Q4 2020 Ra Medical Systems Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Ross Medical systems fourth quarter 2020 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 session.
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I now would like to turn the call over to Jody Cain. Please go ahead.
This is Jody Cain with L. A J. Thank you for participating on today's call. Joining me for my medical are will Mcguire, Chief Executive Officer, and Andrew Jackson, Chief Financial Officer.
Earlier today RA medical issued a news release announcing financial results for the 20th 24th quarter and full year. If you've not received this news release or you'd like to be added to the company's email distribution list. Please contact L. O J in New York at 2128383777 and speak with.
Carolyn Kurt you can also sign up for email alerts and access the news release in the Investor Relations section of the raw medical website at IR Raman Dot com.
This call management will be making a number of forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 to the extent that statements made by management are not descriptions of historical facts regarding ROM medical they are forward looking statements, reflecting the beliefs and expectations on.
Management as of March 16, 2021.
You should not place undue reliance on these forward looking statements because they involve known and unknown risks uncertainties and other factors that are in some cases beyond the company's control that could materially affect actual results in particular, there is significant uncertainty about the duration and.
The impact of the COVID-19 pandemic. This means results could change at any time and the contemplated impact of COVID-19, our RA Medical's operations financial results and outlook is the best estimate based on the information for today's discussion.
For details about risks please see the news release that accompanies this call and the company's SEC filings, including Rob Medicals Annual report on form 10-K for the year ended December 31st 2020 to be filed with the S. D C.
Ron medical expressly disclaims any intent or obligation to update forward looking statements, except as required by law.
Today's conference call remarks will include both GAAP and non-GAAP financial results from medical believes the non-GAAP financial results to provide investors with useful supplemental information about the financial performance of the business enable the comparison of financial results.
Between periods for certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management in operating the business. These non-GAAP financial measures are presented solely for informational and comparative purposes. It should not be regarded.
As a replacement for corresponding GAAP measures reconciliation between GAAP and non-GAAP financial measures can be found at the end of the financial results news release that was issued earlier today.
With that I'd like to turn the call over to will Mcguire well.
Thanks, Jody good afternoon, everyone and thank you for joining us on.
Pleased to have this opportunity to share our progress and provide an update on our business.
We are excited about the opportunity our differentiated vascular products address the large and growing market for the treatment of peripheral artery disease.
D.
He recently obtained updated third party research estimates the value of the combined chronic total occlusions, our CTO crossing market and the atherectomy market at approximately $900 million for 2021.
Atherectomy represents the majority of this figure at more than $750 million.
As a reminder, we have FDA clearance for crossing Cto's and are in progress on a pivotal clinical trial for the atherectomy indication.
Today, I will outline our progress to develop a product line, we believe has distinct and important competitive advantages and our work to secure the appropriate FDA indication required from market success.
I'll begin with an update on our engineering initiatives from the vascular business.
We're making great progress with efforts to extend the shelf life of our future catheters as well as our development efforts related to those catheters.
As previously reported we have identified the root causes of the limited shelf life, namely one the introduction of unwanted elements into the catheters core water and to the degradation of the catheters inner coating.
Our efforts to mitigate both issues include material process and sterilization changes.
Recent in house accelerated aging test data are very encouraging and support on shelf life of at least six months. We are continuing our aging test to develop a more robust data set to support an FDA submission and to extend shelf life potentially beyond six months.
Yeah.
Our team also continues to advance the work on our next generation Deborah catheter.
As a reminder.
This next gen catheter incorporate separated over jacket to make it more deliverable and kick resistance when navigating tortuous anatomy.
We evaluated prototype designs in late 2020 at a hands on workshop with cerebral vascular physicians and received constructive feedback concerning the potential improvement in performance of the catheter with this new design.
We expect to complete the engineering work for this catheter in the second half of 2021 and will subsequently submit for FDA clearance.
We are also reporting great progress with an improved fabric catheter that is compatible with a standard Guidewire. This project Leverages. The work of the previously described project with the added compatibility design goal, we evaluated several prototypes of this catheter during the hands on workshop in late 2020 and.
Received positive feedback regarding the usability and performance features we are incorporating in the final catheter design.
We expect to complete the overall design work for the Guidewire compatible catheter before the end of 2021.
Lastly on the development front, we have initiated several laser development projects to improve both the pharaohs and Deborah laser systems, specifically, we have projects underway to upgrade the CPU and extend the gas life, we expect to introduce the initial upgraded laser systems in 2022.
Moving on to our clinical trial to obtain an FDA atherectomy indication for the <unk> platform. We continue to make good progress here as well. The study is approved for up to 10 clinical sites and 100 subjects since our last investor call in mid November we have enrolled an additional 17 subjects for a total.
Of 30 subjects enrolled to date.
Currently five sites have been cleared for enrollment in this study and three additional sites are in various stages of the qualification process what.
One of these three sites is in the final stages of qualification and we expect it to begin enrolling subjects in the next 90 days due.
