Q1 2020 Earnings Call
Please standby we're about to begin.
Hello, everyone and welcome to this end her life Sciences first quarter 2020 earnings conference call. During todays prepared remarks, all phone participants shall remain in a listen only mode. But later you will have the opportunity to ask questions. As a reminder, todays conference is being recorded and to get started with opening remarks and introductions I am pleased to try.
On the floor the CFO Mr., David Wells, Good afternoon Mr. wells.
Thank you Jim Good afternoon, and welcome to Entrust first quarter 2020 business update in financial conference call.
We issued a press released this afternoon. Those of you don't have a copy of the release you can access it in the Investor section of our website at Www Dot and drive Inc. Dot com.
Before we begin please note that today's presentation includes forward looking statements.
All statements other than statements of historical facts.
Polluting statements regarding our strategies.
Financial condition operations costs plans and objectives as well as anticipated results of our development and commercialization efforts and the timing for receipt of required regulatory approvals and product launches are forward looking statements except as otherwise.
Required by Federal Securities laws accompany this great disclaims any obligations are undertaking to update or revise any forward looking statements.
Please refer to our form 10-K for the 2019 fiscal year.
Filed with the FCC to get a better understanding of the risks and uncertainties uncertainties related to forward looking statements.
I will now turn the call over to our chairman and Chief Executive Officer, That's why Michelin that's why.
Thank you David Good afternoon, everyone. Thank you for joining us today to review Andrews first quarter 2020 performance and 2020 business update.
Along with David Me on todays call our were no Malibu Richie Chief commercial officer.
And Michael Forton, Andrus, Chief Technology Officer.
Let me quickly go through today's agenda.
First I'll highlight a recent achievements and David will review financials.
I'll provide an update on our key milestones and expectations for 2025.
Followed by renewal will provide additional commentary on commercial activities with the focus on Europe.
Finally, we'll open the call for Q1 I.
Before I begin.
I want to acknowledge all the people who are dealing with cobot 19 of the patient parent family member friend.
Our thoughts and well wishes or with all of you in a particular appreciation goes out to the front line care givers, providing helped to doesn't need.
On a corporate level, David will detail proactive actions, we've taken to align to company structure with this environment, while also ensuring our ability to bring to tell your system to market in 2020.
Right now I'd like to discuss the company's progress during the quarter on or stayed at 2020 objectives in commercial milestones.
So those who may not be aware of Indra story, where the pioneer of thermal acoustic enhanced ultrasound no one is pay us.
Sure, Yes allows clinicians to visualize tissue in waste similar to whenever.
That's 50 times lower cost.
At the point of patient care.
Andrew's goal is to develop clinical applications for the taste technology.
In areas of high unmet clinical need.
And our initial focus is on helping to more than 1 billion people globally affected.
Hi, nonalcoholic fatty liver disease known as NAFLD.
And non alcoholic steatohepatitis known as match, where there's an acute need for practical tool to us and monitor liver fat before the conditions progress to fibrosis, cirrhosis and possibly cancer.
During the first quarter, we achieved a major milestone paving the way for commercialization of task when we receive the CE Mark approval for T.S. fatty liver imaging probe also known as flip.
We were see this ahead of schedule in March.
The CE Mark indicates the Ts flip system complies with all applicable European directors and regulations in the European Union and other CE Mark geography, which include 27, you member States.
In spite of the global slowdowns brought on by the Cobot 19, but dynamic.
We've continued to move aggressively to capitalize on our CE Mark approval and our first mover advantage.
More specifically, we've launched new clinical education tools and are advancing a network of potential terrorists evaluation sites in Europe, where we see the greatest opportunity to achieve near term commercial success.
We remain on target to install tacit our first evaluation sites in Europe. This summer.
This will be followed by training our partners recruiting and scanning patients as soon as hospital operations returned to normal and we see this cycle gaining momentum over the summer and are encouraged by our partners enthusiasm to start using the test system.
We're now we'll provide more details in a few minutes regarding the important activities underway to support the commercial ramp in Europe.
Turning now to the progress we're making it our second key market the U.S. with our CE Mark in hand, we focused our regulatory resources on completing or five 10-K application to the FDIC during the current quarter.
