Q3 2020 Soliton Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the solar tons third quarter 2020 earnings conference call.
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I would now like to introduce your host.
Today's conference Karen <unk>, founder and President of the Ruth Group Solar tons 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 at all John Dotcom and a replay of the call.
All will be available on the company's website for 30 days with.
With me today are Wally Quinn co founder and executive Chairman.
Dan Houser, President and Chief Executive Officer, Lori Eaton, Chief Financial Officer.
In our remarks today. We will include statements that are considered forward look.
Let's move statements within the meaning of the United States Securities Laws. In addition management may make additional forward looking statements in response to your questions forward looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business.
For energy operations or financial performance.
A detailed discussion of the risks and uncertainties that the company faces contained in the annual report on form 10-K quarterly reports on form 10-Q, and current reports on form eight k. actual results may differ materially from those.
Breast in or implied by the forward looking statements. The company undertakes no obligation to update or review any estimate projection or forward looking statements.
Me intends to file in the <unk>.
Form 10-Q for the quarter ended September 32020 by the end of the day today.
Now, let me hand, the call over to Wally.
Thank you Carol.
Good morning, everyone and thank you for joining our third quarter 2020 earnings call.
We're pleased to share with you all the progress Solitron made during the quarter.
Our focus remains on ensuring the success of our planned U.S. commercial law.
Launch of our rapid acoustic pulse device in 2021 and.
We believe the achievements we made during the quarter position us optimally for this launch.
I first like to formally welcome Brad Hauser, as our new President and Chief Executive Officer.
Brad is a true veteran in the aesthetics industry the most.
Recently served as VP of R&D and general manager at Allergan, Anesthetics, which is now in Abbvie company.
There he oversaw the integration of the Coolsculpting business into both the Allergan and Abbvie organizations.
Prior to his time at our Gan Brad was instrumental in the commercialization.
Coolsculpting, while serving as a senior executive it's LT.
He's held multiple leadership roles across the aesthetics industry, serving as SVP of commercial operations for Q Tara.
Director of R&D at Medicis.
And managing director of product and clinical marketing at Solta medical.
Our confidence in brad's ability to lead a successful launch of our product is reinforced by his long standing membership on our board of directors.
During his time on our board has provided excellent guidance and insight for the development of our products.
And our strategies.
Given his strong command of our business and is proven.
And track record of launching products in the aesthetic space, we truly feel Brad is the ideal person to lead sell it on into the future, especially as we prepare for our commercial launch next year.
We were also very excited to appoint Niquette hunch and Dr., Michael Kamenar to our board of directors.
MS Hunt, who currently serves as president and CEO of Candela biomedical brings more than 25 years of general management and commercialization experience in leading consumer product and biotechnology companies.
She has launched more than 20 products and built in valuable relationships with the physicians in our market.
Base, which we think will greatly support our ongoing commercialization efforts.
Dr. Kamenar has over 20 years of experience in the dermatology industry and has already been a valuable asset to us at solid shot.
He served as the principal investigator for our tattoo removal trial and.
He was also an investigator in our pivotal cellulite study.
In addition to playing a key role in our clinical trials Dr. Kaminer has served and will continue as chairman of our scientific Advisory Board.
We look forward to leveraging both Ms Hans and Dr. catheters tremendous expertise as we prepare to bring.
Bring our RFP device to market.
Now as we have previously discussed we decided to adjust our strategy for product launch in light of the current market climate and the global pandemic.
Through our discussions with advising physicians, we learned that practices remain.
Remain limited by social distancing requirements, which constrained the number of patients that can be seen in treated each day.
In this current environment, most dermatologists and plastic surgeons are really focusing on procedures that can generate immediate cash flow without capital outlay. This includes for example meeting the Cygnus.
Inefficient current demand for recurring fast throughput procedures like fillers and neurotoxin injections.
We believe these market conditions, we will continue through the remainder of the year and into the first quarter of 2021.
