Q1 2021 Clearpoint Neuro Inc Earnings Call
Greetings and welcome to day, Clearpoint Neuro, Inc. First quarter financial results Conference call. At this time, all participants are in a listen only mode.
And the next session will follow the formal presentation.
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Comments made on this call may include statements that are forward looking within the meaning of the securities laws.
These forward looking statements may include without limitation statements related to anticipated industry trends and the company's plans and prospects and strategies, both preliminary and projected and managements expectations beliefs estimates or projections regarding future results of operations and.
Actual results or trends could differ materially.
The company undertakes no obligation to revise forward looking statements for new information or future events.
For more information please refer to the company's annual report on form 10-K for the year ended December 31st 2020.
Which has been filed with the Securities and Exchange Commission.
And the company's quarterly report on form 10-Q for.
For the quarter ended March 31 2021.
The company intends to file with the Securities and Exchange Commission on or before May 17th 2021.
All the company's filings maybe obtained from the SEC or the company's website at www Dot Clearpoint neuro dotcom.
I would now like to turn the conference over to your host Mr. Zhu.
Burnett Chief Executive Officer. Thank you you may begin.
Okay.
Thank you Devin and thank you to all of the investors and analysts on the call today for being a part and the Clearpoint vision and journey.
We are here to help restore quality of life to patients and their families who are suffering from some of the most debilitating neurological disorders and imaginable.
And the first quarter of 2020, one we made substantial progress across all four of our pillars of growth, including functional neurosurgery navigation biologic and drug delivery clearpoint owned therapeutic products and achieving global scale.
And importantly, we made this progress in our portfolio against the backdrop of record revenue on the quarter.
The resumption of elective procedures at the majority of our hospitals and the addition of multiple pharma partners to our growing list of active customers and the significant infusion of capital that we closed and the quarter also supports not only the expansion and acceleration of our product portfolio, but also our geographic and quality system expansion to a more global.
Gail.
I will now turn the call over to Danilo, our CFO to review, our financial performance and the quarter after which I will add some additional detail to our four pillar growth strategy day NOLA.
Okay.
Thank you Joe and thank you all for joining us today.
Looking at the first quarter 2021 results total revenue was $4 million for the three months ended March 31, 2021.
And $3 $1 million for the three months ended March 31, 2020, which represents an increase of $49 million or 29%.
Our revenue is made up of three components functional neurosurgery navigation and therapy, biologics and drug delivery and capital equipment.
Functional neurosurgery navigation revenue, which consists of disposable product commercial sales related to cases, utilizing the clearpoint system increased 10% to $1 $9 million for the three months ended March 31st 2021 from one 7 million for the same petered out in 2020.
This increase reflects the resumption and the three months ended March 31st 2021 of electric of elective surgical procedures, which were postponed or canceled over the past months due to the COVID-19 pandemic.
Case volume increased each month and the quarter.
Biologics and drug delivery revenue, which include sales of disposable products and services related to customer sponsored clinical trials utilizing our products increased.
Increased 61 per cent to one 7 million and for the three months ended March 31st from 1 million per the St Jude and 2020 due primarily to the resumption of clinical trial activities that lead to increased sales of biologics and drug delivery products.
Yeah.
Capital equipment, and softer revenue consisting of sales of Clearpoint reasonable hardware and software and related services increased 31% to $5 million for the three months ended March 31st from <unk> 3 million for the same period in 2020.
While revenue from this product line historically has varied from quarter to quarter, we believe that the increase and represents the partial resumption of hospital capital equipment acquisition activities. Following the onset of the COVID-19 pandemic.
All hospital budget constraints caused by the pandemic continued to be a real headwind. The current funnel of potential installs is very healthy.
Gross margin for the three months ended March 31st with 65 per cent compared to 70 per cent for the same period in 2020. This decrease was primarily due to a greater contribution and the first quarter of 2020 to total sales of service revenue, which contribute higher gross margins and comparison to other product lines.
And a portion of overhead allocation of overhead allocated to cost of revenue, resulting from larger production output volume. During the three months ended March 31, 2021 relative to the same period in 2020.
Research and development costs were $1 6 million and for the three months ended March 31st compared to <unk> 8 million for the synchrony and 2020 and increase of <unk> 8 million or <unk> 91 per cent.
Sales and marketing expenses were one 6 million for the three months ended March 31st compared to $1 $3 million for the same period, and 2000 and twin and increase of <unk> 3 million or 21%. Both of these increases reflect additions in key areas to our team and they build the infrastructure necessary to expand product lines launching indications and comply with global <unk>.
Standards as we plan our international expansion.
General and administrative expenses were one 7 million for the three months ended March 31st 2021, compared to $1 3 million for the same period, and 2020 and increase of <unk> 4 million or 30%. This increase was due primarily to increases in insurance occupancy costs and incentive based and share based compensation.
At March 31st 2021, we had cash and cash equivalents totaling $64 $9 million as compared to $20 $1 million at March 31st 'twenty, and 'twenty with and increase resulting primarily from the completion of a public offering of the company's common stock and February 2021.
I will now turn the call back to Joe.
