Q3 2021 ViewRay Inc Earnings Call
Ladies and gentlemen, thank you for standing by and walk through the view right Q3, 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you can.
Press Star one on your telephone if you acquired younger assistance. Please press star zero.
I'd like to turn the call over to your host to your host Cathy Mohan you may begin.
Thank you operator, good afternoon, everyone and welcome to <unk> third quarter 2021 financial results Conference call. Joining me today are Scott Drake, our President and Chief Executive Officer, and Zach Stassen, Our Chief Financial Officer earlier today, <unk> issued a press release and presentation for today's call the presentation can be.
Viewed live on our webcast or downloaded from the financial events and Webinars portion of our site at www dot investors that be rate dot com.
Today's call is being broadcast and webcast live and a replay will be available on our website for 14 days.
Before we begin I would like to caution listeners that comments made by management. During this call may include forward looking statements within the meaning of federal Securities laws.
These statements involve material risks and uncertainties and actual results could differ from those projected in any forward looking statement due to numerous factors for a description of these risks and uncertainties. Please see be raised annual report on Form 10-K for the fiscal year ended December 31, 2020, and its quarterly reports on Form 10-Q as well.
Data periodically with the company's other SEC filings.
Furthermore, the content of this conference call contains time sensitive information accurate only as of today November 4th 2021.
<unk> undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances. After the date of this call I will now turn the call over to Scott.
Thank you Cassie good afternoon, everyone and welcome to our Q3 call today, we will begin with key patient metrics, then discuss our third quarter results and recent events will share exciting progress in our clinical and innovation pipelines Zach will cover our financial results and then we look forward to answering you.
Questions.
If youre not on the webcast I'll be referring to slides from the presentation on our Investor Relations site.
Turning to slide three our mission is to treat and prove what others can't we now have 46 meridian systems installed in over 50 in backlog.
About 16000 patients have been treated on meridian.
<unk> of them with clinically reported outcomes that are consistent and compelling.
Clinical curiosity on our system is remarkable our customers have initiated over 60 clinical trials.
This growing body of data is vital to our efforts to change and improve the paradigm of care.
Let's begin with our Q3 results on slide four.
We continue to have solid financial performance in 2021.
This quarter, we delivered another seven meridian orders versus four in Q3 2020.
We have received more orders in the first nine months of 2021, then all 12 months in 2020.
Our backlog grew $56 million or 24% over prior year and now stands at $295 million Rev.
Revenue was $19 million for the quarter based primarily on three revenue units totaled.
Total gross margin for the quarter was 10% an increase of 2100 basis points over prior year.
All of this growth was achieved while keeping operating expenses roughly flat.
Finally from a cash perspective, we used approximately $17 million in the quarter and ended with $150 million of cash on hand.
Beyond financial results, we continued solid execution on our clinical innovation and commercial pipelines.
Turning to slide five.
It's important to always anchor on two critical customer desires.
The number one thing our customers want is meaningful clinical data and second they are very clear about how they define clinical success.
They want to deliver an ablative dose with tight margins no implants in fiber fewer fractions and low to no grade three or higher toxicity.
These elements represent the critical meridian five.
Meridian continues to drive the only meaningful body of work that meets these criteria.
Customer input has shaped our clinical pipeline and goals, which are twofold.
To expand the utilization of Meridian, smart and second to become frontline therapy.
Cycle of more clinical proof leading to more therapy adoption is greatly benefiting our customers cancer programs and patient care.
Turning to slide six.
Last week, we conducted a webinar with two key opinion leaders, who provided insights on meridian's value in both tough to treat and more ubiquitous cancers.
Our goal in tough to treat cancers is to maximize local control and survival, while minimizing grade three or higher toxicity.
Dr. Michael chunk presented yet another compelling dataset in pancreatic cancer.
148 patients were treated in a multicenter prospective study.
Median survival was 26 months for Meridian patience, which compares favorably to 12 to 15 months survival, which is commonly delivered with conventional therapy.
Two year survival was 53% on meridian versus about 20%, commonly seen with conventional technology.
These data are consistent with what's been demonstrated on meridian across customer sites excellent survival and local control with minimal levels of side effects.
On the next slide Dr. <unk> highlighted the incredible results he delivers in prostate cancer and the upcoming data eagerly anticipate in.
