions at new fun.

Cities I'm, Mark if you want to just chime in with a little bit more detail as it relates to that please feel free.

Thanks, Tim I think I think you said it well I think we're in a very good condition from inhibitory perspective.

And you know we have a extending the.

Good shelf life on our product so that you know with any ups and downs that happened or you know where should be in a very good position. Then you have no really no concerns at all from a supply chain perspective.

Okay got it. Thank you and then I'm just curious for your virtual program, what kind of mix are you seeing as far as tend to eat anything you know physicians that have been using it and are looking change you know get a better like understanding and additional training are you seeing more.

Pipeline accounts and then are you also considering maintaining these virtual options if conditions I know you talked a number of companies that have been doing that.

Yeah, Yeah Destiny, that's actually it's really exciting and the way I look at this you know we've really digitized if you will our go to market model and some of this was in the works prior to Cove, Ed you know what are the things that we've always looked at with this but this businesses over time I'm getting a hostile.

<unk> self sufficient on doing the pure be pure view procedure once we've come in and done all the training and are no longer at the site on a daily basis, you want to be able to provide the appropriate tools to to allow them to a to do cases without us there. So.

What I would say is a silver lining here with cobot as it accelerated you know our time and effort in these areas. So as I as I mentioned earlier, we have been as you'd imagine utilizing some of the standard tools like zoom and Webinars. We also created this virtual training room, which I think its.

Going to be very interesting or where you can call in and you know see a live demonstration without having to you don't have a sales rep. There I talked about the App, which we've gotten tremendous early feedback on what we put into that app in terms of content and the and the fact that you can go through an in service on the device, but we've.

Chapter <unk> with commentary I'm. So if there's just one part of the system set up you know or <unk> or disposable remove all at the end that you want to remind yourself forget a refresher on you can go right to that section and just watch as you know call. It 30 minute clip did a few other things that we hadn't mentioned, but we have a a new whiteboard animation tool that's going to be launched.

Here in the next two weeks and this really outlines the importance of the system, how which utilized and some specific case studies that we think is gonna get good attention both at the hospital level, but also in social media. So there's a lot of these things that they're now ready and they're they're they're starting to be utilized in the market we will.

Absolutely continue to support this and I would say even add to it over time in terms of where we've targeted this you know as I looked at our business right now and I've said this before the pipeline and because of this unmet need and because of the fact that we are the only a technology in the market could that can meet this need we have not had a difficult time getting into.

First and having facilities want to do an evaluation. So we're focused now on going you know a bit deeper before we go wider if you will so the focus of a lot of this remote work has been on existing customers trying to get them through the remainder of the sales process as well as the immediate kinda on the cost cost.

So these are facilities that either have our device on site and we're about to start a trial or you know had received approval for a trial and we'll be starting now in June and July we spent most of our time with those folks over the course of the last 60 days.

Okay perfect. Thank you so much I'll jump back in Q.

Thank you.

Thank you. Our next question comes from line of Ben Haynor with Alliance Global. Please proceed with your question.

Good afternoon, gentlemen, thanks for taking my question I, just had one they've done a good job providing quite a bit of color. So far you mentioned are the you know some of the these are procedures being pushed to outpatient centers at the same time that you're seeing a.

You're seeing the length of stay improvements pure view really resonate with these hospitals I mean do you worry at all that or somebody said are getting pushed out.

To the outpatient centers not just in time ultimately do not come back to the hospital and maybe you need to shift or the commercialization strategy a more towards a outpatient centers or or any color you could provide there would be helpful.

Yes. Thank you Ben I'm I wouldn't say that you know and we've talked to a large number of our docs I'm one of the benefits you know in this period of time has been a lot of the GE eyes had been working from home.

So our ability to interact with them on a much more routine basis has been has been remarkably high I would say that the majority of these cases have been postponed as opposed to have been picked up.

In in the outpatient center I think if it was significant and they were able to do it they did.

But what we're hearing from our DOCSIS, they're expecting a significant influx of these sicker patients as they start to ramp back up and what they've asked what they basically told us and we've now share do we put some bar existing guys in touch with you know docs that haven't had a exposure to the technology yet to.

