Q3 2020 ViewRay Inc Earnings Call
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Q as updated periodically within the companies other SEC filings.
Furthermore, the content of this conference call contains time sensitive information accurate only as of today November 5th 2020, you ran undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances. After the date of this call I will now turn the call over to Scott.
Thank you for Kayla good afternoon, everyone and welcome to our two three call.
Today, we will discuss our third quarter results, we will show how meridians clinical data unlocks the strategic and economic value of the system will provide color on our path to treating more patients Zach will cover our financial results and then we look forward to answering your questions if you're not on the webcast.
I'll be referring to slides from the presentation on our Investor Relations site.
Turning to slide three our mission is to treat improve what others can't.
We have now surpassed more than 11000 patients treated and have more than 2800 patients with clinically reported outcomes.
This growing body of clinical data.
Is critical to our efforts to change and improve the paradigm of care.
Let's turn to our queue three results on slide four <unk>.
We received for Meridian orders in the quarter highlighted by the first system, we will install in the veterans administration, we continue to be pleased with the level of customer engagement. Despite the challenges posed by the ongoing pandemic.
Turning to revenue, we recognized approximately $10 million, including one revenue unit.
As we stand today installations are largely moving forward, albeit a differing speeds from market to market.
We currently have free movement in the U S and have been able to complete installs in reasonable time frames. However work in Asia is delayed and in some instances significantly so.
Timelines to achieve required visas have been unpredictable.
Europe is somewhere in between as their inter country travel challenges and timelines remain difficult to predict we.
We continue to closely monitor the impact of COVID-19 to our business worldwide.
[noise] regarding cash we used approximately $16 million in the quarter.
The actions we have taken this year augmented by the financial discipline and rigor we drive have yielded progress on reducing cash burn.
A few receivables moved into queue for which elevated Q3 utilization.
These payments are now in hand.
We also amended are 56 million dollar term loan with S. V be effective October 30, which will differ amortization payments until November of 2022 <unk>.
Zac will share more detail later in the call.
Before we dive into our value propositions, let's turn to slide five to first discuss the journey we're on.
Customers are clear.
They want what patients neat.
Clinical data that allows ablative dose five or fewer fractions low to no grade three toxicity and no fiduciary.
They want Meridian smart.
[noise] Stereotactic M R guidance adaptive radiotherapy delivered consistently and reliably.
We are building upon our pancreatic cancer beachhead in other tough to treat areas.
We're also proving value and ubiquitous cancers like breast and prostate.
This clinical value unlock strategic and economic value.
From this foundation of clinical data, we will focus on driving treatment efficiency to enhance value for our customers and the patient's day trip.
Now onto slide six <unk>.
Meridians value propositions are resonating in the marketplace last quarter, we share detail on her clinical goals and roadmap.
Everything begins with and flows from our clinical value let's.
Let's start there.
On slide seven another example of how our customers are treating improving what others can't.
This is the first known report of ablative radiation, two and a ligament in mesenteric lymph nodes.
The patient was diagnosed with primary bladder cancer in 2015 and was initially treated with surgery.
Two years later he had a metastasis develop in the adrenal gland came.
Chemotherapy was administered but another met was found in a nearby lymph node.
He continued cycles of chemotherapy for two more years, but the cancer did not respond and the lymph node continue to enlarge.
After almost five years of various treatments. This patient was referred to Doctor Chung, who treated 50 gray in five fractions or two to three times higher dose then would typically be prescribed using an X ray based system.
The images show the online adaptive planning via Meridian.
Due to significant movement of Oregon's between fractions adaptation insured dose to the tumor and not to healthy tissue.
Dr. Chung wrote in this case report that Meridian Smart was a positive experience for the patient since he was able to quote not only achieve tumor reduction despite progression on prior systemic therapies, but also offer him hope that he could still continue effectively fighting his disease. This case would never.
Sure be treated on any other machine period to the dose we treated period end quote.
Moving to slide eight our customers are continuing to drive clinical data better expanding to use of meridian smart and opening the pathway for first line therapy.
Astro last week, our customer shared wealth of Meridian clinical data.
