Q4 2020 ViewRay Inc Earnings Call
Ladies and gentlemen, thank for standing by and welcome to the few rate fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer Sir.
To ask a question during the session you will need to press star one on your telephone.
A reminder, today's program may be recorded I will now like to introduce your host for today's program Makayla Galena. Please go ahead.
Thank you operator, good afternoon, everyone and welcome to view Reis fourth quarter and full year 2020 financial results conference call joining.
Joining me today are Scott Drake, our President and Chief Executive Officer, and Zach Stassen, our Chief Financial Officer.
Earlier today <unk> issued a press release and presentation for today's call. The presentation can be viewed live on our webcast or downloaded from the financial events and Webinars portion of our site at Www dot investors not be Ray Dot com.
Today's call is being broadcast and webcast live and a replay will be available on our website for 14 days.
Before we begin I would like to caution listeners that comments made by management. During this call may include forward looking statements within the meaning of federal Securities laws. These statements involve material risks and uncertainties and actual results could differ from those projected in any forward looking statement due to numerous factors for a description.
These risks and uncertainties. Please see the raise annual report on form 10-K for the fiscal year ended December 31, 2019, and its quarterly reports on form 10-Q as updated periodically with the company's other SEC filings, including its form 10-K for the fiscal year ended December 31 2020.
Furthermore, the content of this conference call contains time sensitive information accurate only as of today March 4th 2021.
<unk> 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 it over to Scott.
Thank you Mikael good afternoon, everyone and welcome to our Q4 calls today, we will recap our fourth quarter results share detail on our clinical pipeline and how its driving therapy adoption Zach will cover our financials in more detail and we look forward to answering your questions.
I'll be referring to slides from the presentation on our Investor Relations site.
Turning to slide three our mission is to treat and prove what others can't.
Through year end Meridian has treated over 11500 patients with more than 3000 of them, having clinically reported outcomes.
This growing body of data is critical to changing and improving the paradigm of care will share more depth later in the call.
Let's turn to our Q4 results on slide four.
We ended the year with solid performance across the business.
In the quarter, we received five meridian orders, we are pleased with our commercial traction and how our value propositions are resonating ever.
Evidence of Meridian's clinical strategic and economic value is evident in our recent achievements in the Eindhoven region of the Netherlands, the largest in prestigious category in a hospital purchased meridian.
As the top training facility, we're excited about the patient impact they will have.
Amsterdam, UMC and S N new wage in South Korea, both surpassed the 1000 patient milestone.
Penn State and Henry Ford each added their second meridian system and whole cost Battle and Thomas Jefferson University treated their first patients.
Turning to revenue, we recognized $18 $5 million, primarily from three revenue units, including one system upgrade.
Q4 also marked our fastest installation to date at 39 working days, we continue to improve operationally in particular, we're focused on better training and serving our customers are.
Our backlog has grown to about $241 million, we removed one system in the quarter and continue to have zero order cancellations due to COVID-19.
Regarding cash we used approximately $7 million over.
Over the past few years financial discipline has driven significant progress on reducing cash burn.
Our recent capital raise topped off the balance sheet and provides us runway to make significant progress on our clinical innovation and commercial pipelines.
As we look back on 2020, we executed solidly in the face of the pandemic. However, due to the ongoing uncertainty we feel that it is prudent to not provide 2021 guidance at this time.
What I can say is that meridian is driving top and bottom line economics for our customers, we're seeing more customers purchase incremental meridian systems, we've driven process rigor and are installing systems faster, we've significantly improved our cash burn and allocating capital to protect and <unk>.
And our clinical and innovation lead.
In summary, I believe that we have a solid setup for driving meaningful therapy adoption and shareholder value over the next several years.
Turning to slide five our innovation and clinical pipelines accrue to commercial traction.
On the innovation front, we are driving toward our goal of sub 20 minute treatment times and improving workflow and automation.
In the future you can expect enhanced MRI imaging increased dosing a brain treatment package and remote access.
We are concurrently driving cost efficiencies to improve margin over time.
With that broad context, let's go deeper into our clinical work as it is central to driving therapy adoption.
Moving to slide six the number one thing our customers desire is meaningful clinical data.
They have also been very clear about how they define clinical success.
Ablative dose tight margins, no implants, five or fewer fractions and low to no grade three toxicity. These.
These elements represent the critical meridian five.
Customer input has shaped our clinical pipeline and goals, which are number one to expand the utilization of meridian smart and number two become frontline therapy.
Slide seven demonstrates home meridian expands the utility of radiation therapy.
As it stands today radiation has been underutilized in soft tissue tumors due to the risk of radiating healthy tissue and organs at risk.
Conventional technology yields high levels of customer concern about the trade off of dose delivery versus healthy tissue toxicity.