Of course, we continue to monitor the impact of the pandemic and we remain optimistic there will.
Sufficient recovery to launch our new technology in the first half of 2021, we.
We expect to see at least a pattern of stabilization that will afford our prospective customers a level of consistency in their practice and the ability and desire to offer a broader array of.
Got it treatments.
Now I'd like to pass the call over to Brad Hauser, our new CEO for more context around our third quarter achievements and upcoming milestones.
Brad.
Thank you Ali and good morning.
This is an exciting time for us it's all the time and I'm truly thrilled.
Joined the team as such a pivotal point in the organization with lifecycle.
During my time as a member of solid onboard I have seen the company progress from a private clinical stage company to preparing to launch our innovative technology that has the potential to disrupt the industry by meeting two key unmet patient.
Current demands it.
Faster in a more effective solution for tattoo removal in a completely non invasive approach to cellulite reduction.
Currently pending FDA clearance we.
We believe launching the RFP technology with both tattoo removal and cellulite reduction upon approval of the latter will signal.
Inefficiently strengthen the caliber of accounts that may adopt the device in the limited launch.
The physician support and excitement we build in this initial launch phase will be fundamental to a successful nationwide rollout in the following year.
In order to realize our goal of launching the RFP device during.
During the first half of 2021.
We reached several key milestones during the quarter, which optimally positions us for commercialization.
We first made several improvements to our RFP device.
These include a new design for the Handys and cartridge and.
And several key features which provide ease of use.
And a more user friendly experience.
Following the R&D completion of the optimized hand piece and cartridge.
We initiated tooling production issued orders for all the critical components, which should allow.
For production at scale of the new cartridge design at an improved cost of goods.
Additionally, we have generated the first parts off of these new tools.
We also made several inroads in our upcoming sales and distribution efforts.
We entered into a distribution.
Sales agreement with a static solutions inc. to help distribute our improved RFP device for the initial us commercial launch.
The team that aesthetic solutions is strategically focused on the target placement of the RFP device in physician practices that.
Currently treat high volumes of patients for tattoo removal.
The acetic solutions team will sell and service the selected tattoo focused accounts until our direct Salesforce is fully established for the expected national rollout.
Focusing on brand development.
To support the introduction of our technology, we selected greater than one group as our integrated marketing agency.
We believe our relationship with greater than one will raise the visibility of our RFP device and help establish the salatin brand in the aesthetic industry.
Through multi channel marketing efforts.
We also selected Lippi Taylor group as our public relations and customer engagement agency.
They'd be tailored garners, a deep understanding of the industry and their partnership will be paramount in furthering our efforts to create brand loyalty with both.
Our practitioners and future tattoo removal and cellulite reduction patients pending FDA clearance.
Importantly, we would also like to provide an update on our filing with the FDA for clearance of our second generation RFP device for cellulite reduction.
On July.
Hi, 15, 2020, we announced that we cleared the FDA administrative review for our five 10-K application for cellulite reduction with our second generation RFP device.
The device is already indicated as an accessory to the 10 64 nanometer Q switched laser for black ink tests.
July removal in Fitzpatrick skin types, one through three.
Our latest new application is for the temporary improvement of the appearance of cellulite.
The application has now in subsumed review.
The FDA has responded to our application with a request for additional information.
Nation on certain questions related to our technology and clinical data.
Our team is preparing responses to their questions and plan to submit these responses in the next four to six weeks.
We expect the FDA to respond within approximately 30 days of receipt of our formal risk.
Response with either additional questions or a final decision.
We believe we could potentially receive a clearance as soon as late in the fourth quarter of 2020.
But we have aligned our internal plans around the first quarter of 2021.
These timelines may be impacted by co bid related to.
Delays in FDA submission review.
We are certainly enthusiastic about the achievements we have made this quarter and I am extremely pleased to join the company at this pivotal point.