In pancreas alone our customers presented three additional impressive studies.
Cornell demonstrated excellent one year survival at 87.5%.
M C I reported on a cohort of 35 patients with excellent one year local control also about 88%.
Market reported strong one year survival and local control of approximately 92%.
As you look out two years retrospective trials demonstrate nearly 50% survival, which is very promising and an improvement upon historically reported two year survival rates of approximately mid teens to low twenties.
Turning to slide nine other recent data continue to point to safe and effective treatment via meridian smart across tough to treat and ubiquitous cancers.
In renal cancer, a U M C reported zero grade three toxicity and 91% survival at one year and cancer patients that had large primary tumors and no other treatment options.
The toughest up the tough once again treat of bold because of meridian.
In patients with a link and that's M. C. I presented a treatment series with zero grade three toxicity again, demonstrating the ability to safely deliver ablative dose and abdominal tumors, while sparing oregon's at risk.
And in prostate cancer at your bottom demonstrated low toxicity with no fiduciary is required yet another data set reaffirming what we've seen from other customers with no fiduciary and prostate cancer.
Furthermore, all the trials, we previously shared on our clinical roadmap are now enrolling patients.
On slide 10, you'll see the progression of how customers are pulling us toward potentially new heights.
To illustrate I'll use the progression on how multiple customers are treating pancreatic cancer.
First we made the leap from X Ray guided Linux, where customers were faced with the trade off of low doses and high toxicity to meridian smart.
Ablative dose tight margins five or fewer fractions with low to no grade three toxicity.
This yielded great clinical results, yet physicians recognize that disease may reoccur outside of target volumes.
Physician experience now years in the making is giving them the confidence in meridians ability to protect healthy tissue and organs at risk.
Okay levels.
The goal here is moving from just treating the tumor for local control to comprehensively treating the area at risk for regional tumor reoccurring <unk> with the expanded goal of improving overall survival.
Our customers are pulling us toward this method in other cancers.
Now, let's move to our strategic and economic value propositions.
On slide 13, let's begin with our customers macro Golden mind, they seek to treat patients with the best possible care.
Attract new patients into their health system and retain patients already in network.
Essentially they're seeking net new patients that they can tree in a clinically and financially responsible manner.
Meridians clinical value drive strategic and economic value for customers.
Meridian helps deliver these goals by first adding new patients that they couldn't or wouldn't treat prior to meridian.
Second by attracting new patients from outside their catchment area.
And third by increasing in network referrals.
Lastly, meridian drives program efficiency by lowering the total treatment time per patient.
Let's touch on each of these in more detail.
First customers are treating patients that they wouldn't or couldn't prior to meridian.
Many of these cases have been highlighted in the webinar series our customers have posted.
Second on slide 15 customer sure how they are attracting and retaining patience with meridian.
Many customers have added that new patients from outside the hospitals catchment area for.
For example, at Miami Cancer Institute Physicians estimate the 20% of their patients come from outside Miami.
In Genesis care, Oxford reports that most of it's patients travel long distances for meridian treatment.
Meridian is also helping customers retain patients within their network for example, Doctor Nagari at Cornell has seen approximately a four fold increase in prostate cancer patients because of referrals to their meridian program.
On slide 16, let's translate these net new patients into economic value.
Dana Farber Brigham and women's for example, attracted 41, new patients and just their first year with meridian.
Using conservative Medicare rates this translates into about $850000 of incremental ongoing revenue per year due to the impact of meridian.
Over 10 years. This is about eight and a half million dollars, which we believe more than justifies our price premium.
To recap meridian is helping differentiate cancer programs by adding new patients that wouldn't or couldn't be treated on other systems.
By attracting new patients from outside their catchment areas and increasing in network referrals.
Additionally, meridian can help drive program efficiency by lowering the total treatment time per patient.
As a result, we have multiple customers that have bought a second meridian system and other current customers better contemplating the same.
On slide 17, while the clinical strategic and economic benefits to cancer programs are clear the benefits to patients are also profound.
These benefits include shorter courses of treatment less disruption to their lives and more savings in their pocket.
Perhaps most importantly, meridian offers powerful clinical outcomes.
