Q4 2020 Titan Medical Inc Earnings Call

[music].

Good evening, ladies and gentlemen, and welcome to Titan Medical's year end 'twenty 'twenty earnings conference call. If callers should require operator assistance during the conference. Please press star zero on your telephone keypad after.

The presentation, there will be an opportunity for a call participants to ask questions. As a reminder, today's conference is being recorded I will now turn the conference over to Kristen Golf, Eddie Titan Medical of Investor Relations consultant. Please proceed.

Thank you operator, good evening, everyone and thank you for joining us for Titan Medical's year end.

<unk> 'twenty earnings conference call during our call. We will review Titan yearend 2020 financial results and key business highlights, which were summarized in our earnings press release issued earlier today a copy of the release can be found on the Investor Relations section of our website at Www Dot Titan Medical Inc. Dot com.

As a reminder, certain statements made during this conference call constitute forward looking statements that reflect management's current expectations of the company's future growth results of operations performance and business prospects and opportunities.

Wherever possible words, such as May would could will anticipate believe plan.

Specced intend estimate potential for as planned and similar expressions have been used to identify these forward looking statements.

These statements, including statements with respect to the use of net proceeds of offering projected development plans and milestones timelines and budgets regulatory pathways and anticipated license payments.

Preparation for light Assembly and manufacturing development of manufacturing processes and advancing our in house Knowhow, our exciting innovation pipeline, our expectation to close with gross proceeds of approximately $20 million by the end of February 2021, robust remediation plans to improve our internal controls over financial reporting.

Porting.

Plans to participate in certain investor conferences reflect management's current beliefs with respect to future events and are based on information currently available to management.

Forward looking statements involve significant risks uncertainties and assumptions many factors could cause the company's actual results performance.

Our achievements to be materially different from any future results performance or achievements that may be expressed or implied by such forward looking statements, including without limitation. Those listed in the risk factors section of the company's annual report on form 20-F dated March 32020, which may be viewed at www dot cedar.

Dot com.

And at Www Dot SEC Dot Gov.

Should one or more of these risks or uncertainties materialize or should assumptions underlying the forward looking statements prove incorrect actual results performance or achievements may vary materially from those expressed or implied by the forward looking statements made during this conference call.

These factors should be considered carefully and prospective investors should not place undue reliance on the forward looking statement.

Although the forward looking statements made during this conference call are based upon what management currently believes to be reasonable assumptions. The company cannot assure prospective investors that actual results performance or achievements will be consistent with those forward looking statements.

With that I will turn the call over to David <unk>, Chairman, President and Chief Executive Officer of Titan Medical David.

Thank you Christian.

Good evening and welcome to Titan Medical's fourth quarter and year end 2020 earnings call.

I want to thank our supportive shareholders who are familiar.

Oh, you are with Titan medical and I'd like to welcome our new shareholders, who are new to the Titan story.

Most importantly, I want to thank everyone for their support and belief in our work to develop our E. Those robotic single access surgical system.

Joining me on the call today will be per region.

<unk> Senior Vice President research and development and President of Titan Medical USA and.

And Monique Delorme, Titan Medical's, New Chief Financial Officer.

Titan made great strides forward in 2020, a year that proved challenging for individuals and organizations all around the world.

We hope that our listeners are able to appreciate that in spite of COVID-19, Titan medical has made substantial forward progress during the past year and we wish all good health and rising spirits as we move forward together in 'twenty and 'twenty one.

Despite the challenges of last.

Sure Titan has emerged stronger than any time in our history.

<unk>.

For any of that have known Titan in the past this is a completely different company.

Progress in 2020 resulted in the addition of new members of our management team.

And enrich board of directors.

Last June three new experienced industry veterans as independent directors, representing the majority of the board.

Improved governance practices and policies.

The establishment of our U S subsidiary in Chapel Hill, North Carolina focused on development activities.

The.

Inclusion of development and license agreements with Medtronic and the receipt of license payments under those agreements.

Our rapidly growing intellectual property portfolio.

And multiple successful fund raising activities, providing a strengthened financial position.

With all of these accomplishments and with our new leadership team and substantial financial resources.

We believe we're in a solid position to execute on our milestones.

As many of you know there is high demand for robotic assisted technologies for our versatile single access platform.

