Q1 2021 Asensus Surgical Inc Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the a census, surgical Inc's first quarter 2021 conference call.

At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

I would now like to turn the call over to Mr. Mark Klausner of Westwick. Please go ahead.

Thanks, operator, good afternoon, everyone and thank you for joining us on today's call.

On the call with me today are Anthony Fernando President and Chief Executive Officer, and should these romper tap Chief Financial Officer.

Before we begin I would like to caution listeners that certain information discussed by management. During this conference call, including any guidance provided are forward looking statements covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business, including any impact from the COVID-19 pandemic.

The company undertakes no obligation to update the information provided on this call.

For a discussion of risks and uncertainties associated with the census, surgical business I encourage you to review the company's filings with the Securities and Exchange Commission, including the 'twenty 'twenty form 10-K filed in March 2021 and the form 10-Q expected to be filed later today and other filings we make with the SEC.

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During this call. We will also present certain non-GAAP financial information related to adjusted net loss attributable to common shareholders and adjusted net loss per common share attributable to common stockholders.

Management believes that these non-GAAP financial measures taken in conjunction with U S. GAAP financial measures provide useful information for both management and investors by excluding certain noncash and other expenses that are not indicative of the company's core operating results.

Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions reckon.

Reconciliations from U S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website. It is now my pleasure to turn the call over to our census, Surgical's, President and Chief Executive Officer, Anthony Fernando.

Thanks, Mark and thank you all for joining us today on.

Today's call I will provide a brief summary, and us from east to review our financial performance after which I will discuss our performance during the first quarter as well as our priorities for the rest of 2021 before turning to Q&A.

Before turning the call over to <unk> I would like to provide an overview of our recent performance.

Overall, despite the continued headwinds from COVID-19 impacting hospitals across the globe, we made significant progress towards a number of our goals for 2021.

Subsequent to the end of the quarter, we signed two new lease agreements with hospitals in Europe.

One of which we announced in a press release earlier this week and the second.

Which will be announced upon installation later in the second quarter.

We also had our first lease buyout occurred during the quarter with a high volume sand has hospital in Japan opting to purchase the system after having leased but just over a year.

We believe this shows the value we bring to hospitals and is an early proof point that our business model around pricing and flexible economics is lucky.

In addition, we had a number of published clinical papers.

One other clinical papers combat health economic outcomes of this enhanced systems, where it says another robotic system as well as traditional laparoscopy.

Which among other things pointed to very favorable cost per procedure as compared to the other robotic offering.

Lastly, we drove compelling procedure volumes in key geographies with over 500 procedures completed globally.

We are very proud of what we were able to accomplish.

And look forward to continuing this momentum throughout 2021.

With that I will turn the call over to sell lease for a financial update.

Thanks Anthony.

Turning to the first quarter, where the three months ended March 31, 2021, the company reported revenue of $2.1 million as compared to revenue of zero point $6 million in the three months ended March 31 2020.

Revenue in the first quarter of 2021 included $1 $3 million on system revenue.

To your point $4 million on instruments, and accessories, and zero point $4 million on services.

Some lease arrangements with customers are provided with the right to purchase at least enhance system during or at the end of the lease term or at least by it.

System revenue consisted of one lease buyout revenue from multiple lease arrangements.

For the three months ended March 31, 2021, total operating expenses were $14 $4 million as compared to $16.0 million in the three months ended March 31 2024.

For the three months ended March 31, 2021, net loss attributable to common stockholders was $17.3 million or eight cents per share as compared to.

Net loss attributable to common stockholders of $17 million or <unk> 59 per share in the three months ended March 31 2020.

For the three months ended March 31, 2021, the adjusted net loss attributable to common stockholders was $12.2 million or <unk> <unk> per share as compared to an adjusted net loss of $12 million or <unk> 41 per share in the three months ended March 31 2000.

20.

Adjusted net loss as GAAP net loss adjusted for the following items.

Amortization of intangible assets.

Change in fair value of contingent consideration change.

Change in fair value of warrant liabilities.

And for 2020 restructuring and other charges and the deemed dividend related to beneficial conversion feature of preferred stock all of which are noncash charges.

Adjusted net loss attributable to common stockholders is a non-GAAP financial measure.

A reconciliation from GAAP to non-GAAP measures can be found in our earnings release.

Turning to the balance sheet, the company had cash and cash equivalents and restricted cash of approximately $166 $4 million on working capital of $172.8 million as of March 31, 2021, which is expected to extend the cash runway into 2020.

Sure.

I'll turn the call back over to Anthony.

Thanks Tommy.