We look forward to keeping everyone posted on our continued progress towards our initial launch and five 10-K application.
For the treatment of cellulite.
With that I'll pass the call over to our CFO Lori Bisson law.
Laurie.
Thank you Brad and good morning, everyone.
For the third quarter ended September Thirtyth 2020, operating expenses were $3.7 million as compared to four.
$4.3 million in the third quarter of 2019.
The decrease was primarily due to lower research and development expenditures, resulting from lower expenses for contract engineering and clinical trial costs.
Net loss for the third quarter ended September Thirtyth 2020 was 3.6 no.
<unk> million dollars or 17 cents per share on a basic and diluted basis.
For the same period in the prior year net loss was $4.3 million or 27 cents per share as of September Thirtyth 2020 outstanding shares or $21.2 million.
Total cash cash equivalents and restricted cash was 34.8 million as of September Thirtyth 2020, compared to $12.1 million at December 31, 2019, the company's cash cash equivalents unrestricted cash on hand is expected to be.
Sufficient to fund the Companys operations into the third quarter of 2022 and is expected to be sufficient to properly support the initial phase of the commercial launch of the wrapped device.
Despite the impact the COVID-19 pandemic has had on certain financial markets. We believe our current financial position.
Strong and will allow us to properly execute a successful commercial launch of our RFP device.
I'll now turn the call back over to Wally for closing remarks.
Thank you Laurie and thank you all for your ongoing support.
We're certainly excited about the progress.
And has made during the quarter and believe that with Brad as our new CEO.
We are ideally positioned and well funded to execute a successful initial launch so.
So with that I'll turn the call over for questions and answers operator.
Thank you.
And as a reminder.
You ask a question you need to press star one on your telephone to withdraw your question. Please press the pound key.
The symbolic in politics, when a rush.
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And our first question comes from the line of recession with Canaccord. Your line is now.
Hi, congratulations on the quarter and thanks for taking my questions here. So first question.
And I have for you is on operating expenses in 2021 versus 2020, if you cant give exact numbers, maybe just some qualitative feedback on how we should think about it and then you did present some data this quarter just curious what the physician feedback has been on the presentation of that data, especially in cellulite.
And then last thing is.
Do you have any updated thinking on the pricing points for your product as you head into this launch next year. Thank you.
Thanks, Louise I'm, obviously with regard to the quarter end numbers and pricing discussion not I'm going to suggest that morry respond to that and then Brad may want to weigh in.
Relative to two to just some of the data points.
So highly ways nice to speak with you this morning.
Your question I believe was more related to guidance on where we should expect expenditures to go in 2021 versus 2020 correct.
[noise].
Yes, that's correct, okay. So enjoy.
In General you will start to see more investment spending in the brand development and marketing side of the business and you'll start to see cost increased as we began to hire and bring in and train.
Our sales force and.
Service team and quality team to deal with an interface with their customers and account. So we'll see an uptick in the sales and marketing area and engineering and research and development costs were nine remain relatively stable.
Stable as well as gene they won't move very much.
Brad do you want to cover.
Physician feedback.
Sure.
Had a.
A reasonable amount of conversations obviously.
Only been on board for just over a week, but.
And speaking with a lot of our.
Our current.
Opinion leaders as well as some other physicians in the space that have long term relationships with I think the the physician community is very excited by the data that has been shown so far.
And look to continue to look to see.
How primarily around cellulite.
We will be coming to the market.
Great. So overall all the data has been very positive.
Thank you Brad and noise in response to your last question about how we're pricing the device. We are staying away from specifics right now as we gear up to enter the marketplace with our technology.
But to give some color to that our profit and strategy is designed to allow the doctor to achieve payback on the device within a year.
And we'll be facilitating financing arrangements for doctors, where that that number is significant to them.
Okay.
Thank you very much.
Thank you Julie.
Thank you.