<unk> intended to perform abdominal surgery, which may result in improved clinical performance and operating room efficiency, better patient care and less trauma, and scarring, allowing faster recovery times and shorter hospital stays.

Especially relevant today is the.

The observation that COVID-19 has shown us that patients and caregivers alike are looking to reduce the time in hospital.

Titan is developing the surgical system.

Moving to become the new standard of care for single access robotic surgery with.

Dual three D and two D high definition vision systems for improved visualization.

Multi articulating instruments for increased dexterity.

And then ergonomic surgeon workstation for surgeon comfort.

Based on this unique combination of clinically relevant features.

An early validation from experts in minimally invasive robotic surgery, we believe that our <unk> robotics single access surgical system is well differentiated from Singapore and multiport robotic surgical systems currently on the market.

Our initial.

Clinical focus upon appropriate regulatory clearances is expected to include benign gynecologic surgery for the U S market.

Although based on our preclinical success, we anticipate that ultimately with the appropriate regulatory clearances.

<unk> agility of the system could be.

<unk> attractive for use in multiple sub specialties.

In that regard we believe our single access surgical system has potential for application in numerous global procedures, resulting in a share of the millions of robotic procedures that are projected to be performed annually and which continue.

Found it to grow over the coming years.

As we shared on December 30th Communications with the U S. FDA indicate that the regulatory pathway for our <unk> robotics single access surgical system is expected to be at the de novo process reserved for novel medical devices.

Based on our communications with the FDA to date and input from expert consultants. It is our understanding that the fda's guidance towards the de Novo pathway is likely not specific to Titan, but all robotically assisted surgical devices or raspberry applicants.

We plan to continue our correspondents in conversations with the FDA in order to clarify expectations for our planned clinical study and application for marketing authorization.

As we do we will continue to communicate our progress on getting the system cleared for marketing and into the hands.

The surgeons.

2020 was an exciting year from an intellectual property perspective, as we continue to expand the breadth and depth of our robotic surgery focused intellectual property portfolio.

Which now includes over 150 global patents.

And patent applications pending.

We also leveraged a portion of our portfolio to enter into a strategic relationship with Medtronic through the execution of development and license agreements to progress the development of robot assisted surgical technology.

Under those.

Two minutes.

Certain tightened technology and intellectual property, representing about one third of our portfolio has been licensed to Medtronic in exchange for a license payments to date.

Tightened retains worldwide rights to commercialize all of the technology and intellectual property.

<unk> agrees with the <unk> surgical system.

Including incorporation of the developed technologies into future generations of the <unk> surgical system.

The agreements with Medtronic resulted in an initial license payment of $10 million for access to about one <unk>.

For us our IP portfolio at the time.

And then additional $10 million milestone payment received in October 2020, pursuant to the ongoing development and license agreement.

We believe that based on our progress to date, we are well positioned to meet the remaining two milestones.

<unk> of our development and license agreement in 2021.

What's your expected to be reached in approximately may and September <unk>.

Resulting in payments of $10 million and approximately $11 million, respectively for a total of $21 million in 2021.

Separately from anticipated Medtronic milestone payments Titan has already raised well over $20 million since the beginning of 2021.

With $11 5 million, having been raised through a bought deal offering with Bloom Burton <unk> company, plus $10 million from the exercise of warrant.

Under we also announced a subsequent bought deal offering with Bloom Burton earlier, this month and expect to close the offering for gross proceeds of $20 million later this week.

Additional accomplishments in 2020 included increased stakeholder communications involving.

Continuous enhancements to our website for ease of navigation and communication with investors.

Launching Titan living labs, which via our web site provides the opportunity for investors to engage in our journey through product development and.

Updated corporate governance.

Warrants received based on robust input from our board of directors.

Please see our website for details.

I'm now proud to turn the call over to Dr. Perry Genova senior.

Senior Vice President of R&D for Titan Medical and President of Titan Medical USA, who.

Who will provide insight into the team and the operations. We are building in chapel Hill and details on development activities relating to the <unk> surgical system and those being carried out pursuant to the ongoing development and licensing agreement with Medtronic.

Thank you David.

And it is a pleasure to be addressing all of you. This evening.

As David mentioned, we had many successes during the past year, despite the challenging environment.

We established our U S subsidiary based in Chapel Hill, and significantly augmented our technical expertise in the areas of software electrical.

<unk> and mechanical engineering quality assurance and program management.