In summary on slide 18, our journey begins with our mission to treat and prove what others can't.
We have a beachhead and pancreas, we now have consistent and compelling data on over 200 patients develop by some of the top cancer centers in the world.
Or expanding to other talk to treat cancers, such as a ligament central and ultra central lung liver and more.
We believe that the work our customers are doing is leading to a new paradigm of care Meridian smart.
We build on this work in tough to treat cancers and show benefit and more ubiquitous disease, such as breast and prostate.
With this growing body of compelling data the name of the game becomes driving efficiency.
This journey of clinical data.
Changing the paradigm of care and driving efficiency is enabled by our ability to see shape and strike as only meridian can we.
With that I'll turn it over to Zac to discuss our financials.
Thank you Scott.
For the fiscal quarter ended September 30th 2020, total revenue was $10.1 million, including one revenue unit.
As compared to $20.9 million, including three revenue units in the same period last year.
Total gross profit was a loss of approximately $1.1 million compared to a profit a point $6 million over the same period last year.
The decrease was again attributable primarily to lower system revenue in 2020 versus prior year, which led to lower absorption of our installation infrastructure.
This decrease was partially offset by positive margin from our service business.
Total operating expenses were twenty-three $9 million as compared to $32.3 million for the same period last year.
The decrease in operating expenses reflects the continued impacted the cash savings program, we implemented earlier in the year along with the impact of the headcount reduction at the end of Q too.
Also contributing to the decrease our continued lower expenses as a result of covid related reduced activities.
Operating loss for the period was $25 million.
As compared to $31.7 million for the same period last year.
Finally, net loss for the quarter was $28 $1 million or 19 cents per share compared to $28 million or 21 per share for the same period last year the.
Extended the maturity from December 2023 to November 2025, lowered the interest rate and Favourably adjusted several of the covenants. This.
The specific changes along with the amendment are described in more detail in an 8-K, which we filed today.
We appreciate Silicon Valley banks ongoing partnership in this transaction.
With that we will now open the line for questions.
Ladies and gentlemen, thank you have a question at this time, please press the star and the number one key on your telephone.
I'm through everything just yet and if so.
Maybe give us an understanding of what percent of your U S installed base is actually.
Falling into the ATM right now.
Yeah, Andy we've got we've gone through that data I don't know the percentage off the top of my head of Uspa's customers, but we do have.
Customers that are covered by the APM.
I would agree with you I think the the movement to July one.
Really is not a very big deal I think clarity is a big deal as it relates to the APM.
And I would just remind everybody that we perform very well in the current reimbursement scheme.
If you.
Really think about the clinical strategic and economic value that we're delivering.
Here, what our customers are saying.
Very solid performance in meridian centers, even with Covid.
And then you contemplate the future of the APM I think two things are very likely to happen.
One is the organic movement that is already underway toward SBR T will continue quite possibly accelerate.
Our customers say.
Consistently that where the ultimate SVR team machine.
And the other thing that I believe will happen is competition for patients will increase and again when you when you hear what our customers say about the clinical.
<unk> of the system strategically, how they're standing out with meridian, attracting net new patients that they wouldn't or couldn't treat otherwise patients that are traveling to be treated on the system and how that translates economically.
We feel like we're even better positioned under the ATM.
Yeah, it seemed like that.
Physician led webinar for master really highlighting some of those points, which is interesting.
Hi curious as.
How do you see things evolving.
Once the ATM initiated looking at Florida as an example, it seems like.
You've been able to build a niche based on proximity over there and more system, they're kind of installed because.
Secondly.
You have a base that's building over there do you think that can be expedited by the ATM in certain regions, where one of your customers does fall within that.
At ATM model with code and then.
<unk> around there can be forced to our potential.
Potential hospitals around there before look at alternative model equipment to be able to you to meet the profitability within the guidelines.
Yeah, Andy I think there's there's two dynamics that you're really pointing out there one is the APM and I think I I covered there the the drive toward.
SPR T in our case, what we're calling meridian smart five or fewer fractions ablative dose no fiduciary low to no grade three toxicity I think thats its own dynamic and then on top of that to your point, whether you are talking about the Florida market the mid Atlantic northeast.
