Q2 2021 Ra Medical Systems Inc Earnings Call
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Welcome to the RA medical systems second quarter 2021 financial results Conference call. All participants are now in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero. Please note. This event is being recorded I would now like to turn the conference over to Jody Cain. Please go ahead.
This is Jody Cain with L. E. K. Thank you for participating in today's call. Joining me for my medical are will Mcguire, Chief Executive Officer, and Andrew Jackson, Chief Financial Officer earlier today RA Medical issued two news releases, one announcing the sale of its pharos business and the author announcing financial results for the second quarter.
Our 2021, if you've not received these news releases or you'd like to be added to the company's email distribution list. Please contact L. A K, a 310691.7100 and speak with Daniel sure talk.
Can also sign up for email alerts and access to news releases in the Investor Relations section of Rob Medical website at IR raw Mat Dot com.
During this call management will be making a number of forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 to the extent the statements made by management are not descriptions of historical facts regarding medical they are forward looking statements, reflecting the beliefs and expectations of management.
As of August 16th 2021, you should not place undue reliance on these forward looking statements because they involve known and unknown risks uncertainties and other factors that are in some cases beyond the company's control control and could materially affect actual results.
In particular, there is significant uncertainty about the duration and contemplated impact.
The COVID-19 pandemic. This means that results could change at any time and the impact of COVID-19, all broadband at close operations financial results and outlook is the best estimate based on information for today's discussion.
For details about these risks please see the news release that accompanies this call and the call.
<unk> SEC filings, including Bond Medical's annual report on Form 10-K for the year ended December 31, 2020, and Form 10-Q for the period ended June 30th 2021.
Yeah.
It was filed with the SEC on August 11th well I'm medical expressly disclaims any intent or obligation to update forward looking statements, except as required by law.
Today's conference call remarks will include both GAAP and non-GAAP financial results, while medical believes the non-GAAP financial results to provide investors with useful supplemental information about the financial performance of the business enables a comparison of financial results between periods for certain items that very very independently of this.
This performance and allows for greater transparency with respect to key metrics used by management in operating the business. These non-GAAP financial measures are presented solely for information and comparative purposes. It should not be regarded as a replacement for corresponding GAAP measures.
Reconciliation between GAAP.
And non-GAAP financial measures can be found at the end of the financial results news release that was issued earlier today with that I'd like to turn the call over to will Mcguire well.
Thank you Jody good afternoon, everyone and thank you for joining us.
He used to have this opportunity to discuss the transaction, we announced today and to update you on our progress in developing competitive.
Vascular product portfolio targeting the large and growing market for medical devices to treat peripheral artery disease.
Yeah.
I'll begin with the sale of our Pharos dermatology business as discussed during last quarter's conference call. We have been evaluating multiple strategic options for the business.
Our goal of building value for Rob medical shareholders. As a result of this extensive evaluation, but the decision to explore a so the pharos business.
With the assistance of a financial adviser.
So we're very pleased to have closed the transaction in which we sold assets specifically related to the pharos business to strata skin Sciences.
The transaction provides immediate cash proceeds to further our vascular initiatives and allows us to reduce our cash burn in the future.
We believe this transaction is in the best interest of the company and our shareholders as we intend to maximize value with a strategy focused on the market.
An estimated 19% to 21 million people in the U S have ph D and third party research places the U S market for atherectomy and CTO devices at more than $900 million in 2021 and.
In addition, many products in this space have robust gross margins and pure play peer companies enjoyed relatively high valuation multiples.
From the patient perspective, I am also confident that we are putting the pharos product line in very good hands strata as a company.
Focused on the therapeutic dermatology market with a commitment to individuals with chronic skin conditions.
Sincerely thank the pharos team for their sustained performance during the past year, managing the business and tackling the ever evolving challenges.
<unk> by the COVID-19 pandemic.
Our decision to sell this business was in no way a reflection of their performance.
Fact is because of their performance that we had expressions of interest to buy this business.
I would like to make several points relative to the transaction and our path forward first.
We have a clear strategic focus on the vascular business will continue to allocate the majority of our resources on the achievement of that.
Or are you, creating milestones associated with our next generation <unk> catheter products and the completion of our clinical study to obtain an FDA atherectomy indication second we have begun to explore a possible application of our <unk> technology.
Create shockwaves that contracture arterial calcium sometimes referred to as Intravascular lithotripsy. This application of our technology represents an exciting potential growth opportunity.
Treat calcified vessels and the ph D and coronary artery disease markets I'll talk more about this application in a minute.
Third.
I mentioned earlier this divestiture provides immediate cash.
To fund our Bachelor initiatives, while also reducing our future cash burn and extending our cash runway.
Fourth becoming a pure play vascular company should provide more clarity to investors in terms of evaluating our potential in valuing our company.
Turning now to our <unk> business I'll start with our clinical study to obtain an FDA atherectomy indication.
As a reminder, this study is approved for up to 10 clinical sites in 100 subjects.
