Q2 2020 Transenterix Inc Earnings Call

Good afternoon, ladies and gentleman and welcome to the trends in Terex second quarter business update conference call.

This time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

I would now like to turn the call over to Mr. Mark Klausner of Westwicke. Please go ahead.

Thanks, operator, good afternoon, everyone and thank you for joining us on today's call.

On the call with me today, our Anthony Fernando President and Chief Executive Officer, and Brett Farabaugh interim Chief Financial Officer.

Before we begin I would like to caution listeners that certain information discussed by management during this conference call.

Leading any guidance provided our forward looking statements covered under the safe Harbor provisions of the private Securities Litigation Reform Act 1995.

Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business, including any impact from the cobot 19 pandemic.

The company undertakes no obligation to update the information provided on this call.

For discussion of risks and uncertainties associated with Transenterix business I encourage you to review the company's filings with the Securities and Exchange Commission.

Putting the form 10-K filed on March 16th 2020, and other filings, we make with the FCC.

During this call. We will also present certain non-GAAP financial information related to adjusted net loss in adjusted earnings per share.

Management believes that non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non cash and other expenses that are not indicative of the company's core operating results.

Management uses non-GAAP measures to compare our performance relative to forecast in strategic plans the benchmark our performance externally against competitors and for certain compensation decisions.

Reconciliations from U.S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found any investor relations section of our website.

It is now my pleasure to turn the call over to Transenterixs, President and Chief Executive Officer, Anthony Fernando.

Thanks, Mark and thank you all for joining us today on today's call I mean, it provide a quick update on the impact of Colby 19 during the quarter.

Brett will then provide an update on our second quarter performance. After beach I may provide an update on recent trends seemed a bit that's and the progress made toward Twentytwenty strategic initiative.

Lastly, I'd be it'd be taking your question.

[noise] dotting Oh, we adopted throughout the second quarter Veeva focused on operating while ensuring the Hell then safety all our employees and their families.

One of our key focus areas during the initial onset dependent Emmy that's been ensuring the continuing tee up our manufacturing operations in Milan, Italy.

We are pleased to say that the facility back up and running and operational at normal levels.

From a productivity initiatives perspective, we took its time to pilot and now what remote support technology.

One of the biggest how does in that time from when we signed an agreement with the hospital is the time to get the news site.

Up and running.

This requires sufficient training and support.

I see a global organization.

And heavy installations in a variety of geography, it can be challenging to quickly have a team of surgeons to get up to speed.

He can stop cannot be Hudson, particularly in a trial that restrict that environment.

I'd now like technology allows us to support our customers by offering training and kids support remotely at both new and existing installations.

I'll now turn the call over to Brad to provide the second quarter financial review.

Thanks <unk>.

In the quarter ended June 32020, the company reported revenue of zero point $7 billion as compared to revenue of $3.6 million.

Prior year.

Revenue in the second quarter included $153000 instruments, and accessories $162000 in system leases and $340000 in services.

In the quarter.

Operating expenses were $13.6 million as compared to 22.2 main hours in the prior year.

I would note that on a sequential basis, our operating expenses decreased significantly.

First quarter 2020, including $1.4 million in savings realized as the impact from restructuring actions continued to be recognized and due to your reduction in travel and other costs due to the code at 19 pandemic.

In the quarter net loss attributable to common stockholders was $14.1 million as compared to a net loss of $20.2 million in the prior year.

In the quarter, the adjusted net loss attributable to common stockholders was $10.9 million as compared to an adjusted net loss of $19.2 million prior year quarter.

After adjusting for the following charges.

Change in fair value Werent liabilities amortization of intangible assets.

Change in fair value of contingent consideration and deemed dividend related to conversion preferred stock in the common stock.

Adjusted net loss attributable to common stockholders as a non-GAAP financial measure.

See the reconciliation from GAAP to non-GAAP measures included in our press release.

The company had cash cash equivalents unrestricted cash approximately $16.2 million as of June 32001.

I'll now turn call back Anthony.

Thanks, Brett.

I would now like to provide an update on recent performance as well that the progress we have made.

Under four key areas that we have focused on in 2020.

Despite the challenging in line, but due to cold we'd 19, we have made significant progress in marketing development clinical validation portfolio expansion and capital funding.

Beginning with new system installations.

Our goal, it's like 2020 watts to have 12 to 15 new systems installed.

Given the challenges faced by hospitals around the but at the deal the ongoing quoted 19 and Amy beginning in March 2020.

Yeah, but uncertainty about our ability to get new systems installed in the near term.

However, we have continued to make solid progress in line, but I expect this ends up at this point into year.

In the first quarter, we installed based systems.

In the U.S. running Germany, and one in Japan.

In the second quarter Green beans dog two systems binding the U.S. had signed I had Chicago and wanting Germany at sign up beneath them ethylene.

Subsequent to the end of the second quarter, we installed an additional system in Austria.

At the kids fed courage and signed a new agreement in the Netherlands, Maastricht view M.C.