The strength of our technical competencies has risen to a level of unprecedented for Titan medical and continues to drive innovation of robotic surgery at an exciting pace.

Additionally, the advancement of the surgical system continues.

As we improve instrument a camera designs for enhanced performance and invest in tooling and process development as we prepare for light Assembly and manufacturing.

Notably we are developing manufacturing processes and advancing our in house knowhow to manage the innovative technologies that are key to our multi articulate.

<unk> instruments, and two D and three D high definition camera systems.

In short the technical team has created an exciting pipeline of innovation our product evaluation strategy has evolved with respect to increased simulation labs and continued KOL input even within the restrictions imposed by Covid.

<unk> precautions are location in chapel Hill is ideal based on proximity to independent evaluation laboratories, and some of the United States top thought leading hospitals.

Our software development team is already made substantial progress developing hardware stimulation and test systems identifying opportunities to improve.

The ninth kinematics electromechanical system response times, and reliability and implementing display overlays for augmented reality informatics to improve the surgical experience for surgeons. We have also continued with our implementation of a robust simulation training suite.

Our development program under.

Robot Tronic development and license agreement continues to proceed. According to plan as programs are regularly coordinated through a joint steering committee comprised of an equivalent number of members from each company. We are presently on track to achieve the next planned milestone for the program in May of this year.

Lastly, we now have.

71, U S and international patents issued and 86 patent applications pending a portion of which is licensed to Medtronic and all of which are available for use with the <unk> surgical system.

I am very pleased with our accomplishments over the past year and look forward to sharing additional updates with you going forward via.

Press updates as well as the recently launched Titan living labs, which provides the opportunity to join our team of motivated expert engineers on our journey of innovation.

With that I will turn the call to Monique Delorme, our CFO to review our financial results Monique.

Perry.

It's my pleasure to be addressing all of you on my first earnings call in the capacity of Chief Financial Officer.

I'm very pleased with what Titan has accomplished to date and I'm proud to be a member of the executive team.

During the year ended December 31, 2020, Titan generated its first.

Hey, Anthony of $10 million from a license agreement and $10 million from a development and license agreement with Medtronic.

In 2020 patent raised aggregate net proceeds of approximately $23 3 million from equity financing and $2 $7 million from the exercise of warrants.

I have a runny also received a loan from an affiliate of Medtronic in the amount of $1 $5 million.

Evidenced by an 8% senior secured promissory note at.

At December 31, 2000, Twenty's the company had cash and cash equivalent on hand of approximately $25 5 million compared to 0.8 million at December.

The company's 2019.

Since December 31, 2020, the company has received $10 million from the exercise of warrants and net proceeds of an additional $10 2 million from a bought deal financing, which closed on January 26, 2021 with full exercise over allotment option.

Based on these additional proceeds the companys cash position had increased to approximately $42 5 million as of January 31 2021.

The company also announced that subsequent bought deal offering which it expects to close with gross proceeds of approximately $20 million by the end of February 2021.

31, David in Perry has noted earlier during the past year. The company has established a U S subsidiary triples, our work force and secured important agreements with Medtronic, which have generated our first ever revenue in the form of license payments.

As the new CFO guiding the company through this period of remarkable.

Couple change the responsibility is not lost on me.

Together with management and the audit Committee of the board of directors, we've been working to bolster our accounting systems and resources to address the rapidly changing needs of both our Canadian and U S operations.

This includes accounting for dual currency and country operations complex.

Financial transactions, including derivative financial accounting related to our stock options and warrants and maintaining compliance with listing requirements of both the PSX and Nasdaq.

As we noted in our MD&A during preparation of our year end on it we identified material weaknesses.

Next find internal controls over financial reporting.

In particular in the valuation for noncash derivatives, such as warrants and a large accrual relating to a subcontractor expenses as we performed cutoff procedures at year end.

All corrections relating to the non cash errors identified were made pre.

In our today's filings and release of our financial statements and MD&A for the year ended December 31 2020.

In view of these identified weaknesses management has been developing with full support of the audit committee robust remediation plan to improve our internal controls over financial reporting.

Reporting as noted in our MD&A.

Our three primary remediation activity include.

Engaging outside subject matter consultants to assist with more complex accounting transaction.

Adopting an ERP and other relevant business information systems.

Adam.

<unk> capacity to our team.

