Q1 2021 Motus GI Holdings Inc Earnings Call
[music].
Greetings and welcome to the motives Gi holdings first quarter 2021 update call at.
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A question and answer session will follow the formal presentation it for.
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Now I'd like to turn the call over to your host today Garth Russell of lifestyle Advisors. Please proceed. Thank you operator, and thank you everyone for joining us for the bonus Gi.
First quarter 2021 update call representing.
Representing the company are Tim Brandt, Chief Executive Officer, and Andrew Taylor, Chief Financial Officer, and Mark Pomeranz, President and Chief operating officer of bonus Gi.
Before turning the call of the management for the opening of our I would like to take the minutes of remind you that this conference call and webcast will contain forward looking statements about the company.
These statements are subject to risks and uncertainties that could cause actual results to differ.
Please note that these forward looking statements reflect our opinions only as of the date of this call.
We will not undertake any obligation to revise the publicly released the results of any revision to these forward.
The statements in light of new information or future events.
That could cause actual results or outcomes to differ materially from those expressed or implied by such forward looking statements.
In greater detail in our most recent filing on form 10-K, and all of other periodic report on form 10-Q, and 8-K filed with the SEC.
I would now like to turn the call that the brand CEO of voting Gi yes for.
For years.
Thanks, Garth and thank you everyone for joining us today for Motors Gi is first quarter 2021 earnings call.
I'll start by providing an update on our commercial progress from the first quarter, followed by an update on each of the for value creation drivers that I first outlined during our fourth quarter call, which include product innovation and more specifically, our recently FDA cleared upper Gi pure Vu system.
Reimbursement Clint.
Clinical data and strategic partnerships.
And then ask Andrew to provide an overview of our financial performance for the quarter at.
At the end of our prepared remarks, we will open the call to take your questions.
As it relates to Q1 commercial progress I'm pleased to report that market conditions are steadily improving in the U S hospitals and as a result, our team continues to focus on building important customer relationships as we execute our strategy to cultivate awareness market acceptance and utilization of our.
Terry pure Vu system for colonoscopy.
To date, we've conducted of valuations at more than two dozen target hospitals, most of which are prominent academic medical centers that are part of larger multi hospital health systems.
These product evaluations have progressed at varying speeds, particularly due to site specific impacts of COVID-19.
As a result, the initial phase of our commercialization has taken longer than planned. However, I am pleased that interest in peer view is growing.
Importantly feedback from existing users and prospective customers regarding our technology has been highly positive.
We are receiving more inbound requests by physicians and hospitals interested in evaluating the peer view system, which we believe positions us very well for future commercial success.
Our initial strategy has been primarily focused on key opinion, leading Gi is at prominent U S Hospital systems.
During the last year, we've supported this effort through investments in digital marketing, including the creation of our peer view podcast series, which are one on one interviews with Gi physicians as well as our growing compendium of clinical case studies also available online through our website and other social media platforms.
In terms of our pipeline our sales team is expanding its outreach to regional community hospitals and the idms.
For example in Q1, we restarted and completed the valuations at both Houston Methodist Hospital in Texas, as well as Sinai Hospital, one of the largest community hospitals and Maryland.
In terms of key performance indicators in the first quarter of 2021, we delivered a 40% increase in revenue compared to last quarter.
Notably this represented our third consecutive quarter of incremental revenue growth.
While revenue numbers are still quite modest relative to the very large addressable market opportunity for peer view in the U S. We are encouraged to see a steady increase of pure view procedures conducted this quarter, both paid and as part of product evaluations in comparison to the second half of 2020.
We attribute this progress to the rebound in Gi procedures at U S hospitals as well as the additional training were conducting with targeted physicians as we regain onsite access at most accounts.
We now have for major hospitals signed the volume agreements, which require minimum quarterly purchases of pure view of single use sleeves in return for use of our pure Vu workstation.
We are currently negotiating additional such agreements as well as capital purchases with key sites that we expect to close in the second quarter.
Let me expand a bit further on these committed volume agreements specifically.
First these early adopter customer agreements provide us with reasonably predictable recurring sleeve revenues each quarter.
Second these agreements provide for strong gross margins as we typically command list pricing on the sleeves and returned for use of the workstation.
Finally through the balance of 2021, we expect to continue to train additional physicians within each of these committed sites with the aim to grow quarterly procedural volumes at levels that exceed the minimum purchase requirements.
Our commercial focus remains on establishing a strong base of pure view users who are advocates for our technology.