Thanks Daniela.
As mentioned our commercial team enjoyed a record quarter supported by recovery and elective case volume New Biologics partners added to the funnel and even capital sales and service agreements, let's break down that progress into our four growth pillars.
First functional neurosurgery navigation continued to rebound with 214 cases covered by our specialist team and the quarter versus our prior estimate of 190 to 200, the deviation versus our earlier expectations came and the last few weeks of the quarter as many of our hospitals that had halted elective procedures and January and February.
Turning to action. It is encouraging that March was our highest month of the quarter and gives us confidence that U S case volume is returning to pre pandemic levels.
From a development standpoint, we continued progress across our portfolio and solidified budget schedules and team members using the capital infusion and the first quarter imports.
And importantly, we achieved FDA clearance for our array navigation system, and our and the process of starting on a limited market release for the product.
As a reminder, the array is designed to not only streamline the work flow and reduce time, but it's also the first product designed by clearpoint to be used and both the MRI suite and the operating room.
This is an important step and our strategy and becoming a true neurosurgery platform that can be used with multiple imaging modalities and not only the MRI we.
We expect first cases to be performed here in the second quarter and the limited market release to extend throughout the second half of 2021.
We have continued development across the rest of our pipeline as well, including the 2.1 Clearpoint software the maestro brain model the orchestra multi trajectory headframe, our co developed and our system and collaboration with Blackrock and our robotics assisted system, which was announced yesterday and we are building and partnership.
With D N K engineering we.
We feel that we have and exciting cadence of new and improved products over the next few years, which will continue to demonstrate clear point and it's one of the true innovative companies on the neurosurgery states.
With our additional funding we are now better able to communicate estimated timelines for the first human cases with each of these products. For example, we expect first cases and smart frame array and 2021 clear point to 0.1, and Maestro and 2022 and orchestra M E R and the robotics platform in 2023.
Second our biologics and drug delivery team continued to add additional partners and capabilities to the team and the first quarter.
By the end of Q1, we hit the threshold of 30 active customers and the biologic space, adding an additional indication and shots on goal and gene therapy and cell delivery programs.
As a reminder, it is common that each customer or partner has a drug platform of their own meaning they are not planning to use their drug.
Only for one indication.
Our decision to expand into Europe has already helped us to win additional European based pharma business and academic researchers and we plan to continue adding partners and still believe that initial term commercial gene therapy approval for neuro could take place and 2022.
It is also important to note that the majority of our investment into the navigation system mentioned and pillar. One applies also to biologics and drug delivery that is the beauty of the platform strategy as much of this investment is applied across many indications and both biologics and medical device navigation.
For our third pillar, which is our own therapeutic products are primarily development activities today.
The laser program and concert with CLS, and Sweden, and IGT and France continues to make progress as we prepare for and FDA submission and the second half of 2021, we expect first clinical cases with the complete neuro system and 2022.
After laser or biopsy and smart biopsy programs continue to progress and we expect first clinical uses of these products and 2022 and 2023, respectively.
Finally, our fourth pillar of achieving global scale has made progress as well most substantially the new European M. D. Our guidelines are meant to go into effect later this month, our project to update our quality system to ensure compliance with the new directive has been successful and we fully expect to meet these new guidelines.
This is a tall order for many companies and while the investment into our quality system has been extensive we believe the fact that we made and will continue that investment.
And that creates another barrier, where many companies have decided not to continue in Europe for certain product lines.
We want to be we want to be there to fill the void for hospitals and patients that need clearpoint.
We also obtained CE mark for our four French five French and seven French accessory kiss.
Showing that we continue to demonstrate the capability of getting new product CE marked even in this challenging environment.
As many of you are aware of the pandemic has continued to rage and Europe across the first quarter. So our case volume and installation schedule was put on pause. However, we are encouraged by the more aggressive vaccination distribution across Western Europe, which is our next focus for expansion.
As it appears elective case volume is rebounding and some of our pharma partners have resumed clinical trial work, we are more comfortable providing a forecast for the full year of 2021.
We believe revenue will be and the range of 16 to $17 5 million for the year and case volume supported by our clinical team will be and the range of 900 to 1000 cases well.
And while we are encouraged by the return of cases, the wider than usual range is primarily driven by two things.
First the timing of capital, while we do expect the resumption of a number of evaluation systems being installed and the second half of 2021, the timing of attorney and eval into a formal purchase order has slowed and there is a chance that sales might crossover into 2022.
And secondly, the timing of the initiation of new pharma trials. We are encouraged that the number of our partners continue to progress through the FDA Protocol review and.
And internal.
Internal hospital Irb's. However, the comprehensive review of protocols delivery drug manufacturing and storage are all hurdles that certainly need to take place before it.
With that I would like to open up the call to any questions.
At this time and we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad apart from mission. So indicate your line is and the question queue.
You May press Star two if you would like to remove your question from the queue from participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.
Our first question comes from the line of Andrew deal Silver with B Riley Securities, whose share with your question.
Hey, good afternoon, congrats on the progress and thanks for taking my questions. So I just opened up your 10-Q and you know I was actually surprised on the biologics and drug delivery side of the business and the strength and really looked like it was almost completely tied to the disposable side of the business Oh can you give them.