Share, which is you know the number one thing that they want to do with these patients is ensure that if they're bringing them into a hospital environment. You know what do you think about the covert testing that has to be done the P.P., that's gonna be consumed by both the health care professionals as well as the patient and the fact that there's a risk there's always going to be a risk there that patient can.

Catch the virus, while they're there the last thing that they want to do is have that procedure be prolonged or canceled so.

So the feedback we've received is the value proposition likely be even more important now you know post cove, it and with me there and is on the importance of you know length of stay reduction. So no. We really think that this this works well in terms of you know what we've been talking to the market about even before cobot hit.

Okay. That's definitely helpful and actually just one more quick one from me a you mentioned the strategic partnership opportunities and Oh, the potential of maybe is signed an agreement here for the U.S. market. You know any color you can provide on you know how those discussions have been going to.

So whether you think that that.

As a likely route to you know anything any help there would be would be great.

Sure Yeah, you listen there's there's only so much as you know band that that I can comment on now, but what I will say just generally speaking is I'm very pleased with the interest and attention that we've gotten in the market with our with our product.

I think it's being recognized by other folks that are either play directly in this space or.

In a nearby you know part of the hospital look to try to get into the G.I. space I think they see that we've gotta technology. That's taken US you know eight or nine years to really perfect that allows a physician to control a a procedure that is is today very much I'm not controlled well and it's costly to hospitals. We also first.

Mover advantage. So you know as I mentioned earlier, we protected this asset yeah. We think it's gonna be quite some time before someone is in the market competing with US you know I think that's gotten the attention of some of these larger companies. So we continue to be an active dialogue on it when there's an update of course I will I will provide that but right now you know we're really fell.

Okay, just or on continuing to bring these large centers on board, which I think just gives US you know I'm more leverage as we move forward and and continue to have these discussions.

Okay very helpful, but thanks for taking my questions and keep up that batting average for the vac approvals.

Thanks Ben.

Thank you. Our next question comes from line of Matthew O'brien with Piper Salmon. Please proceed with your question.

Oh, absolutely. Thanks for taking my questions of those 75 docs, you train or they all those Nike facilities, where you have a system or there's some that are outside of those 90.

So Matt I would say the majority are at the sites that we have a system. There's there's a there's a few that you know we have oh, we have spent a little bit of time with that you know they were we have because we have loan or units that we give to our reps that they can go out and do some training so when there.

You know I'm, creating interested in the market. The they may have got a meeting and they'll train a position on how to utilize the device, but if they're not ready to trial. Then obviously, we're not going to leave it on site, but I would say the large majority route the facilities that that we're working with today.

Okay, and then you know Tim as we think about things are they progressed during the course of the year. I mean, you know capital is definitely constrained with a lot of these hospitals. They have a lot of other things to do worry about at the moment in other hemorrhaging money or you know currently so how do you think about the recovery here for you guys you know during the back half of the.

Here or is that they're going to be really difficult and so we probably getting a 21 and things that have moderated more so or can you be more flexible with your you're a business model.

Yeah, Yeah. So as you know I'm, Matt we've talked about this I mean capital capital, it's kinda always been tight and I think it just got you know a bit tighter and at least in areas that have been hit the hardest and we've heard that feedback in particularly even with some var existing accounts that you know we're on the cost of releasing funds to purchase the work.

Station and now that's been put on hold at least temporarily but what I will say is I think we have the flexibility to really partner with these sites and be creative in terms of how we structure our programs and we've already had some of those discussions you know and there's things and we'll we'll talk in more detail as they are actually.

We enacted but you know volume based agreements, where some sites have said hey, we can make a commitment on the number procedures will do but there may we may not be able to pay for the capital now you know in in our mind and I've said this before the capital has value of course, however, getting these sites to the point, where they are doing.

Repeat procedures were getting repeat disposable orders and our product has become just a standard tool you know in their toolbox within the G.I. lab is really where we need to be and what we're focused on so you know we will not let capital slow down these conversions, but we think we can get creative as it relates to you know the way.

We go about the partnership and including the disposables.

Okay. Thanks, and then one for Andrew just you know the level of cost is definitely necessary given what's going on can you talk about where you.