Due to the unpredictable impact of the COVID-19 pandemic on this study we cannot estimate with precision when enrollment will be completed.
One final note regarding the vascular business. We recently completed the final leg to the F D. A.
Questing approval to resume commercial shipments of the current Deborah catheter as you may recall, we voluntarily stopped shipments of this catheter in September 2020.
Due to variations that we detect it at that time and our internal shelf life data.
On our November quarterly call. We stated our belief that we would resolve this issue in the first quarter of 2021, we met this timeline by submitted the filing to the FDA earlier this month.
Turning to our dermatology business I am pleased to announce that our new commercial leader John Bullock two.
So under Rob medical in Q4.
Non has 17 years of experience in the dermatology and aesthetics market and a track record of success is current focus is on executing and refining our commercial strategy for a post COVID-19 environment.
We believe we can grow this business in a capital efficient manner by carefully expanding our commercial footprint with both direct hires and contract representatives with the latter being paid solely on a commission basis.
Although our dermatology business continues to be impacted by the COVID-19, as many customers delayed the acquisition or purchase of capital equipment.
We did experience sequential quarter growth in dermatology revenue from Q3 2020 for Q4.
As a reminder, our dermatology business generated revenue of roughly $5 million to $6 million a year pre COVID-19.
On the quality assurance front during the fourth quarter of 2020, we completed a quality improvement plan.
Was comprised of 116 items the plan addressed a wide range of items within the quality management system with a focus on standard operating procedures preventive maintenance equipment status and calibrations and supplier quality.
I'm also pleased to report that we successfully completed the BSI quality system audit in January with no observations.
Finally, as previously disclosed we entered into a settlement agreement at the end of 2020 that resolved simple false claims act claims asserted by the U S Department of Justice and the investigation previously disclosed by the company.
In connection with this settlement the company also reached tentative agreements with the participating states that if executed.
<unk> previously disclosed related investigations conducted by certain state attorneys general.
We fully cooperated with these investigations starting with the internal investigation that began in the second quarter of 2019 and I am pleased that settlements have been reached to resolve these matters.
We remain committed to meeting the expectations of.
And cooperate with the federal and various state governments.
We hired a compliance officer to oversee our compliance programs going forward.
Now I'll turn the call over to Andrew to discuss our financial results Andrew.
Thank you will.
Starting with our Q4 financial results net revenue for the fourth quarter of 2020 was $1 2 million and consisted of product sales on <unk> 5 million and service on the other revenue on 0.7 million. This compares with net revenue of $1 4 million for the fourth quarter of 2019, which consisted of product sales.
Zero point $6 million and service and other revenue on zero point $8 million.
Revenue from the vascular segment for the fourth quarter of 2020 was de Minimis compared with 0.2 million from the prior year period.
Revenue from the Dermatology segment was unchanged at $1 2 million for the fourth quarters of 2020 and 2019.
Gross loss decreased to 96000 in the fourth quarter of 2020 from 360000 in the fourth quarter of 2019.
SG&A expenses for the fourth quarter of 2020 were $6 9 million compared with $8 6 million from the prior year period.
SG&A expenses for the fourth quarter of 2020 in 2019 included stock based compensation expense from zero point $8 million and $1 1 billion respectively.
R&D expenses for the fourth quarter of 2020 were $3 4 million compared with <unk> 8 million from the prior year period.
For 2020 quarter included an increase of $2 3 million in personnel suppliers on consulting expenses related to our efforts to remedy the inconsistency is without <unk> catheter performance and to expand our efforts with the next generation of products R&D expenses in the fourth quarter of 2020 in 2019, each included stock based compensation.
On 0.1 million.
The GAAP net loss for the fourth quarter of 2020 was $10 4 million or $3 61 per share. This compares with a GAAP net loss from the prior year quarter on <unk>.
$9 7 million or $18.04 per share per.
Our share amounts reflect the one for 25 reverse split that was effective last November.
Adjusted EBITDA from the fourth quarter of 2020 was negative $8 8 million compared with negative 8.0 million from the prior year period, a reconciliation of GAAP net loss to non-GAAP EBITDA is included in today's press release.
Finally, a few words on general about the continued COVID-19 pandemic on.
Manufacturing facility in Carlsbad, California has been operational throughout the pandemic, we have continued to manufacture lasers and catheters without interruption and on.
Personally I have complied with and continues to comply with state and local guidelines. The full extent towards COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be predicted.
Turning to our full year financial results net revenue for 2020 was full force 4 million compared with $7 2 million for 2019.
<unk> sales for $2021 4 million compared with $3 9 million for 2019 and service and other revenue for 2020 was 3.0 million compared with $3 3 million for 2019 revenue.
Revenue from the vascular segment was <unk> 3 million for 2020 versus $1 3 million from 2019.
Revenue from the Dermatology segment for 2020 was $4 1 million compared with $5 9 million for 2019.
Gross loss decreased to $1 1 million in 2020 from $1 7 million in 2019.