Color on on why that has such a big uptick I didn't see any <unk>.
Commercial activity that would drive that wasn't it wasn't just off the new partners or anything there would be useful from a color standpoint.
Yeah, I mean, the one kind of a net thanks for the question and Andrew I think the one comment I'd make on this topic is that we.
We still enjoyed a significant part of that revenue being service space. So I think that did continue what we fight fee added is as you pointed out the resumption of some of these clinical.
Clinical trials that have started to take place again and some of the preclinical work that often happens behind the scene. So you know where we saw I think and increase here and the first quarter was many of the toxicology studies that might be done at certain preclinical labs and see our OS.
And those started to return both based on new customers as well as our existing customers as well, but I think the primary uptick you there and change to the mix was a number of smart flow cannula. As for example, our custom cannula that were delivered to these labs to perform these preclinical tests prior to a submission to FDA for a new.
Al.
Okay, and what was your guidance and.
And as it relates to the biologic and drug delivery disposable side of the business and it and your guidance kind of figuring out and one Q numbers are fairly stable for the remaining three quarters as it relates and disposables or.
Is there other kind of variances and there that we should be thinking about.
Yeah, I mean, some of the biologic revenue are often comes in.
Sort of buckets similar to capital deals closing.
So for example, we might hit a milestone for a development revenue.
For a project and one corner so and so for example, if we're making a custom day.
Advice for one of our partners, we might get a significant milestone payment and one quarter, but then we won't cross a milestone and the next quarter. So that one would be zero or vice versa. So so that can be a little bit choppy.
And similarly, you know these large orders that you can sometimes see for toxicology studies.
It could be a few hundred thousand dollar order, because they're ordering 100 catheters or so and theyre doing all of that testing and the quarter, but the next quarter. It might just be protocol, writing and preparing for and FDA submission. So as we continue to add partners I think those numbers will will absolutely be stabilized.
But you know for the for the time being is we're still early with some of these new partners.
It can be a little choppy quarter to quarter.
Okay, Great I got I got one more on on the biologic and drug delivery and then one on a D B S.
So I I think you touched on this and your prepared comments, but I'm, assuming you're still preparing for a potential commercial launch by the end of this year or early next year for your first drug delivery partner and if that's correct.
Can you just give us a little color on and how the infrastructure readiness is going as it relates to some of the international and domestic it needs for the transit the translational services that you and tender offer there.
Yeah. So to answer your first question, yes, we are still and preparation and supporting multiple partners on their first commercial release I believe P. T. C said on their earnings call last week that they have delayed the U S. BLA application by about three months as it related to you know sort.
Sort of sort of some of the COVID-19 and believe the delays that we're all experiencing but you know as I touched on you know certainly we at this point believe that things are on track for <unk>, 2020 'twenty 'twenty two commercial release sometime hopefully in the first first half of the year is it sort of what we're thinking but we're still putting a lot of energy and to the.
<unk> of getting ready for that and some of that preparation can be identify identification of potential patients a communication with pharmacy all of those different things and and to be clear. These are not things that we'd do alone you know the large much larger pharma companies that we partner with have teams associated with as well and and we're trying to handle is <unk>.
And the device training and education that we possibly can and then when necessary and so I think that's a that's that's kind of one side on the on the biologic side and I'm sorry, what was the second question I didn't quite get it.
No you answered I was actually going to have a D. D. B S follow up and it's just related to where you are and the asleep procedure protocols as far as either your partners running tests or are you having to start a clinical trial I'm, just really curious where you are and getting there.
Sleep procedure label and what the next steps are.
Yeah, I mean and in some ways, where it it's sort of two fold one theres preparation work that we can do and are doing organizing and all of the clinical evidence that supports both awake and asleep procedure again. This is really up to the surgeon on how they want to pursue a treaty and an individual patient. So we you know, we support them and and either man.
And her.
You know that being said, we're also developing the rest of the portfolio that would support these types of procedures as well. So some of the products that I mentioned in my prepared remarks around M E R around.
The array system that can be used and the operating room around the maestro brain model you know it is.
All of these tools together that are going to create an excellent work flow both for awake procedures and asleep procedures, but you know as as we continue to see you know a higher percentage of asleep procedures being done it's quickly becoming sort of and I must say these standard of care, but certainly and accepted practice at this point and.
And as that progresses, I think that helps.
We shared before we have an indication for MRI guided lead placement. So you know that's that's what we particularly do but because we are not knee deep DBS company itself.
You know, we we kind of rely on these specific labeling of the DBS companies and you know I think you can see from a number of communications from DBS companies that image guided placement of DBS systems is certainly becoming more and more prominent and the training and education and as that continues to evolve we will certainly be evolve.
And with it.
Okay great.
And when one of your questions and answer one of your questions. Though at this point you know, we we don't believe that a clinical trial of any kind would be or at least a prospective clinical trial would necessarily be a net are required to get that sort of indication for some training materials. You know, we think theres significant data all the way already out there that shows.
On the safety and efficacy of these procedures.