The majority of those types are really focused on and then how that could impact your is you're adding to 21 as far as trying to grow the business.

Yeah.

All come on all Clement a generally and I'll I'll hand, it over to Jim to talk about a general impact on the strategy and our commercial objectives, but the short answer.

Matt is really across the board.

You know as we talked about last quarter, we had some cutting the commercial department little bit more than 50% in that regard and then in other areas I. It was anywhere between 30% to 50% really across the board on Tim If you want to comment on sort of how that.

That's not for the remainder of the yearning to 21.

Yeah, what I'll say is one of the most important things when we made that decision was we wanted to be decisive we want to ensure that it was meaningful enough to allow us to weather the storm to get through this period of time, you know in the unknowns in terms of when hospitals would start to get back online.

And we also you know one of the kinda tenets of the process was we didn't want this to be ongoing so I'm doing the best of our ability to ensure that there wouldn't be additional costs and right now I feel comfortable you know with the at least the view that we have that's getting a little clear that they're there wouldn't be additional cuts what we did do though is Matt as well.

Looked at the overall get his organization and.

No we trimmed in areas, where we may be placing a bad that's much longer term.

And we said Okay does this meet our immediate objectives and you know the number one immediate objective for modus G.I. is demand generation in the market commercially with our product building out that foundational group of hospitals that then you know really become the proxy for what this market can be you know either as we add back.

More salespeople and grow that business ourself, where we look at a strategic partnership I think that's the critical priority. The other key objective you know that we thought about when we made the cuts where you know the technical expertise of the company ensuring that we can drive.

Some of the opportunities that we see that are in the near term. So you know next generation ideas around our disposable sleeve, which had been in the works as well as the a the upper Gi I opportunity that we talked about on last call. So we made sure that we didn't impact those key priorities, but we did have to make some hard decisions.

On things that you know weaken or we can add back you know as we see things getting getting a little bit more positive in the market, but I feel very comfortable that that we're able to achieve the most important objectives.

Oh, so hopefully that that makes sense and you know a if you look around the market.

I've heard from you know colleagues and others that have had to make.

Make no much worse decisions you know and some that you know are questioning whether they can weather the storm and I'm really pleased that we took quick action in terms of what we did.

Okay, and just quick follow up on that Tim how many sales reps you have at the moment Oh, you can get back into the year.

Yes, so we as I I think I've mentioned this in the last call. We made about a 50% reduction in terms of our head count So roughly Matt I'm, we have five a it's a customer facing a field people and we've really focused them on you know central west.

And east with our key relationships in many of those sites.

We also have support in Texas.

Where we've got some good installations of product and of course, our head of sales. So that that's the way the commercial team is structured now.

And then in terms of marketing and and you know the other some key support areas. You know we we've we've pulled off a few folks, but we've kept our key employees there.

Got it thank you.

Thanks, Matt.

Thank you. Our next question comes from the line of Kyle Bowzer with Dougherty <unk> Company. Please proceed with your question.

Hi, Tim Andrew Thanks for the updates here and taking the questions I know a as you mentioned, it's more important now than ever to get the cost could be done in inpatient setting in the first try and I understand that.

Given these non elective inpatient calling Oscar piece are are being pushed out so its hard to get into the new hospitals, but given the size of the early adopting hospitals it seemed like.

The sales reps could stay quite busy making sure all the G.I. docs and support staff have been in service and trained in.

So if you look at these 19 hospitals with Gen. Two just kind of curious roughly what percentage of the targeted clinicians at these hospitals have been trained and.

Yeah. That's a good question and Oh, we we as I mentioned earlier, we kind of had the luxury of many of these physicians working at home.

So we've been able to be in contact and I would say with almost every one of those facilities. The key G.I. champions that you know either ER docs that from the earlier accounts places like you see L.A. that are doing you know procedures on a regular basis University of Texas, They're doing you know doing in purchasing sleeves on a regular.

Basis, Yeah, we've been able to be back in touch with them just too you know check in but on the facilities that were in the mid seven evaluation or the ones that had not yet started their evaluations we've been a in touch with I can say confidently all of those stocks to ensure that we're walking through questions on the the system.