I will now provide an update on recent performance relative.

We have made on.

On the key areas that we're focusing on in 2021.

As a reminder, this out first.

The new market development by the same system.

And second expanding our portfolio and continuing the technological advancement of Syn.

Yes.

Starting with our market development efforts it.

It is crucial to our strategy that we continue to educate on the benefits of sand has system and then follow up with clinical data to support them.

At the beginning of the two clinical papers published that are very important to us the first paper from pad health economic outcomes.

Our system versus another robotic system as well as traditional laparoscopy and was published in the International Journal of medical Robotics and computer assisted surgery.

Yep.

The study indicated that for certain gynecology procedures, the same health system per procedure cost well less than half of the cost.

Compatible robotic procedures.

And in line with Laparoscopically assisted vaginal hysterectomies case costs.

The study also showed case times between San heads and the other robotic system book comparison.

In addition, a number of other papers were published both suggesting the safety and reproducibility of procedures utilizing the <unk> system, including a study on the first use of <unk> in laparoscopic Loca Gastrectomy Augusto.

So on the stroma to tumor and Ah study focusing on European procedures in neurology, abdominal thoracic and gynecologic surgery.

We still expect to have a second milestone paper, which further analytes as clinical performance and economics in general surgery, and gynecology when utilizing the <unk> system.

It will be completed during the first half of this year and published in the second half day to.

For anyone.

As we continue to demonstrate real world evidence that we are delivering clinical and surgical benefits as well as provide good surgical outcomes.

Lower proceeds or costs. We believe these publications could be a tailwind to accelerate San has system adoption.

Yeah.

The next segment of our market development effort is the growth of our global installed base.

The acceleration of procedure volumes and the increase in the number of foundation on our sites.

We said last quarter our goal for 'twenty 'twenty. One is to have another 10 to 12, new centers systems installed.

System installs, well and continued to be negatively impacted by COVID-19.

So various geographies in the quarter still struggling with third and fourth waves of COVID-19.

Specifically, the Netherlands, Germany, and Switzerland, but effectively shut down for most of the quarter.

Japan lifted its national state of emergency, but still have local government restriction in place.

Even with some of the slowdowns, we believe we have a robust pipeline and remain confident in our system installed on board.

Yes.

As I stated earlier subsequent to the end of the first quarter, we signed two new lease agreements with hospitals in Europe, which we expect to be installed during the second quarter.

Moving on to procedures.

During the quarter, we saw strong procedural volumes. Despite the continued elective procedure volume constraints caused by COVID-19.

The total of 500 cases completed.

In both the U S and Asia, we saw strong volume growth over the first quarter of 2020.

With volumes growing over 40% in Asia.

And growing over 60% in the U S.

This growth was largely driven by accelerating utilization of sand has in a number of procedures.

Within existing installations as well as the growth in procedures significantly outpacing the growth in new system installations year over year in both regions.

Europe continues to face strong COVID-19 headwinds as a result of numerous countrywide lockdowns leads persisted during the quarter.

Even with these shutdowns impacting hospitals ability to perform procedures over 50% of the overall case volume was performed in Europe during the quarter.

On a global scale, a broad mix of procedures are performed across gender.

Quality and colorectal.

The broad applicability of the system and the applicability of our digital laparoscopy platform.

He is being validated in the case volume.

Shifting to an update on our foundation on sites.

At the end of the quarter, we had 13 foundational sites up from 11 at the start of 2021.

As a reminder, foundational sites are hospitals that are performing on track to perform clinical procedures with <unk> at an annualized rate of greater than 100 procedures, but yet.

The fact that we have been able to increase the number of foundation on sites, including.

The continued uncertainty.

Peaks volumes about the value proposition of the system and the ability of our team to support our customers as they ramp up utilization.

Another positive trend in our market development efforts is the early progress with the lease buyout.

As you know from previous calls all of the hospitals that installed the <unk> system in 2020 update to utilize a leasing model.

As part of these agreements hospitals have the option to purchase the system at the end of the initial contract period.

I am pleased to announce we had one lease buyout in the quarter, which is a foundation on site located in Asia.

This hospital litre system for just over a year before exercising their option to buy the system.

The hospitals' willingness to convert a lease into a capital purchase demonstrates the value you would see in the St has digital laparoscopy program.

This is an early proof point that the systems low cost per procedure and our flexibility around pricing models is working even in the COVID-19 environment.

While lease buyouts on not a primary focus so far we do expect some edison on conversions in 2021.

Now turning to our second initiative for the year.

The continued portfolio expansion.

And technological advancement of this enhanced system.