Right right and remember you talked about that little bit and last quarter.
And that's useful context. Thank you very much for all the color on it and best of luck on board.
Alright, Thanks, Andrew.
Our next question comes from the line and free checking and with Lake Street Capital markets. Please proceed with your question.
Hey, guys. Thanks for taking my questions and congrats on the progress and score.
Thanks, Brian.
Yeah, starting with the FDA clearance of smart frame array I was hoping you could just take us a little bit deeper on the importance of that smart frame I heard your comments about a little bit of a limited launch throughout this year, maybe you could talk to how you anticipate that.
Scaling and further out years, and then just kind of explain the importance of the increased automate automation and enabling software and how this could.
More broadly expand your Tam in this area.
Yeah happy to you know as a as a quick reminder, we currently really do not do any DBS work in Europe or outside the U S and even in the U S. We have less and 10% market share today of total DBS procedures, but really what that means is less than 10 per cent of our procedures are done and the MRI and more than 90 per cent.
And today are still done in the operating room using optical navigation.
C T guidance or E M navigation, yes, that's something other than the MRI, so what kind of put it that way. So really what this tool allows us to do is instead of only focusing our efforts on taking a customer that's used to doing and operating room procedure for the past, maybe 20 years and trying to convince them of and entire.
New workflow in the MRI suite.
This is a tool that will allow us to offer them a tool designed for the operating room as well, where we can sit there with that customer and we can say look we know you know clearpoint has worked to develop incredible algorithms navigation tools very precise movements on our disposable frames and the path you could only you know experienced that.
And the MRI suite now we've got something that you can try and the operating room as well. So that's that's really the power of what this product is and again, it's 95 per cent of the workflow and the navigation steps and the preplanning and the import and importation of different data and the fusion if that can all be the same between both environment.
And it becomes much more likely that once our system is on the operating room that some of the surgeons at that hospital would be willing to give it a try and the MRI suite as well. So that's really the primary part of the strategy, but from a platform standpoint, it's crucial to what we want to do because we don't want to be known as only the MRI and company, we want to be the neurosurgery platform company.
B therapy, enabling company and this just gives us a I think a very powerful tool set to do it.
On your second comment was sort of around the scaling of this you know.
If anything was neurosurgery, we wanna be incredibly careful because the stakes are incredibly high.
So you know we planned on taking kind of a you know a metered approach as we roll. This out first in our labs that wants to do the procedure and the MRI, where we learn and we have plenty of experience as well after that procedures that are in more of a hybrid workflow, where they can actually transition when and and intraoperative MRI from the operating.
And to the MRI with that same patients and our system in place and then the final step of that would be to do and operating only procedure, where the entire navigation would be done both either by optical and navigation or a C T or something like that so there's a a progression and the rollout of this and we're going to do it and you know and organized fashion, which allows us to create white.
Papers to create case reviews training materials et cetera for more and more broader rollout.
2022.
Got it and it makes sense and then.
And with functional neurosurgery, just wanted to ask and a little bit more depth about the B and K Engineering partnership you guys announced can you talk to exactly what pieces of the procedure, you're looking to rollout robotic size and exactly.
What this could do for a surge and as far as our patient throughput or procedural times and and how impactful that could be once that's launched and and a fee.
Two years.
Yeah, and I'm happy to do so.
There's a couple of different phases that we're sort of rolling out and and to be very clear you know we this is not the most ambitious robotics system that we are not attempting to build the da Vinci robot for the MRI suite that that's not the intent here is really the automation of some of the more mundane and parts of the procedure.
That as you pointed out can certainly save some time and save some and crude precision and accuracy as well.
So and I try not to go into too much detail, but you know I know you've been following us and you've seen the technology.
And what we're trying to do is one of one of the steps of our procedure that delivers our precision is that and you make a fine tune adjustment with art from wheel and then you've taken additional image and then the image would be taken our software will automatically calculate how much more you need to adjust those turns and then the surgeon would stand up walk over to the.
Morai suite makes those turns and then take another scan. So it's repetitive process that allows you to continuously get closer and closer and closer to your target, which is how we are so precise.
You know the reality of what our surgeon experiences and sometimes they have to get up you know three or four times for each trajectory and run three or four scans for each trajectory and each scan could be a minute to two or three minutes as an example.
So if you add all of those up you know, we're probably spending on a simple procedure, maybe 15 to 20 minutes on the navigation and stuff and a more complicated multi trajectory drug delivery case, we could be spending an hour to an hour and a half on that particular stuff.
So you enter in the robotics platform and it does a few things for you on number one is that the surgeon doesn't have to get up anymore to make those adjustments. They can do it from the control room and buy it with a simple push of a button. So that limits. A few you know annoying and parts of the procedure you could say.
The second step and an improvement that it makes us that a human being trying to turn a thumb wheel one eighth of the turn is not going to be quite as precise as a robotics motor that can turn it and exacting them out. So we think the number of times that the surgeon and her fellow sort of OPE overestimates, the turn or underestimate.
The turn we think that'll be resolved, so there'll be fewer adjustments that need to be made.
And the third step is actually to communicate directly with the scanner itself.