I'm talking to their staff about set up and also even working through you know the anticipation of the value analysis committee, ensuring that we've got the data necessary to have that being efficient process. Once we get back on track. So overall you know this has been in my mind, a pretty effective period of time.

Terms of a you know we've got to reduce the size team, but you can get a lot done when people are available and we're doing things over the phone. If you think about it kinda from that perspective, and we even had procedures that we're taking place in one of our evaluation sites Sinai Hospital in Baltimore that did a you know 70 procedures. This past may.

Without us there and were able to support them remotely in there and then the early evaluation accounts. So that was very very positive.

Interesting that's helpful and can you talk about the rental process timeline. It sounds like there's flexibility here with accounts willing to do you know sort of minimum disposal volumes, but.

How long are you offering the rental option to accounts once they sign up typically.

So you know the priority is I'm trying to get these facilities onto.

Some type of capital program, whether it be you know an outright purchase a rental or at least or a different you know creative volume based program you know really right. Following the vac approval now at times that is not able to be done you know depending on the dynamics of the hospital. So we've had instances where you know we've committed.

Say, okay based on the volume that you're going to give us on a monthly and quarterly basis. You know we will leave the workstation here for the next three months.

But at that point, we now need to try to get you under some type of an agreement. So we've shown that kind of flexibility and keep in mind. It's early right. We're calling a were two quarters into our launch you know what's a month you know was impacted so these are the most of these facilities, we talked about or you know really getting through the final portion of their process. So.

I log in terms of you know the timing of when they will move to a rental is really happening real time, if you will.

Got it and then just just lastly, I know the clinical trials across the board has largely been put on hold but can you just a walk through in a little bit more detailed plans for each of your upcoming and ongoing studies that we should keep an eye on.

Yeah sure let me make a general comment so yes, I'm they've all been impacted you know justice as everyone else in the market has seen in terms of clinical study activity. You know you know what that we're running the expedite study in Boston in of course, Boston has you don't have a large number of cases and we've been in.

Very close contact with with Dr. Jacobson and they are not really back yet up and running as it relates to the clinical study, but we continue to stay in close contact.

As you know I'm. We're also focused on and you know just think about 2020.

We've said this the investments that we want to make around clinical studies are all to advance our commercialization efforts. So we haven't yet revealed the details I'm when we will win when when the time is a when it when these are approved but we are working with a couple of the largest centers in the U.S. to construct studies that will give us.

You know additional data that we don't have today, you know around G.I. bleeding and Nick the economics associated with using pure view for the G. I believe so you know we've talked about I'm getting into a g. I believe it or with a reduced timeline you know and some physicians are already done that with very minimal prep, so we'd like to formalize.

That we're working with some of the largest centers to do that I can ask Marc if you'd like to provide a little bit more color or you know as it relates to Clinicals. Please please at.

Yeah, I think you covered it well Tim you know you know to Tim's point I won't really you know looking at you know those critical patients and developing more data.

Around that so you know everyone's already fairly awareness, we don't want to delay patients in the code that issues and only accentuated that so really driving to that I'll point out, especially for those critical bleeds.

No not even waiting you know overnight to try to prep those patients and I'm really to try to move that to a much more rapid colonoscopy experience you had a really not only for the economic benefits, but could also have the large potential to show some significant clinical benefits as well.

Got it thanks, Marc Thanks, Tim and Andrew appreciate the update here.

Thanks Kyle.

Thank you our next question comes online.

She Wainwright. Please proceed with your question.

Hi, This is bolland dialing in for each and I've a couple of question. So I just wanted to make sure.

The rescued study you I'm not even she had had correct I mean I'm do you have any plans when you plan to initiate that.

Are you planning to use the study data for any future indication expansion or some kind of special item can Karen.

Can you just repeat the first part of the question, which study are you referring to.

Rescue study.

That's good.

Oh, I'm, sorry, I'm, sorry, it was cutting out the rescue studies, Mark you want to probably a little bit of color as it relates to the rescue.

Sure. So yeah. The the rescue study you know we have currently put on hold which is more about an outpatient focused study and you know that study we're going to determine probably a as we get later into the year, depending on how things begin to open up whether that's an area that we want to.

