Q4 2020 Asensus Surgical Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the census, surgical and fourth quarter and full year business update conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
I would now like to turn the call over to Mr. Mark Klausner of Westwick. Please go ahead.
Thanks, operator, good afternoon, everyone and thank you for joining us from today's call.
On the call with me today are Anthony Fernando President and Chief Executive Officer, and Chemise, Romper top Chief Financial Officer.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call, including any guidance provided are forward looking statements covered and do the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Actual results could differ materially from.
And from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business, including any impact from the COVID-19 pandemic.
The company undertakes no obligation to update the information provided on this call.
For a discussion of risks and uncertainties associated with our sensus surgical business and.
Encourage you to review the company's filings with the Securities and Exchange Commission, including the form 10-K expected to be filed later today and other filings we make with the SEC.
During this call. We will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and adjusted net loss per common share attributable to common stockholders management believes that non-GAAP financial measures taken in conjunction with U S. GAAP financial measures provide useful and.
[noise] formation for both management and investors by excluding certain noncash and other expenses that are not indicative of the company's core operating results.
Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions.
Reconciliations from U S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website.
It is now my pleasure to turn the call over to a census, surgical's, President and Chief Executive Officer, Anthony Fernando.
Thanks, Bob and thank you all for joining us today.
On today's call I will begin by reviewing our recent progress.
And then I will hand, the call over to <unk> to review our financial performance.
After which I will discuss our priorities for 2021 before turning to Q&A.
Now shifting to an update on our key focus areas for 2020.
As a reminder, these are first market development, which involves building awareness of the <unk> system and effectively demonstrating the clinical and economic value in the marketplace by increasing the visibility.
After the success that our customers are having with the sentence.
Second clinical validation, which emphasizes the development of clinical evidence supporting the value proposition of the sentence.
And third portfolio and expansion, which focuses on broadening the applicability of enhanced by adding new indications features and new instruments.
Starting with our first focus area market development.
Specific to new <unk>.
System installers and up the we initiate the 10, new clinical programs three in the U S. Four in Europe and free in Asia.
As it relates to our pipeline the demand plus and hence remains strong.
To help support that and demand we have added dedicated training facilities in key geographies.
We launched a training center in Japan in the third quarter of 2020 and in February of 2021, we announced an agreement to launch a new surgical training center in Amsterdam.
Through our partnering agreement.
Damn skill center this site with a surgeon and staff throughout Europe with training and Senate.
In addition, the skill center will also provide us with a world class facility to engage European surgeons.
And technology and clinical development studies.
We face a growing need to train and European and surgical teams as we continue to expand our footprint and adoption in Europe, and adding the second training site alongside a site and Milan will go a long day towards doing so.
Turning to procedure volumes.
After hitting a low point during the second quarter of 2020, we have seen a continued rebound during the second half of the yet.
Fourth quarter volumes approaching 2019 levels and growing sequentially over the third quarter by over 20 per se.
Performance varied between geographies, primarily driven by Covid and Covid related shutdowns experienced in their respective areas.
It is encouraging to note that in all three of our geographic regions procedure volumes improved on a sequential basis.
As compared to the third quarter of 'twenty 'twenty.
And two of the three regions showed year over year growth.
The U S and Asia.
Europe was and continuous to be the most impacted region.
As various recent Gen says have forced shutdowns and significant slowdowns in procedure volumes.
For the full year of a 1400 and 50 procedures performed using sand heads down approximately 10% as compared to 2019.
We expect this trend to reverse as we move into 2020 one.
Shifting to an update on our foundational sites.
At the end of the year, we had 11 and foundation of sites up seven at the start of 2020.
As a reminder.
Foundational sites.
The hospitals that are performing well.
And on track to perform clinical procedures bits and hands at an annualized rate of greater than 100 procedures, but yet.
The slowdown in elective procedures experienced during a significant portion of that yeah slowed the expansion of these foundational sites.
