Q2 2021 Asensus Surgical Inc Earnings Call

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Good afternoon, ladies and gentlemen, I was the the assessors surgical Inc. Second quarter 2021 conference call.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct the question answer session at that time. If you have a question. Please press the 1 followed by the 4 on your telephone.

If at any time during the conference you need to reach an operator, Please press star and zero debt.

As a reminder of this conference is being recorded.

Now, let me turn the call over to Mr. Mark Klausner of Westwood. Please go ahead.

Good afternoon, everyone and thank you for joining us for the census of second quarter 2021 conference call.

On the call with me today are Anthony Fernando President and Chief Executive Officer, and she leaves ramp of tab 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 of Sensus surgical business.

Courage you to review the company's filings with the Securities and Exchange Commission, including the 2020 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.

During this call. We will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and adjusted net loss per common share attributable to common stockholders management believes that 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 for <unk>.

Benchmark of performance externally against competitors and for certain compensation decisions reconciliations from U S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website. It is now my pleasure to turn the call over to of Sensus, Surgical's, President and Chief Executive Officer.

Anthony Fernando.

Thanks, Bob and thank you all for joining us today.

On today's call I will provide a brief summary of our recent accomplishments and then asks for leave to review of financial performance after which I will discuss our performance during the second quarter as well as top priorities for the rest of 2021 before turning to Q&A.

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

Since our last call we have made significant progress towards the number of goals for 2021.

We signed a lease agreement with 2 hospitals, both previously announced 1 of which has already begun performing cases with debt during the quarter.

We reached 2 key regulatory milestones with the filing of EBITDA of 5.10-K submission and subsequent clearance for 5 millimeter articulating instruments and filing.

The 5.10-K submission for the expanded the capabilities of the intelligent surgical unit.

See you.

In addition, we continued to see strong global proceeds of volume trends during the quarter.

With particularly strong growth in the U S.

We also strengthened the organization leadership.

With the introduction of 2 new board members.

The Elizabeth Paul and Kevin Hogan.

Both lists and Kevin have significant experience, bringing innovative digital technologies that leverage AI.

To the market.

Liz has highly specialized expertise in utilizing predictive analytics and big data to improve patient outcomes through digital solutions and Kevin with an integral part in the early development of innovative digital imaging technology.

Net leverage AI and proprietary algorithms.

We look forward to tapping into the combined talent as they continue to work to realize the vision of performance guided surgery.

We are very proud of what veeva able to accomplish and look forward to continuing this momentum throughout 2021 with the.

I will turn the call over to <unk> for a financial update.

Thanks Anthony.

Turning to the second quarter for the.

3 months ended June 30 of 2021 company reported revenue of $1.1 million as compared to revenue of.

Zero point $7 million in the 3 months ended June 30 of 2020.

Revenue in the second quarter of 2021 included <unk> $4 million system revenue zero point $3 million in instruments and accessories zero point $4 million in services.

For the 3 months ended June 30 of 2021 total operating expenses were $14.8 million as compared to $13.6 million in the 3 months ended June 30 of 2020.

For the 3 months ended June 30 of 2021 net loss attributable to common stockholders was $13.2 million for 6 cents per share as compared to net loss attributable to common stockholders of $14.1 million or 27 per share in the 3 months. The then.

Ended June 30 of 2020.

For the 3 months ended June 30 of 2021, the adjusted net loss attributable to common stockholders was $12.7 million or <unk> <unk> per share as compared to an adjusted net loss of.

$10.9 million or 21 per share in the 3 months ended June 32020.

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

Amortization of intangible assets.

Change in fair value of contingent consideration.

Gain on extinguishment of debt.

And for 2020 change in fair value of warrant liabilities.

The deemed dividend related to conversion of preferred stock into common stock all of which are non cash charges.

Adjusted net loss attributable to common stockholders of GAAP financial measures.

The 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.

<unk> $158.1 million and working capital of.

$165.7 million as of June 30 of 2021.