In addition, we have one other signed agreement with the hospital that installation has not yet taken place as Heavyside quoted 19.

Since my beyond that University school of Medicine local hospital, a hospital in the greater Tokyo Metropolitan area.

Agreement was signed into second quarter, and we are targeting the installation enough senhance had their facility in the third quarter.

To summarize yet to date, we having started and stock at six clinical programs and have one pending installation in Japan and one of the in the Netherlands bought plan for installation in the tough quarter.

Totaling eight systems, you have to date and keeping us on track to its our goal of installing 12 to 15 systems in 2020.

Shifting to our pipeline.

Continue to have a strong global pipeline of potential hospital customers. Despite the current quoted 19 environment.

A perfect example of this trend you see in Europe that pipeline has continued to expand.

We attribute this to the execution of our strategic market development efforts.

Typically a continued publication of clinical data across Europe.

Yes, the introduction of new instrumentation and indications for use, particularly the availability of a pediatric indication.

In Asia momentum has stepped but slightly Escobar 19 has taken priority with hospitals and administrated inch key geographies such as Japan.

But we haven't seen pipeline account fall out of the funnel, we have seen increased uncertainty around timing of installation.

Lastly in the U.S., we continued to make progress in line with the expectation and feel good about a efforts as we have been able to play and that isn't a system in the U.S. since the end up the first quarter of this year.

As part of our efforts to can what new customers as well as quickly and there, but it's so dennis to begin doing cases using send has.

We have put a significant emphasis on training.

To optimize training in Asia, and Europe, we expect to add dedicated training facilities one in each geography later this year.

Once complete we will provide incremental color on both of these new facilities.

Shifting to procedure volumes.

As with most other medical devices used in primarily elective procedures.

We saw significant headwinds in the call it.

However.

To date, we haven't made great progress in driving procedure volume.

Prior to call of it we had developed tremendous momentum with February growing 116% all the February of last year, and even with the materially impacting much first quarter procedure volumes grew approximately 43% over the first quarter Oftwenty 19th.

Well I leave a negatively impacted in the second quarter. The momentum we generated in the first call. It to help drive the rebound in procedures in May and June.

In the second quarter total proceeds of volumes were down approximately 55%.

Yeah, all that yet.

It pretty much hit the hardest after which we saw a rebound in may and the rebound continued into June.

The rebound is largely a function of high European installations.

Key geographies getting back to perform procedure is often reopening during the quarter.

Looking at the first six months up the a in taught to proceed to volume was down 15% compared to the previous year.

Shifting to an update on our foundation of sites SMB mind, a foundation. Those sites are those that are performing procedure at an annualized rate of greater than 100 preceded by yet.

We currently have nine foundation a sites up from seven at the start of Twentytwenty and expect to continue to add foundational sites during the second half of the yet.

The slowdown in elective procedures has slowed the expansion of these foundational sites in recent months.

Turning to clinical validation.

In Twentytwenty.

We continue to focus on the development of health economic and clinical performance data with an emphasis on the cost impact of Senhance.

Relative to traditional laparoscopy as well that Ida surgical robotic systems.

Early trends are very positive and we remain on track.

Some initial data published later this year.

In addition, we expect that a handful of current Senhance use has continued to published studies outlining the experience and outcomes.

Moving on to our portfolio expansion efforts.

Following the FDA clearance for the first machinery sense system in robotic surgery did the intelligence surgical unit Oh I S U.

We continue to progress to an additional indications.

Technology.

We're very excited to announce that we are planning to install the first set up I its use at multiple clinical sites in the U.S. shortly and the first can't says I expect that to be performed during the third quarter.

In the second quarter being made a CE mark submission for the U.S. Yoo and expected received clearance by yearend.

In addition, we continue to look to add incremental I guess, you fetus, namely the next generation of machine vision and augment that intelligence capabilities.

Given some of the delays caused us every size up the call. We'd 19 shutdown. We now plan to fight on next I guess you feature set the F.D.A. into first quarter off 2021.

This next deterioration I assume represents the next step been delivering on our digital strategy via continued to invest in the ongoing develop a sense has by being innovative technology.

10 capabilities onto the platform.

We also remain focused on the expansion of indications in the U.S. So you did the same has system.

The initial efforts you brought that to a broader general surgery indication, which we submitted to the FDA earlier this week.

As it relates to a instrument.

Fashion efforts, we are planning to file.

Yeah, five decay submission for articulating instrument seem to first quarter of Twentytwenty well.

Finally, an update on capital funding.

On July six we announced the closing off an underwritten public offering including the flu exercise off the old lockman adoption, bringing in net proceeds of approximately $13.7 million.

The current cash on hand to get that meet anticipated cash received from product and instrument sales and leases.

We now believe that we have sufficient cash to support all operations into the second quarter of 2021.

From a cash conservation perspective, we continue to find ways to preserve cash in the near term that includes reduced marketing trade show anti any expenses.