Meridian is shifting the paradigm to include patients that were generally not candidates for radiation therapy.
At the same time meridian expands the opportunity for treating with SBR T. In cancer types that have historically been limited to iron Marty due to the old paradigm and trade off.
It is important to note on slide eight that customers consistently share how this clinical value translates into strategic and economic value in the form of adding patients they wouldn't or couldn't treat on other systems.
Adding patients who travel for treatment from outside catchment areas and increasing in network referrals a couple of examples prior to Meridian M.
M C had not treated kidney cancer with radiation therapy.
They are now treating patients that were generally not candidates previously.
Moffitt, a leading cancer center in the U S treated few pancreas patients with radiation prior to Meridian and now it's a key tumor site in their practice.
Slide nine depicts how meridian enables the shift from <unk> to <unk>.
The overall market is organically moving to SPR T. As customers believe high dose short course treatments drive improved outcomes <unk>.
Clinical data the pandemic, the Ro APM and patient desire will likely accelerate this trend.
You see even in the early days of Meridian, our customers utilized SPR T over 30% of the time versus the overall market of about 14%.
As customer knowledge and confidence grew the percentage of <unk> increased dramatically.
Today, nearly 80% of meridian patients are treated via SPR T over five times the market rate.
It is remarkable that our customers are utilizing iron Marty nearly as sparingly as the market utilizes SPR T with conventional systems.
The market is driving toward what meridian enables safe ablative completely noninvasive short course treatment.
As Dr. Steinberg has said Meridian is quote the ultimate SPR team machine and quote and Dr. Haas Kogan has shared that just as two dimensional ex rates were replaced by <unk> guided radiotherapy. So we'll MRI guided technology renders CET obsolete.
On slide 10, it's interesting to note the dramatic growth of patient treated on meridian, which has grown at a CAGR of 85% since day one.
We believe this to be a precursor to future business growth.
Our customers are demonstrating that one successful meridian program can and increasingly does lead to another.
Our clinical and innovation pipelines will continue to drive therapy adoption.
Turning to slide 11, let's take a step back to view our clinical strategy.
Our customers have led this journey by demonstrating the value of meridian in tough to treat tumors.
They believe meridian stands out and there is an unmet clinical need in our beachhead targets of prostate pancreas lung and brain.
We aimed to generate meaningful data in these key areas that also signal application in adjacent cancer types. As an example by proving value in prostate customers have expanded to kidney.
Staying at the macro level on slide 12, we view the process of developing clinical proof longitudinally.
Phase one represents feasibility work that can result in an interesting signal that leads to phase III confirmatory trials when required effort progresses to definitive phase III.
Other than the smart pancreas trial, our pipeline is predominantly investigator led.
Currently customers are conducting over 60 trials.
The breadth and depth of this work reflects extraordinary clinical curiosity.
<unk>. An example of how this road map takes us down the path to frontline therapy.
Slide 13 depicts how customers are driving clinical proof in pancreas.
This multiyear process began with the high low dose retrospective trial.
The signal was powerful.
Customers delivered ablative doses and grade three or higher toxicity, not only went down went to zero.
Also very importantly, two year survival for high dose patients was about 50% more than double conventional systems.
This signal led to the smart trial.
The aggregate body of work in pancreas has led to two randomized controlled trials that span the spectrum of the disease.
The first is in late stage metastatic cancer, where standard of care chemotherapy is compared to standard of care plus meridian smart.
The second is for medically inoperable patients that compares symptom management. The typical protocol vs Meridian smart.
We intend these data to establish meridian as frontline therapy for pancreatic cancer patients operable or otherwise.
Slide 14 is a boiled down view of our robust pipeline.
As we just shared in pancreas, let's discuss the prostate roadmap.
There are two key clinical targets for.
First for intact patients UCLA has opened a head to head randomized controlled trial to assess meridian smart vs conventionally delivered SBR T.
Second for post prostatectomy patients Cornell has opened a randomized controlled trial to compare 20 fractions at conventional dose therapy versus five fraction meridian smart.
Like pancreas, we believe that expanding the spectrum of disease can position meridian as a frontline therapy.
Next we're moving through the execution phase four confirmatory studies in metastatic and lung cancers.
Finally on slide 15 patients are pushing for shorter courses of effective treatment. Our technology allows clinicians to move along the continuum from <unk> to <unk> to Meridian smart.
Our customers are now leading us to exploratory work with single fraction Meridian smart.
The smart one trial opens enrollment this year for single fraction therapy in both primary tumors and a ligand that's located in lung pancreas, liver kidney adrenal and lymph nodes.
In summary on slide 16, our clinical value drive strategic value, which yields economic value.