We are optimistic that we should start to see and acceleration of new foundational sites as Covid subsides, and we start to see a positive impact from the recent system placements along with the tailwind from our recently expanded portfolio.
Turning to our second focus area clinical validation.
In 2020, we continued to focus on the development of health economic and clinical performance data with an emphasis on the cost impact of <unk>.
Relative to traditional laparoscopy as well as other surgical robotic systems.
During the year, Devon, and 15 peer reviewed clinical papers published providing further support of the clinical utility of the Sen has across a variety of specialties, demonstrating the utility breadth and the complexity of procedures being performed.
Beyond those published clinical papers, we made good progress on several studies, including two cost comparative studies.
Comparing the average cost per procedure between San has laparoscopy and robotics.
Turning to our third focus area portfolio expansion.
During 2020, and thus far in 2020, one we made tremendous progress in what turned out to be a challenging regulatory environment given COVID-19.
In February of 'twenty, and 'twenty, we received our CE mark approval that enable it and send has to be used on pediatric patients.
October the first cases were completed and since then our cadence of pediatric cases has increased.
We continue to view pediatrics as a highly underserved market.
We would benefit significantly from the capabilities and provides.
In March 2020, we received FDA five 10-K clearance from the intelligent surgical unit or I S U.
In September we announced the completion of the first surgeries using the ies use machine and we send capability and Kansas and now being done on a regular basis with I guess you enabled systems.
In early 2021, we received the CE Mark for this version of the ASU and early feedback from surgeons and following the first cases completed in Europe has been very positive.
Yeah and excited about the early success of the ASU as it represents the initial building blocks of our digital strategy.
We are working to add incremental I guess your features namely that next generation of machine vision and augmented intelligence capability.
As seen recognition and surgical image analytics.
During the fourth quarter, we received regulatory approval in the Russia and Federation.
We believe that the Russia and robotic surgery market is underserved and provides an opportunity to grow stent and surgical system installations.
Just last week.
We received FDA five 10-K clearance for expanded indications for general surgery.
This is a major milestone.
But the growth.
And clinical applicability.
All of our technology.
General surgery is by far the largest area of manual laparoscopy, which can benefit from the robotic precision and digital insights of centers.
The indication expansion and also allows.
And then has to be used in many high value complex reconstructive surgeries.
Such as those used to create reflects and obesity.
Taken together with other indications for use in the U S. 10 has can now be utilized in over $2 7 million general surgical procedures performed annually.
Despite the challenging macroeconomic environment.
That persisted throughout 2020, we made great strides in the development of sand has and achieved the vast majority of the goals we set for ourselves at the beginning of the year.
In addition, we believe we put ourselves in a great position over the long term to bring innovative surgical technology, two operating rooms around the world.
With that I'd been now turn the call over to <unk> to provide a financial overview.
Yeah.
Thanks Anthony.
Turning to the fourth quarter for the three months ended December 31, and 2020, the company reported revenue of $1 1 million as compared to revenue of zero point $7 million and the three months ended December 31 2019.
Revenue in the fourth quarter of 2020 included zero point $3 million and systems leasing zero point $3 million and instruments and accessories, and zero point $5 million and services.
For the three months ended December 31, and 2020 total operating expenses were $14 2 million as compared to $18 $1 million, excluding the gain from the sale of the auto life assets and the three months ended December 31 and 2019.
I would like to note that were and the process and fully transitioning over to our new corporate headquarters in research Triangle Park and.
New office space was purpose built for sensus, allowing us to effectively pursue our commercial clinical and research and development goals and a more cost efficient manner.
For the three months ended December 31, and 2020 net loss attributable to common stockholders was $13 8 million or 13 cents per share as compared to a net loss of $13 $7 million.
And <unk> 69 per share and the three months ended December 31 and 2019.
For the three months ended December 31, and 2020, the adjusted net loss attributable to common stockholders was $9 $7 million or <unk> <unk> per share as compared to an adjusted net loss of $16 $4 million or <unk> 83 per share and the three months ended December.