As of awareness for our solution grows so does the opportunity to expand our reach both within hospitals that have started to use peer view as well as to the sister hospitals within the same health system.
To support our growth, we do anticipate thoughtfully, adding sales resources in 2021 as needed in select areas.
I want to shift gears now to our for value creation drivers.
Let's start with new product innovation.
I'm pleased to report the two weeks ago, the FDA granted us five 10-K clearance for our peer view disposable sleeve designed to fit on gastroscope for use during upper Gi endoscopy.
This is an exciting new market opportunity that further enhances the overall utility of peer view in the Gi lab.
The new sleeve uses the same peer view capital equipment as our existing lower Gi solution and the procedures are performed at the same target hospitals by the same target physicians.
Therefore, the commercial activity and customer base, we've been developing will soon be able to consider using our new peer view upper Gi sleeves for another clinical application.
From a clinical need perspective in upper Gi endoscopy blood and adherent blood clots frequently obstruct the field of view for the physician as they are attempting to identify and treat the bleed source.
We expect by leveraging our pulsed vortex irrigation and smart sense suction technology that peer view can play a key role in assisting with the removing these obstructions to improve visibility.
Upper Gi bleeds the carrier in the U S. At a rate of approximately 400000 cases per year, which expands our total addressable inpatient market in the U S by approximately 25%.
In terms of next steps our first priority is to leverage our FDA approval to initiate upper Gi clinical case of evaluations that will allow us to demonstrate clinical utility and game of learnings in collaboration with existing peer view users.
We expect to commence our pilot cases in June at key centers of excellence, who will perform an initial series of approximately 30 real world procedures.
During this pilot phase, we will gain important procedural feedback and experience across a variety of different upper Gi patient cases.
We expect these learnings to help inform our plans for a full upper Gi commercial launch.
Now, let's discuss reimbursement.
In the fourth quarter, we submitted two reimbursement applications to CMS, one for a new technology add on payment, which if awarded would provide reimbursement for peer view in the inpatient setting and potentially serve as an accelerator to our current commercial execution.
The second application is for of transitional pass through payment, which if awarded would be the first direct coverage of peer view in the outpatient colorectal cancer screening market.
Securing pass through coverage for peer view for outpatient procedures could be an important catalyst for our business as it may provide an incentive for physicians and outpatient centers to adopt our innovative technology due to potentially favorable additional payments.
Financial and health economic drivers of course served only to complement the superior patient outcomes that we believe the pure vu system delivers today.
We expect feedback on both CMS applications by the end of 2021.
We are also in the initial stages of executing our strategy to gain coverage for the <unk> system by private payers.
The first step in this process is aligning with an external partner to assist us in our efforts I.
I am pleased to report that we just signed a partnership agreement with one of the nation's top reimbursement firms, who has been engaged to help us develop and implement a payer outreach program as well as to manage of patient access and provider services platform to support reimbursement for the peer of your system.
Please keep in mind that there are a variety of different avenues to obtain product reimbursement and we've only outlined on this call are initial submissions to date.
While we cannot guarantee reimbursement or favorable payment terms. This is a key priority for the company and I'm pleased with the early progress we are making to move our plans for it.
Moving to our third value creation driver the generation of new clinical data.
Last week, the journal cost effectiveness and resource allocation published of sponsored analysis of the pure Vu system on the outcomes of costs.
Quality of life and a version of colorectal cancers as compared to the current standard of care for outpatient colonoscopy.
There are important and compelling findings outlined in this article that showed the use of the <unk> system has the potential to generate lifetime savings of up to $992 per patient compared to the current standard of care for outpatient colorectal cancer screening.
We believe this new data could be helpful. In our efforts to seek outpatient reimbursement coverage.
In terms of active clinical studies as we reported during our last call. Our investigator initiated study at the Cleveland Clinic is currently enrolling the.
This study is evaluating the clinical and economic benefits of using the pure vu system in patients with the emergent lower Gi bleeding.
The study is designed to enroll at least 20 patients who will undergo minimal bowel prep to provide patients at a much faster time to diagnosis as compared to the current 24 to 36 hours typically required to complete a full bowel prep.
The outcomes. We received from this study could begin the challenge the current standard of care for critical lower Gi bleed patients. We anticipate having this study completed by the end of 2021.
Finally, let me reiterate our thinking as it relates to strategic partnerships.
We continue to advance our dialogue with several potential strategic partners. Our focus is finding pathways to accelerate and expand our commercial efforts in the U S and in targeted regions outside of the U S enhance our technology development and unlock value for our shareholders.