So what that means is that instead of making the adjustment with the robotic system and then manually having to take and additional scan the computer and the scanner will talk to each other so that the surgeon will inevitably be able to just simply push a button and then you know 510 minutes later all of the adjustments and additional scans will already have taken place.
The surge and we'll simply have to come back into the room.
And sort of confirm that final trajectory before insertion and then everything will be lined up so there's kind of a series of phases here that are both hardware on the robotics side and software and navigation that are that are important to the project and that's really where D and caves expertise is so they are sort of a supplement to our existing team.
To to kind of accelerate the program as we said.
Okay.
Got it and it makes sense and then just the last one from me hopping over to the biologic side and maybe this just came up on previous calls, but I think it's worth revisiting and given the approval from P. T. C is in the near and intermediate term and we'll call it.
One P T C and going through the approval process ours day, specifically, writing into the documentation and the delivery is required to be done so on either a smart frame on smart low cannula or how does the documentation and look for our partners assets once it.
Approved on the market.
Yeah.
So that's a good question and I you know I don't I don't want to go into details on the P. C sort of exact example, you know I think that's and we want to make sure we're protecting their documentation and strategy to and I'm sure. If he can add to it.
And my answer for you, but if.
If I were to speak in Generalities says and we look across all of our partnerships and sort of what we expect is going to be commonplace is that you know our number one there's like as you pointed out there's two parts of our procedure and how we're we add value are the first one is the navigation system itself and I think it's common that companies will submit a protocol.
That provides sort of a sort of an open ended part for navigation, you know where we come in to say any commercially approved neuro navigation system can be used to deliver the device, okay and whether the FDA agrees with that are you know regulatory bodies agrees with that and.
Some cases and they might say, yes, that's appropriate because of the level of precision that you want and some cases, they might say you know.
We appreciate you wanted to open label, but you actually you know enrolled every single patient and your trial using something like Clearpoint under MRI guidance. So it remains to be seen exactly what decision the FDA makes and.
And between and many of these trials that would certainly benefit US is if the FDA were to say you can use any MRI guided navigation system, because obviously, that's a you know a a.
Less crowded market and one that we you know we are the kind of the dominant player and today. So that's that's one side of the navigation on the cannula side, you know, it's incredibly com and that as a company goes through the regulatory process.
They are doing and extensive number of flow tests, and toxicology tests and preclinical testing bench top flow rates and infusion rates and everything else you can imagine a lot of these clinical services that we are we are now offering today.
You know if you said net adds to the F. D. A it's very common that you would say we plan and are using the smart flow cannula and manufactured by Clearpoint Neuro Irvine, California and that does get in fact written into the protocol and and in many cases that the benefits of the pharma company because it allows them to get through the FDA review quicker because.
The FDA has already seen our cannula and so many times and prior protocols that they've already reviewed it and they kind of understand you know where where that says it's not a surprise or not a new device that they then have to review independently. So I think that's that's the benefit. So you know so if you if you think about a a co labeled or.
You know co registered device to the drug itself I would say that the likelihood that that happens with a cannula is a very high and and higher than it would be from and navigation standpoint, but again nothing has been approved yet so whatever the company actually puts into the labeling and doesn't necessarily mean that the FDA or the European.
But if I bodies is going to deliver the same information.
Got it perfect. Thanks for taking all my questions.
Yeah sure. Thanks Frank.
Yeah.
Our next question comes on line of be sure and done well.
And sometimes capital. Please go with your question.
Hey, Joe Congrats on a great quarter I think that you are amazing and see you the growth pillars set off on coupon and you need to achieve he's very rialto and I'm looking forward to the continued growth on a clear point on the yard leadership.
Alright, thank you.
Yeah, Hey, Joe until during the last earnings call you pointed out that you have identified 75, and as you know potential customers 40, biologics and drug delivery growth pillar could you share some updates on the progress on the kind of conversations and what we are doing with them and what's the five new biologics partner from these 75 and as you know potential.
On this.
Yeah, so and so and thanks for the question and I really appreciate it and I think it's an important one so you know with the way that we measure partnerships I think it's important to think about you know effectively we said you know who's and active customer who has purchased products and services from US and you know recent history, let's say on that.
Last 12 months to 18 months that sort of thing. So we try to keep this common count, but it's also possible that we have a partner that comes in that only you know orders five cannula is to do initial testing that's not something we would count as a partner or a customer because it's just a tiny little entrants into.
On a relationship.
Similarly in some cases, a company might acquire that we're working with might acquire another company in which case you have two platforms inside one company, which has happened as well so that we don't want to give an exact and count because we don't want on a weekly basis be saying, Oh, we added to and subtracted one it gets a little tricky. So so whereas in the past we said 25.
Five active accounts in the first quarter of this year, we crossed that 30 thresholds, which is why we sort of updated that number I think it's a very fair statement that you made and that these additional five partners would would have come from the 75, plus our additional targets that we had and our funnel.
So we we plan to continue to add.
Biologics customers to the top part of the funnel and then continue to convert customers already in the funnel to a formal partnership after we at least have some significant agreement or a master services agreement or something something in place that that kind of justifies that transition.