Our customer share that they are attracting net new patients in the form of patients that wouldn't or couldn't be treated on another system patients who travel for treatment from outside catchment areas and increasing in network referrals the per.
Proof is in multiple customers buying incremental meridian systems.
We have made meaningful progress across our business value propositions and pipelines, we are well positioned to improve cancer care for patients globally.
With that I'll now turn it over to Zach to discuss our financials.
Thank you Scott.
For the fiscal quarter ended December 31, 2020, total revenue was $18 $5 million, primarily from three revenue units, including one upgrade compared to $16 $5 million, primarily from three revenue units, including one upgrade for the same period last year.
Total revenue for the full year 2020 was $57 million.
<unk> to $87 8 million for the full year 2019.
A decrease in sales year over year is largely attributable to the impact of the COVID-19 pandemic.
Total gross profit for the three months ended December 31 2020.
Was <unk> $2 million compared to a loss of $3 9 million for the same period last year.
Total gross profit for the full year 2020 was a loss of $4 1 million.
Compared to a loss of $5 5 million for the full year 2019.
The full year increase in gross profit was the result of improvement in our service margin.
This improvement was more than offset by lower system margin as lower system revenue is absorbing our full installation infrastructure.
We maintained our installation infrastructure to preserve capacity positioning the company to respond to an anticipated recovery in installation volume.
Total operating expenses for the three months ended December 31, 2020, or $25 5 million compared to $28 5 million for the same period last year.
Total operating expenses for the full year 2020 were $101 9 million compared to $115 $3 million for the full year 2019.
The full year decrease in operating expenses reflects our cash savings initiatives as.
As well as significantly lower travel expenses as a result of COVID-19.
Operating loss for the quarter was $25 3 million as compared to $32 $4 million for the same quarter last year.
Operating loss for the full year, 2020 was $106 million as compared to $128 million in 2019.
Finally net loss for the three months ended December 31, 2020 was $26 $1 million or <unk> 18 per share compared to $35 2 million or <unk> 31 per share for the same period last year.
Net loss for the full year 2020 was $107 9 million or <unk> 73 per share compared to $122 million or $1 18 per share for the full year 2019.
Turning now to orders and backlog.
As Scott mentioned earlier in the fourth quarter of 2020, we received five new orders for Meridian systems totaling approximately $24 million compared to four new orders totaling approximately $21 $2 million on the same period last year.
As of December 31, our backlog stood at $241 3 million as compared to $227 3 million as of December 31, 2019.
One system was removed from backlog in the quarter to date, we have not removed any orders from backlog due to COVID-19.
Regarding cash we used approximately $7 million in the quarter, reflecting continued progress on our cash usage.
We made solid strides in reducing our working capital primarily through continued leaning out of inventory levels.
We finished the year with $156 $7 million on cash immediately prior to commencing our public offering of common stock in January.
Where we ultimately raise net proceeds of $53 5 million.
We feel well positioned that this cash runway allows us to focus on achieving sub 20 minute treatment times improvements in workflow and ease of use move well down our clinical pathway and ultimately commercial acceleration.
With that operator, we will now open the line for questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of Jason Bednar from Piper Sandler Your question. Please.
Sure.
Jason you might have your phone on mute.
Yes.
We're still not hearing you Jason.
Would you like me to move on to the next.
Yes. Please certainly our next question comes from the line of Suraj Kalia from Oppenheimer. Your question. Please.
Good afternoon, Scott Good afternoon, everyone can you hear me alright.
We sure can hi, Suraj.
So Scott Lee.
A lot of incremental information in your presentation today, let me just start from the from the last few slides.
Give us the timing of the phase II phase III for pancreas, and the smart one trial.
It did have a bunch of tumor types included in that it's a pretty fascinating approach to have just one radiation essentially youre, taking it to the to the extreme on on.
Hyper fractionation was wondering if you could just give some additional details on how to facilitate the smart line or is it too early to be talking about it.
Yes, Suraj, let's take those in reverse order regarding the smart one trial will begin enrollment.
This year, so it's a little bit premature to give.
Too much information at this time, we anticipate that we'll be sharing.
First data sometime in the 'twenty two timeframe if enrollment goes as planned.
Secondarily regarding the pancreas trials that I mentioned here.
First data will be likely in 'twenty, two for smart and for the two other.
Pancreatic trials that I mentioned.
Likely at 'twenty three time frame.
The randomized controlled data for those two studies, but youre right Suraj, we're sharing.
More data here on the clinical roadmap.
It's candidly 30 years in the Med tech industry.
I think what we're experiencing from a clinical curiosity perspective and customers initiating over 60 studies.
Is quite extraordinary.
Not infrequently these are patients that they say wouldn't there couldnt be treated on any other system. So.