As we continue to drive greater awareness and utilization of peer view in the market, we believe strategic options that fit our criteria and they're actionable will become available for consideration.
In summary, we are making important commercial progress and have deployed a highly disciplined and focused approach to capitalize on for value creation drivers that of the potential to enhance the trajectory of our business in 2021 and beyond.
I will now turn the call over to Andrew who will review our financial results for the first quarter.
Andrew.
Thank you Tim and thank you everyone for joining us today.
We reported revenue for the first quarter 2021 of approximately $51000 primarily from the sales of pure view single use suites.
As Tim mentioned this represents an increase in reported revenues of approximately 40% compared to the fourth quarter of 2020.
For the three months ended March 31, 2021, we reported a net loss of approximately $4 6 million or.
For 11 cents per basic and diluted share compared to a net loss of $6 5 million or 23 per basic and diluted share for the same period last year.
The net loss attributable to common shareholders in the first quarter 2021, with $10 8 million for.
For 25 cents per basic and diluted share.
Which included a noncash deemed dividend from warrant issuance totaling $6 $1 million associated with the previously announced issuance of warrants the warrant exchange agreement executed in January of 2021, with an existing institutional investor.
During the first quarter net cash used in operating activities and for the purchase of fixed assets with $4 7 million.
As compared to $7 2 million for the same period 2020.
The reduction of approximately 35% year over year.
As is the case each year first quarter cash expenditures include certain one time annual outflow associated with compliance and corporate matters. This year totaling approximately $1 6 million, which will not recur in future quarters in 2021.
At March 31, 2021, we reported $27 $7 million in cash and cash equivalents.
This balance included approximately $11 million raise this quarter through the warrant exchange agreement as well as the $8 million from our 2019 term loan agreement with Silicon Valley Bank.
With our current cash balance we are poised to execute on our 2021 value creation drivers Inc.
Ensure compliance with our bank liquidity covenant and meet our overall anticipated cash needs into 2022.
And with that I'll now turn the call back over to Tim.
Thanks, Andrew.
In closing we remain committed to continuing to build a strong foundation of loyal peer view supporters and capitalize on our first mover advantage in this large addressable market.
We intend to work with our customers to ensure access to our technology and expect to continue to ramp procedure volumes in the back half of 2021.
From a near term catalyst perspective, we believe we have never been in a stronger position as a company.
We will continue to drive forward each of our for major catalysts, including new product innovation.
Reimbursement for <unk>.
Clinical data generation.
And strategic partnership opportunities.
Our commercial progress coupled with these key catalysts provide opportunities for us to unlock significant value for our customers their patients and our shareholders.
I'll now ask the operator to open the call for your questions.
Yeah.
Thank you at this time, we will conduct a question and answer session.
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One moment, while we poll for our first question.
Our first question comes from Matt O'brien with Piper Jaffray. Please proceed.
Hi, guys. Good afternoon. This is the exit youre on for Matt and Thank you for taking the question.
I wanted to start off on the minimum sleep for a disagreement obviously you kind of couple of last quarter of couple of more of this quarter.
Just any update on how those of talent you signed last quarter are tracking relative to those agreements I understood.
The COVID-19 impact in there as well and then any feedback from those institutions.
<unk> started the ramp up their volume.
Yes drew thanks for the question this is Tim.
Yes. So we're pleased that we were able to sign more committed accounts this quarter and as I as I referenced in the prepared remarks, we expect to sign additional accounts here in Q2 and beyond.
I am pleased to say that each of these accounts so far are hitting their minimum objectives.
On a quarterly basis.
Which is what we want to see but we've also been spending time in these accounts now that we're regaining access training additional physicians. So we fully expect that these truly will be minimums. In these accounts will grow well beyond that as we get further into the year, but so far the the design of the program is allowing us to get into these accounts quickly and not have cash.
Capital funding.
Roadblock.
And having it on site just fosters further usage couple that with all of our ability to now get in those accounts and <unk> Inc.
Influence of that process, and we expect that the ramp up in the back half of the year, but so far so good.
Okay, that's great to hear.
Turning to the upper Gi congrats on the approval well ahead of schedule.
Maybe you could kind of help us think about the rollout there I think you mentioned some pilot cases are going to kick off.
What point do you think it proceed for the full launch is that 'twenty, one or is that more of like a 'twenty two type of event and then how should we be thinking about how youre going to market. The institution does it change the way youre able to approach.
Of the Vac committees or anything like that.
Yes, so we were pleased.