Four sites are currently cleared to enroll subjects and a fifth site, which was previously cleared as moved locations and is in the process of being reactivated since our last investor call. In early May we have enrolled an additional 20 subjects in this trial, bringing total enrollment to date to 70 subjects.
I continue to be pleased with the pace of enrollment and appreciate the work of our clinical team to navigate summer vacations and continued challenges due to COVID-19.
Yeah, given the unpredictable impact of the pandemic of the study were still unable to estimate with precision when enrollment will be completed.
Next I would like to provide an update on our engineering initiatives for next generation Deborah catheters.
F D. A completed their review of our recent submission and granted US an additional five 10-K clearance for the <unk> catheter currently being used in the atherectomy clinical study to.
The submission incorporated various changes we've made to the <unk> system and included data to support a two month shelf life. We are still evaluating plans for a potential limited commercial release of this catheter and are very pleased to have received this clearance from the agency.
In addition, we have generated accelerated aging and real time aging data for various catheter configurations that we believe support the achievement of a six month shelf life for future catheters.
In short, our mitigation efforts, including material process and sterilization changes.
<unk> the desired outcomes later this year, we'll finalize a plan to develop the requisite data needed to support a shelf life of at least 12 months for future generation catheters.
Our team also continues to make good progress on our catheter development projects, we achieved the design freeze milestone for our next generation <unk> catheter in Q2.
You will recall this next gen catheter incorporates abraded over jacket to make it more deliverable in kink resistance, but navigating tortuous anatomy.
We have encountered some supplier and manufacturing process related challenges during our design verification builds I'm confident these will be resolved and now expect we will complete all engineering work and filed with the FDA for regulatory clearance in the first quarter of 2022, rather than the fourth quarter of 2021.
Yeah.
So Rob medical team is proceeding on schedule with an improved Deborah catheter that is compatible with standard <unk> for Interventional guide wires.
This project Leverages. The work of the previously described Nextgen <unk> catheter with the added Guidewire compatibility design goal.
We evaluated the performance of various prototypes of this catheter during our workshop in June with physicians experienced in performing peripheral interventions.
The feedback we received was extremely valuable in exactly what we were looking for in summary, the new catheter design is a clear improvement over our first generation <unk> catheter.
Thoughts to physician feedback our engineering team is making a few design changes to increase the overall robustness even further.
We intend to conduct another hands on workshop with interventional physicians later this year with this progress we are tracking well against our previous expectation that the overall design work for the Guidewire compatible edible catheter will be completed by the end of 2021.
Before leaving the R&D I want to address two additional initiatives first we continue to execute on our laser development front with various upgrades to the dapper system and anticipate completing design work for a new CPU by the end of this year.
We have conducted some early promising research over the past several months in conjunction with experts who are external to the company.
Our work has demonstrated that the gabbro laser system can be utilized to create shockwaves, a sufficient magnitude to fracture calcium and arteries.
Type of procedure is commonly referred to as Intravascular lithotripsy fracture.
Structuring calcium and coronary or peripheral arteries can help make the arteries less rigid doesn't make it subsequent procedures easier endorsed safer to perform.
Our next step is to fabricate several prototype systems and conduct a preclinical study to confirm our initial bench top results. Although it's still very early I am quite excited about this potential application of the tablet system, given the huge unmet clinical need and the potential to create significant additional shareholder value.
I will provide updates on our activities during future calls.
Lastly, I'd like to thank the entire team at <unk> medical for their continued hard work and dedication during a period of significant change at the company and uncertainty in the world around US everyone has done an amazing job of focusing on the needs of our customers and their patients enrolling a clinical study and continuing to achieve critical engineering.
Stuffs.
Now I will turn the call over to Andrew to discuss our financial results and provide additional details about the pharos transaction Andrew.
Thank you.
The first transaction provided us with net cash proceeds of approximately $3.6 million after deducting financial advisor fees and allows us to reduce our cash burn in the future from recurring operations.
We will continue to provide certain transitional services to strata as part of the agreement. However, our R&D efforts and strategic focus will be 100% on the vascular business.
In the second quarter, we bolstered our cash position by raising approximately $10.7 million in net proceeds from and after the market from an aftermarket facility.
We also received confirmation from the S. P. A.
2.0 million PPP loan has been 100% forgiven.
We exited the second quarter of 2021 with cash and cash equivalents of approximately 22 million.
Turning to our Q2 financial results net revenue for the second quarter of 2021 was 1.0 million.
Consisted of product sales of <unk> 3 million and service and other revenue of <unk> 7 million.
This compares with net revenue of <unk> 9 million for the second quarter of 2020, which consisted of product sales of <unk> 2 million and service and other revenue of <unk> 7 million.
Net revenue from the vascular segment for the second quarter of 2021 with de Minimis compared with 0.1 million for the prior year period.
Net revenue from the Dermatology segment was 1.0 for the second quarter of 2021, and <unk> 8 million for the second quarter of 2020.