31 2019.
Adjusted net loss as GAAP net loss adjusted for the following items.
Net gain on the sale of the auto life assets.
Amortization of intangible assets.
Change in fair value of contingent consideration change in fair value of warrant liabilities.
Restructuring and other charges.
Inventory write down related to the restructuring plan.
And loss on the extinguishment of debt all of which are non cash charges.
Adjusted net loss attributable to common stockholders is a non-GAAP financial measure.
Reconciliation from GAAP to non-GAAP measures can be found and our earnings release.
Turning to the balance sheet, the company had cash and cash equivalents and restricted cash of approximately $17 $5 million and working capital of $23 $7 million as of December 31, and 2020.
Subsequent to the end of the fourth quarter and close separate equity offerings, resulting in combined net proceeds of approximately $111 million.
Following such financing transactions as well as proceeds from the ATM offering and exercises of our series C and D warrants and the company has cash and cash equivalents, including restricted cash of $169 $5 million as of February one 2021, which provides us with the capital.
To execute on our strategic plans for years to come.
I'll turn the call back over to Ed.
Thanks.
I would now like to provide our perspectives on 2021.
A few weeks ago, we rebranded the company.
Sensus surgical.
And so we have been undergoing and evolution from a robotics company to a digital surgery company, we felt it fitting to rebrand and the company to better reflect our vision.
Our mission is focused on elevating robotic surgery to drive predictable outcomes.
Optimizing resources and cost and work with hospital systems that seek to try to employ innovative health care strategy.
We believe that by digitizing the interface between the surgeon and patient we can unlock the clinical intelligence to pioneer a new era of surgery.
We are calling fulfillment guided surgery.
As we set out to advance the capabilities of secondhand and to deliver those outcomes.
We reviewed the current surgical landscape to determine that he believed value could be added.
And he came to the realization that there's something missing in the way of surgeries being performed today.
Postop complications I'll comment yeah.
Net surgeons have little clinical intelligence at their disposal pre operatively and intra operatively in the operating room.
This led us to imagine a future of surgery, where we can leverage machine learning advanced visualization data analytics and augmented intelligence to dramatically improve critical.
Critical decision, making and drive predictable and help level.
The field by gathering and analyzing and presenting information and insights to empower our surgeons of all levels of experience with deeper situational knowledge.
Overtime. These technologies will support what we call the surgical assurance framework, which includes intelligent pre operative intra operative and post operating capabilities.
We have made early progress towards delivering on performance guided surgery through the introduction of <unk>.
See you.
We will introduce additional new applications in the coming quarters with the goal of driving surgical evolution towards perceptive real time guidance.
Turning to what you should expect from us in the near term.
In 2021, our focus will continue to be driving the adoption of <unk> globally, and expanding the technological capabilities of <unk> SC progress towards the realization of performance guided surgery.
While we will certainly be cognizant of delivering revenue our priority is getting <unk> into the hands of as many surgeons as possible.
With that said our key areas of focus.
First the continued market development and photos and health system.
And second expanding our portfolio and continuing the technological advancement.
Sales heads.
Starting with our market development efforts.
In order to drive widespread adoption and we need to inform and educate our potential customer base on the benefits of <unk> head and then follow up with clinical data to support a claim.
As we move into 2020, one we have continued to invest to develop and increasing volume of high quality health economic and clinical performance data with an emphasis on the cost impact of sales head relative to traditional laparoscopy as well as other surgical robotic systems.
We expect to have a number of clinical papers published in peer reviewed journals during the first half of this year.
As we continue to demonstrate through real world evidence that we are delivering clinical and surgical benefits and that <unk> can provide good surgical outcomes at a lower procedure cost.
Should aid in our effort to.
And to convince surgeons and hospitals to convert from laparoscopy to digital laparoscopy with tenants.
The next segment of a market development effort is the expansion of our global footprint, including the growth of our installed base the acceleration of procedure volumes and the increase and the number of foundational sites.