As I think you are quite well aware since we got here.
We have really led clinically and that's where we're going to keep the conversation going because ultimately we think that's what matters, most and thats the precursor to the business growth that.
That we look to drive in the future.
Scott Dumb question Smart one wouldn't be yet on clinical trial start up right.
I don't believe so because there's so many different tumor types and it'll be interesting to see what is measured on each.
Can take it offline.
Scott I don't believe you gave an update on the Po to Rev. Rec trend any color there would be great and maybe just to tag along on that question.
Sort of take a step back just give us a perspective on the structural dynamics on the pricing dynamics.
What youre seeing on the competitive front also.
Yeah happy to Suraj so.
As it relates to your first question on Po to Rev Rec.
I would say, we continue to make really solid progress operationally.
We highlighted here on this call that EBIT in the midst of the pandemic we achieved in Q4, the fastest installation yet that the company has had at 39 working days.
We put that out there just kind of as an anecdote of.
The progress that we're making.
At the same time I would tell you. The pandemic has been probably most nettlesome to us in terms of our ability to get into certain countries and therefore.
Hospitals to do the desired installation work. So that's not helpful. As it relates to that overall timeframe, but where we have control.
We're just getting better and better on.
Net front.
<unk> remind me the second part of your question. Please more on a higher level, what you're seeing from a from a structural and structural pricing competitive dynamic perspective.
With what current predominantly Elekta I would say.
But just that now Siemens zones variant.
Yes, Suraj I would I would tell you that debt.
Very good about what is.
Turning competitively for us in the field I think there is a deeper and deeper understanding as time goes by in terms of the clinical applicability of meridian and the number of patients were able to treat and the kinds of patients and I think our customers view that as a pretty unique.
Solution.
They connect that to the strategic and economic value chain that we've highlighted now on the past several calls.
And from an ASP perspective.
Generally speaking.
Asps is steady.
Looked at Asp's.
For Q1 orders that we'll report on <unk>.
Obviously, when we do our Q1 call.
But they remain pretty steady as they have over the past couple of years at least since I've been with the company at around $6 million.
The distortion that you see from quarter to quarter is primarily driven by three things number one new business models that our customers.
Are starting to appreciate and we've had some success with so think in terms of maybe a lower upfront price, but some kind of shared economics on the backend number two the proportion of our orders that are direct versus through distribution and number three like we had in.
This quarter and upgrade upgrades are often give or take $2 million vs.
Asps for a new system at six so I feel like we're in a pretty good place there.
And hopefully that gives you some color on variability that youll see from quarter to quarter.
Got it got it.
Scott I'll just throw in a couple of quick and hop back Scott for you just piggybacking on what you just said about share grabs weighted.
Status of discussions because I know this has been bantered around for some time.
At that point, where this is going to become a reality in gist.
Just like what intuitive is doing on da Vinci could see meridian in a similar.
Sort of a leasing or shared revenue format and Zac quickly for you what is the average age of the 40 or so units in backlog in <unk> is it pretty much LIFO or FIFO base right now any color there would be greatly appreciated. Thanks for taking my questions. Thank you Suraj, Let me, let me touch on the first.
Part of your <unk>.
Question regarding those alternative business models.
I'd say a couple of things number one we've had some success I don't want to overstate that we've had a couple of free standing centers.
Take advantage of models that we have worked with them.
And it has kept some conversations going during the pandemic, while capital budgets have been pressured.
We have not I don't believe crack the code on what ultimately the model will be I think we're some time away.
From really solving for that Suraj, but I do think we have a portfolio of of different opportunities for customers to acquire meridian and.
Actually did another one with a for profit.
Chain here recently that was pretty creative as well. So I don't think we have a big enough and to define what ultimately our model might be but we are being appropriately flexible because we really do believe in this therapy in terms of what it means for.
Cancer patients and also the return strategically and economically for our customers and to your point I'll, let Scott touch on the second component yes.
Yes, so as it relates to backlog, we don't comment specifically on average age of the backlog, but I can tell you we assess it.
Rudy.
Rigorous process every quarter.
Primarily driven by the level of activity, we see at end users.
You got to keep in mind that.
Some of the some of the orders we take our <unk>.
For cancer centers at systems that are.
Kind of slated for construction far out into the future sometimes so.
We really look at it on an activity in progress level with each system in and make a call. So.
In order to stay in backlog, we need to see activity in.
Signs that the projects moving forward, otherwise, we evaluate whether or not to take it out at that point.
Thank you.
Thank you. Our next question comes from the line of Anthony Petrone from Jefferies. Your question. Please.
Hi, good afternoon, and congratulations on a strong year I hope everyone staying healthy.
Anthony.
A couple of Scott on on.