In the first quarter of 2021, which we achieved a number of regulatory milestones.

First book.

Plus the CE marking of the initial version of the ICU.

Rich will provide <unk> digital laparoscopy programs in Europe access to this new technology.

Second was the FDA clearance of our expanded general surgery indication in the United States.

With this clearance the Sen has surgical system can be utilized in over two 7 million general surgical procedures performed in the U S annually.

This is a major milestone and key to our future growth and clinical applicability of our technology.

Since the quarter end we.

We have also made progress on our regulatory goal as stated on our last call.

We expect to achieve during the first half of 2021 day.

First being filed.

Filing the submission for a five 10-K clearance for articulating instruments, which we filed earlier this month.

Adding articulation.

Lightened, the clinical utility and value of our platform technology to a broader number of surgeons.

The second goal was to submission of 10 day clearance, but the next generation ASU, which we expect to submit in the second quarter.

We have also made progress on other portfolio expanding tools and applications that enable the pursuit of our mission to improve the adoption of digital laparoscopy and performance guided surgery with tenants.

For example, during the COVID-19 shutdown last year, we developed an independent product called <unk> connect.

Mobile in all our surgeon communications system.

With enhanced connect we allowed up to six clinical and product specialists to remotely interact observe and communicate with the clinical team in the O R. Throughout a surgical procedure, we add the systems encrypted virtual video capabilities.

This enhanced intra operative communication is accomplished through two key features of this enhanced connect system.

First the system enables multiple camera feeds from the O R.

Allowing participants from outside the law to view the surgeon performing the procedure.

With this enhanced console, including the laparoscopic camera.

And view the system, including the patient side view of the surgical team.

In addition, the system allows for two way voice based dialogue between the surgeon and the participant outside the whole lot.

This allows for real time on demand mobile communication during the quarter the surgical procedure.

Secondly, with the use of the touch screen monitor on this enhanced connect system allows users on both ends of the conversation to annotate points of interest on the display to better communicate and illustrate surgical approaches when using center.

The center is connect platform enables the sensors clinical specialists to access the O R without physically being present and also allow external clinicians to Colin and Linda expertise on optima surgical outcome.

The same has connect system has not only been useful for surgeons and surgical teams.

But has also proven.

To be a valuable tool in training.

The ability to observe cases remotely provide surgeons more opportunities to educate themselves on San head without disrupting the operating growth.

Currently this system is being piloted at a few sites in the U S Europe, and Japan, and we plan to bring this enhanced connect to a greater number of accounts across these regions in the second half of 2021.

Next I will highlight performance guided surgery development.

We have received good feedback on the use of <unk>.

Initial application of performance guided surgery, thus far.

We have seen high utilization of the ICU with over 100 procedures being performed across just two sites in the U S and Europe.

This is especially exciting given the fact that European site was only installed three months ago.

Feedback has been great. So far and we are working to get the isu's rolled out to our foundational sites worldwide in the second half of 'twenty or 'twenty, one including multiple sites in Japan.

To support continued demand we have added multiple training facilities in key geographies.

We launched a training center in Japan.

In the third quarter of 'twenty three.

In February of 2021, we announced an agreement to launch a new surgical training center in Amsterdam.

And the Japanese training center inside Tama Veeva able to generate a very strong cadence of surgeon training during the back half of 2020, which continued into the early part of 2021.

This momentum has been interrupted by COVID-19 related shutdowns in the region, but we expect that as those restrictions are lifted that the Cytometer training center will help drive new surgeon adoption and support New hospital installations.

And the New center in Amsterdam, there have been a number of surgeon training over a relatively short period of time during what has turned out to be a very challenging European situation due to the variety of shutdowns across a number of countries.

Despite all of this interest remains very high for both training centers.

And believe David both helped facilitate the accelerated adoption of <unk> has in their respective regions.

As it relates to the balance of 2021.

Because the operating on a variety of geographies, which are in various stages of resurgence on recovery. It is difficult to predict how our operations will be impacted.

However, we continue to expect that as we progress through the year, we will see an increase in case volumes as elective procedures are more widely per fault.

We also continue to expect on new system installations to become less challenging as our commercial teams gain broad access to hospitals.

As restrictions are lifted and hospital staff have more bandwidth to devote attention to non COVID-19 related matters.

In summary, after back off a successful 2020, we are very pleased with the progress we have made in the first quarter of 2021.

During the quarter, we submitted for five 10-K clearance for articulated instruments.

We received FDA clearance for general surgery.

Bob Good utilization of the Ies you announced.

We announced a new training center in the EU.

Significantly strengthen the.