I'm happy to report we remain on track to make the final submission to the FDA during the current quarter finalizing verification testing labeling requirements and Assurant compliance with FCC regulation, which will position Andrew to receive approval and began initial commercial activities of the taste flip system in the U.S. and the second half of this year.
Cannot overstate the significance of this upcoming milestones as the FTC approval will position Andreas simultaneously ramp.
Commercially and two major markets in 2020, the U.S. and Europe, each with an acute need for a practical and cost effective liver diagnostic solution.
In anticipation of the FDA milestones, we continue to advance our pre commercial activities in the U.S.
This includes renewing our collaboration agreement with GE healthcare during the first quarter.
Standing the agreements termed a january of 2021.
As a reminder, under the terms of the agreement GE healthcare will continue to support Andrews commercialization activities words task technology for use in the fatty liver application by facilitating introductions to GE healthcare ultrasound customers.
In return Andrew will afford GE certain rights of first offer with respect to manufacturing in licensing for the taste Libre application.
As widely reported cobot 19 has impacted existing and new clinical trials for countless companies. However, we're encouraged by the fact that health care facilities appear to be gradually returning to normal what's more the recent centers for Medicare guidance about health care facilities rich restarting elective procedures.
Aligns with the feedback we're getting from our clinical partners.
On that front, we continue to strengthen our relationship with our U.S. clinical partners Rocky Vista University, The University of Pittsburgh Medical Center, finalizing experimental design and patient recruitment, even as cobot 19 is affected hospital operations.
As soon as these sites are ready to resume normal operations, Andrew will be ready and we see that happening in June and July.
That's an important reminder, clinical data from the two U.S. evaluation sites Rocky Vista and University of Pittsburgh are not required for our planned U.S. spiked NK submission this quarter I want to make that very clear the agreements with Rocky Best then you P.M.C. were signed using the institutional review.
Board process also known as the IR B, which allows research institutions to use technology, that's deemed to be a low risk ahead of the FDA regulatory clearance.
So we'll be ahead of the game collecting clinical data that can support our U.S. commercial launch even before we anticipate receiving the five 10-K approval later this year.
Following five 10-K approval, we can look forward to leveraging rocky best stuff and you P.M.C. as great reference sites for U.S. commercial teams.
Organizationally like to highlight the recent additions to the Andrew team. During Q1, we expanded our scientific Advisory Board with the addition of Dr. RASM Malik director of Hepatology, an associate cheap division of Gastroenterology at Tufts Medical Center in Boston.
More recently, we added Lou Basenese founder of disruptive Tech researched Andrus board of directors.
Well Dr. Malik bolsters, our already strong team of clinical professionals advocating on behalf of vendor to the worldwide Liberal health community, we look forward to leveraging lose expertise in identifying disruptive.
And protected technologies as well as corporate communications to help us broaden awareness with institutional and retail investors as we begin our commercialization phase.
Bottom line not be more pleased with the progress we've made during these challenging times to keep the company on track to receive critical regulatory approvals and advance commercialization activities on schedule in Europe, and the United States.
I'd like to call turning the call over to David Wells to review the financial results for the first quarter ending March 31st 2020, David.
Thank you Francoise I will now provide a summary of our reported first quarter 2020 financial results. Our operating expenses increased to $3.1 million for the quarter ended March 31, 2020 up from $2.7 million for the same period.
2019.
Our research and development spending decreased year over year by $255000.
While our sales and marketing cost increased to $114000 for the quarter.
Our general and administrative costs were up by $551000 due to employment related costs, including non cash expenses for stock compensation.
Additional spending on costs associated with being a publicly traded company, including Investor Relations an increase cost for insurance.
Our net loss for the quarter ended March 31, 2020 was $3.3 million as compared to a net loss of $2.7 million. The quarter ended March 31 2019.
Our net loss included non cash charges, which totaled 870 $817000.
Comprising expenses for equity based compensation.
An amortization of debt discount.
Our net loss per share for the quarter ended March 31, 2020 was 29 cents per basic and diluted share.
Our cash balance as of March 31, 2020 totaled approximately $3.1 million as compared to approximately $6.2 million as of December 31 2019.
Decrease in cash for the first quarter is the result, our spending from normal operations costs associated with submission of key regulatory filings as well as the purchase of inventory in preparation for the sale of test systems. We do not expect this elevated level of spend to persist for the remaining.