Just maybe COVID-19 implications as to where we sit today and then I'll have a follow up on Clinical's on.
On the Covid front, maybe can you give us an update as to.
How much of a near term headwind do you view COVID-19.
At the start of the year.
As it relates to capital purchases at hospitals, but then as we sort of look ahead to vaccine rollouts and a second potential second half recovery, which most companies have been talking about how does how do you view the pent up demand here in a post pandemic setting.
As we look to the second half and perhaps 2022, and then I'll have a follow up on clinical.
Yes, Anthony Thank you were well here and hope the same for your family.
In terms of Covid.
I kind of think about it and break it down in two ways. One is from an order pipeline perspective in the second lens, we put on it is installations.
I would say I think its reasonable to state that the environment.
Has improved already and will likely continue to improve.
As we go throughout the year.
And I think to your point vaccines are having a significant impact on the psyche of everybody and also our customers are seeing their way.
Through the real crisis that we originally had in that reemerged here at year end.
We have had customers may be the most concrete example, I could give you would be customers that very overtly and intentionally hit the pause button on.
On on conversations with US who have said hey, we're ready to Reengage. So we are seeing improvements on that front.
I think on the order side things.
We will likely improve in terms of the environment.
The area that's been the most frustrating for US is on the installation front.
Yeah.
We're still having challenges in certain parts of the world getting travel visa has to get in and do the installation work.
Would point to that as being the primary reason why we don't believe we're in a position to guide today.
As you know one or two systems really can swing things for us from a revenue standpoint. So I think we need just a little bit of time here to get more line of sight.
To those Q4 planned installations.
And countries need to sort out can vaccinated teammates of ours travel to do that kind of work Thats, what we really that's the clarity that we need here.
But I do believe to your macro question.
Thank the commercial pipeline is improving.
And then just the pressure there a little bit just on a post pandemic sort of situation on.
Orders in particular, I mean, do you kind of get a sense that.
You mentioned hospitals coming back in and now wanting to negotiate but overall.
As a way to think about how much pent up demand there is broadly for radiation therapy, and then particular meridian.
Yes, I do I think theres demand I mean, when you look across the landscape as I know you do you saw reasonably healthy orders from others in the space.
And you saw a little bit of progression from us even in the last three quarters of 2020, and we'll be reporting on <unk>.
Q1, and beyond here as we move forward. So hopefully we will we will.
Be able to show that progression in a tangible way.
So I feel good about that.
That's different about Meridian as you know Anthony is the size of these overall programs our ASP is higher our installation.
Cost and timeframe is more significant than a conventional linac, so they're probably viewed a little bit differently. The big the big thing that I think is sinking in and the marketplace is the clinical utility of the system.
Our customers are willing to share with prospective customers the number of patients that they're treating how meridian is helping their program stand out strategically.
Marilee in the three buckets that we highlight.
Patients they wouldn't or couldn't treat on any other system patients traveling for meridian therapy, and also an increase in in network referrals and they seem to be pretty pleased with the economics. If this was just <unk>.
Marketable technology, you would only need one and we've got a non trivial number of our customers.
<unk> already purchased a second.
Now, perhaps a customer purchasing their third so I like where we're at there and I think it portends good things, but I don't think you can really look at view Ray at this point in terms of the overall market, reflecting what we're doing I think what we're doing is more unique to us given.
In the system, given the clinical benefit and given the overall expense to put our meridian program in place.
That's helpful on the last on the clinical one would be just referring to slide 14, I want to make sure we have this.
Correct.
Prostate specifically should we be viewing this as a simultaneous enrollment on phase II and phase III.
Starting together on when you think about phase III.
How large do you think the enrollment will be.
Yes.
Yes, you got it.
Relative to price.
Prostate overall, there's there's the studies that are happening at.
At UCLA, and Cornell are happening and concurrent fashion.
I anticipate from UCLA, we may see data as early as this year.
So I think we're going to get some very interesting signals.
From our clinical program, specifically in 'twenty, one and even more narrowly from a a prostate perspective, we will get some pretty interesting head.
Head to head data here from UCLA and also we'll see how complementary meridian therapy is post robotic surgery. Both of those I think are pretty relevant.
Thanks again thank.
Thank you.
Thank you. Our next question comes from the line of Marie Thibault from <unk>. Your question. Please.
Hi, Thank you for taking the questions just two quick ones from me.
Scott I was intrigued by the discussion of hospitals buying second systems can you talk to us a little bit about what a center needs to be seeing in their practice in order to kind of pull the trigger on a second system.
Yes, Murray I think.
What we've heard now on a number of occasions.
Is there.
We've heard it I would say 41 times now to be precise customers by meridian because of the clinical value that they perceive.
