Q2 2020 Soliton Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Silicones second quarter Twentytwenty earnings Conference call.
This time all participants are in listen only mode. After the speaker presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one on your telephone.
As a reminder, today's conference is being recorded I wouldn't like to introduce your host for today's comforts Carol Ruth founder and President of the Ruth Group Silicons Investor Relations firm. 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 and solid and Dot com and a replay of the call will be available on the company's website said 30 days.
With me today, while equine co founder and Executive Chairman Grace Kelly Co founder Chief Executive and scientific off is that well Ari they've been chief financial Officer.
Remarks today. We will include statements that are considered forward looking statements within the meaning of United States Security laws. In addition management may make additional forward looking statements in response to your questions forward looking statements are based on managements current assumptions and expectations.
Future events and trends, which may affect the company's business strategy operations, well financial performance, which may affect the company's business strategy operations or financial performance.
Detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on form 10-K quarterly reports on form 10-Q encouraged reports on form eight k. actual results may differ materially from those expressed in on slide by default.
Looking statements.
The company undertakes no obligation to update or review any estimates projections or forward looking statement. The company intends to filed a form 10-Q for the quarter ended June 30 by end of day today.
Let me hand, the call over their Wally Wally.
Thanks, Carol and good morning, everyone.
We're pleased to share with you. So what's on second quarter 2020 results and provide further color on the plan 2021, U.S. commercialization of our rapid acoustic post advice.
And the various steps, we're taking to ensure that we're best positioned for long term success, especially in the current environment.
As we have previously disclosed because of the impact of the pandemic, we voluntarily delayed the initial launch of the RFP device until the first half of 2021.
We continue to believe that the present environment is sub optimal for a new technology launch and that pursuing this revised launch plan is in the best interest of our customers and investors.
It's clear that the impact of Cobot 19 on the global economy continues to be significant [laughter].
And through.
Conversations with or advising positions in the aesthetic space.
Their practices remain limited by social distancing requirements that are constraining the number of patients that they can see in each day.
Dermatologists and plastic surgeons are understandably focused on scheduling procedures that generate immediate cash flow for their practices and without capital outlay. So this means an emphasis on meeting the pent up demand for fillers and neurotoxin injections.
We believe this dynamic will continue throughout the rest of 2020, and we simply don't want to launch into a sub optimal environment with a brand new technology.
Our ultimate revenue model is powered by repeat single use cartridge sales, which are used for each patient by the practitioner.
Such practitioner by end and adoption will be critical to our long term success.
This is an exciting new technology, and we want to launch it into the marketplace under conditions that allowed doctors to focus on maximizing the potential of this technology in their practices and current conditions.
Simply don't allow for that dynamic.
We continue to be optimistic and we believe that there will be enough recovery in the aesthetic marketplace to make the first half of 20, Twond 2021 and appropriate launch window.
And we expect the aesthetics industry to begin to demonstrate a pattern of stabilization, which we hope will allow our dermatology customers enough predictability and consistency in their practices that there will be open in receptive to something entirely new.
Throughout the second quarter, we achieved a number of key milestones necessary to maintain our commercial launch timeline.
We also use this time to explore additional clinical work that would add to our technological abilities and long term medical potential.
In addition to the key regulatory progress that we made during the quarter through the filing of our five 10-K for cellulite reduction.
We bolstered our balance sheet through a secondary financing expected to be adequate to fund the business over the next two years into the fourth quarter of 2020 cheap. So although kogut 19 has created a number of challenges for solid so on and the overall market in general it hasn't stuff.
After our progress.
So now I'd like to pass the call over Dr., Chris Capelli, our CEO for more context around our second quarter achievements and upcoming milestones.
Yes.
Thank you Ali and good morning.
As well I touched upon we believe our latest strategy to launch the RFP device in the first half or 2021 best position solid talk for a long term success.
Although the current 19 pandemic push hard time to amend our strategic path forward. It did not impede the progress of the company as a whole.
On June Thirtyth, we filed our five 10-K premarket application with the FDA.