The balance sheet and rebranded the company.

We are more confident than ever in the opportunity ahead for the business and our shareholders. Thanks to our strategy execution and cash on hand.

I want to thank our entire organization for their tireless efforts during these uncertain times.

And we believe we are well positioned to achieve on mission to digitize the interface between the surgeon and the patient to pioneer a new era of performance guided surgery.

With that I would like to open the line for questions.

Thank you we will now begin the question and answer session.

And the question queue. You May Press Star then one on your telephone keypad, you'll share atone acknowledging Europe quest. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

Once again to join the question queue. Please press Star then one now.

We will pause for a moment of callers join the queue.

Our first question comes from RK.

H C. Wainwright. Please go ahead.

Thank you.

Good afternoon on Anthony and Xiaomi.

Couple of quick okay.

Actually it's fantastic to not that that was one buyout.

And in Japan.

Especially in this environment.

And on it looks like that happens to be a foundation side as well.

Fantastic so could.

Could you.

And on.

Hi.

I remember you telling us telling me that Japan has had planes there.

On the plus coffee is used to a large extent.

Okay.

Just on that'd be understand a little bit more what brought wachter on the dynamics in play for this center decide to go on.

And do the buyout.

Hi.

What drove them and our domain condensation, obviously it looks like they've used this system for <unk>.

For about a year at best.

Sure Okay.

So with respect to this buyout as you said Youre correct, Japan Passover.

So very broad.

SKU base of Laparoscopy and also remember that the Japan.

Cash system is very.

Conscious about cost.

And he goes to speak to this hospital as well so.

Hey.

<unk> entered into this lease agreement and used the system for about an hour a day performed.

Well over 100 cases and prove to themselves that the economics work.

The per procedure cost.

Is significantly lower.

Compared to other robotic platform.

And therefore, they decided that this was something that they wanted to.

Purchase and expand into other specialties as well so I think it's really the proof that when they have the system.

And they have surgeons using it.

Significantly increases that confidence and they know what they're getting.

Alright, very good and then.

You talked I think in the press release I saw that they are at about 500 procedures were performed.

During the first quarter.

Any way we can.

On some more granularity on these procedures.

Just trying to figure out whether these are you know.

And on.

Hernia closure kind of procedures out there get more complicated than that.

You know just just so that you know.

We have an ideas you have to add more complicated due day.

On the cost efficiency better.

I'm just trying to understand how that if there's a linkage between those two are not.

Sure RK I think Paul you know what I can say that in these procedures.

Spread across gynecology general surgery, and even within general surgery.

Very good extent into the colorectal space.

And then data from pediatric cases.

So if you think about all of these cases I Wouldnt say that just simple procedures that pretty quick.

The broad spectrum of.

Simple or complex.

And I don't quite have the breakdown with me right now, but that's something that we can.

Tried to provide in a little bit more.

On new entity offline.

Thank you one last question on the.

On the number of foundation.

Sites.

It's good to see that that is a growth from 11 to 13 by the end of the first quarter.

I think at some point you had stated.

How many foundational sites you would like to see in 2020, one I don't remember that number.

But you know in general.

Do you see this on.

As a start of.

I have a much bigger number than you would you would get to by the end of day ear.

Because you.

You know if you.

If you talk to people at least in the United States. They seem to be feeling comfortable that we are coming to the end of.

Seeing the light at the end of the COVID-19 ton of about.

Watch what is your expectations as the as we progressed through that true.

Yeah.

Yes.

So our cash in the thing is it's.

There's still a lot of uncertainty.

With 18, Japan, Europe or the U S about.

Case volume, there's definitely interest and the fact that we were able to get two more sites on track.

To be at a foundational level.

That's a good sign on a positive sign and obviously our goal is to keep increasing that but it's very difficult to predict.

How things are going to turn out I mean U S definitely I agree with you.

Some positive momentum.

And Europe, and Japan, I Couldnt quite say that yet so from our point of view. The goal is to keep increasing that number so that we get majority of our sites performing at.

Net level.

Uh huh.

So that we can improve on adoption.

Systematically.

But that's pretty much what we can say for now given the.

Third from getting lumpy commodity should be able to.

Be more true.

BMO can we take the committed about the numbers.

Perfect. Thank you very much good luck to you.

I'm Sami and talk to you soon.

Thank you okay.

Once again, if you have a question. Please press Star then one.

This concludes the question and answer session I would like to turn the conference back over to Nick Anthony Fernando for any closing remarks.

Thank you again for your interest in Sensus surgical and we look forward to updating you on our progress on our next quarterly call. Thank you.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Thanks.

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