Our goal for this year is to have another 10 to 12, new sat and had systems installed.
While we expect to see revenue growth over 2020 this year.
Our focus remains on accelerating the number of systems being utilized and the volume of procedures being performed globally.
We are actively targeting hospitals and each of our three primary markets. The U S. EMEA, which includes the Commonwealth of independent States and Asia through a mix of direct reps and distributor relationships.
In addition to growing our installed base of systems. We are focused on expanding the utilization of sales heads both in terms of the volume and types of procedures being performed.
Alongside and increase in the total volume of procedures being performed.
We expect the number of foundational sites to increase.
The material expansion of indications for use.
Additionally, technology launches and entry into new geographies should all that's.
And that's incremental tailwind across our market development efforts, including new system installations procedure volumes and foundational type growth.
As a result of the ongoing COVID-19 headwinds in certain parts of the world.
Unable to provide specific guidance related to procedure volumes and foundational sites.
However, we do expect significant growth as compared to 2020.
Last year all of the hospitals that installed ascend has system opted to utilize our leasing model.
As part of these agreements hospitals have the option to purchase the system at the end of the initial contract period.
While it will not be a primary focus for us we do expect that some of these hospitals may decide to ultimately convert to a purchase.
Which will drive incremental.
System revenue during the year.
In general Yeah, nasty to the manner in which the hospital acquires a system and.
And we will continue to provide flexible economic arrangement to eliminate barriers to adoption, particularly as we continue to see hospitals under financial pressure as we work through the ongoing impacts of Covid.
Our second initiative is our continued portfolio expansion efforts.
We have recently achieved a number of critical milestones first the CE marking of the in each of our version of the ICU.
Second the regulatory approval in Russia, and Federation and third the FDA clearance of our expanded general surgery indication.
But the balance of the a we will continue to work towards the following.
All of which we expect to achieve during the first half of 2021.
First filing the submission for five 10-K clearance for articulating instruments.
And second the submission for five 10-K clearance for the next generation ASU, which includes Edison, a fetus, namely advanced machine vision and augmented intelligence capabilities, such as seen recognition and surgical image analytics.
As a company we have accomplished a tremendous amount over the year.
During what will likely be looked back upon as one of the most challenging periods in the history of the health care industry.
I wanted to thank our entire organization for their tireless efforts during these uncertain times.
We are mindful that COVID-19 is still having an impact on our business and it's likely to continue to be a headwind during 2021.
Because we operate in a variety of geographies, which are in various stages of resurgence of recovery.
It is difficult to predict how operations will be impacted.
However, we would expect that as we progress through the yeah.
We expect to see increase in case volumes as elective procedures and more widely performed.
We would also expect for new system installations to become less challenging.
Commercial teams gain broad access to hospitals.
As restrictions are lifted and hospital staff have more bandwidth to devote attention to non COVID-19 related matters.
From an operational perspective, having now been in the Covid environment for approximately a year.
Our fully operational and ready to deliver on the demand we see in the market.
In summary, we are very excited about the future at a census.
And our long term, we said and so a lot surgery can become.
With performance guided surgery yet.
Bringing our capabilities to the entire surgical paradigm from pre op planning to post op analysis unlocking the clinical intelligence to enable consistently superior outcomes and a new standard of surgery.
With that I would like to open the line for questions.
We will now begin the question and answer session.
To join the question queue you May Press Star then one on your telephone keypad.
There are torn acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any Keith.
To withdraw your question. Please press star and then too.
We will pause for a moment of callers join the queue.
The first question comes from.
So a month.
From a comp from H C. Wainwright. Please go ahead.
Thank you and this is RK from H C Wainwright.
And good afternoon, and can I ask I mean.
And.
Okay.
You are suddenly and crossed a great years despite COVID-19.
COVID-19.
And congratulations on that part.
So.
As you stated and your.
<unk>.
Hum.
And you initiated operational leaves us.
And that seemed to have gone and I'm pretty decent or <unk>.