For the remainder of the year in fact during the last call I reminded our shareholders of the advantages of our asset light operating model.
This is especially relevant and advantageous now in the uncertain and challenging economic environment that we find ourselves as friends, while I mentioned earlier as Covidien 18 endemic hasn't told it.
Andrew has taken preemptive actions to align the company's cost structure with this environment.
Also ensuring our ability to bring the test system to market in 2020.
These actions include for the remainder of 2020.
Lamenting a cash salary reduction of 33%.
Accompanies management team and paying non employee directors annual retainers in the form of restricted stock units instead of cash.
We also submitted an application under the small business administrations, Pete that paycheck protection program or the P. P. P.
The application was approved in on May 22nd of this year excuse me on April 22nd at this year. We received the proceeds of this PPP loan in the amount approximately $308000.
We continue to actively pursue and evaluate opportunities to strengthen our balance sheet and position our company for the exciting commercial growth opportunities that lie ahead.
This includes the exercise of outstanding warrants.
Various market based funding opportunities strategic partnerships as well as Nondilutive academic research grants.
I'll now turn the call over to went out right now.
Thank you David since joining and draw in May 2019, and we've made great progress and building awareness and ceding the market for sales of Andrus steels technology and ahead of key regulatory approval.
With that in mind today I'd like to abate investor is on our European commercialization strategy and keep progress.
Immediately upon securing CE Mark approval, we accelerated our efforts to establish clinical evaluation reference sites in each target European market, including Germany.
Vince, Switzerland, and the UK. The purpose of these reference sites is to get the T. as technology into the hand of early clinical adopters, who will serve as commercial Springboards. We believe this go to market strategy is the fastest way to establish could equal usage secure initial sales.
As well as achieved a faster sales ramp on the last call. We indicated that we plan to deploy our CE Mark He is never systems to the selected evaluation sites beginning in the second half of Twentytwenty, we remain on track with physical and anticipate in studying our first evaluation sites. This summer.
[noise] these evaluations sites in Europe in the U.S. will sort of two very important purposes to support our commercialization efforts first the sites will help to build our clinical evidence human data with Rts liver device as we've mentioned before all medical technologies and need.
To have a strong base of data on which to build a compelling clinical value proposition.
Second these evaluations sites will also serve as regional reference an anchor sites for the commercial can treat teens, allowing them to bring in new potential customers to see the product in clinical use.
We also discussed her to add up could approach to engage with our target audiences in the digital formats to maintain a high degree of market awareness and grow our critical relationship. Despite the reformatting of clinical than industry conferences to online venue due to cold. It 19 to that end, we launched Andres you would ever for.
Because website on April thirtyth that reinforces our commitment to enabling better earlier detection of NAFLD Nash. This site is being translated into multiple languages to educate the market and supports commercial pipeline expansion.
We also shared in you educational video with over 3500 interested to clinicians entitled to how to use the taste liver device, which is available on our website.
These clinicians relationships have been developed through marketing outreach participation in key global clinical conferences and contributions from partners like GE healthcare, we continue to add new relationship each weeks in month as we view this database as an important marketing pipeline as we begin commercialization.
This is all part of our plan to increase communications with potential partners and investors ask commercialization begins we encourage people to regularly checkout website for updated information and content regarding our two system end market opportunities.
We are making also excellent progress in our recruitment plans to build a small team of these clinical market development specialist in Europe, who will provide direct support an onsite training to clinical reference sites and work with our commercial partner GE healthcare is at a local level. This small team of market development specialists.
Yes, we'll focus on fostering relationships with key local political leaders.
Execute our lunch and learns demo strategy and continue building a warrant actually credibility for the T. as technology in target markets. We plan to start making job offers to the final commercial candidates in June.
So we're very excited to initiate our commercial activities in Europe, and I look forward to updating you on our progress and initial sales into coming quarters, now I'll turn to called to Francois who will make some final remark.
Thanks, very much Renault and David I'll wrap up the call before Q and a with the following key points looking forward into 2020.
First we remain laser focused on two key milestones ramping up commercialization activities in Europe, and finalizing or five 10-K submission to the F.D.A. in the U.S., we look forward to providing investors with updates in the coming weeks and months as we make specific progress on both fronts.