Alright, Thanks, a lot Joe and got it I just wanted to touch a little on the functional neurosurgery side. So it's great to see that all cases are rebounding nicely and then we have to be and successful in attending set and keeps us by a pilot program. So given our current hate accounts, how many procedures do Deane we are able.
To do on a yearly basis should COVID-19, a gas lift at all and how would you think the remote support program would help to increase the number of keys us weekend and tend to moving forward as well.
Sure Yeah, I mean, if you're if you're simply did the math across our entire team of folks that are either hired or positions that we are openly recruiting for that.
And that math would say that we and the capacity to do let's say about 3000 procedures right. That's the that's the number that we're sort of built to do and as I mentioned and our forecast we're planning on doing about 902 1000 and this year. So we we we are building excess capacity not just for you know a full return to elective procedures.
After COVID-19, but also because we are planning on adding these new products to our portfolio like array like M. A R likes the robotics platform. Some of these will expand our presence and an individual hospital into multiple rooms. So you know so we're going to continue to hire sort of ahead of the curve there.
The pilot program, we're doing for remote support is designed to solve a couple needs number one is that there are certain situations, where we simply.
The procedure is a very quick procedure a biopsy, possibly for example for a relatively large target and.
It's very common that the surgeons discuss what the need is with our team prior to that surgeries, taking place and I think it's very likely that in some cases the surgeon with day. Yeah. This is gonna be a quick procedure, we actually don't need the clearpoint person to be here and this gives us a chance to cover that remotely and not have to pay the expensive flying from went in and some cases et cetera.
So that's one reason for the pilot program. The second reason for the pilot program is that and some cases, we do get get something added on and the last minute you know as I mentioned and our remarks you know the last three weeks of March led to a significant increase in case volume.
And in some cases, we found out about a case the night before.
So and those circumstances, if it's in a more remote hospital and its difficult for us to get to.
And that case, we might be able to offer this remote service where to say sorry, we couldn't get there in person. It would so last notice, but we you know you're not going to be alone for this procedure. If you you do need if it's a challenging one and you need do you need some help and those are really the things that we can do.
The third part that the remote system offers us is the ability to bring new clinical specialists up to up to speed quickly.
So you know you one of the value propositions of our team is having someone there to help you troubleshoot and that's not something you can learn and a textbook that's something where you really need to see cases, and you need to see how different surgeons respond to challenges. So that you can share other surgical experiences with folks.
This would allow you to do is that instead of only attending actual lives cases, you would be able to sort of beam and two additional cases for your education too. So theres really three three reasons that we're piloting and that program and we think it'll become a bigger part of our future.
Great. Thanks, a lot Joe So I just got one last question I've listened to the one of the part and costs with Jack and Kelly, our VP of marketing spoke about how she got to know you and how capable you are as a leader. So could you just share your thoughts about the culture, you are building and goodbye.
And that's a wonderful question and thanks for asking you know.
You know our culture is something that I think a CEO can can help put guardrails on but it's up to the company to actually build it and it's it's not something that.
You know you you want to be totally on top.
Top down by any stretch the imagination and it really has to come from the ground up so it really starts with.
Number one and attracting just some of the top talent that you can imagine people that are self motivated and want to win and share that common purpose and I think that's something that I think it was already here at MRI interventions before we became clearer point and it certainly has become more prominent as well. So I think that's that's a very important part of it and the other one is really.
And elements of of trust as well and understanding you know how you can rely on your fellow teammates come through when you need to and share and that excitement in that sense of responsibility to and I think that the thing that really unites us all as a common purpose that we talk about all the time, which is we recognize the people. We are helping the stakes are incredibly high and these people.
And our truly these patients are truly suffering and you know that's something that we absolutely all have in common and is that we want to help those people and we recognize every day that we waste is another patient that we could've helped and maybe didn't and so that's that's the common elements I would say.
Alright, that's awesome, Joe Thanks, a lot for sharing I have no doubt and debt Clearpoint will be D. Standard go to auction fall and use of Juicy and our future is a privilege to be your shareholder and we are supporting your auto we thank you for all your hard work.
Thank you.
And once again and people like to ask a question. Please press star one on your telephone keypad. Once again, if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes on line from Michael Lipton.
And in small cap, whose share with your question.
Hey, Joe it's good to talk to you again.
And Mike.
Hey, I had a question about the general counsel that you had hired.
Or is that related to negotiating any kind of royalty agreements and I know you discussed that and the last the last conference call.
And I wouldn't say that.
On them.
Oh, sorry, and then have you done any how did you guys and.
And negotiated and any royalty or milestone and agreements with and your your trial partners.
Gotcha, and it's a great question.
I would say our Elisa our general counsel was hired because she's amazing [laughter] and not just for that that one topic. So you know while I think she has that expertise and she's certainly has a network to call and when we are encountered with something that we haven't seen before not just on the device side, but on the pharma side you know that.
That's the type of resourcefulness that she certainly shows so I have no doubt that we've added that capability here you know to date I would say, we're still on the exploration phase of exactly what you described and you know part of it becomes the type of partner that we're dealing with you know if it's a you know a customer with a market.