And more ubiquitous cancers like prostate, we strive to prove critical quality of life value Dr.
Dr. <unk> highlighted a series of groundbreaking trials that are designed to prove the value of meridian.
First the Mirage trial is designed to prove that meridian delivers a 50% or greater reduction in grade two toxicity as compared to conventional radiation therapy.
Mirage is a phase III randomized controlled trial and if successful represents a landmark event for <unk> and prostate patients.
The Scimitar trial is designed to prove that five fraction meridian SPR T can safely be delivered post prostatectomy versus the four to six weeks of treatment unconventional technology, another needle moving trial.
Finally shorter a phase II randomized control trial and Ford are designed to prove first that five fraction therapy is as safe and effective as 20 fractions and second the Fort trial is designed to prove that we can take five fractions down to just two.
Dr. <unk> stressed that this clinical value is translating directly to strategic and economic value for Cornell with a four fold increase in their prostate volumes since the inception of meridian.
The aggregate effect of these trials has the opportunity to demonstrate the outstanding safety profile of Meridian SPR T versus conventional therapy and holds the promise for two fraction therapy to be a viable noninvasive no catheter alternative to surgery.
Turning to slide eight to summarize on the clinical front. It is important to highlight the depth and breadth of work our customers are doing.
They have over 60 trials underway.
They're studying dozens of cancer types, they are demonstrating value in the toughest to treat and ubiquitous cancers alike.
They are experimenting with cutting edge things like single frame.
And a half a dozen tough to treat cancers.
Everything from Phase one feasibility studies to phase III randomized controlled trials. According to key opinion leaders there is nothing else like it in the industry.
Slide nine highlights the recent commercial activity at Astro last week.
It was great to be back with customers Astro afforded us the opportunity to highlight recent clinical data and our 500 10-K filing the.
The customer presence and response was terrific.
The excitement was palpable and we cannot wait for imminent clinical data releases and the launch of our newest innovations speaking of which moving to slide 10 on the innovation front. Our 500 10-K was recently accepted for review by the FDA on the newest generation of Meridian features.
<unk> focused on enhancing on table adaptive workflow efficiency and expanding clinical utility.
Advancements include features such as new MRI imaging sequences automated workflow steps on table auto contour ring tools, multi planar tissue tracking with automated beam gating and the ability for clinicians to work in parallel throughout the workflow.
The submission also includes a new brain treatment package and the integration of real time patient feedback display.
These elements are the highest priority items for our customers and prospective customers.
Turning to slide 11 momentum in our clinical and innovation pipelines accrue to commercial efforts, we work hard to identify the clinical proof and innovations that really move the needle for our customers with that clear understanding we allocate capital and energy to deliver an exam.
What our customers desire.
This process has led to more and more customers purchasing incremental meridian systems, an important sign that changing and improving the paradigm of care is actively underway.
I will now turn it over to Zach to share our financial results.
Thank you Scott.
We continue to have solid financial performance in 2021.
This quarter, we delivered another seven meridian orders versus four in Q3 of 2020 our.
Our performance in the first nine months of the year as solid and represents 24% growth over our full year 2020 order total.
We again grew backlog to a new high end in the quarter with a balance of $295 million. This represents a 24% increase over Q3 of 2020.
Revenue grew 90% to $19 million for the quarter based primarily on three revenue units.
Our gross margin was a positive 10% for the quarter as we have commented on in the past each incremental revenue unit is key to improving our margin profile.
The 'twenty 100 basis point improvement largely driven by the step up in revenue units from one in Q3 of 2020 to three in Q3 of this year.
We are growing orders backlog and revenue and enhancing gross margin all while controlling opex, which was roughly flat versus the same period last year.
From a cash perspective, we used approximately $17 million in the quarter. Our cash use was adversely impacted by a single payment of $5 $2 million that was collected early in Q4.
We finished the quarter with $150 million of cash on hand.
Earlier this week, we filed an 8-K regarding the modification of our debt covenants with SBB.
Through a combination of performance and partnership we were able to lower our liquidity covenant from one seven to one down to $1 35 to one providing access to further liquidity.
Slide 14 provides a more detailed view of our Q3, P&L, which will be available when we file our 10-Q tomorrow.
Turning to slide 15.
It is important to look at the business both quarter to quarter and over more extended periods of time.