As part of an effort to be more efficient without cash rate. So it says maybe a soon be transitioning to a new corporate headquarters facility Mia Caren facility in research Triangle Park North Carolina.

This new facility, we had provide better utilization and functionality while at the same time, reducing expenses and streamlining operations.

Turning to guidance given the continued uncertainty that exists within the global health care market. We cannot currently predict the specific extent or duration of the impact of the quoted 19 outbreak on our financial and operating results.

I said he said, we're not providing forward looking revenue guidance at this time.

To recap.

Even with the headwinds associated with core we'd 19, we continue to make proactive steps to drive towards our goal for Twentytwenty and set ourselves up for success in 2021 and beyond and I'm very proud I thought theme and address bonds. During these uncertain and unprecedented.

Yes.

Yeah aggressively executing on the component of our long term strategy, while being mindful of our cash usage.

To date, we have made significant progress across the board, we having started six systems globally and have to model under contract.

Procedure volumes are showing signs of recovery, we have made tremendous progress towards the publication of compelling clinical evidence.

Have expanded I indications for use with the clearance off the I guess you in the U.S.

The pediatric indication in Europe, and I'm, making progress towards the general surgery indication in the U.S. and last but not least we have bolstered our balance sheet.

We remain very excited about the opportunity that exists for St has.

With that I would like to open the line for questions.

Thank you well now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear telling acknowledging your request. If you are using a speakerphone. Please pick up your handset for pricing any key too.

John Your question. Please press Star then too well, we'll pause for a moment of colors join me Q.

Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Oh, Hi, Anthony and Brian how are you.

Then good Jeff.

So our and thanks again, so much for the or a couple of surgeons or we're going to have some discussions with and congrats on the island the general surgery.

Finally, you sound like something that will take a corridors to turn around or is that something that you think could happen more shortly.

Yeah.

If I think that typically Todd timeline.

Prior to call it, but something that four to six month range. So given Colby I know they had some delays in intake as well. So we're not sure exactly off the timeline, but you know pre call. It it's been a.

For the six month kind of timeframe. So we are hopeful it would be sometime in.

That timeframe or you know not knowing exactly what the current timelines and delays on the different but it should be a I think that should be average number of you should be expecting to get back.

Okay could you talk a little bit about the a D.A.R.R. issue platform.

You mentioned that it seems some sites now in the U.S. can you talk about those sites and somebody experiences. They had and then a reminder.

What's your filing to the EU, what that what might that turnaround time be like.

Sure Jeff So just to clarify we have not installed these systems in at the U.S. hospitals, yet or if you're planning to do so hopefully good ended this month early September.

Would be the installation time, then soon after the in store will be performing or trading okay says even in the U.S.

And with respect to Europe again, the same product the same product that you got approved.

In the U.S., if walk me submitted a in Europe now.

And the timeline again approximated two at the end of VCA Fenby.

Expecting to hear back from that notified bodies in a in Europe.

You can.

Get to.

Good day, I guess, you integrated into the system in Europe as well.

Okay got it and then as far as your utilization of the platform out there you talked about Q1 being up 43% acute you're down 65.

I imagine could you talk about July over June and its I was better and then talk about ER docs. After the year. If you could does it sound like or seem like to you that the trajectory from Q to Q3 may be there on the positive sense and.

Well, we see some carry through into the the fourth quarter School.

I think so I think you know.

Andrew less than reality low point.

And since.

You know every Oh man, that's better than April and June was better than man july's better than that June so be being on the uptick primarily you know because the above the reopenings in Europe, a theyve kind of been leading the way in terms of procedures so be it definitely.

Hoping to have a much better.

The caught a data in terms of cases come bad debt.

Second quarter.

So definitely I didnt <unk> cancer thought going into right direction, it's trending the right.

They are but I I think they've continued to see a you know modest growth from quarter to quarter.

In Q3, and then onto Q4.

Okay got it lastly from me any experience from the field as far as a some commentary as far as your articulation via instrument or circulation in the five millimeter size from users out there are there.

Here's a sense of the number of use yours or their percentage as your systems out there that are utilizing articulation no.

Yeah. So I think I'd just like they said that they've been on a sound like a limited launch in Europe and articulated instruments are being used.

You know obviously more surgeons are using it then you're getting some really good feedback and very positive.

Feedback from the surgeons. So that's a you know that that's currently in Europe, and we continue to expand or utilization enough. It fits defense a in Europe or that the rest of this year, that's kind of the plan B led out and we continue to do that in Europe.

Through the third and fourth quarter.

Okay got it does it for me thanks for taking the questions.

Thank you Jeff.

Our next question comes from James Meyer with RBC wealth management. Please go ahead.

Oh, just like to thank you for saving the company in the hard work you do that's all.

Carry on.

Thank you James.

That concludes our question and answer session for today I would now like to try and the call back to Anthony Fernando for closing remark.

Thank you all for joining us on today's call.

I appreciate your interest in constant directs and look forward to updating you on our progress next quarter. Thank you very much.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

[music].