Cash you know over over 10 billion and maybe even higher certainly higher than that.
They have a different appetite for the spending and they can provide relative to the development versus the way that they would protect royalties on the other and or or milestones you compare that to many other startup companies that we work with that have zero revenue have you know significant funding, but would still like to share there.
The risk and some fashion and which I would say that we're prepared to do so we have certainly had exploratory conversations on these but you know at this point I wouldn't I wouldn't point to any substantive agreements that we have in place are just yet and put it that way.
Okay.
And then a little bit bigger picture I wanted to see if you guys of any targets in mind about let's say the next three to four years for revenue and EBITDA margins and anything that we could kind of model out.
Yeah, we're at where we're in a tough spot, where we're not quite prepared to do that and.
<unk> got over the hump with my board to to do guidance or forecast for this year. So I got you and I got to.
Work slowly at that and I think we absolutely have our internal budgets, but I think like you see from maybe some of the analysts reports or some of our prior comments as well is that you know we've got two ways to look at our business. The way one way is to really say look we've got a base business based and navigation and where we can continue.
To place new sites, we can continue to grow utilization a little bit each year and those things together and we'll continue to grow that base. You know 15 to 20 per cent over the next five years right. So that's that's sort of kind of the known predictable elements of the business itself well it becomes a little trickier is when you have these you know potentially and much larger.
Revenue driving and milestones that can sort of flip a switch and make us move faster you know so.
The approval of a laser system or the approval of one or two gene therapy commercial partners.
Or the addition of.
You know one or two significant phase III clinical trials are or these new products getting approved for M. A R or biopsy or smart biopsy needles and things like that so we've got a number of different things that are a little bit harder to predict exactly when those have and what year, but would certainly add to that that sort of base business.
So you know without getting into the you know the questions around you know when.
<unk> is this going to hit in 2022, and therefore when does that revenue hit.
It's not we're not quite prepared or sophisticated enough from that planning standpoint, that's I understand that time and perfectly.
Okay and then.
I guess on on EBITDA margins, and and just overhead costs and general.
You have any and.
And what frame of reference for let's say 50 or 100 million.
On.
What we could expect for those.
And just trying to figure out well.
Still what is the what is the.
The SG&A look like and you know.
Yeah, I mean, I think if it is a few different buckets. So number one you know the two primary investments that we're making right now after the infusion of capital we had in February.
One is on the product development side of things both through partnerships like the NK, which you already saw as well as internal hiring.
So you know the way we think it is because we brought that extra $46 million into the company and our investors clearly wants us to put that capital to use what we're doing is we're almost are planning to spend to bring in that that sort of steady state from an R&D standpoint, a couple of years faster than we would've otherwise so instead of waiting and.
Slowly hiring 2021 2020, two 2020 three and this gives us a chance to hire a bolus of really good people here and the latter half of 2020, two and then kind of ride that team for the next few years. So so again accelerating hiring and then similarly to do you know where we can't hire the expertise or don't want to build.
That capability in house, because it could be massive we do a deal like with the U K, where we can leverage that their company or do a deal like we did with Philips, where we don't have to hire and entire artificial intelligence machine learning team, we can tap into the Philips team through a joint development efforts. So those are the types of things on the development side that we're investing and similarly on the clinical spell.
Les side.
As we continue to grow and add products, we need to increase our capacity for a couple of reasons number. One is simple case volume right you have to do the math and figure out how many cases the clinical can cover and are in a given year and you know how do you make sure that there's extra time leftover for P T O and maternity and paternity leaves and things.
Like that so that that's more of a math problem.
The other one is the development problem as well as we want to make sure that you know its clinical specialist and join our team. They have a place that they can grow and they're not expected to sort of be a clinical for 20 years and so that's something as well, where we're doing our best to cycle, our clinical team and other functional parts of the company and then replenish that team and some of that case volume with.
With new folks that are very excited to join and that's.
That long.
Long winded answer to your to your question, but it's a you know it's really meant to show that.
The capital that we're using.
Arguing and increase our spending here over the next 18 months or so, but it's not something that kind of lives on forever.
As far as the speed of that growth and I think you start getting into 2020, three 2020, four and and certainly by the time, we get to a $50 million revenue ramp by.
By then and we would we would certainly be on the and the black.
Okay.
And one other comment I would make there too is it's an important one is again a big part of our strategy is not try to be and a thousand hospitals around the world because we don't we don't see that as the future of neurosurgery, we see concentrated into more select centers, where patients are willing to travel to to get these procedures done and so what that means.
Is that where we do need a strong and incredibly talented clinical specialist team. It does not necessarily mean that we need a massive sales organization. So for example, if you're if you're calling on you know 100 at 150 sites around the world.
Certainly don't need 100, and salespeople to do that and you need a smaller group of organized competent folks that leverage the clinical team who's there and is there is and the route and so.
I think all the the money we would save instead of hiring a massive sales team allows us to reinvest invest that money either into supporting R&D and clinical specialists or into you know into our EBITDA margin.
Okay and then the last question I had was about the the maestro.