Taking a look at our nine month 2021 results. We are encouraged by several metrics.
Order backlog and revenue growth that are all tracking nicely.
In particular it is important to look at gross margin over multiple quarters and the trend is positive when measured over the nine month period versus prior year.
We are operating well in controlling costs with operating expense down slightly year over year and we are encouraged by how the team is performing and by the growth in demand as evidenced by increases in orders and backlog now.
Now turning to guidance.
On slide 16.
We are reiterating our previously issued full year 2021 guidance for both revenue and cash usage.
Our team is doing solid work in managing Covid related project and supply chain disruptions.
We anticipate that these challenges will abate sometime in mid 'twenty, two and we are encouraged by the opportunity for value creation that lies ahead.
I will now turn the back over to Scott for closing remarks. Thanks, Zach we're in the midst of an exciting time for the company and for patient care.
Iridium therapy again demonstrates excellent clinical results and low levels of toxicity we.
We anticipate significant datasets from groundbreaking trials, such as Mirage scimitar shorter and smart.
We highlighted several innovation enhancements that are pending with the FDA all intended to further the technical and clinical advantages of meridian.
We are bringing world class institutions into the meridian family, such as Stanford and northwestern and more and more customers are purchasing incremental systems evidenced by the recent Baptist health expansion the.
The momentum in our clinical and innovation pipelines are visible in our P&L.
Orders revenue gross margin and backlog are all up significantly while opex or flat.
We are seeking to drive considerable leverage and shareholder value over time.
We are in an exciting phase of our company's growth and the future is bright for patients treated on meridian.
With that operator wed like to open the line for questions.
You ask a question at this time. Please press Star then the number one can you touched on this one.
To remove yourself from the queue.
Once again Thats star one for questions one more for your questions.
First question comes from the line of Jason Bednar from Piper Sandler you may begin.
Hey, good afternoon, Scott Zac, congrats on another nice quarter here.
Hey, Jason.
Yes of course, they are welcoming you guys had been a model of consistency here I mean, you're running four orders per quarter in 'twenty 2020, and now Youre running seven orders per quarter here in 'twenty, one I mean, I know, it's dangerous to try to connect dots, but how much visibility do you feel like you have into the order funnel remaining near these levels as we think ahead to the next several key.
Orders and then kind of within that could you also confirm whether there were any genesis care orders in the seven that you booked this quarter.
Yes, Thanks again, Jason appreciate the question here.
I think youre right I think we have reached a level of consistency you point out both last year and this year.
And it feels like we're at a.
Our newer nicer level of commercial activity.
And as you know, we monitor that very closely.
I am very pleased with both the qualitative and quantitative nature of our commercial funnel.
And I would say our confidence level is increasing.
I think it's important to note in many of our metrics certainly orders included.
As important to look at this business over longer periods than just one quarter I'm very gratified by the work that our commercial team is doing.
They are signing up orders.
Generally speaking more at the beginning of the quarter than at the end.
I think thats, a very nice sign for US we are holding firm.
On our pricing because we know the value that we represent to our customers' clinically strategically and economically.
As it relates to specifically any orders with Genesis care, we don't have anything here to announce Jason.
We're working very closely with Genesis care.
On opportunities across targeted landscapes.
But I wouldn't over think any individual customer we have a lot of opportunities with for profit chains academic centers community hospitals freestanding centers.
And we feel very good about that order funnel.
While we care deeply about our partnership with Genesis care I would encourage investors to look very broadly across the landscape of opportunities that we're working on.
Got it very helpful. There Scott.
Maybe if I flip over on the on the install side.
Since that was mostly order focus it sounds like maybe there's actual remarks, there that you all have some line of sight to some of those installs and activity there in the installed starting to loosen up next year, but maybe maybe expand a bit more on the comment on what Youre seeing is it hospital access that's opening up our construction delay.
As resolving themselves.
Just any additional color there would be great. Thanks.
Yes, absolutely maybe I'll start and then by exact to chime in as well.
As it relates to the landscape, Jason I kind of think about it in two ways.
Number one the competitive landscape and I would say on that front.
Things are very steadily improving maybe even.
Significantly improving.
Think we're articulating our story and it is better and better understood by both current and prospective customers.
Clinical pipeline that we have.
As evidenced by Dr. Michael Chung's presentation at Astro in the toughest to treat cancers is extraordinary.