Midwest I think the competitive dynamics of those markets are such that we're seeing an improvement.
In our commercial pipeline.
Based upon those competitive dynamics and patience traveling for Meridian therapy. So I think both of those things bode well for us.
And it's part of our commercial strategy as we go forward.
Okay last question for me.
Believe it was the first half of the second quarter.
You noted that you didn't have any new orders in.
In the back half of the second quarter now in the third quarter, you had four orders both times.
Can you just maybe discuss capex spending.
And how about eating as long and maybe some the transition to the years of off.
Yeah.
I'll answer the question is I think I understand it Andy but welcome you to to sharpen the point.
The question is really around.
The commercial pipeline I would tell you I feel very good about where we are.
Our customers are incredibly clear both current and prospective.
In terms of what they want.
And what they want is really what patients need.
Which is clinical data.
And I've hit the point.
On multiple occasions here, but they want an ablative dose they won five or fewer fractions. They want no fiduciary they want low to no grade three toxicity and that is very much. What we are delivering and I think that's really what's driving the commercial pipeline that we have.
To your point on the pandemic, it's certainly not helpful to us as it is having an impact on capex budgets for our customers.
What we're seeing a way to kind of thread that needle a little bit yeah.
Okay wait and see approach until we get 2021, and maybe have a vaccine in hand.
Yeah, Jason I I would say.
It is a bit of a mixed bag to your point, we we have customers that have you know move forward with decent.
Decent pacing in the midst of the pandemic, we have had others, who have told us that they would like to purchase but they're gonna delay that there are larger academic centers that are moving forward and for profit centers that are moving forward.
About the strategic value treating patients they wouldn't or couldn't on any other system patients traveling from outside of their catchment area.
Ours.
I think Scott you May you mentioned some of the efficiency improvements here again, just now here in the in the last response there.
Just.
Hope you can unpack some of maybe in a bit more detail.
Some of what we could see from the on the upgrade side that might be coming here over the next whatever it is few quarters couple of years.
Hey, guys skin and different on timing, but just I think it was dr. Mac that talked about some imaging parameters selection upgrades and auto segmentation upgrades.
And where are those on your roadmap and again anything you can speak to on rollout plans again without getting too detailed on timing I understand for competitive reasons.
Yes, we're in the midst right now of rolling out improvements that we've made both hardware and software.
As it relates to eight frames, a second and high speed MLC.
We're going to continue to go through.
More recently and how do you expect it moving.
Moving forward.
Is it pretty normalized.
As before or is the trend line somewhat change.
Yes Raj.
I would say that our relationship with Siemens.
Being away from home months at a time.
But that said it is it is definitely made things very difficult for us in Asia.
I would say difficult for us in Europe.
And in the U S were still able to to do installations and relatively rapid timeframes think in terms of.
45 days or so.
But it but it has been a challenge for us in various markets and I will tell you. The the installation that we have going on right now in Paris with.
With the spike in.
Covid cases is is.
Beginning to get more difficult so.
And what are your line is open.
Hi, This is marissa baisch on for David This afternoon. Thanks for taking the question.
We have touched on this before but we're seeing increased interest for San capital of those businesses in newer and more disruptive sales models like leasing or usage based agreement I'm. Just curious you are we can thoughts on how the pandemic may impact or Sally model was going forward.
Do you have any sort of clarity or color around that thank you so much.
Your line is open.
Good clip.
As you well know covering other companies even as this second wave is happening.
Hello of clinical data from our customers and time and again, you're looking at ablative dose five or fewer fractions low to no grade three toxicity no fiduciary <unk>. This is exactly what our customers are looking for and there's more and more and more of that.
Health and.
That that is progressing as well so hopefully that's responsive Anthony.
Very helpful. Thanks, again off that can kick.
Thank you.
And ladies and gentlemen, I'm not showing any further questions. At this time I'd now like to turn the call back to your speakers for any further remark.
Thank you operator, and thanks, everybody for joining their call here. We appreciate your interest in view Ray and look forward to talking to you in another 90 days thanks very much.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a good day.
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