Second as I mentioned in the Q1 I ever last quarterly call, we've definitely seen an uptick in the strategic partners approaching Andrew up from the pharmaceutical and contract research organization sectors involved in the development of therapies for NAFLD and Nash.
I don't want to overstate the progress of these partnership discussions, but I believe andrus technologies, a natural fit for these companies who are seeking to drive efficiencies in their clinical trials, while facing the same in practicalities as clinicians with liver biopsy and MRI to screen and monitor patients during the studies.
<unk> partnership would one or several of these companies makes perfect sense for Andrew wouldn't nicely complement our GE partnership with the ultra sound equipment side.
With that I'd like to open the call for questions operator.
Gentlemen, thank you for your remarks today and to our phone audience. Joining if you would like to ask a life question over your telephone line at this time. Please press Star then one on your telephone keypad pressing star on one will place your line into acute and of course will take your questions. One at a time also a from a reminder, that if you're joining us today on the speakerphone. Please return to your handset.
I heard a pressing star and one to be certain that your signal does reach our equipment. Once again, ladies and gentlemen that is star in one we'll hear first from the line of Brooks O'neil with Lake Street capital.
Good afternoon, guys that how are you.
Great. Thanks, Thanks for joining.
Sure so.
As always I guess I'm trying to understand how you think about the speed to commercialization.
Both in Europe, and ultimately in the U.S.
And how do you balance that against your rate of cash burden and obviously your available cash or just trying to think board to the rest of the year and <unk> kind of assess how these two key factors balance out.
Yeah, Great question. So I think building on what David mentioned earlier in terms of our asset light historical operating model, we're clearly ramping down the engineering spending is the product is finalized and carefully ramping up the commercial spending so you're not going to see a net doubling.
Per se of our spend with commercialization underfoot.
That's one of the benefits of having partnered with service providers in engineering.
And as David Anderson of also mentioned, we're being very careful about timing the build out of a small commercial team in Europe. So right now to be very clear, we've got a great pipeline with some final candidates, but we don't have any people on our payroll sitting idly in Europe. We're you know carefully engaged.
For the evaluation slice it we're talking to and at the right time starting in June.
We're going to start building out that small team I anticipate it'll be four to five people in Europe and that as I've mentioned historically is for a couple reasons.
One we want to control, our destiny or for the company and the investor sake, and having a small team there carefully managing evaluation sites pursuing commercial opportunities locally is something that we want to control, but it also allows us to be complemented by our partner GE healthcare as we've mentioned in.
She has been very generous in their sharing of customer information and we'll continue to introduce us to ultra sound customers focused on the abdomen and liver and we believe that that'll help us manage our cost structure commercially in Europe in partnership with GE I Hope that's helpful in answering.
In your question.
Very helpful very helpful. Andy So and second question I'm, just curious how you view the goal, but they deem in Baghdad.
You asked regulatory approval pathway and do you see that slowing things down at all or do you think using continue to move forward more or less on schedule as you head towards U.S. approval.
Yeah, I can tell you what we control in terms of our submission this quarter or certainly in hand, and there's no issue as we've discussed or impact us.
For the submission from co, but I can't speak for the F.D.A., but the signals we're getting.
Brooks, our ER positive Medicare as David mentioned has referenced a returning to elective procedures and those elective procedures or not you know cosmetic procedures. There all the bread and butter operations orthopedic joints general surgery and many many other procedure so.
I am seeing that opening up we're certainly getting the same feedback from our U.S. and European evaluation sites and I have to imply since I have not seen otherwise at the FDA is also a remaining of fishing in that regard and not being impacted or de focused if you will from game changing technology like.
Andrew So I remain confident.
That we will file the five thinking in the U.S. in June and that will according to historical timelines position us to get approval by the end of the year in November.
I hope that's helpful.
Yeah, that's very helpful and last question.
I had is obviously, we see the value of the GE partnership they ask you Brad organization in place.
Can you begin to speculate on how you might envision the relationship.
Extending beyond.
Deadline of the current agreed.
Yeah, I think to be fair to both of US what we have in hand already with them is what we need to focus on initially in terms of building out carefully the target markets working with the local GE teams.
You know we are in regular contact with a global GE health care teams they've been very generous as I said in terms of introductions, but they've also provided us with demo systems and other ultra sound capital that are very helpful to a small company and further support our capital efficient process that we don't have to invest in that so without dodging the question Brad.