And in more ubiquitous cancers. Likewise, there are a series of trials that I think are really groundbreaking for prostate patients in particular, but also breast cancer and then there's things that our customers are experimenting with like single fraction therapy in some of the toughest to treat.
Cancer, So I feel like on the clinical side, our customers are more clearly and deeply understanding the value of what meridian delivers.
Then on the innovation side Likewise, I would say momentum is building there and that feels very good to us all of those things that are pending with the FDA as we speak we highlighted what those attributes are and it is just a prioritized list of what our customers want.
And all of that accrues, the clinical and innovation pipeline accrues to our commercial pipeline.
So that's kind of our what we control view of the landscape and then of course, we continue to manage challenges as it relates to the pandemic.
With our construction partners difficulty with their supply chain and hiring workers all of the things that you will have seen from other companies out there. We do anticipate that those challenges will abate in the next couple of few quarters and really see things hopefully open up to your point in the back.
Half of 'twenty, two and into 'twenty, three and our goal and our customers' goals are really to accelerate the backlog into revenue, but we do remain challenged in certain locations. There Zach anything to add yes, I think that the big key for us is.
Once we get the kind of the shovel in the ground on the construction project.
We have very good line of sight into ultimate completion, and turning the system over to the customer.
I think the challenge right now is just theres a lot of constituencies involved at the hospital level and just kind of coordinating those projects.
Globally speaking our customers are in various positions.
<unk> positions us as a result of the pandemic, but we do see signs of life and like I said.
The opening remarks.
We think some of that will abate kind of mid next year and hopefully pick up steam in the back half of the year.
Alright, very helpful bought back in queue.
Thanks, Jason.
Our next question comes from the line of Anthony Petrone from Jefferies. You may begin.
Thanks, and congratulations on a good quarter I wanted to focus on actually installations that revenue was ahead of our expectations.
So it looks like installations got a bit back on track. So maybe an update on installation cycles and then a follow up there would just be on on hospital access generally as Youre working through the final obviously, we've had the renewed delta headwinds and we're hearing a lot about staffing shortages. So I'm just wondering how that's playing out in terms of Haas.
Spittle access for the sales force and then I'll have a follow up on data. Thanks.
Yes, you got it Anthony Thank you.
Relative to installations.
And hospital access.
I think theres, a couple of points that I would make.
First and foremost just acknowledging what is we continue to be challenged.
In a in a way from location to location in terms of being able to get into accounts supplier challenges worker challenges all of that stuff that we mentioned in the prior question, but I think theres two things Anthony but I would point out here number one we did our best.
To really take that into account when we set our guidance.
After Q2.
And number two I think our team is doing a very good job managing the challenges that we face.
We are not only working directly with our suppliers, we're working with.
Secondary and tertiary suppliers really trying to mitigate see around corners, and manage the business to the best possible way that we can.
And as Jack mentioned, we believe we're we're trying to see into the future here. We believe that mid next year back half 'twenty two into 'twenty. Three we think we get into a really attractive situation, even though our growth numbers from a percentage standpoint are pretty <unk>.
Impelling today, we think we can really deliver going forward, even when the numbers yet.
Meaningfully larger so.
That's our best assessment at this time.
That's helpful and the follow up would be on the Baptist study in pancreas. Just noticed it was you had dosing of 100 Gray and certainly at two years of substantial benefit in survival.
Just wondering sort of.
The takeaways at Astro. After this data was presented 100 gray is even higher than some of the dosing I believe in the retrospective study.
But again certainly are.
And overly positive outcome here at two years in terms of survival. So.
Maybe just next steps.
The pancreatic cancer side, and what Youre hearing from radiation oncologists as this data was presented and congratulations again thanks.
Thank you Anthony Yes, I would say the reaction at Astro was really positive and we've had a number of conversations since them with customers and if you look at the data that has been compiled it's really compelling you referenced the successful outcome in the high low dose study.
That has been followed by wash U moffitt any number of institutions that have published more data, we followed that on with 148 patients with this multicenter study that Dr. Cheung presented.
Standing clinical outcomes and very low levels of healthy tissue toxicity.
And what what I would point out here Anthony are a couple of things.
Number one not only are we getting those kinds of results in pancreas, but look at the data that has been demonstrated in central lung and ultra central lung.
