Q1 2020 Earnings Call

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After the speakers for her remarks, there will be having a question and answer session to ask a question. During this session. You want me to press Star then one then you touched on telephone.

If you're acquiring any further assistance during the call. Please press Star then zero.

As a reminder, today's conference is being recorded.

I would like to introduce your host for todays conference that's Carol.

<unk> president of the risk groups, all the time Investor Relations.

Please go ahead.

Thank you operator, and welcome to everyone participating on today's call. This call is also being broadcast live over the Internet at children Dot Com and a replay of the call will be available on the company's website for 30 days.

This morning, we posted an updated investor presentation, which can be accessed.

That's true section I buy website with me today, our while equine <unk> founder and executive Chairman.

Capelli co founder and Chief Executive and scientific Officer, Laurie This and Chief Financial Officer.

Our remarks today I do like one statements that are considered forward looking statements are then the meeting of United States Securities Law. In addition management may make additional forward looking statements in response to your question.

I was looking statements are based on management's current assumptions and expectations of future events in trades, which may affect the company's business strategy operations or financial performance.

Detailed discussion of the risks and uncertainties that the company pacing is contained in its annual report on form 10-K quarterly reports on form 10-Q.

Currently for reports on form eight k. actual results may differ materially from those expressed or implied by the forward looking statements.

Company undertakes no obligation to update well, we view any estimates projections or forward looking statement. The company intends to filed a form 10-Q for the quarter ended March 31 to 2020 by the end of today.

But he has a lot in 30 minutes for today's call.

And now I'll turn the call Alberta Wally.

Thanks, Carol and good morning.

We used to share with you our first quarter 2020 results and provide further color on the next chapter of solid <unk> story, especially given the lingering uncertainty regarding cobot 19.

As you May recall salt on announced in early April a revised launch plan for our rapid acoustic poultry or a pea device given the impact of the current crisis on like a static and financial markets.

To launch anesthetic device amid this global pandemic would clearly be ill advised and sticking to our original launch plan wouldn't it made sense for us or for our customers.

Instead, we've chosen to delay the limited launch of the RFP device until the aesthetic industry demonstrates a return to normalcy or at least a pattern of stabilization.

In the interim will focus on advancing the regulatory profile of the cellulite indication so that when the expected launch of the RFP device becomes feasible, both the tattoo removal and cellulite improvement indications can be incorporated into the same advice device.

This of course is conditioned upon the FDA clearance of the cellulite treatment indication.

Additionally, we're using the added time to incorporate manufacturing costs down design work. So that we will be able to launch our initial product with improved margins.

Of course, the cold at 19 crisis is forcing companies to reevaluate strategy and make difficult decisions that in our case. It's also affording us the time to develop a more valuable product for our customers, which we believe will position solids on for long term success.

Although cobot 19 affected all of us during the first quarter. It did not prevent solid John from achieving some very important milestones.

First we submitted and received after FDA clearance for the special five 10-K pre market notification for our generation two RFP device.

In addition, we completed the pivotal cellulite clinical trial as well as the 12 week 12 week key Lloyd in hypertrophic scar proof of concept clinical trial.

I'll now pass the call onto Chris Capelli, our CEO for more context around the operational and regulatory progress made at our upcoming milestones Chris.

Thank you welcome and good morning.

As well I touched upon.

Our first quarter, we filed for special Pac 10-K, Premarket notification, what do you have to <unk>.

Our generation to wrap it equates to cross device.

We see after FDA clearance in early March.

Especial patent case, probably designates the device as an accessory to the 10 64 keys with laser for tattoo removal arms and legs into our silicon Fitzpatrick skin type 123 individuals.

Clinical trials have demonstrated that use that accompanies our 80 device.

In conjunction with acute which laser.

Allows for multiple laser patches in a single treatment session, resulting an accelerated catch you paid.

Person to traditional laser treatments.

The generation to operate P. device delivers the same tattoo removal therapy as a generation one device, but it's slightly modified for improved ease of use in a physician office.

The generation to RFP device has the same underlying technology. The RFP device there will be used in the U.S. commercial launch.

Only detect you livable indication was reviewed by the FDA and this mission.

And cleared for marketing.

Similar technology was utilized in the Companys say like trials another proof of concept trials.