Pleased with that FDA approval and as you said it came in.
Very short order of the team I want to compliment our team.
Internally, our R&D and engineering team did a terrific job and then of course, the regulatory folks with the with the great submission to make it very clear and focused so based on that.
The first key priority here for upper Gi is to initiate this this initial grouping of of pilot accounts to do upwards of call. It 30 procedures and the reason that's so important is we want to get the.
The key learnings the physician feedback things that will really inform us in terms of.
Procedural development all of the things that you want to do to ensure a robust eventual full commercial launch.
That's going to take.
All of it a couple of months to do those initial cases, and then based on that drew we're going to that will inform us in terms of the speed that we then.
<unk> into the market, but we're very excited right now with this with this opportunity upper Gi as I've talked about before.
It really is synergistic to everything that we're doing right. It's in it's in the same accounts the <unk>.
Same physician call point, so we can leverage and add more productivity to the to the very lean sales force that we have but they know they've got another indication to sell and on top of that it works off of the existing capital. So for accounts that already have capital on site. This is a very simple upgrade.
The peer of yours system, and the overall utility and I think that's going to play a big role.
As it relates to the Vac committees on a go forward basis, because now obviously this one capital investment is going to allow them to treat two different indications we've talked about this but upper Gi is something that.
When when blood or blood clots are obstructing the field of view for the physician. This can be a very critical in acute situation. So we truly believe that our product is going to act as a nice combination to the existing gastroscope to allow the physician to have that clear visibility, while still being able to use the working channel.
Of the Gastroscope, so theyre not now tying up the gastroscope using it for suction, they're using our device to get that suction and irrigation, which is allowing them to put their tools down the working channel, which is truly what it's intended for so we're very bullish but we have to take this in a very strategic approach. So the first portion of this will be the pilot series and then I would anticipate on the next day.
Turning call providing.
A further update.
Very helpful.
Just last one for me just stepping back from looking at the the total business in General I just wanted to make sure I fully understand the the strategy you laid out and kind of what they expect from a revenue perspective over the next 12 months to 18 months here.
Yes.
Number of things going on you've signed some high profile institutions the peer view.
Am I right the sort of interpret that you kind of expect to continue.
This process and its been the pay.
<unk> work with other institutions to build out efficacy and cost debt and then.
Maybe you start pushing a little bit more aggressively in the.
The early part of 2022, and that's when you start to see the revenue acceleration of debt.
Is that the correct interpretation.
So I think I think generally speaking drew.
That's relatively accurate, but I think the way we're thinking about this is the.
If you think about the initial.
Initial kind of call. It 2025 sites that we've talked about from the beginning of the launch obviously there was a setback with COVID-19 that it's taken a couple of extra quarters, two to really get through that first phase and the reason we said that was so important is because it gives you. The learnings. It gives you the feedback in terms of.
The procedure themselves, what the physician the saying how the best utilize the product and the procedure.
And you really need those learnings to then make a significant investment into selling resources. So I think we are.
We're moving much further along in that now that things have opened up and we were able to get our reps back into these accounts. So you heard me say earlier, we will start to add sales resources. This year. So we have more opportunities than the size of our sales team. So you'll see us add resources start to ramp up into the the end of the year, which coincides.
With the kind of closing out the.
The expectation of getting these accounts fully converted committed to capital and reordering the process of the products on a consistent basis and then I think.
We have the ability to continue to invest heavily into the.
Sales resources as we are seeing that happening, but we're also evaluating as I mentioned in the prepared remarks, the potential for strategic partnership which could be a viable option to to really scale of the business more from.
From a commercial perspective so.
That's the thinking in terms of how do we take what we have here and really get into this large large addressable market that quite frankly, we're the only product available right. We've got that first mover advantage so ex.
Citing future ahead.
Great. Thank you.
Our next question comes from Steven Lichtman with Oppenheimer. Please proceed.
Hey, guys. This is actually David on for Steve Thanks for taking our questions.
Just starting off work for me.
Wondering if you could.
Congrats on getting the extent of indication of into the upper Gi.
Was wondering if you could talk about what the reimbursement environment would look like of hotlines for Pat.
Sure. So what I can say is this.
Similar to our lower Gi.
The there are programs that we believe that this product would fit into we just talked about what we're doing with lower Gi submissions with CMS.
These initial kind of more fast track programs that they offer for new technologies.
So obviously, an upper Gi product like this that is unique to the market would have those same opportunities and we're evaluating those now David so.
So we don't have an update to give you in terms of timing, but that's certainly something that we're evaluating and we will take advantage of.