When they utilize the system for a relatively short period of time.
And they have kind of an aha moment, where they say to us again almost invariably my goodness there is even more clinical value here than we perceived and you saw it in.
The webinars that are customers held.
Dana Farber as an example in their webinar thought that they might get as high as 55 zero percent SBR T on Meridian and I think they shared at that time that they are at 95% SPR T. On meridian. So you kind of get that initial we bought it because.
Of clinical utility on my goodness, there's more here than we thought and then they follow on very quickly with the recognition that it's helping them standout strategically in their market sticking with the Dana Farber Brigham and Women's example, they share to how patients are traveling to them in their region.
Across the country and indeed across the world for Meridian therapy, and how that strategic value then translates into economic value.
And what we hear time and again from customers is not only do we help them drive bottom line productivity in other words, putting a lot of they are really hard to treat patients on meridian freeing up capacity for.
More kind of bread and butter cases on their conventional Linux.
Kind of uniquely positioned to help them drive top line again patients they wouldn't or couldn't treat on any other systems patients traveling from outside the catchment area and increases in.
On network referrals. So this.
This is the story that we hear time and time and time again and as they get deeper into that progression. That's when we start to have conversations about that second system and now in some instances that third system. So.
We've heard now that same story on on many occasions, and we hope to really bring a lot of that to fruition.
Okay. That's really helpful. Scott Thanks for all that detail one follow up then if I can on the clinical side I think we're all sort of fascinated by the timelines here.
When we think about the phase two and phase III prostate cancer studies.
How meaningful is this on the <unk>.
On the things I know you just said that customers are buying meridian for the clinical value. So how much of the proving needs to still be done and is that something that could.
Sort of shift in a major way with phase three data if we see that in 2023.
Trying to get me on what this means for orders.
Yes, no I hear you I know thats kind of the ultimate question.
There's little question in our mind that.
On the clinical data and the outcomes that we're driving.
Is really central to us driving therapy adoption and really driving the the pipeline from a commercial standpoint, and I think it's also important to bring into the conversation. The innovation pipeline. All of this that I have described for you is with the current form of.
Meridian.
If our customers are really pleased with the clinical strategic and economic value with the way things stand today imagine how they will feel when we get to sub 20 minute treatment times, when we get the brain treatment package and we have more and more of this clinical data coming out so.
Do believe marine that the.
Clinical value for example, as you mentioned in prostate is really going to matter. They want to see meridian be a workhorse in ubiquitous kinds of cancer and they also want to see more and more data in the toughest to treat cancers.
We really started in pancreas, we're being led into.
Central lung ultra central lung <unk> liver kidney and not only in meridian smart, but in single fraction therapy. So we feel like we're in the early days and in the early stages of what could be really exciting news for cancer patients.
<unk> and for investors.
That's really helpful. Thank you so much thank you.
Thank you. Our next question comes from the line of Andrew <unk> from B Riley Your question. Please.
Hey, good afternoon, congrats on the progress.
And thanks for taking my question and again, sorry, if you touched on any of these but I was jumping between calls so.
Let me just tell me to check the transcript if you like if you hit on any of these earlier.
But.
I always really just interested in.
On your thoughts about the expected APM trial start and specifically as it relates to shipping pushed out about six months.
That shift in timing change anything on your end.
Operationally or with the pipeline.
No I don't think so Andy.
I think the.
The pushing back of the APM by six months.
Is helpful for customers in terms of their ability to prepare for the APM. The knowledge that they are in it and really thinking about what do they need to do to get ready for that I think the certainty of the APM.
As more important than the timing and I think the impact of the APM.
Is really important and frankly very good for view Ray.
We our customers would tell you that clinically strategically and economically they love their meridian program and under the AP in the current reimbursement scheme and under the APM Im reasonably confident that two things are going to happen number one deal.
Organic trend toward shorter courses of treatment is going to continue and number two competition for patients is going to increase.
Both of those things bode very well for US you may have seen in the in the prepared remarks and in the slide deck.
Nearly 80% of meridian patients are treated.
With five five fraction SPR T and the overall market is at about 14%. So we're just incredibly well suited there and then you look at the work that's being done on single fraction therapy, the importance of throughput the innovation pipeline of getting to sub 20 minutes.
Treatment times all of the clinical data that will substantiate for tumor boards that yes. Indeed, you can treat xyz cancer, and five or fewer fractions with no fiduciary tight margins ablative doses all the things that our customers are after I think we're incredibly well positioned in that.
M World.
Okay that was really really great insight.
Then.
On January you gave what at least what I thought was very good color about how operations specifically operations as it relates to changes tied to COVID-19.
We are evolving and paraphrasing, a little bit, but I think the statement went around.