Our generation to rapid acoustic cost device for the treatment of say like.
This application with supported by the positive pivotal phase I trial results that were presented to the cycling community at the virtual American Academy of Dermatology Conference.
Yeah, yeah, except that our application given it administratively complete in early July putting thoughts are on track FDA clearance by the conclusion of first quarter 2021.
Management believes that there is a reasonable expectation that the f. They will allow us to remain on the five 10-K clearance pathway in order to market the product.
However, our time I'd commercialization should not be impacted as it allows time for an average de novo process should the FDA disagree with our protocol argument and that's because the ship from the fact kit pathway for approval to a de Novos with.
As these maybe before they then as time went ahead of the initial launch has allowed us the opportunity to watch the RFP device.
But in both detachable indication as well as the cellulite indication pending FDA approval of the latter.
We believe locking the RFP technology with two approved indication versus one with a clear advantage bra launch.
Firstly.
We believe that largely as a platform technologies that include there like rather than a single indication with had to along.
The caliber of key account will accept the device in the initial launch phase.
Support Bill key opinion leaders in this space will be critical to successful nationwide rollout.
Secondly, our marketing that well be leverage across both indications, allowing us to both increased brand awareness of our prayer brand name across both the tattoos and failed treatment solutions.
Lastly.
Incremental device upgrades, we plan to make during the second half a 2020 with simplify the use of the device for our practices, making significant practice adoption much more likely.
As an example.
We will be launching with a country that's self loads.
Make any and all variability that currently exist in the manual loading process.
Furthermore, the incremental manufacturability enhanced planned to be incorporated prior to the initial launch will reduce the cost of goods improved margins ahead of their originally expected timeline.
The recent successful completed equity raise properly capitalize the company to watch the pool, a robust marketing support for successful launch that could both them think traction with our consumables.
Bill practiced frothy moving into nationwide rollout.
As we progress towards our extent expected launch that you're ramping up our manufacturing efforts to ensure we are ready to ship on day one.
Our global manufacturing partners that Amina has initiated privilege it clearly preliminary steps in the manufacturing supply chain.
Fixtures and tooling to build the prototype devices.
You used to validate our production might have been ordered.
As well all the component parts for the testing prototypes and commercial devices to be built.
Got it tended to our manufacturing progress.
<unk> has welcome Jim Bucharest consulting head of sales and Jennifer Cook as Vice President marketing to lead the sales and marketing efforts to underscore our initial commercial launch.
Together, they will generate in implementing strategic sales and marketing initiatives, including practice initiation strategies.
Training program and marketing launch the port material to effectively reinforce the market introduction of the RFP device.
Also.
During the second half of this year, we plan to hire the first members of our practice development team.
Support initially place devices.
The practice development team recorded training program on both the implementation of the technology as well as practice development tools designed to help the positions both influenced existing patients and attract new eligible patients for south on RFP treatment and their offices.
We believe creating a comprehensive support network, where our position will lead to a superior overall practice experience and assist in generating pet patient traffic.
Now turning to our clinical work.
As a result of the ongoing pandemic and given the state of the dermatology marketplace.
We have experienced significant challenges with all of that in our ongoing say like clinical trial assessments and delays in the initiation of further clinical trials at type around the country.
We expect us to impact the timing of the longer term follow up visits in our satellite pivotal study as well as the outcomes that additional products proof of concept study.
As soon as it is feasible, we will continue our satellite clinical trial and initiate the steady work that as planned.
In addition.
We still believe accumulating hypertrophic scar indication.
Which is if I bought a condition is a significant potential expanded indication longer term for salgado, we're equally enthusiastic for RFP devices impact on other fiber optic disorders.
Again, the clinical results from our Toby Kilroy hypertrophic scar proof of concept study.
Completed in January we're very encouraged as it demonstrated profit 30% average reductions car buyers from a single initial treatment for continued benefit observed at the Coke probing our visit.
Further based on the proof of concept trial, we intend to explore the potential efficacy of our IP device or other byproduct disorders patches cafs are contraction.