Our focus on that would not have studied to help with any indication expansion or any claims where any regulatory process that was more just for a per market development reasons or into the you know eventually into that outpatient setting so not a critical study for US you know in the shorter term you know more for a longer term focus that's.

I will pick that up at the appropriate time, you know it may even redesigned it based on you know what we're seeing happening in the a in the called at World.

Okay. Thank you.

Hum Lance or the pure you will see look like and tiny planning before and after the peaking but maybe you can give some number.

And also do you have any expectations or guidance.

The year, that's like the pure will <unk>.

Sure Yeah. So so at this point, we have not given guidance I'm as it relates to revenues nor have we you know obviously then broke out the sales mix, but what I can tell you just to provide a little bit of color and we've said this publicly before you know what.

We expect initially won an account makes a conversion to pure view, we typically have two to three physicians that are G.I. champions in that site that you know would've been part of the evaluation process and part of supporting the Vac approval you know what their clinical feedback.

We expect those early accounts to ramp up.

Ups to somewhere between five and 10 procedures per month initially and then over time you know as we continue to expand at that site you know what we do as we focus on bringing additional physicians in have them trained and then obviously that drives you know increase sleeve volume, but in terms of modeling you know when we.

Put out detail I think to two calls ago. We had we had talked about a five to 10 procedures per month. Initially is what we would expect that these sites can get to and then if you think just kind of longer term and at a macro level, there's about a million and a half procedures done each year.

In U.S. hospitals. These are the critical inpatient procedures, so about a million that procedures and the literature has shown and we've seen in the real world that you know upwards of 50% to 55% of these procedures are indeed delayed for a night or too which is the perfect target opportunity for us.

Here as we are launching the product to go. After so you know called that 750 to 200000 procedures in the U.S. that immediately our target market for US and then you know of course as you model things over the course. The next couple of years. You. You know you can look at various penetration rates, but we think it's premature to.

Provide specific revenue guidance until we get a couple more quarters under our belt.

Great I'll just one other question.

Turning to find them. It continue for the rest of the or what are some of the that you might have to pick up your book.

Yeah. So I think you know largely the the big step that we've taken already you know as you are aware I'm on March 30, as we announced the cost reduction program. We just talked about that I think taking.

Half of our burn out of the court on a go forward basis. It gives us more runway.

To hopefully allow things to get a little bit Oh, you know more concrete in the market I am pleased that you know we're starting to see if you look at the concentration of our accounts. We've got a large number of facilities that we have been working with in California.

We've got a nice in group of installations in Texas and also parts of the Midwest and and in speaking to those accounts over the last couple of weeks. It looks like the majority of those will start to get back up and running here in the first half of June I think some of our facilities in the northeast New York Boston.

Some of the largest cities like Chicago, maybe a little bit later in the year, but we're anticipating that these facilities are gonna start to get back up to a their normal volume overtime. We've even had a few of the larger centers, telling us that they're expecting by July to potentially be at 120% of their volume as they bring back this influx of patients.

So you know we're expecting that things are going to get a better as we get into the summer, but I think we stabilize things from a financial perspective, we do of course, you know continued to have a dialogue as as we discussed with strategic partners. Both on the commercialization side, but also on the financial side in terms of.

You know I'm, the folks that understand our story and could be financial partners in the future for a so you know right now I think it's all about execution.

And you know we're hopeful that are the signs that we're seeing in some some parts of the states. There are going to continue and we can get back you know on the trajectory that we are on before covert hit.

Okay. That's it for me. Thank you so watch.

Thank you.

Thank you ladies and gentlemen, this concludes our question and answer session and I'll turn the floor back to Mr. Moran for any final comment.

Great. Thank you I just want to thank everyone for their time today for the continued interest in Modesto.

You know we've got an incredible technology that we are really in the early phases of developing into the market, but when you look at this this procedural market. Our first mover advantage you know it's that a in just two quarters were able to get our product into we've been very bullish about a about the overall.

Oh.

Future opportunity the company and well look forward to providing updates next quarter. So thanks, everyone for participating today.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.