In cardiac sarcoma in liver and kidney.
I know there are some out there that want to talk about well, we're a niche for pancreas, but you look across the whole landscape of the toughest to treat cancers and we're generating this kind of data in a very consistent and compelling way.
Okay.
Maybe here first on the new innovation package submitted a few weeks ago.
How should we think about maybe the timing here and the rollout once cleared.
Well I'd say save I guess I guess, the context that I would provide is.
It is our ongoing process.
That's been very consistent since.
The team joined view right to really deeply and clearly understand what's going to move the needle for our customers.
Teammates as well, but I think you are focused on customers here, both clinically and from an innovation standpoint.
And the work that our team has done deeply in clearly understanding the desires of our customers has led to the five 10-K filing that we have in place.
It is a.
Pretty robust list of things that our customers most desire from us and I would point out that that is true for both current customers and prospective customers very important that we understand the boy the voice of the overall market.
And so we very much look forward to driving those innovations into the marketplace.
Numbers for us.
But but we really focus on us Europe, Japan at this point in time.
The markets that I think you really need and want to succeed in.
We're hopeful that we'll be getting into the China market.
At the place yet to be able to call that.
We're really doing quite well in our focus markets and look to expand that over time.
Absolutely makes sense, Okay, and then shifting a little bit.
Curious if you guys had any surprises or have any additional color on the R. O. A P. M that was finalized this week.
Yeah. It really came out like the way that we anticipated no no surprises in terms of its final form no surprises in terms of the timing we have several customers that are included in the row APM, we've had a lot of conversations not.
Only with those customers, but those.
Outside of the ZIP codes that are targeted there to understand what kind of impact the ROH APM may have in the marketplace. I would tell you. The view is pretty unanimous out there. There are two consequences that we anticipate as a result of.
The new payment scheme and that is number one driving shorter courses of treatment and number two as we drive shorter courses of treatment that excess capacity that our customers will have as a consequence of that they're going to want to fill up that capacity with patients and.
So I think.
Two along with shorter courses of treatment, there's going to be increased competition for patients and if you think about what we offer what meridian offers.
Give or take the overall U S market is at 14% SBR T and our customers in the U S are delivering sbr's fraction sbr's.
About 90% of the time. So if you are looking for short courses of treatment, we're very well positioned to do that and if you are looking to compete for patients. Similarly, you hear consistently from our customers that about 20% to 25% of the patients that they treat on their meridian system.
Come from either outside their catchment area.
Or our patients that they wouldn't or couldn't tree on any other system. So I think we're incredibly well positioned.
For the row, APM and I think Thats instigating some.
In liver kidney central long cardiac sarcoma prostate you name. It it really has the attention of prospective customers as well and I think a couple of other things are moving in our favor.
Number one patients are traveling for this therapy.
Virtually all cancer patients or their loved ones go on the internet to find the best care for whatever condition. They may have and number two we have certain markets now where since patients are traveling it's instigating incremental commercial interest in meridian.
<unk>.
We want to be factual with investors and transparent with whats happening we want our performance not our words to speak but that's very much what's going on in the north in the marketplace right now.
Got it. Thanks, that's very helpful and maybe a follow up on that point.
Clearly you guys have been making some.
Great investments in R&D to help continue to push that obviously your customers are doing a lot of the trials as well as you mentioned I'm curious how you see your sort of R&D spend looking in the next couple of quarters in and if you think that that is going to have a meaningful impact on that post.
Mid 2022 breakout that you guys are shooting for.
Yes, Justin I think youre going to continue to see really nice leverage in our P&L.
You saw nice growth in orders revenue backlog margin and operating expenses roughly flat.
I do think we will continue to invest more in.
I think we will invest more commercially, but I think that will be significantly outstripped by revenue growth on the top line.
We have.
Think a lot of clarity as it relates to what we need to do clinically and from an innovation perspective for our customers to continue along the pathway that we see ourselves on.
But I think youre going to see significant leverage in the P&L.
Great. Thank you for taking the question.
Thank you.
Once again Thats star one for questions one loan for questions.
And I'm not showing any further questions at this moment.
Perfect well, thanks, everybody for joining us here for our Q3 call. We look forward to doing it again next quarter. Thanks for your interest in view right.
And this will conclude our conference call for today. Thank you for your participation you may now disconnect have a great day.
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