I'll turn the call back over the answers.

Yeah.

Thanks Amy.

I will now provide an update on recent performance as well as the progress we have made on the key focus areas for 2021 assets.

That's the reminder.

Lisa.

The continued market development for the <unk> system, and second expanding our portfolio and continuing the technological advancement of centers.

Starting with our market development efforts.

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

As mentioned in the beginning of 2020, 1 we expect that to have a number of key clinical papers published this year.

To date, there has been 1 paper published that covers the health economic benefits of <unk>.

We still expect to have echelon of papers published this year, which further analyzed clinical performance and economics in general surgery gynecology when utilizing the same system.

In an effort to accelerate the compilation and utilization of real world clinical data.

We have increased our focus on the growth of our trust outcomes registry.

Which includes procedural data that spans across multiple geographies and surgical specialties.

To date, we have all the 1200 patients enrolled in this registry.

Data from this registry has already proven to be impactful on our clinical data development difference.

In the first quarter of study was published that analyze the outcomes of over 810 has procedures across multiple specialties.

As we continue to expand our installed base and ramp up procedure volume, we would expect to see more studies published utilizing this growing data set to demonstrate real world evidence that we are delivering clinical and surgical benefits.

Another key tool in our market development strategy is leveraging industry events, such as conferences and congresses to engage with industry thought leaders and potential customers.

1 of these efforts have been generally limited over the last 15 months as the result of pandemic related restrictions in June we attended the sages surgical disruptive technology summit and we will also have of present at this year's sages annual meeting.

<unk>, which kicks off at the end of August.

At this meeting we will be hosting of breakfast symposium at which <unk> will discuss the experience using <unk> in general surgery.

The next segment of our market development effort is the growth of our global installed base acceleration of procedure volumes and the increase in the number of foundation of the sites.

During the quarter, we continued to experience headwinds associated with Covid.

Given that the majority of our existing installed base and a large proportion of our commercial development efforts within some of the most impacted geographies, including certain countries in Europe as well as Japan.

Despite all of this we were able to expand our installed base and deliver strong continued procedure volume growth.

As it relates to the balance of the year.

Optimistic about the macro environment and expect to see growth in procedure volume and expect that new system installations will become less challenging as our commercial team at the broader access to hospitals.

In the second quarter, we announced 2 new European the installation of the <unk> system.

In May the announced that local net hospital had entered into an agreement to lease and utilize the same hence surgical system.

The system will be utilized at the landsat arched of hospitals just outside of Munich, Germany.

Germany is 1 of the largest surgical market in Europe and has grown into the largest European country for Sun has in terms of users surgeries and hospitals.

In June we announced that <unk> University hospital of Bud, Switzerland had initiated its enhanced program.

Budd is the largest University hospital group in Switzerland.

And the surgical department focused on upper gastrointestinal and bariatric procedures is implementing <unk> heads into the daily surgical practice.

The team at Bud ramped up extremely quickly after installation with 7 cases being performed during the first week with the system.

We currently have multiple installation agreement in late stage negotiations with hospitals, which we would expect to close over the near term and we continue to expect to have 10 to 12 total new system installations during the year.

Moving on to procedures.

We continue to see positive volume trends throughout the first half of the yet with the.

All of 5 St has procedures being completed for the second quarter in the role.

We saw strong year over year of growth in all geographies with total proceeds of volumes increasing by over 175% over the second quarter of 2020.

Volume trends the strongest in the U S.

We're up significantly over 2020, but also up 32% sequentially compared for the first quarter of 2021.

Procedure volumes in both Asia, and EMEA was Charles However, we did experience a slight headwind associated with lingering negative impact of Covid on procedure volumes after 3 consecutive quarters of growth, particularly in major European.

In Asia market.

During the quarter.

We were excited to see 1 of our BCS hospitals in Europe hit the milestone of completing the 500 case using centers.

This is a tremendous achievement that speaks to the value enhanced brings to surgeons hospitals and their patients.