2020.
But in general how has that.
Hum and especially in terms of.
Sales cycle and the time it takes to get our sales are done and also.
Do you feel.
You, you'll get more leads and when you start talking to.
And shell customers.
And regarding operational lease done that Dan and.
And then our immediate buyout.
Hi, RK. This Anthony Thank you for your question.
On the cycle time are I would say that deleveraging.
Leveraging the operating lease model.
Yes.
And if anything it reduced.
And the time it takes to.
From the beginning of our conversation to assigned.
Greenland and installation.
Because I think as you know it.
And that hospitals don't need to go through the same capital.
Uh huh.
And our processes. So that's definitely helpful.
And and I think the second part of your question.
And our system installed and being utilized.
Its probably its price is the best evidence that.
Anyone can provide so and our system is up and running and doing surgery on a regular basis.
And the dates and the hospitals.
Surgeons and speak with other colleagues so it definitely helps helps accelerate that process.
Great.
And then.
And regarding the number of procedures and the procedure.
And you stated that there was great and then.
1000, and form 50 procedures done in 2020.
So the two.
Two questions.
And that comment one.
What is in general per procedure revenue I understand.
It really is depending on obviously the procedure, but but in general what could be.
Per procedure revenue and then the second part is as you're getting more of these approvals done and especially the recent one and that's just for general surgery.
Hum do you when you get such a very important impactful.
And.
Approvals.
How should we think about them.
Two things procedure volume and also per procedure and revenue.
Okay.
So RK we don't.
Directly track.
Procedure.
Revenues.
You know it can be because it.
It varies from.
And different geographies and also with the.
Leasing model, so that's not something we per.
We're actively track to look at revenue per procedure.
And for multiple reasons because.
No matter, which procedure you do tend to use a certain set of standard.
From Mentation.
And then if there's any specialty instrumentation.
Like vessel day sectors are used.
That has also a standard incremental.
Cost associated with it so that.
And we don't track the revenue side of it.
But I think the second part with respect to the general surgery they expanded in.
Vacation that we recently received.
And the U S.
I think this just opens up.
Bariatrics.
And I'll put Gi side.
And for us to be able to proactively speak.
A quick search and in those areas.
You know where rates are.
Gastric sleeve, so nissin find application kind of bj's.
And those.
The.
New procedure areas that have opened up so so we're looking forward to.
Encouraging surgeons to use our system for those types of procedures that we didn't have previously.
Thank you and then one last question on the Joseph a.
Johnson and I.
And you were talking about one day.
The Russian market.
And then Russia and approvals.
How big is the Russian market and.
And and Ah.
And you are thinking.
And how long do you thing and it could take two.
And that into a meaningful market for yourself.
Okay and it is.
Great question So SB.
And you've kind of alluded before we've been building out a distributor relationship.
In the Russia for Colorado Rush and market for some time.
And working with our and distribute a out of Germany.
And who's also a device manufacturer.
Who has a really good presence in the Russian market, they're very well established they have.
And our sales teams.
<unk> teams and even net field service support function. So we are really leveraging that infrastructure of the distributor.
To be able to enter that market and grow that market.
Uh huh.
With respect to the market size I would say that day is definitely good opportunity there because that robotic penetration.
In Russia is relatively low.
And so and cost is also a concern.
With respect to procedure cost.
So I think we can offer the lower book per.
Proceeds economics.
So we believe that day is a really good opportunity for us and hope to.
And I'll put some points on the board this year in that bucket.
Perfect. Thank you. Thank you very much for taking my questions.
Thank you okay.
The next question comes from Frank Frank Harris from Raymond James. Please go ahead.
Hey, good afternoon, and this is Frank ancillary and it's just a start off last quarter. You noted that the procedure Tam and the U S was about $1 4 million and would expand by 800000, and we'll see a general surgery indication, bringing it to two point too, but obviously and the press release and and today you mentioned a general surgery indication.
Expanded the Tam to about $2 7 million procedures.