Your next question comes the line of Scott Henry with Roth Capital. Your line is now open.
Thank you.
Good morning, and congratulations Brad on the new role with the company.
A couple of questions.
First.
With regard to the regulatory update.
I guess should we I would assume from from your comments that it will not be a de Novo review is that correct at this point.
So Scott this this is Wally.
I I understand your question.
As you know when it comes to regulatory matters. We can you can sometimes be limited in what we can say.
Yes, and especially that's especially true in an active submission review.
This is in substantive review and so this is one of those times, so we're pretty limited.
Yes, basically we're limited to what we.
What we said in the Q.
Having said that.
Yeah, I think you've been around the business long enough to know that the norm in the normal course of five 10-K a process.
If you've gotten this far.
And having been pushed back on in terms of the five 10-K status versus denovo than the probabilities go up dramatically that you probably stay a five 10-K, we can't guarantee that course, but we do acknowledge that we've sort of made.
Okay and on the time point when most conversions to the noble would have already happened and and so we're we're pleased by that but we're we're we're mindful that FDA okay.
Okay always has the latitude to change their mind at the last minute. So we certainly can't make any promises in that regard.
[noise].
Okay, that's very helpful and.
Let me ask one more question you may have limited comments, but.
I did want to ask is it has the correspondents he mentioned getting questions and back and forth, which is not atypical would you classify these as normal events within a review.
Period.
Or was there anything unusual.
So we we we unfortunately, we really are limited.
You know I, obviously, you know if if if.
If something had been.
Been sort of a knockout punch or you know.
A big problem.
In the normal course that would have given rise to the potential for specific disclosure and since we haven't had that disclosure I think anybody can conclude that we consider ourselves.
In the normal course of a five 10-K submission and I'm comfortable with that representation.
Okay.
That's helpful as well.
And then Uh huh.
Could you talk about assuming we get an approval in early 2021 can you talk about the launch metrics for the first kind of six to 12 months is is there a number of placements. He would like to have I know in the past you've talked to.
About.
Getting into this into some thought leaders just how should we think about what to expect as far as.
The strategy and the initial kind of six to 12 months.
So Laurie I think you might want to to start that answer just given your your.
That's on the on the model.
Sure. So Scott we are intending to place approach.
Approximately 25 devices.
Yeah in and around the country with looked after that would be considered key opinion leaders like lead lead other doctors I'm in the dark.
Open new technology or have no podium present at conferences.
And we've identified and most of those decisions that will participate will be asked to participate more trying to concentrate and in key markets as much as we can do that instilling.
Will include the positions that we'd like to include some that we have an easier time supporting.
The rollout from a metric standpoint, we are going to use this launch period.
To really.
Perfect our program for interacting with training.
Optioned working with office staff to help them.
Bring in existing.
Existing patients that are in their practice to.
To become adopters of our technology and to help them ultimately learn how to reach out into their marketplaces and attract new patients to to their practice for.
Technology will.
We'll be building experience around how many patients are we going to expect a practice to be able to treat.
In a in a month.
And we'll be in <unk> will be learning some p. things about how the device works in a commercial operation. So there's a lot of things that we want to get out of this law.
But primarily our focus is building advocacy in these key account.
Accounts that we launch with which will help us as we prepare to roll out nationally in early 2022.
Okay and.
From a mom.
Modeling standpoint, those initial.
25 placement.
Will you book those those revenues or even the recurring revenue will you book that are or will that.
Be more of just getting getting them out there now we are we are actually selling these devices in the initial launch so it will be revenue.
Okay.
And when we think about sales reps did you expect because you know where these 25 are going do except expect the rep rollout will be more of a 20 to 22 event versus 2021, just trying to think about yes. The.
The selling costs.
Yes, it will be.
And the ramp up of the Salesforce will not begin.
2021 will hire a several key people.
Several practice development managers to those are the folks that will be on the ground interacting with the practice on a very regular basis and in helping to support the pull through of our cartridges.