What's the general purpose of this and is it is it to speed up surgery times, and then could you maybe give an example of.
And how it would work and a procedure and what the revenue model or margins might look like on those.
Uh huh.
And my best and so the one part I can definitely answer is how it works and what they're going to do it. So I'll start there. The the maestro is designed to really be the engine of our navigation system and the future you know so instead of really relying on two D and three dimensional images that are reported over from the C T scanner or from and the MRI side.
What we can do is take those images and just makes them all much more informative and applications to it.
So what you know what I mean by that is with a push of a button and being able to take a three dimensional MRI image and turn that into a tool that has all 22 of the sub critical structures.
<unk> already identified sort of defined from a shape and volume standpoint, so there's a surge and can actually see what they're doing and a much more detailed fashion and not having to use their own eyes to figure out exactly where the boundaries of the structures are so that's that's sort of the base elements of what the tool will do the applications that we can.
And so that are much more significant right. So what we're able to do for example is not only highlight our primary structures of the brain, but for example will be able to add the sub nuclei, which are the targets that you would go to from a deep brain stimulation standpoint, you know this is really what the surgeon is looking for this is sometimes difficult.
Two identify on MRI, and and certainly difficult to identify on C. T being able to automatically find those for you call out the boundaries and later confirmed that your lead is actually in the southern Atlantic nucleus. As an example is something that I think will be very beneficial and and something that will speed up procedures.
On the other very important aspects and tools that we're working on is a sort of a and infusion finder for our drug delivery partners.
So what I mean by that is incredibly common that when you're writing protocols for a gene therapy or a stem cell infusion you say that your goal is to achieve 50 or 60 or 80% coverage of a particular structure of the brain.
A surge and how are you actually going to calculate that during that procedure and ensure that you know you've achieved with the protocol demanded so what the brain model can do is not only identify the structure that is your target, but it can provide and envelope around the infusion itself and be able to give you a calculation and saying you're at 21% you're at.
27% Green light, you're at 60% and you did what you set out to do as a surgeon now you can go ahead and close up that patient and send them home. So it's that that has so much importance across a number of different reasons not just for a successful clinical trial, but imagine you have this very expensive gene therapy that you're commercializing and you have.
Patients that did not respond to the treatment.
And now you're talking to and an insurance company and trying to figure out well, how am I going to justify payment for those patients that did respond and how important is it to have a complete patient record that shows your trajectory the safety of the approach the tip of the infusion cannula at the target the complete infusion measured and calculated on the successful close you know as a surgeon.
And then show that exactly all of that detail to anyone who wants to know and say look I did everything I, possibly could for those patients. So that the documentation that the brain model can offer is another incredibly significant part of our strategy.
Right and it makes sense and then on.
The revenue model as well I guess is this is this something that's running throughout the entire procedure or are there kind of what stopped point, whereas it runs a scan.
There would be it depends on certain use cases, but what's what's I think you know as far as I know unique about our system and what it's designed to do is the speed of which the calculation takes place you know there there are similar Atlas type technologies that can certainly be used and.
And I can identify individual box soles and create boundaries.
But those are commonly require much larger and more powerful computers and in many cases and they can take 810, 12 15 minutes for each calculation and and it faster and if that's the case you know it obviously is not really a peri procedural tool that can be used during the case. They would it would just be taking too long you know we think we can get these calculations down into the sub.
15, maybe sub 20 seconds range in which case and you know now every time you run a scan with Clearpoint you could be plugging it into the model and the model could be adjusting as well. So so those are the those are the types of things, but like I said it depends on the use case for our pharmaceutical drug delivery infusion, that's something you're absolutely wants it.
Continue to updates during the procedure.
For something like a DBS procedure, where everything is static the whole time, you know it really doesn't make sense to constantly do the update. So you really just wanted to do kind of a pre and post for the confirmation standpoint.
Okay, and then would this just be like and added.
So the total procedure revenue.
Okay.
Yeah, there's a number of it and so it could be a combination of capital and sort of single use software.
Or it could be in addition to the a S. T of the disposables used and the procedure.
And there are some situations so imagine a pharmaceutical trial and you're trying to track and individual patient over time to see how they're responding to drugs and you know forget about surgery. For example for a for a second you know this is just a drug based therapy to treat a patient with traumatic brain injury or whatever it happens to be.
And our brain model that can calculate everything and the exact same way on that same patient longitudinally to show change caused by the drug or the placebo you know that's another way it can be used where it might not necessarily have our disposable and net and that particular element. So theres a number of different ways and different circumstances, where we think this tool can be used and then and the you know the.
Model might change based on what it is we're trying to accomplish.
Alright, great and I'll hop off thanks, so much for our for answering my question.
And I'm sure thing Mike.
Ladies and gentlemen, we have reached the end of our question and answer session and now I'd like to turn the call back over to Mr. Gardner for any closing remarks.
Yeah.
Alright, well once again, thank you to everyone interested and being a part of our team story here at Clearpoint.
We believe we are doing very important work and will continue to put the patients and their families first as we take on greater and greater responsibility for their treatment across our portfolio Goodnight everyone.
This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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