So could you just help us reconcile the difference there or is there something that we're missing.
Yeah, Hey, Frank Yeah. Good good question. So the $2 7 million that we just recently talked about and just talked about today is the overall general surgery, because as you know previously.
Previous indication for use including colorectal procedures hernia and gallbladder and.
That was all part of a general surgery. So in addition, with the new.
Clearance that we received a total of two point and the addressable $2 7 million, which includes.
And the colorectal space that we'd previously and that's what gets us to the $2 7 million number.
Okay, Great and then.
Now that you have the clintons for general surgery could you break out the various procedures and annual opportunity for each that you've added.
Yes, I Couldnt give you exact numbers right now maybe you can answer that offline, but I can tell you that that the incremental procedures and more in the upper Gi and bariatric space. Those are the procedures that were not originally included and that with the most recent approval.
And the upper Gi and Bariatrics cases.
And we'll include it so maybe we can follow up with you and give you the exact numbers.
Okay perfect.
Okay, and then you know obviously since you've just got to class last week, but but how are you thinking about the impact of increased interest from hospitals and going forward and wanted to to one for Lisa.
Yeah. So I think the we believe that day interest will definitely increase.
For two reasons one.
The bariatric.
Procedures.
And reflects procedures have a high level of interest free.
From patients and also from the surgeons to be able to use technology.
And and the reimbursement.
And as applicable.
Also in that same direction. So for those reasons, we believe that.
They're eating the interest will be higher for these kinds of procedures.
Okay, and then and there's two quick last one and one with one being a follow up to that one how should we think about the pace at which general surgery procedures should start to ramp up with and current system placements within the U S. And then I have.
One other quick one after that.
Yes.
So currently the far the procedure mix for us and the U S. It's I would say.
And not to be very precise, but probably a majority of the procedures.
And the general surgery space and the U S and.
Also our gyn oncology. So we believe that with this clearance the general surgery portion of procedures performed well definitely.
Foster growth trend.
Compared to the gynecology procedures.
And the U S with the new placements and even with current existing placements.
Okay. That's helpful. And then I guess just to close out. So obviously, it's good to hear about the pediatrics and Ah.
Obviously, you have a unique opportunity there with the three millimeter instrumentation could.
Could you just update us how you're thinking about the size of the pediatric market and the expectation for penetration going forward.
Yeah, Frank So again, primarily yes.
We have the pediatric approval for Europe.
So that's our primary market.
We are now at two hospitals.
In Europe.
And for Pediatrics now so we're trying to work through that in Europe and.
And get collect some data.
On a performance and.
And I'll tell you and see if there's any.
You know breakthrough.
The outcomes that we can find and in the meantime initial procedures. So.
The market is not I would say the market is not large.
But even though its a relatively.
Smaller market.
That's very little technology adoption and day available technologies from a surgical point of view available to the pediatric space and.
And that are more tailor made for that part of the pediatric space.
The use of three millimeter instruments is relatively common in pediatrics.
But what we offer is not just the three millimeter instruments when you combine two.
Three millimeter instruments and with a five millimeter scope and.
And had haptic feedback to that it becomes a real powerhouse for the surgeons and Thats what the surgeons that has been the feedback we've gotten from surgeons is that complicate the combination.
Three millimeter instruments five millimeter scope.
And.
The layer of haptic feedback day able to.
And if these instruments with ease and also again.
Good stability using the three millimeter instruments.
Less.
Interest in trauma.
To the patient so that's really how we are building the value proposition that and once he.
Get.
More procedures completed.
In Europe, I think we'll be able to size up the opportunity much better.
Great. Thanks, so much.
Thank you Frank.
That concludes our question answer session for today I will now turn the call back to Anthony Fernando for closing remarks.
Thank you again for your interest in defense of surgical and we look forward to updating you on our progress on our next quarterly call.
And you.
That concludes today's conference call.
You may now disconnect your lines. Thank you for participating and have a pleasant day.
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