Management fully expects these remediation activities to correct the material weaknesses recently identified as well as provide the company with a solid foundation to build upon as it progresses through its journey of growth.

In summary, our recent financing activities.

Adding further strengthen our balance sheet to support continued development on our <unk> surgical system as we prepare for human clinical studies.

With that I will turn the call back over to David.

Thank you Monique.

Despite headwinds that 2020 brought it has not impacted.

Our fundamental goal to become the global standard of care for robotic single access surgery.

We look forward to keeping you apprised of progress towards the significant milestones ahead, including those related to our <unk> robotic single access surgical system and.

And the development and license agreement with Medtronic.

We believe that the <unk> surgical system will address an underpenetrated, but high demand segment of the robotic assisted surgical device market promising less patient trauma and faster recovery times.

And savings on capital equipment service and procedure cost for hospitals and ambulatory surgical.

Centers.

We remain committed to corporate governance, and investor outreach and we will continue to communicate through news releases or web site and participation in virtual investor conferences.

Currently we plan to participate in several upcoming virtual health.

<unk> care focused investor conferences, including H C Wainwright Roth capital partners and Oppenheimer in March and.

And Bloom Burton in April.

We will be publicly announcing our participation in these comprehensive via press release in advance.

Thank you for your support.

We will now open up the line for questions operator.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question.

From the queue for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys one.

One moment, please while we poll for questions.

Okay.

Yeah.

Yeah.

Okay.

Okay.

Okay.

Okay.

Yes.

Thanks.

First question comes from David Martin with Bloom Burton. Please proceed with your question.

Hi, there.

I was just wondering if you could give us an idea of how final of the design of the <unk> at this point.

And when you think you'll be able to start the clinical trial.

Thank you David This is David Mcnally here.

So we've made many improvements to our system, focusing particularly on the multi articulating instruments the camera systems and the sterile interface to the central unit of the patient car that has been the focus of the refinements based on Ah.

While input that we received.

We're also doing some work with software and expanding the use of overlays for augmented reality to provide surgeons more real time information related to the operation of the system.

How that relates to our March forward.

Kayla planned commercialization is that we expect to complete the refinement this year, including the validation that Doctor Gino spoke of.

With respect to our plan for F.

F D a market authorization and how fast we can get to market the EF.

Toward indicated that they would expect us to pursue the de novo pathway for a device classification and subsequent clearance to market through the <unk> surgical system.

We expect to continue to engage with the FDA to further define the investigative investigational device exemption study required.

Requirements those of the clinical study requirements that are going to be very important for our application for marketing approval.

Our current plan is after completing product development this year and following FDA approval of our application for the investigational device exemption.

David We expect to proceed with human surgeries under the I D E next year in 'twenty 'twenty two.

Following successful completion of the I D E studies and requisite follow up.

We intend to submit the de Novo application and from where we are today based on our current estimates.

<unk>, we could potentially achieve clearance to launch commercially in 2023.

Okay. Thank you.

One other question and.

Im not sure if it's been answered but.

<unk> led tronox develops their own robot with the IP that they've licensed from you.

Are there royalties that would stand to receive beyond the milestone payments.

There are no provisions for royalty payments under the existing agreements. They are royalty free license payments associated with the technologies that we're developing under the development and license agreements.

Okay, but.

Medtronic is.

Their intention is to build their own robot.

Correct.

Yes. It is public information that Medtronic is developing its own as Hugo robotic platform.

And.

They have a vision.

That we believe is a vision that.

Diverges in certain ways from Titans platform in that in there and we see the relationship is synergistic.

Got it thank you.

Yes.

Okay.

We're following along with that we have a couple of questions from the webcast.

Is the comp very good Kristen.

It is the company considering FDA breakthrough designation status for IMO.

We have.

From that to ground with our <unk>.

In house regulatory.

Executive leadership.

And determined that it is unlikely that we will meet breakthrough designation based on the requirement of achieving a breakthrough designation including that.

There would be no cleared alternatives.

On a positive note. The fact that that are already exist a single port system and accessory for single Port surgery in the market.

We view that as positive in that the market acceptance of single Port surgery.

<unk> appears to be robust and growing and we're very excited.

They have the opportunity to serve that growing need.

And following along with that is tightened planning to take to the market themselves.

Presently our plan is to launch day.

Critical system ourselves with focus, particularly in the U S.