Upon completion of the pivotal phase I trial.

Got it was accepted for presentation at the annual American Academy of Dermatology conferences.

80 in March of this year.

Due to the Cobot 19 pandemic the medical meeting was postponed.

The 80 has now notified us that he virtual conference is expected to take place in mid June.

Well, we will present, our say lake Charles I need to decide to the community.

We are very excited for this new alright p. indication.

Yes.

Next up to 90% of women over a billion dollar spent annually on treatments in the U.S.

Results with a pivotal study will support our anticipated I can't keep probably with the FDA for the treatment of say like during the second quarter.

Currently we believe we could receive FDA clearance, but let's say you like indication as early as the fourth quarter 2020.

Possibly in the first quarter of 2021 should we experienced delays with the FDA process.

Although we are highly focused on advancing to stay like indication in the near term.

He Lloyd and hypertrophic scar education is an exciting potential expanded indication longer term.

Clinical most all my told me he Lloyd hypertrophic scar proof of concept study.

It was completed in January.

We're very encouraged you demonstrating approximately 30% ever rich reduction at scar by a single initial treatment.

The overall average reduction in both the bias.

And the height of those cars have to 12, we follow because it are there appear to show the potential efficacy of our RFP to bite.

Thank you Laurie.

Scars.

In addition.

We believe is proof of concept proper bikes fully support for the RFP devices impact on other by bottom this orders.

Same mechanism that you have worked we just keyboard and hypertrophic scars maybe far reaching.

An important for such indications as cash the contraction.

Well he disease.

EBIT liver fibrosis.

Close.

Great lead with the progress made during the quarter and highly optimistic about the future of solid time.

Your hyper focused on building an innovative.

The indication device.

The provides our customers the latest technology static market.

Now, let me pass the call it Laurie we view our financial performance. Thank you, Chris and good morning, everyone.

For the first quarter operating expenses were 3.3 million at compared to 2.4 million in the first quarter of 2019.

The increase is primarily attributed to higher research and development expenses, resulting from greater spending with development partner and costs related to our ongoing clinical trials for cellulite.

Net loss for the first quarter ended March 31st 2020.

Was 3.3 million or 19 cents per share on a basic and diluted basis.

The same period in the prior year net loss was three point fourmillion or 43 cents per share on a basic and diluted basis.

As of March 31st 2020 outstanding shares for approximately 6.9 million.

Total cash was 7.7 million as of March 31st 2020, compared to 12.1 million at December 31st 2019.

We had previously indicated that our December cash balance will be adequate to finance operation into the third quarter at 2020.

Given the modification in our timeline and the instability in the financial markets.

We've reduced our planned spending related to commercialization.

And now expect our cash on hand to finance operations to December 2020, assuming that we do not encounter any unforeseen cost or expenses.

Although our commercialization timeline, it's been modified and we are facing incremental challenges as result of cobot 19, we remain committed to providing our future customers with the innovative rapid acoustic pulse technology and generating long term value for our shareholders.

I'll now turn the call back over to Wally for closing remarks.

Thanks Laurie.

Although the world remains in a state of instability driven by the lack of clarity created by coated 19, we it's all what's on have a clear mission.

I remain optimistic that the aesthetic in financial markets will recover and our team is working diligently to be ready when they do.

We look forward to providing details of our future U.S. commercial launch once conditions have stabilized for our dermatology customers.

And I'd like to thank our solid tone employees for their continued dedication and our investors for their ongoing support.

With that I'll turn the call over for QNX operator.

Thank you as a reminder to ask a question you'll need to press Star. Then one then you touched on telephone to withdraw your question from the Q. Please press the pound key please standby well, we compile the Q1 day roster.

Our first question comes from Scott Henry with Roth Capital. Your line is now open.

Thank you and good morning, I I guess first for clarity.

I wouldn't make strike.

The following this correctly.

The generation to approval for tattoo removal.

Now he is is that going to be the same.

Product when you refer to the generation two for cellulite reduction and will the P. a may or the five 10-K will that be filed with that same generation two or is there a generation one that you have to switch to to because I know that generation three as well I just.

I just want to get to yeah, yeah clarity around all that.

Scott This is Wally so I'm glad you asked that question.