We expect a number of other high volume installations to reach similar procedure volume milestones in the near future.

Overall, we are very pleased with how our installed base is being utilized assets be.

With applicability of <unk> across multiple of surgical specialties.

As well as the plus positive clinical utility being realized by surgeons across the globe.

Now turning to our second initiative for the year.

The continued.

Portfolio of expansion and technological advance but of the center of system.

We recently achieved 2 key regulatory milestones.

First we fired the FDA 500, 10-K submission for articulating instruments in May and at the end of July we received clearance.

Adding the articulation widened the clinical utility and value of our platform technology by offering better access to difficult to reach the areas of the anatomy by providing 2 additional degrees of freedom.

Second we submitted a 500.10-K for an expansion of capabilities. The ICU, which also took place in the second quarter.

The current features of the ICU enable machine vision driven control of the camera for a surgeon by responding to commands and recognizing certain objects and location in the surgical field.

And allows the surgeon to change the field of view using instruments.

The new feature set could expand to include more advanced features together of real time data during surgery based on the anatomical structures in the surgical field.

Early utilization of the ICU has been strong.

And the 3 initial launch sites in the U S Europe, and Japan have completed over 150 cases.

Thus far surgeon feedback indicate and the appreciation for the foundational improvements in certain control and enthusiasm around the vas enhances augmented intelligence will go in the future.

In particular surgeons have commented on the benefits of the camera control tools, which rely on machine vision to digitally recognized and instruments tip and effectively direct the laparoscopic camera towards an intended target and also allows us.

For the automatic reorientation of an angle laparoscope during zooming to maintain disability of of surgical the target.

Given the strong interest and feedback from the surgeon the.

Anticipate implementing the ICU on a greater number of installed <unk> systems over the balance of the year.

As we mentioned last quarter, we develop an independent product called <unk> connect.

The mobile in all our surgeon communications system, which.

Which represents another step forward.

To bring the benefits of performance guided surgery to the market.

With Santana connect up to 6 clinical and product specialists can remotely interact observed and communicate with the clinical team in the O R. Throughout a surgical procedure, we are the systems and cryptic virtue of video capability.

As an example of how this can be beneficial we have recently performed several of remote case observations in the U S and Europe.

And provided assistance in setting up the St has.

The jewelry and also being available to surgeons for any into operating system assistance that they need it.

Being able to get the assistance the ore team needs on demand without crowding. The O R has been viewed favorably by hospitals.

Currently the technology is being piloted at a small number of installations and we continue to expect to bring St has the connect to a greater number of accounts in the second half of 2021.

In summary, we are pleased with the progress we have made in the second quarter of 2021.

Looking to the back half of the year I believe the incredibly well positioned to take advantage of the opportunity that lies ahead not only to bring the benefits of <unk> to more surgeons and patients globally, but also of could deliver a new era of performance guided surgery.

We are 1 of the only 2 soft tissue of abdominal surgical platforms on the market in the United States.

And our footprint continues to grow to.

To date over 5000 cases have been performed using same hence globally with over 1000 cases, having been performed during the first half 2021 alone.

Importantly.

<unk> has.

Has been utilized across multiple specialties, including general surgery gynecology.

The rector bear.

Reattribution pediatric neurology highlighting its broad applicability.

We now have over 30 hospitals with the St has installed at over 100 surgeons actively performing procedures utilizing the platform.

I want to thank our entire organization for their tireless efforts and we are more confident than ever in our long term vision for the company and our technology.

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

Thank you.

If you would like to register for a question. Please press the 1 followed by the for on your telephone you will hear a 3 times cap.

To acknowledge your request for your question has been answered and you would like to withdraw of your registration. Please press. The 1 followed by the free again to register for a question that is 1 for all of your telephone keypad.

1 moment please.

As a reminder to register for a question that is 1 for on your telephone keypad 1 moment. Please.

We have no questions at this time I'll turn it back to you Mr. Fernando for closing remarks.

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

That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.

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