I think the best path to success in enlargement of a relationship in a contract with GE or other partners is proving that were very successful executing this commercialization plan in the second half with GE is help and I think that will prove to all parties and others, who may be sitting on the sidelines that this product is indeed as attractive as.
We believe so I hope that's helpful as well and answering the question.
Yes, very very good keep up all the good work I'm excited for U.S. approval and European commercial launch.
Great. Thanks again Brooks.
Next we'll hear from a line of Joe Giamichael catalytic. Please go ahead. Your line is open.
Hi, Joe.
But you have Francois Oh, just one question really so no I think I understand the commercialization process in Europe, well a in a really focused around the early adopters and centers of influence is with these reference centers can you walk me through I'm going to make a leap assumption here and in the sense that you should have your five 10-K approval this year.
Sure what's the commercialization strategy in the U.S. look like.
Great Great question, frankly, it's very similar to what we're putting in place in Europe with the I would say exception that we've already started the will have started the evaluation and clinical data in the U.S. through your PMC and Rocky Vesta to answer your question specifically as we approach five 10-K.
We will build out a small commercial team here regionally with probably a similar number of a commercial people of fiber so throughout the U.S. working locally with the evaluation sites. We have the too that I mentioned others are in the pipeline and we have confidence that we'll be announcing those over the coming months.
And we will cultivate commercially the next round of adopters around those valuations like so having the clinical data in hand from U.P.M.C. Rocky best on European sites, you can now imagine a small U.S. commercial team Joe leveraging those reference sites leveraging that data and re.
Reaching out to our and GE shared ultra sound customer database and offering the taste liver device to enhance the utility of ultrasound in used today, that's really I, it's gonna be a repeat in a.
Fish at way of the model that we're taking to Europe does that answer your question.
It does thank you.
Thank you so much.
Our next question will come from the line of Vernon Bernardino at H.C. Wainwright. Please go ahead running.
Hi Vernon.
Hi, guys. Thanks for taking my question and congrats on the CE Mark approval I'm sure that was a lot of hard work and thank you is only than expected definitely like that a good surprises.
Especially in this environment.
So I just wanted to ask a few questions about.
On the digital formats, just wondering if he could provide a little kind of details I assume perhaps you already has the videos already ready for that the ASCO presentation. Okay great.
Sure Dan and by the way go <unk>, a vernon yeah just to emphasize.
This is a build out leveraging our website as the main repository, but we're also very proactively engaging through our own CRM of now 3500, clinicians and engaging them directly with this new content, but it's publicly available at Andhra Inc. Dot com and you'll see their new animations that.
I'm simply explain to clinicians how the product, which we show for the first time in real format in the video can be intergraded seamlessly and easily in their clinical practices and you will also start seeing a number of videos and interviews that I think articulate in our own voice mine to.
Again.
The current progress in our plans as a company.
Okay, and I will there be.
And other company that I cover they often have these live cases as I'm sure you can't.
I mean, I mean that wouldn't be possible, especially in a situation where everybody is protected and the procedure, especially in small factors not in hospitals.
Where it is a is that something for example of that always in Atlanta, yet. So I think as soon as you know in the case of.
Our product in Europe. It is see approved so we are approved to sell in market it and as soon as we get our product into the reference sites that we brought that we mentioned on this call in Europe in each key market.
And by the way, we have verbal approvals and agreements with several of those were finalizing the paperwork then its absolutely possible for us to demonstrate we fully intend to have testimonials and to have video demonstrations of the product, which is noninvasive, which is very easy has no. A you know you don't have to be in a special room like an MRI.
Hi, or surgery. Its there's there's really nothing outside of the co, but ah limitations that would prevent us from sharing that and so we certainly intend to build out more content, so that clinicians and investors can see our product in use both in the U.S. and in Europe.
Okay and I see from.
Some of the company's I've been following the U.S., that's especially with your clinical trials.
They're able to continue although at a slower pace works as far as clinical trials are concerned. It is non hospital small centers now for these procedures with us to slip a is that a the a the target in the U.S.N. do you see that also indications where.
Great to see a in there so.
Commercialization in Europe.