SG&A expenses for 2020 were 26.0 million compared with $51 5 million in 2019 SG&A expenses in 2020, and 2019 included stock based compensation of $3 3 million and $24 million respectively.
R&D expenses for 2020 were 9.0 million vs full point $5 million for 2019.
R&D expenses in 2020 included an increase of $5 2 million Inc.
Personnel costs suppliers on consulting expenses to understand the inconsistencies in our Deborah catheter performance.
On the next generation of products.
R&D expenses for 2020 in 2019 included stock based compensation of zero point Formula and $1 5 million respectively.
The GAAP net loss attributable to common stockholders for 2020 was 36.0 million $21 22 per share compared with a GAAP net loss for 2019 $57 million $408.28 per share.
Adjusted EBITDA for 2020 was negative $29 6 million compared with negative $32 4 million for 2019 the per share amounts reflect the one for 25 reverse split.
Effective last November.
We used $28 3 million in cash to fund operating activities. During 2020, which included $2 5 million for legal expenses related to the Securities litigation and government investigations and $2 4 million in settlement costs related to the government civil claim.
Compares were $33 2 million used to fund operating activities. During 2019, which included 4.0 million to legal expenses related to the securities litigation and our internal and government investigations.
We exited 2020 with cash and cash equivalents of $23 9 million.
With that I'd like to turn the call back over to will.
Thank you Andrew before we open the call to your questions I'd like to welcome our newest director Suzanne Malines Suzanne joined our board at the end of January and she brings to raw medical extensive and valuable experience in finance and corporate governance.
This is an expansion of our board, which now stands at seven directors.
So in closing I'm pleased with the progress of our engineering efforts, we see significant opportunity ahead in two large and growing markets and we are committed to our mission of saving lives and loans.
With these comments I'd like to open the call for questions operator.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question please.
Please press Star then two.
Please standby, while we compile our Q&A roster.
Our first question will come from Anthony Vendetti with Maxim Group. Please go ahead.
Hi, This is Jeremy Pearlman on the Hi, this is Jeremy from it on the line for Anthony.
Just a couple of quick questions. So just wanted to get some more clarification on the timeline for E improve Dab a catheter or is it still on schedule. You have you won't have all the engineering work done by let's say the middle of 2021.
Yeah, what we said on our in our script is that we would have the engineering work done sometime in the second half of 2021, we haven't been more specific on that and that so we can complete the engineering and then subsequently be in a position to file with the FDA.
And that's just for the improved shelf life that is not the guide wire is separate that you hope by the end of 2021 and two.
File early 2022.
Yeah. Good question. So the one that would be the second half of 2021 that would be completion of engineering and then moving towards an FDA filing would be oh with the improved outer jacket. So it would improve the deliverability and robustness of the catheter and so it is a it is a new catheter new outer jacket that would include.
The extended shelf life, and then as you said kind of taking that improved catheter and go on one step further and making it guidewire compatible we would complete the design work for that.
On the back half of the year by the end of 2021 and of course after the design, we'd move into a validation and verification and other things to finish up the engineering.
Okay. Okay.
Yeah, that's yeah that's helpful.
And then what would be best and worst case scenario. Once you submit to the FDA. When do you think that would be ready for commercialization.
Great Panther.
Yeah, I think so.
No.
That's case.
You know these niche we think these will be 90 day submissions, let's say if you wanted to have a.
Our base case plan too.
I would add 30 days to that so around 120 day should give us time for a round of questions 120 to 150 days for a round of questions and then we'd have FDA approvals and to be clear then when we when we get those FDA approvals, we would be in a position to launch with our CTO crossing indeed.
And then depending on where we are with the atherectomy study we.
We may not have the atherectomy indication yet we couldn't launch with the crossing indication.
Okay, and then I guess you could assume last question because at the same time on would apply for the Guidewire catheter. Once that engineering is finished on that and then you submit to the FDA of the same on just went after 50 days pending with questions from the FDA and then commercialization and then by then hopefully you might even be able to include the atherectomy or that's all.
So still questionable.
It depends on when we are when we file.
What we have said.
How quickly and maybe in our in our latest update to the investor deck as we certainly would expect to have the new the new tablet catheter as well as the Guidewire compatible version of that catheter.
<unk> approved and on the market in 2022.
The clinical study.
Could coincide with the Guy who are compatible catheter, but where we're at.
At this point unable to precisely predict enrollment due to COVID-19. So what we did say is in 2022, we would certainly expect to have the trial enrollment complete the six month follow up complete.
And have a FDA submission and for the atherectomy indication, but we haven't gone as far to say that we would we would.
Have that indication received in 2022, we have to give yourself a little room.
Given COVID-19 and the potential impact there.
Okay I got it. Thank you very much that's all I have on them.
Thank you thanks Jeremy.
This concludes our question and answer session I would like to turn the conference back over to will Mcguire for any closing remarks.
So thank you again for joining us this afternoon and for your interest in raw medical we look forward to speaking with you again in May when we reported first quarter 2021 results have a nice afternoon.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.