I have to say, we will have no that team will start to be built out in 2021.
Sales leadership will be put in place and some of the sales leadership infrastructure will also start to be put in place and then we'll start to really ramp up to appropriate numbers of sales people in.
From an early 2022.
Okay, great. Thank you for taking the question.
Absolutely Scott.
Thank you.
It's time for one more question and that question comes from a lot of Anthony Vendetti with Maxim Group. Your line is now open.
Thanks, Good morning, everyone.
Damn thing.
Okay, Wally Hey, Laurie welcome aboard again breath.
Thanks, so much.
So.
You've identified most of the 25.
Okay wells.
And then the rollout in 2000.
21 to those Kay wells dependent.
On on when you get the FDA approval is.
For both tattoo removal.
As well as cellulite.
As you guys are going to be getting that feedback back from them.
Are you are you expecting to make many changes to the protocol or device.
Or or is it just is just tweaks at this point because you already have approval for you already have five 10-K approval for the tattoo removal.
So so just some initial thoughts there.
The we clearly have as you mentioned regulatory clearance.
Yes for the tattoo removal.
Our expectation is that we'll have the cellulite clearance by the time, we launch as we've disclosed multiple times.
And.
Data of course has that treatment protocol is different than the tattoo removal procedure.
But it's it's been pretty well established through.
Through the context of fairly large pivotal trial. So we definitely we definitely know how we want physicians to use the device having said that there are still things we don't know for.
For example, we haven't had the opportunity to test for.
For example, multiple procedures were four so in the case of cellulite removal there is an expectation that we.
Obviously, our results are impressive we've gotten dramatic reduction in cellulite severity scores from a single.
Ill treatment, but the question remains how much better could that be with multiple treatments. So.
We fully expect that with those Kale wells, it's normal course for them too.
To experiment to sort of use their own judgment in terms of how.
How they might be.
Third to improve outcomes. So works, we're definitely expecting that some some.
Okay, along the way from some of these.
Okay wells.
And.
That that often leads to publications.
And additional learnings that helps other physicians so.
We expect that to take place, it's kind of part of the rationale behind having.
This limited launch so that we we know that the devices in the hands of people, who Uh huh.
Have the Bakken went the necessary background and experience to undertake that kind of.
Able to earning and continued development and thats its part of that it's part of the normal process and we want to take full advantage of.
Okay, great and just to.
Just to verify we.
The five 10-K approval for tattoo removal that's been approved in conjunction.
And with a Q switched laser.
And for the cellulite the approval you're going for is for Standalone use.
Correct correct, Yes, yes, yes, and then another distinction there is in most states.
That tattoo removal.
Mobile procedure because it involves the laser usually involves.
Physician and the physician is got to be involved in the entire procedure.
In the case of cellulite it's.
It's different.
In fact, the entire pivotal trial was conducted with staff, providing applying the procedure. So.
It's a real advantage of the Standalone nature in cellulite removal is that the device can be.
And.
The procedure can be administered by staff members and not take up the doctors time.
Then just just a follow up on that.
Well I Uh huh.
How how long.
So the treatment time take for cellulite.
So in that in the pivotal trial.
It it varied.
Between 20 and 30 minutes.
Now that was.
Single biotic are fine and obviously most people.
I just would point symmetry in their treatment.
So I think I think we would expect our expectation would be that a normal.
Treatment session that covers both both legs for example.
That's that's probably going to be a 40 to 60 minute toll.
Total.
Is it.
If you will to cover two treatments.
Okay, great. Thanks for that color I appreciate it.
Thank you.
And this does conclude today's question and answer session I would now like to turn the call back to Walker Clint.
For any closing remarks thanks.
Thanks Art.
Operator and again.
We really want to thank everyone for joining todays call. We really appreciate your continued support and interest in solid sawn and we look forward to the next update in the meantime have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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