Yeah, So our investor presentation shares our targets in terms of clinical segments burn and first and foremost <unk>. The radiologists that perform currently upwards of 50 to 70 million abdominal and liver ultrasound scans for other reasons there.
Can't measure fat the way, we do but they do that for a sort of other reason. So there's an established clinical practice and those radiologists are typically in a hospital or small clinic setting second.
Medical segment are the gastro hepatologists those are the liver specialists and frankly in Europe quite a few of them use ultrasound already in the you in the U.S. less so but they've expressed a enormous appetite to have tools, especially with the new therapies that are still.
Turning to come online with Zydus and others to be approved later this year.
For a tool that it would allow them to assess and screen and patients and then monitor the progression of that therapy on those new drugs those gastro hepatologist.
Our also in both hospital clinic, and private practice settings, and we clearly have messaging and outreach and awareness of where those clinicians are I will say to answer the other part of your question.
We are getting signals from both Hepatologists and radiologists.
In the in our network that facilities small and large are starting to consider and in some cases return to elective procedures and so we have confidence that in June and July will start, placing our systems that those first evaluation sites and continue through the summer it is going.
Would it be institution dependent but we have very good feedback from the clinicians were talking to I hope that's helpful and comprehensive.
And that's fantastic and one more question I'm, sorry, and otherwise don't forget. Thank you are not I've I missed it out so you mentioned that Germany, Switzerland, UK and I think there was one another and and France.
Okay that makes.
Makes sense, okay, yeah congratulations.
Thank you for your call Vernon.
Yes.
Next we'll hear from Ascendiant capital and the line of Mr. Ed Woo.
Yeah, Yeah yeah.
Congratulations on a CE approval. My question is more on the new Oh, when you do get approval and you do target. These 10 or will you be targeting certain geography or will it be pretty broad varies depending on the centers.
Yeah, so our.
Criteria for selecting evaluation sites are are several but there are clear one they have to be a a center of excellence and deliver and have a clear influencers in those facilities that can help us in that regard. So you know we're not just picking.
Any community hospital that happens to have an ultrasound.
Diversity of Pittsburgh Medical Center as a leading example is a world class liver transplant and liver health facility. It's in the mid Atlantic and my hometown of Pittsburgh, and so that'll be a great Act. Your account there our goal is to place our systems <unk> the same vein in Europe, but in your question.
I was focused on the U.S. in regional centers of excellence with early adopters and leading clinicians and so you can look forward to having other announcements in the U.S.
Likely spread out geographically to support that regionalized model that I mentioned with around five commercial people into U.S. andras payroll and I think that will be centered around naturally.
Urban centers very often that have a large population and adjacent clinicians that we could sell too, but you'll see you'll see a regional diversification liver centers of excellence and most importantly, early adopter influence or clinicians who can help us devolved the clinical value proposition and help us influenced the next round of.
Customers to buy.
Great and then have you set a timeframe for how long these evaluation periods will allow.
Yeah, Great question, so it depends on <unk>.
How many patients were doing but just to put it in perspective.
We're not talking about a pharmaceutical lengths type of study that could last several years typically in the case of these evaluations sites they have.
Patients already and targeting 75 to 100 patients as our base target is something that can be achieved in six to nine months typically we're doing all so everything we can to facilitate that with the evaluations by providing loan or equipment of ultrasound when the.
The evaluation sites says that it could accelerate the scan so that they don't necessarily have to depend on a radiology and the department. So she has been very helpful. In that regard and to answer that question I think six to nine months is a good rule of thumb for 75.
Patients and I believe we'll have strong success a in recruiting those patients because clearly we've established those the hepatologists and radiologist already have that pipeline of existing patients that they can use in the study.
I hope that's helpful.
Yeah I was very very helpful. Thank you for permission and beer lot.
Thank you very much.
And operator, I think that seems to be the end of the question. So after this a final. Thank you to the investors we can wrap it up but I appreciate everyone, calling in listening to our story and all the support we're getting from both the a and a little quick community the investors directly and we remain very optimistic and will continue.
Do you to inform you of our progress over the coming weeks and months and look forward to speaking with all of you again on our next quarterly call.
Thank you.
Well, thank you and on behalf of the rest of leadership team, Michael Renault and David We Thank you all for joining today you may now disconnect your lines and we hope that you have a good evening.
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