While COVID-19 still offered a lot of challenges with various countries or regions, having travel restrictions.
Believe it was better positioned than ever and certainly was far ahead of where it was in the first half of 2020.
Do you still believe that statement to be true or has there been any sort of shift within the last two months.
I believe that to be true Andy I think we are just better and better positioned when you look at the the three pipelines that we talk about our clinical pipeline. It's extraordinary our customers have initiated over 60 studies our innovation pipeline is.
Targeted at exactly what our customers want they want greater throughput so getting down to 20 minute treatment times, they want to bring treatment package. They believe what we bring to brain cancers is really potentially quite compelling.
<unk> ease of use all of those things, they're asking for that's exactly how we're allocating capital and those two pipelines accrue too.
Our commercial pipeline and I've been thoroughly impressed with the way that our team has operated.
Really driving the clinical and innovation pipeline throughout and also the operational improvements that we've made so.
We just continue to be better and better positioned the big frustration and I know Youre aware of this is our desire to get in and do all of the installation work that both we and our customers want to do that remains our challenge and.
I think thats going to dissipate with the vaccine, but we don't have.
Clear enough vision on that point quite yet.
Okay, great. So the decision to not provide guidance is really based on unknowns that could come up.
Versus anything specific that you've experienced since you completed the financing in January correct.
Yes, it's all about the externality.
Still.
Haggling with countries to get versus for example to go in and do installation work and as you know we need real clarity, especially on Q4 installations, because it's binary right, we either get credit and the installation happens and we recognize revenue on.
On or before 12, 31, or we don't and one or two systems. We're still of the size that that swings things meaningfully for us and we just want to be very prudent and careful on that front, but nothing in terms of the operations of the business or the progress that we're making.
And last question for me.
Could you just.
Provide maybe.
Our cadence or at least let us know what you currently have.
Scheduled.
Initially firm on install standpoint, this year, if you have that kind of granularity.
I'll just be useful context, we can at least think about how to plan out modeling.
Yes, it will.
We'll provide that guidance when we feel like we have more complete line of sight.
We have a lot of demand to get out there and install systems, we have a lot of desire and the right level of capacity to do so.
But we still have to work through some things to be able to provide you that guidance.
Okay understandable. Thank you very very much and best of luck going forward.
Thanks, Andy.
Thank you. Our next question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your question. Please.
Brian did you might have your phone on mute.
Brian It folks were not hearing you.
Alright. Our next question comes from the line of David Lewis from Morgan Stanley. Your question. Please.
Hey, Thanks for taking the questions. This is Calvin on for David just two quick ones for me. The first one is just could you comment on any updated view on how you see cash burn sequentially throughout 2021, and whether you still feel good about that staying flat or perhaps improving over the four quarters of.
Or the fourth quarter of 2020.
And my second question, which I'll just ask right. Now is just can you also touch on your Opex priorities between R&D sales and marketing G&A, perhaps in the first half on so much.
Yes, Calvin I'll touch on.
Your question and maybe ask <unk> to provide a little bit of color I think the best way to look at our cash burn is on an annual basis, you see pretty significant fluctuation from quarter to quarter. Let me take you back a little bit and give you some context.
Our cash burn number in <unk> was about $127 million in 19 that came down to about $89 million and last year that came down to about $70 million.
We intend to continue that positive trajectory, but I would strongly encourage you and others to look at it on an annual basis Lee.
Less so on a quarterly basis, given how chunky. This this business is.
And from an Opex standpoint.
We shared last year that we were prioritizing our innovation and clinical pipelines and really tightening our belt and.
In other parts of the organization, we remain in that posture currently.
It is.
Our <unk>.
Financial rigor and discipline and the team's ability to operate that's put us in the position that we're here that we are here today, and I think youre going to see a very robust clinical pipeline I think youre going to see a very robust innovation pipeline I think that is going to impact our commercial pipeline.
But we're going to remain very disciplined.
For the time being as things.
Hopefully loosen up with the pandemic Zac any color you want to add no I think.
I think much like the commentary around.
Shifting of our system from quarter to quarter payments or payments on those systems is very much the same.
So as it relates to.
Kind of large on diversified risk with each system.
It's both a revenue on a cash.
Cash impact that's why we really do manage kind of from an annual perspective.
Try to obviously bring it in as soon as possible, but it is very we use the word lumpy from quarter to quarter. So.
<unk>, averaging over the quarters is important.
Got it. Thanks, so much if I could sorry, if I could just squeeze in one more just I wanted to circle back on the ex U S.
Installation trends that you commented on I know back in the December timeframe.
The challenge was around certain regions or countries in Asia, and perhaps some in Europe.
In Europe, so is that.
I think it sounds like Europe was probably slightly better than China, and Japan is that still kind of the pattern.