Chronic disease.
And liver fibrosis, which we are very eager to further beskid through additional clinical work.
However, as it is increasingly difficult to enroll and treat patients in human trials. During this time.
We are exploring animal model will allow us an opportunity to demonstrate the impact of our mechanism of action on our fiber optic target they say like and scars.
Well, we are committed and strong focus on the upcoming initial large RFP devices. We believe there's an opportunity to unlock additional day to other target indications, which we intend to pursue.
Now before I turn the call over life with comments on our second quarter financial performance.
I'd like to conclude although cobot Nike made the deterrent in the market.
I'll try to make every effort to drive or continued momentum execute on the mouse look ahead of us.
In this type of uncertainty, we will focus on the variables control, while being flexible when needed to best position solid enough for future growth and success.
With that I'll pass the call of the Laurie Thank Chris and good morning to everyone.
For the second quarter ended June Thirtyth 2020, operating expenses were $3.1 million as compared to 3 million in the second quarter of 2019.
The increase is primarily attributed to higher research and development expenses, resulting from greater spending with development partners and costs related to clinical trial.
Net loss for the second quarter ended June Thirtyth, 20, 23.1 million or 19 cents per share on a basic and diluted basis.
For the same period in the prior year net losses, 3 million or 20 cents per share on it to basic and diluted basis.
As of June Thirtyth 2020 outstanding shares of common stock were 21.2 million.
Total cash cash equivalent and restricted cash was $37.5 million as of June Thirtyth 2020, compared to 7.7 million as of March 31st 2020, including total gross proceeds of 35 million from Frolic on June 2020 follow on offerings.
We believe the company's cash cash equivalents unrestricted cash on hand is sufficient to fund the company's operation ended the fourth quarter at 2020 tape and allows the company to support initial revenue generation through the first 18 months and the commercial launch of the wrap Tonight.
The proceeds from refinancing will fund the initial commercialization of the wrapped up by including the early manufacturing fundamental brand development investment and the initiation of a sales force and practice development team.
It's also important at this time to review our financial history, we have been a public company for a little less than 18 month, having gone public in February of 2019, and an IPO price at $5 per share with the market cap approximately 73 million at the time.
Since the IPO, we've raised an additional $53 million at transaction prices ranging from $8.03 to $14 a share and our market Pat has approximately double today to around $149 million.
In a very uncertain financial market, we have secured the capital that was need it to transition from a research company to a full fledged commercial entity.
35 million dollar financing. Most recently closed allows our executive leadership can be laser focused on executing our commercial strategy without the distraction ongoing financing activity.
Ultimately, we believe this will translate to shareholder value.
I'll now turn the call back over to Wally for closing remarks.
Thanks Laurie.
It is an exciting time here at college on as we begin our transition into a commercialized entity and continue the significant clinical expiration exploration as Chris mentioned to further expand potential indications for our technology.
Despite the opaque economic and aesthetic environment, driven by ongoing Covin pandemic.
We remain optimistic that the markets will recover and long term demand for a set of procedures will continue to grow at the same faster pace that we've seen in the past.
Before we open up the call the Q in a we'd like to address a question that has come up from a number of investors lately, which is.
Why not just launch immediately into the tattoo indication.
Well the answer is that we only get one chance to make it first impression.
Specifically, we only got one shot to get the full benefit of introducing a brand new technology into this marketplace.
We intend for this launch to be successful.
And account initiation inpatient adoption, along with the resulting physician advocacy are absolutely critical to successful launch.
Well, we could have forced some tattoo removal equipment into the marketplace and tried to fight against the cold It headwinds if you will.
We believe it was strategically wiser to introduce our technology when we have the best chance for success.
With a more receptive commercial.
Audience.
As we evaluated when we thought that might be we began to see alignment with our anticipated clearance for cellular production.
This affords the opportunity to launch our technology for both tattoo removal and cellulite at the same time, and therefore leverage brand support spending and the counter initiation activities.
And keep in mind, although our revenue model is designed to emphasize recurring revenue from replacing cartridges.