And all opportunities that would with the support the commercialization what I will say is this is the hospital based procedure for.
For the most part in terms of upper Gi endoscopy for bleeding cases.
And similar to our lower Gi the value prop with peer view in terms of our ability to avoid delays for the lower Gi or shorten the length of stay we think will also be applicable for upper Gi. If we can shorten the time it takes to get diagnosis on these procedures.
Which at times and difficult cases can be ours.
Gonna have significant benefit both for the patient and the institution. So we think reimbursement is probably not a headwind, but just could be accelerated if we were to get reimbursement on upper Gi in the future.
Okay, Great that's helpful.
And then just secondly for me I was wondering if you could talk about what the current hospital capex environment looks like.
Given the broader vaccine rollout.
Do you anticipate.
Placing any outright purchases of the system in 'twenty one the head.
Yes.
The vaccine rollout as we talked about last the.
Last quarter, we anticipated it would start to improve things and we're certainly seeing that in the first quarter end and getting even better in the second quarter. So that's all positive.
For the downstream impact as we've discussed.
Is significant because it gives us onsite access the.
Of the physician mind share to focus on.
New technologies has certainly begun to open up all very very positive specifically for we're trying to accomplish as of as a company and as the business as we build this market from a capital perspective.
Don't know that our view has changed yet.
Compared to what we've said in the past I mean, we're being very flexible with our customers in terms of options to get the capital into their facility. We've talked about these volume agreements, which seem to be popular currently we do offer of leasing program, which is a very simple program that the hospital can lease over the course of 'twenty.
For 36 months, and then of course, an outright purchase I'm not sure I'm ready to predict the capital environment, improving between now and the end of the calendar year, but we'll certainly update you as we see more.
Got it and then just lastly from me.
Are there any updates on on any types of data presentations that we should be looking out.
This year either from the reduced our expedited the study.
Yes, sure we certainly have a focus on both.
Getting existing trials that are done peer reviewed as well as some of the new clinical studies that we have underway, but I'll ask mark who's on the line to just comment on kind of how we're thinking about.
Coming publications.
Okay.
Hi, everyone. Thanks for joining the call zone.
Yes, we are.
Really looking at.
High likelihood of that.
Steady coming out in the Pea.
Here of your share at all.
Uh huh.
And of course of the of the coming months.
So we believe we're on track for that to happen.
And also looking at.
And I think as we've talked about in the past Unfortunately for the expedited trial.
The investigator.
Such institutions.
The early parts of that trial.
So we didn't get any of full dataset with that study.
Regardless of that we do anticipate that we will be able to get that data out and publicly disclosed in the coming months as well.
Yeah.
Okay, great. Thank you.
Thank you David.
Our next question comes from the <unk> Chen with H C. Wainwright. Please proceed.
Hi, this is <unk> dialing in for <unk>. So.
First question do you anticipate hiring new sales for ups as economies of beginning to normalize.
Yes, hi, Thanks for the question. This is Tim Yes, we do we do intend to AD.
Sales resources strategically throughout this year and really it'll be based on needs and opportunities in specific metro areas, but we're actively looking at that as we speak. So I would expect you will see that we're not ready to give a specific number because as I said, we're gonna it'll.
It'll be kind of commensurate with.
Opportunity, but we do intend to add to our sales team.
Alright next one are you planning to submit new items applications during the coming quarters.
So.
From a five 10-K application perspective the.
Recent is the one that we obviously just submitted a month ago and got approved for for upper Gi. So we're not ready to comment on any additional submissions here in the next call it a quarter or so, but we will definitely update the folks as we continue to develop.
Platform and other opportunities from a product perspective, we absolutely have a robust R&D pipeline, but nothing that we would be it would be appropriate to comment on today in terms of five 10-K submission.
Okay. That's it from me thank you.
Thank you.
Once again to ask a question at this time. Please press star one on your telephone keypad, one moment, while we poll for more questions.
There are no further questions in queue at this time I would like to turn the call back over to management for closing comments.
Great. Thanks, Latanya I appreciate that and I just want to thank everyone for joining the call today as I said, we are enthusiastic and excited that we're now back out in the market with access to most and if not eventually here all of our accounts.
As you heard today.
We're seeing good traction from a commercial perspective.
And the for value creation drivers, we believe can have a nice impact on our purpose here in the near term, but certainly proved to be very important long term for the growth of motives Gi. So thank you everyone and we look forward to talking to you during next quarterly call.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation and have a great day.