It's kind of China, Japan.
So locked down and do you see any improvement in Europe. So I was just wanted to see what the latest on that front. Thanks. So much.
Yes, Calvin Youre spot on and I think it is improving but those those have been the most challenging spots for us have been Asia and Europe.
<unk> seen over the past few months.
Whats happened in Germany, what's happened in France for example, and.
And we have had challenges there and in Asia, We've had a real challenge from a visa perspective lots.
Lots of.
Lots of desire on our side and our customer side too to solve these things and I think we we.
We'll see things improve and loosen up with the vaccine, but again, we just feel like it's a little bit early to give the level of specificity that wed like to provide from a guidance perspective.
Very helpful. Thank you. Thank.
Thank you.
Thank you. Our next question comes on line of Jason Bednar from Piper Sandler Your question. Please.
Hey can you hear me okay.
Yes.
Great Great good afternoon, everyone.
Scott I'll come back to question earlier, and maybe take a stab but just kind of how you guys are thinking about the top line.
So I think we can all appreciate it and just not having the visibility to provide formal guidance right now just with the backdrop being what it is access limitations, just being frustrated and totally understand that but just.
It's a very general question, I mean, you've been able to pretty consistently install a couple systems per quarter throughout much of 2020.
Spite of these hospital access restrictions I mean would you say that's still a reasonable go forward assumption in the near term as long as the pandemic is still limited access to hospitals and then as a follow up to that and once the vaccination rollout has moved further along how quickly do you anticipate hospital will allow your installation teams then.
Yes, Jason from a macro standpoint.
I'll take it up a step and I would tell you that I think we're putting ourselves in the position of having really attractive revenue growth over time.
That I feel very confident in what we feel less certain of is specifically in 'twenty. One how should we be guiding the street as it relates to Q4 installations in particular, so that's what is holding us back at the moment.
Because we don't want to put a number out there and then have things push out that we don't have really good line of sight to but you are a couple of quarter rule of thumb is a very reasonable one.
But.
The demand is.
<unk> is higher than that and our intentions are higher than that but we can't.
We can't say with certainty given the restrictions that we're going to be able to accomplish that here in calendar 'twenty one.
Okay. That's helpful.
And then Scott I mean, there's clearly been a <unk>.
<unk> is there shouldnt be here on the clinical pipeline that youre talking about an update on here today, but the product roadmap also looks pretty interesting on some of those items you laid out.
Improved MRI imaging increased dosing the brain treatment package I mean can you expand on where these are within your development pipeline, maybe the step change each offers and advancing meridian, both clinically and in bringing that treatment time zone.
Yes, yes happy to do that I would say from a timing perspective.
We anticipate that it's near term enough that we're comfortable talking about it.
Publicly here.
Don't want to get more specific than that given the fact that we don't we don't control the full regulatory pathway.
But we are deep deep into development of the items that we have highlighted.
And our customers that have helped us along the way.
This is exactly what they have been asking for from US obviously, a lot of things underneath and behind these things that I have highlighted but the number one thing from a product perspective that our customers want is greater throughput.
You just do the math and I'm not suggesting.
This will be the case in every instance, but.
If we're treating 20 patients a day and the vast vast majority of them are five fractions or fewer thats 20 patients a week, that's a thousand patients a year now granted our customers tend to put the hardest cases on our system and single fraction therapy.
Take a longer period of time than that but I think the point stands that the throughput that our customers seek we believe we have a solution to that that's not too far away. Our customers also believe that we bring something unique to brain cancers.
And theres been a lot of collaboration on workflow simplification and.
And ease of use elements such as remote access.
And other items and I can't tell you how excited we are and customers that have helped us on this journey.
Appear to be very excited as well.
Okay, that's great and good to hear.
One final quick one from me and then I'll hop back in queue.
Could you update us on where you stand with your <unk> relationship.
Is there a reasonable timeframe to commercialization occurring in China.
'twenty one 'twenty two 'twenty three dynamic I'm, just trying to make sure we have our expectations set appropriately with that relationship.
We are we feel really really good about the partnership that we have in China. We are working very closely.
With our partners there on.
On the regulatory pathway, we're not quite ready to share any more specifics there, Jason but once we get a little bit further down the road, we will share more specifics.
China is the <unk>.
Second largest and fastest growing market in the world and.
Frankly, some of the things that that meridian.
Helps do clinically are quite needed in China. So, we're very motivated to to get to market there with with our partner.
Alright, great. Thanks, so much thanks.
Thanks, Jason.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Scott Drake for any further remarks.
Jonathan Thank you and thanks, everybody for joining us on this call we'll be back together in the not too distant future reporting on Q1 hope everybody is well and stay safe. Thanks, so much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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