It's it's simpler than it sounds the generation two device incorporate some usability features that are really important for the commercial launch.

And so we but there there are enough of a change in that product that we acquired a special five 10-K, but that generation two device is launchable. Okay. That then it's capable of supporting both attached you and the cellulite indications of course, we have to get the cellulite approval, but we'll be getting that cellulite.

On the same generation two platform so that when we refer to generation three that's and envisioned future version that incorporates what we learn from the initial limited market.

So that that device doesn't really enter the picture right now that's it that's a feature opportunity.

Okay.

Great. That's that's helpful. So so it seemed like the gating factor to launch at this point.

Cellulite approval and you know when you deem so when you have cellulite approval and you deem.

The market.

Statics favorable you would launch both at the same time is is that has right thinking about that.

That's okay you bet yeah.

Okay and a separate question on the key light indication when do you expect to start that second dosing study is that a near term event or perhaps waiting for a more favorable environment.

This is Chris.

As you know we still have more proof of concept work to be done with regard to determine the optimal dosing regime, where our therapy.

This was scheduled to be done the second half of this year.

At this time, we're continuing to evaluate the impact of code that it's having a clinical trial work in that field before we make any decisions to kick off our dosing study.

We expect to put the cuts worked to take around I must complete and read and they need to do this prior to our pivotal studies submission to the FDA.

We still feel it's possible that we could initiate the study in 2021.

The pivotal study.

Yeah Okay.

Great that's helpful.

That you do it for me. Thank you for taking my question. Thank.

Thank you.

Thank you. Our next question comes from Anthony Vendetti with Maxim Group. Your line is now open.

Thanks, Good morning.

I'm wondering Anthony.

Good morning, Wally <unk>, Chris Good morning, I, just I, just so I just wanted to a check on the plan all for.

Tattoo removal I know the original goal was to launch with 20, K wells and now as as we.

Hold off conserve cash and wait to do it in conjunction with cellulite.

Those 28 wells all going to be the same 20 K wells when you do eventually launch it and do you have other K wells set up for cellulite.

So let me let me maybe start that off that Chris and Lori if you've got thoughts here that would help Anthony.

Definitely adds a man.

Anthony that the.

Clearly if we were only launching the chat to indication it would make sense for us to select at least among the K a wells that get devices to select players who are what I would call heavy users right and that's a different profiles different operating profile.

And let's say a a practice that doesn't do a lot of tattoo removal, but would have a very high demand for cellular production. So I think I think your onto something there that were.

We're likely to probably Oh look there are some core Kale wells, who we've promised the device to their eagerly awaiting this device and so they're gonna have devices, regardless, but at that the margin I think where we have.

Discretion to guide devices to players who will provide really important market feedback we're undoubtedly now going to be choosing some players that we think will give us really good cellulite market feedback. In addition to the chat too. So it's a it's a bit more confusing mix, but.

I can tell you that based on.

The feedback we've gotten from clinicians so far.

It's really clear that the unmet need in cellulite is a big driver. So it's it's going to be natural for us to to play into that that heavy at least anticipated demand.

No. That's that's helpful and then I guess for Laurie Yeah.

You could just talk about.

What expenses and in particular.

You have a hot for reviews to push the cash.

Huh.

Availability until the end of this year is it specifically related to pushing back the launch war or were there other.

Cost reductions to that you took to extend the cash runway.

Sure Anthony I.

Bucket, our cost reduction activities into three main category, one related to that that pushed back up.

We were we pushed back saying like the money that we would yen perks fixtures and validation of a manufacturing line. So those costs are on hold.

Secondarily, there were clinical trial.

That we had budgeted and plan to spend money again in the back half of this year that quite frankly in today's environment, we couldn't execute because patients aren't coming into doctors' offices preclinical work.

Cost advantage pointed this year.

And then lastly, there were some G and H tight let's call them investment spending category that we have put on hold in the meantime, as we watch to see the market recover.

The financial market and the static markets as well so things like any ramp up in staffing has been pause.

Yes, Matt in system upgrades and that sort of thing also policy.

That's that's very helpful. Thanks, Thanks for that clarity Laurie.

Appreciate it I look forward to the.

To the clearances and stay safe and healthy look forward to catch up against it.