There is still a capital equipment component to opening a new account.
We believe that the decision by a position to incur a new capital expenditure and embrace a new practice routine is likely to be easier to make once they feel that their core practice is on the road to stability and predictability.
That's a compelling reason for us too.
Nick our moment carefully.
But once practices settle into whatever the new normal lives for them. We also believe they're going to be eager to offer.
An exciting new technology like ours to reengage with their client base.
In closing I would like to take this opportunity to thank all of our solid tone employees for their continued dedication.
And our investors for their ongoing support.
With that I'll turn the call over for Q and eight to the operator.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question press, the pound or the hash key please stand by well, we compile the queuing named roster.
Yes.
Your first question.
'cause from believes Chen.
Hi, Thanks for taking my questions here. So I had a few first question I had for you is have you seen any turn around in the aesthetics market and is there any flexibility to push up the timeline for the launch pending approval for cellulite, if aesthetics market returns quicker than you anticipated and then.
Secondly, what is your go to market strategy for Cellulite and tattoo is there any overlap here and physicians are patients how big of a sales force what you need but to the marketing campaign will you have and then last question is when will you know as the ft able to approve the cellulite indication based on the five 10-K or if they will more clinical work will be required.
Thank you.
Sure Lori that sounds like it's right there on your Alley, Laurie [laughter] good morning, ladies and I'm glad to have young hi. Good morning. Thank you start let me start without what we're seeing in that marketplace.
And that and try to to remember all your questions in order from there so what we're seeing.
Right now is that there's our reopened and fairly significant degree degree about 80% of dermatology cosmetic dermatology practices have reopened and we're seeing aesthetic procedures for some companies approach, 80% to 90% of their volumes from the same period last year Q2.
That we saw that specifically for injectable.
And we are we are a little bit concern right now in the recent trend in rising case count, causing some.
We treatment in that progress. The we expect Q3 will be a little disappointing and in relation to Q2 as far as number procedures being performed but I think we learn from Q2 was that the market is recovering right. The market does return to some form of normalcy and we would expect.
To happen after Q3 in the second wave I've covered that gone across the country. We also expect you know dr., our smart people and we expect that they will learn newspaper techniques in ways to deal with the throughput issues that they're seeing their practices with your caused by increased vessel distancing requirement.
And increased sand sanitary requirements to clean the clean offices. It so thoroughly we think filthy buzzard some of what causing lucky throughput as we live in this new world. So we're very optimistic that we've seen some recovery already and we expect that you know that recovery continues.
So you can you. Additionally asked a question about our go to market strategy with cellulite tattooing and so from a from my perspective. Those are two very different marketplaces. When you consider the potential patient from another perspective, they're treated and a common location.
So from a selling approach doctors' offices like dermatologist, specifically cosmetic dermatologist plastic surgeon and many spike that our.
Managed by a physician are directed by physician or our target for both cellulite reduction and tattoo removal and does it selling proposition worked very well and because the account have that a common basis for creating both of those indication.
From a marketing perspective, when we start talking to patient our strategy will be to build recognition and value around an umbrella parent brand.
And then speak directly to the consumers the need underneath that umbrella and so we have we were doing lots of restarts constantly about where is our target patient finding your information what are they concerned about who were they listening to so that we're ready to engage in that conversation with them as we go to market.
I think there wasn't one more question that app that yet so Laurie I can tackle that last one the leap Luis was asking you know is there an opportunity to accelerate.
The launch window here and and back me up on this Laurie, but I, but what I would say louisa's.
The first of all Anna and I know you know this but each of launches like this are pretty complex I mean, there is there a lot of important.
Factors and procedures that have to a line and indeed sort of brought together at the same time for a really successful launch and that includes the necessary regulatory approvals on the latest version of the equipment that you intend to put in the marketplace and you have to make that commitment far enough that advance.
So that the production line is validated to make the product that you intend to have the latest ft. A clearance for when it's time to launch that Carl just as an example, and so.