However, we believe that based on the market potential and our value proposition as well as the simplicity of the <unk> surgical system are ideal for partnering with established global.

<unk> companies.

We'll continue to assess strategic partnering opportunities as we move forward and we're free to do so.

Great could you cover what advantages you know system offers compared to other robotic system from the phone surgical space.

First the you know surgical system is based on single a single access architecture, meaning that it enters the body through a single incision or a natural orifice.

This distinguishes our system from most other robotic assisted surgical devices in the market today as well as those contemplated for market entry.

This coming years.

Next our multi articulated instrument technology provides a unique combination of dexterity and ease of movement.

With appropriate force were performing surgical tasks and maneuvers that include suturing tissue approximation cutting coagulation.

And the kind other tasks.

Finally, our dual view HD camera system provides a new element of safety and visualization during initial exploration for surgery with a two dimensional camera and the camera insertion too.

As well as our three D H D endoscopic.

<unk>, which.

Which provides a clear view of target at anatomy during surgery, and our heads up flat panel display which allows for situational awareness in the operating room.

Great. Another question is it possible.

<unk>.

Campbell medical.

And that tonic.

It would certainly be premature to think about any sort of.

Ill call it <unk>.

Strategic move above that level.

I can say however is that even under.

Like the Medtronic development and license agreement, we are free to pursue all strategic options for the company.

Another question, how long do you expect the cash balance to be able to fund the company.

I'd like to turn that one over to Monique Delorme Monique.

Alright, David I'm, just getting off my mute button here as I'm.

Listening. Thank you very much for that question Chris.

And.

Yeah.

You know assay in 2021 after a successful January raise of $11 5 million tightened also received a $10 million of proceeds from the exercise of warrants since yearend so our.

Current cash is approximately 40 million.

And the financing that is expected to close later this week, we'll bring in another 20.

Anticipating that will meet the deliverables related to the next two milestone Medtronic milestones this year, our current cash on hand.

Plus the Medtronic lot Medtronic.

Medtronic license payments and.

And include.

Christian the proceeds of the current offering and it's going to close at the end of this week should really fund our operations through to 2022.

So we're in good shape.

Thank you.

Okay.

A little different question can you talk about the importance of.

No gnomic benefits from it.

In regards to enhance the resurgence dexterity as well as reducing their fatigue.

I'd like to turn that one over to Perry and Dr. De Novo has spent a great deal of time with our kols in in both dry and wet labs and he's been able to game firsthand the feedback.

Back of their experience with respect to the ergonomics of the system and Perry I'll turn it over to you yeah. Thank you David and thank you Kristen.

First you know the system is a very comfortable system to use we have a.

Provided share, which is unusual I understand from robotic surgery, and it's a heads up system. So.

The surgeon does not have to lean into.

Vox and and observe in that manner. So they are familiar with the technology.

<unk> visualization technology, as well as being able to stay in touch with what's going on around them and their periphery.

The ergonomics provide.

<unk> not only surgeon comfort, but longevity for surgical careers as we're seeing in the literature and so forth. So I'm very excited to bring new people, new surgeons into a SaaS and use our system. Another thing that we've found universally popular with our system is the simplicity.

And the natural.

Orientation of the hand pieces.

<unk> seem to not need any explanation about what the.

With features and benefits of these pieces are.

And they're very comfortable using these pieces and therefore, the entirety of the surgeon console for.

Surgeries that can last up to several hours. So thank you for the quest.

I hope I addressed it appropriately.

Hi, Miss my opportunity to say and see more at Titan living labs on the hand pieces.

Sure.

I think we've addressed most of the questions coming from the web I'm just seeing if there's any more that you didn't cover.

I think that's good I would like to turn it back over to David for closing.

Well I'm delighted to be here in chapel Hill to day feeling the buzz.

<unk> of what's going on among our engineering team here. It is thrilling to see the evolution the refinements that are coming together here.

So in closing I'd like to thank you all again for joining us today and for your support of Titan Medical we believe that Titan is on solid footing to validate our vision.

Adding a leading edge robotic single access surgical system for the benefit of surgeons and patients.

We are proud of our progress and recognize that our success is a direct result of the commitment and hard work of our employees.

Strong governance and leadership of our board of directors and the support of our.

To providers.

We're very excited about the future and look forward to keeping you informed of our progress. Thank you again and have a great evening all.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.