Gross loss was <unk> 5 million for the second quarter of 2021, compared with 0.3 million for the second quarter of 2020.
SG&A expenses for the second quarter of 2021 were $3.7 million versus $7.9 million for the prior year period.
SG&A expenses for the second quarter of 2021, and 2020 included stock based compensation expense of <unk> 5 million <unk> 8 million respectively.
SG&A expenses for the second quarter of 2021, and 2020 included legal expense of <unk> 4 million and $3.1 million respectively.
R&D expenses for the second quarter of 2021 were 3.0 million compared with 2.0 million for the prior year period.
The 'twenty to 'twenty one quarter included an increase of <unk> 9 million in personnel supplies and consulting expenses related to our efforts on the next generation catheter, including increased shelf life and improve deliverability and also progress on the atherectomy clinical study.
R&D expenses in the second quarter of 2021 and 2020 each included stock based compensation expense of 0.1 million.
The GAAP net loss for the second quarter of 2021 was $5.2 million or $1.28 per share on $4.1 million weighted average shares outstanding.
This compares with a GAAP net loss for the prior year quarter of $10.1 million or $10.71 per share of <unk> 9 million weighted average shares outstanding.
Adjusted EBITDA for the second quarter of 2021 was negative $6.1 million compared with negative $8.4 million for the prior year period.
A reconciliation of GAAP net loss to non-GAAP. Adjusted EBITDA is included in today's press release.
We used $6.6 million in cash to fund operating activities. During the second quarter of 2021. This compares with $5.8 million used to fund operating activities during the second quarter of 2020.
The increase in cash used to fund operating activities over the prior year period was primarily due to increased spending in R&D and compliance.
And finally, we were pleased to get noticed earlier this month from the SEC that they have concluded their investigation and decided to not to recommend any enforcement action against us relating to their investigation.
With that I'd like to turn the call back over to will.
Thank you Andrew before answering questions I want to mention that we will be presenting at the H C. Wainwright Global investment conference being held September 13 through 15, a webcast of our presentation will be available on our website at <unk> dot com with that I'll turn the call back over to Jody Cain Jody.
Thanks, well I've compiled a few questions that I'd now like to submit the management can.
Can you tell us more about the impact of the Pharos business sale.
Losing revenue as a result of the sale, but your cash burn is actually decreasing is that correct are you giving guidance on cash runway.
Hi, Jeremy This is Andrew that's right with the restructuring associated with the first sale, we expect the net effect to be a reduction in cash burn in the coming quarters.
This is important because with this reduction in cash burn and the proceeds from our aftermarket facility. We can extend our cash runway, while we pursue value creating milestones for the vascular business. We are not given cash runway guidance at this stage.
Okay. Thank you for that next what is your anticipated timeline for the completion of the Atherectomy study and when can we expect FDA submission for approval.
This is will good question Jody we continue to believe that we will enroll 100 subjects complete the requisite six month follow up for all subjects and submit our application for an atherectomy indication to the FDA by the.
End of 2022.
It is also worth noting that we've reported enrollment of 20 additional subjects on each of the past two investor calls so enrollment has been progressing at a fairly consistent pace. Unfortunately, as I mentioned earlier, given the unpredictable nature of COVID-19, and the concerns related to the Delta area.
Unable to provide precise guidance regarding enrollment completion of atherectomy study.
Great. Thank you next can you tell us more about lithotripsy, whereas the market for treating calcified artery, how big is this market our physicians currently using well let's see.
Sure. This is will again.
The market is quite large if you look at the publicly available data indicates that there's about 500000 PID procedures that are performed globally each year with heavily calcified arteries. The coordinated market is even larger with approximately 100 million procedures globally involving calcified vessels.
There are a few companies focused on treating calcified arteries.
As CSI, which is also on the atherectomy space with their orbital atherectomy system CSI has done a great job building their businesses are building their business over the years.
Now generates over $250 million in annual revenue with a market cap of approximately $1.5 billion.
And then Shockwave medical is the pioneer in Intravascular lithotripsy.
And Shockwave has systems on the market for coronary and peripheral vessels. So physicians are using <unk>.
Jacques waves.
VESCO Lithotripsy systems now.
And they have done an amazing job building the market for Intravascular lithotripsy with customer education, and a strong clinical program to go to develop compelling data.
Shockwave recently reported about $55 million in quarterly revenue and they have a market cap of approximately 6 billion.
Again.
The market is really large, though and the market potential.
Is it just.
Quite large and plenty of room for additional players like raw medical one day.
Alright, Thank you will and Andrew for them.
Update please proceed with closing remarks.
So thank you again for joining us this afternoon and for your interest in raw medical I believe focusing our resources on the large OEM market with our advanced excimer laser based technology puts us on a path to building shareholder value as always we are committed to our mission of saving lives and limbs we look.
Forward to speaking with you again in November when we report third quarter 2021 results have a nice afternoon.
Okay.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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