Timing and coordinating all of those things requires a lot of advanced planning and once you put that plan in motion.
It's pretty difficult to materially change the timeline you can delay the timeline, but accelerating the timelines nearly impossible to have it all coordinated the way you needed to be for a successful launch. So so the the direct answer to your question is we don't see a lot of opportunity to accelerate this.
Let's say just because we got off slightly faster approval from the FDA than we might have planned on for example, we'd love for that to be the case, but the launch so the whole launch process is just too complex to to say, we got we got an extra couple of months here, let's let's wrap everything up.
Having said that.
The feedback we're getting from clinicians is the timing we're choosing they think is pretty smart.
As Lorie mentioned, there's a lot of sorting out here that practices are doing in EM. There they are establishing new per procedures and they're doing that.
On the back of the procedures that they most normally those their go to procedures the ones that they most normally rely on for cash flow.
And so right now and during a we would argue the balance of this year, we're not we're probably not going to get the mindshare from clinicians that we otherwise would once they've kind of settled in and established with that new normal lives. So we really we really believe they were.
We need to get those practices or need to see those practices get to the point where.
Now, they're ready and hungry for something new.
And it's they're just too many moving parts right now so sorry for the long winded answer in Lloyds I leave anything out there in terms of of.
How that timing is impacted.
No I know that right answer Wally okay. Okay. So Louise does that make sense for you.
Yes. Thank you very much for all the answers.
Yeah, you bet.
Your next question comes from Anthony Vendetti with Maxim Group.
Thank you good morning.
Hi, Anthony good morning.
Hey, how are you doing [noise].
So just on.
On the latest system.
That you had submitted for FDA approval can you talk about.
Many of the system enhancements and then any actual feedback so far from the FDA June Thirtyth submission.
Or conversations with them at this point.
Sure. So one of I'm wondering I talk about the enhancements that lauria I'll leave it to you to sort of talk about the FDA feedback procedure.
So Anthony that.
There.
Although the device physically will look about the same as it as the last device that we.
Got clearance from on.
Via special five 10-K, there are a lot of.
Seemingly small changes, but ones that we know well make a huge difference in serve as the.
The flow of procedure in the office.
We have now lived with this equipment in a clinical setting through clinical trials for a long time and and we've watched people interact with the device and diligently taking note of.
You know ways that we might be able to make the experience.
More sort of seamless poor for clinicians it because as you know there under a lot of pressure, but they can't tolerate are a lot of things that disrupt their flow in their interaction with their patients. So we need to our equipment experience for them to be like I say seamless and end to end.
Constructed one of those things is as Chris Chris mentioned, the ability for cartridges to be auto loaded the.
Theres a lot going on here as you know.
You know, there's 9 million watts of power in every spark that makes it an acoustic shockwave from our device and we're doing that at 50 to 100 times a second so there's there's a lot of physics that are involved in that that cartridge.
And because of that that cartridge has to be very precisely installed to torque setting and to ensure that always function. The same every time and.
What we sort of learned along the way it was.
We didn't want to leave that to the individual practitioner.
So the our loading function takes all of that out of their hand, they simply just push a button on the screen the cartridge.
Comes out into their hands. They could have you cartridge on the hand piece and the equipment takes over from there and auto loads and brings to proper torque setting an all that stuff. So.
Although those aren't.
Those aren't very visible changes, we believe that third the kinds of changes that will make this a much better first product launch into a into those practices. So.
And kind of going along with that would be like.
The graphical user interface that they enter interact with them screen for example.
Well, let me just add.
I was in the clinic when we were doing the clinical trials and I large all the principal investigators all the technicians to work with that loved the machines. They love how look how it worked house nickel. It was a everything about it. So the changes were putting into place are not because they wanted those changes we're just seeing.
How we can make this a better product without their commitment as robust as possible.
It's not being driven by what we saw that need it sort of this is making a very robust better product.
Right. These are considered minor changes by the by the FDA.
They're just they're just.
Yes.
Thats correct kind of change that would require a special five NK rather than a full secondary fighting Anthony.