Thanks, Thanks Anthony.

<unk>.

Thank you and as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question from the Q. Please press the pound key. Our next question is from Christian Williams, a private Investor. Your line is now open.

Hi, Thanks for taking the question.

Two quick ones here first off what market indicators are you evaluating that would signal a marker recovery.

Sure Hi, thanks for being on the call today Kristen.

We're going to be watching the aesthetic market very carefully for signs of recovery today no.

Cosmetics.

Just had have close.

Or at least minimize their practice to the point, where they're just seeking are treating you know patients with urgent need.

And so we're going to need to see though practice and start to reopen.

And and see those practices start to have traffic coming in that initially that kind of procedures that will start first are those procedures that patients have been waiting to come in and have done like botox treatment than that sort of thing and we expect dermatologist initially focused on.

Procedures that are our cash held for them in that don't require cash outlay quite frankly.

We expect capital purchases to be the last thing that comes back and aesthetic dermatology space.

So we are we partner with a group of scientific Advisory Board members that are all well respected cosmetic.

That are in practice and were in touch with them in a regular communication with them members of our board are in senior management positions and that it companies in the industry and so we're getting really solid guidance in input from those players and we'll take all that feedback and Mike.

Our best determination at the right time breadth to launch a product.

Great. Thanks for that update there more specifically have any of your physicians reopen their practices and any feedback right right on environment if so.

Sure so.

Today.

That we're talking to regularly have not fully reopened their practice, but what has started happening.

The last week or two is planning and preparation is going on to reopen.

That's gonna be as everyone. We expect very much so a state by state degenerate different states are operating under different.

At home and provision and so we are seeing the first sign that doctors are going to start to get back to work, but just now starting.

Great Thanks for that uptick there.

It for me.

Thanks Christian.

And our next question comes from Sean from other private Investor. Your line is now open.

Thanks for taking questions I'm, just kind of question about the cellulite indication approval.

You expect a due to cope 19, a delay in Uh huh.

Yeah, It's a good question John.

We have been in touch with Oh, you know our regulatory advisors, obviously on a constant basis and the feedback that they're getting.

Is that the F.D.A. is it the device division of the F.D.A.

Is committed to continuing to hit their stated timelines so officially and I would say also just sort of unofficially. The observation is it doesn't look like cobot 19 is setting back.

The device clearance process in that side of the FDA.

We're all concerned that there could be an impact here, but so far it it looks like we're we're in pretty good shape.

The the big question for US is is this.

Indication going to be treated as a five 10-K word to know, though and as you may know that that decision pivots on whether or not the the description of Oh predicate device is accepted by the FDA. There are devices out there that have a clearances for the cellulite indication.

And we think we have a pretty good connection to those other technologies, even though ours is is unique because.

We think the connection here between us and our predicates is is actually stronger than it was between us and our credit gets for the tattoo removal. So we're optimistic about the opportunity here, but you never know and so if it if it is a five 10-K, they accept or predicate argument moving forward that way, it's probably it's pro.

Probably in the 90 day kind of timeframe for approval if instead, they don't accept our credit can arguments and they they say you know this needs to be a de novo application well those are taking around six to nine months to two to process. So in either instance.

We still believe we're we have a really good shot at having both the touch you indication and the cellulite indication in place before we're ready to launch that's that's the plan.

Thanks for the color on that that's helpful and just one quick follow up.

Hey, D, giving you a specific date or time to prison study like data.

This is Chris.

We understand that he will be heavily in their virtual conference beginning June well I think it goes for a few days, we do not have specific time, well our presentation will be give it.

So that's sort of what we all right now.

We will start with more concrete information when we get it.

Okay.

Thank you.

John.

I now pass the call back to Walter Club Executive Chairman for closing remark.

Thanks, operator, thank you again to everybody for getting up early and taking this time with US. If you do have follow on questions. Please feel free to address them, we got a a oh.

An email link at our website for for investors, who have questions and we we are aggressively monitor that and follow up and.

Right now, we're just looking forward to giving you more updates as a.

As milestones unfold for us and everybody be safe and have a good day.

[noise], ladies and gentlemen, thank you for your participation on today's conference. This does conclude your programming you may now disconnect.

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