Q3 2021 Titan Medical Inc Earnings Call
Good morning, and welcome to the Titan Medical Q3 earnings results call.
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Thank you operator, good morning, everyone and thank you for joining us for Titan Medicals third quarter 2021 earnings conference call.
During our call.
<unk> third quarter 2021 financial results and share our business highlights which are summarized in our earnings press release issued earlier this morning.
A copy of the release can be found in the Investor Relations section of our website.
Www Dot tightened medical Inc. Dot com.
As a reminder, certain statements made during this conference call constitute forward looking statements that reflect management's current expectations of the company's future growth results of operations performance and business prospects and opportunities.
We're looking statements involve significant risks uncertainties and assumptions many factors could cause the company's actual results performance or achievements to be materially different from any future results performance or achievements that may be expressed or implied by such forward looking statements.
Quoting without limitation those listed in the caution regarding forward looking statements and risk factors sections of the company's annual information form and form 40 F.
The fiscal year ended December 31, 2020, as well as assumptions discussed under the section titled Development plan and the company's recent MD&A each of which may be viewed at Cedar Dot com and at SEC Gov.
Please read all forward looking statements risks cautions and the section in today's news release announcing our financial and operating results and be guided by their contents in making investment decisions or recommendations. The release is available at www Dot tightened medical link Dot com.
With that I'll turn the call over to David Mcnally, President and Chief Executive Officer of Titan Medical David.
Thank you Christian good morning, and welcome to Titan Medicals third quarter 2021 earnings call.
I want to thank our shareholders for their support as we continue to develop the robotics single access surgical system too.
Improved patient outcomes and meet the demand by surgeons to perform procedures to a single incision.
As we look to year end 2021 we acknowledged the strong progress that Titan has made this year in all aspects of the business.
Building upon our accomplishments that we discussed on prior quarterly calls.
We're pleased to share with you today details of our progress and updates on what lies ahead for Titan.
Also joining me on the call today is Steven <unk>, our Chief Financial Officer.
The third quarter of 2021 was highly productive for tightened and marked by several notable achievements.
The addition of industry leaders in single access and robotic assisted surgery to our surgeon Advisory Board.
The completion of our preclinical G. L. P studies and the expansion of our Chapel Hill facility to establish in house manufacturing capabilities for our proprietary instruments and cameras.
Additionally, productive communications with the FDA provided more clarity on supplementary information that will be required to complete our investigational device exemption application.
In view of these meetings with the F D. A along with discussions with an OEM manufacturer for our surgeon workstation and patient cart.
And in conjunction with an internal design review performed after the completion of the G. L. P studies.
We have reviewed and updated our timeline to market as I will explain in more detail.
In addition to communications with the F D. A to the Q submission program. We were fortunate to have a conference call in September that provided more details on requirements for our anticipated I D E submission and clinical study.
Through a review with the OEM manufacturer and our internal design review team. We also determined that additional time will be needed to accommodate design transfer to manufacturing.
The establishment of supply chain management.
Planning for product Assembly and testing.
The implementation of software updates related to safety controls.
Although we identified an ordered long lead time components. When we initially became aware of supply chain disruptions.
We remain vigilant with suppliers in procuring required parts and supply chain disruptions can affect even non custom parks.
In parallel we will be developing assembly and test procedures and related documentation.
Robotic assisted surgical systems are complex and require numerous risk mitigation to prevent misuse and patient harm.
The safe operation of our <unk> system is Paramount.
And although an impact to our timeline the implementation of software that detects hardware or electronic system failures is important.
While the system software that controls core functionality has been demonstrated in numerous preclinical studies the implementation of safety systems software and testing will continue into 2020 two.
Accordingly, we have adjusted our overall timelines, our new target for commercializing. The <unk> system is in early 2025 based on the sequence of completing development and transfer to manufacturing.
Filing and receiving approval of an <unk> application with the F D. A.
Completing our multi center human clinical study and filing and receiving approval of a de novo application with the FDA.
While we are disappointed to extend our timelines the additional clarity that we have recently gained should help us to prepare I D E and de Novo filings that we believe will facilitate more efficient review by the FDA.
When we look at the long term outlook for the company. We remain confident that the system is differentiated from currently available systems.
In addition, our intellectual property position in robotic assisted surgery positions us as a leading innovator in single access surgery.
Notwithstanding the adjustment in our timelines, we will continue to execute a thorough review and make any adjustments necessary to activities related to our IDE application to place the system in the best position possible ahead of commercialization.
Importantly, knowing the robotic assisted surgery market is less than 5% penetrated worldwide. These runway for penetration to increase with a differentiated system that is designed to better meet patient and surgeon needs.
As I mentioned earlier, we recently announced the expansion of our surgeon Advisory Board that includes industry leaders and luminaries in single access and robotic assisted surgery from multiple health systems and practices across the U S.
New additions include Dr. Ricardo a stop a affiliated with Baptist Hospital of Miami, and Kendall Regional Medical Center.
Dr. Jay Scott Magnus and of advent Health Nicholson Center.
Dr. Arlene song of Duke University.
Dr. Kevin step of atrium health.
New members will join Dr. Arnold <unk> of the New York Presbyterian Hospital, Columbia University Medical Center.
We looked at their insight and guidance as we prepare for human clinical studies.
In addition to supporting our clinical studies they were excited to help us to develop best clinical practices and effective training programs. So that upon clearance to market. Many surgeons can realize our shared vision to improve patient outcomes through robotic assisted single access surgery.
During the quarter, we completed our DLP preclinical studies in porcine subjects on schedule.
With procedures, having been completed in accordance with Fda's Good laboratory practice.
We expect pathology results from post surgical tests in the first quarter of 2022.
We continued the build out of our chapel Hill facilities to support in house manufacturing and lifecycle testing, our proprietary cameras and instruments.
Build out is expected to conclude by year end 2021.
Also during the quarter, we successfully completed an ISO 13, 45 quality audit and our certification has been maintained.
Site preparation for our clinical studies is ongoing as we interact with the institutional review board committees of hospitals expected to participate in our clinical studies.
Additionally, our comprehensive robotic assisted surgery intellectual property portfolio has expanded to over 190 patents and applications.
Representing a significant increase from our patent portfolio, just five years ago, which was less than 50 patents and applications.
We anticipate further expanding our patent portfolio by filing additional patent applications as we develop our robotics surgical technologies and potentially by licensing suitable technologies.
We are proud to have compiled such a robust collection of assets supporting our position as an innovation leader in robotic assisted single access surgery and believe this deep know how and scope of intellectual property will put tightened in a unique position among new entrants to robotic assisted surgery.
Our collaboration with Medtronic under the development and license agreement continues to be productive as we approach completion of the final milestone.
Following completion and acceptance of the deliverables by year end 2021 Titan expects to receive a final license payment of approximately $11 million, partially offset by full repayment of the loan previously provided by Medtronic.
Under the development agreement Titan is developing certain robotic assisted surgery technology and Knowhow that provides medtronic access to a portion of our intellectual property portfolio in exchange for milestone payments.
Importantly.
Tightened maintains perpetual royalty free worldwide rights to commercialize the license technologies for use with the system.
Furthermore, we have our own independent and unlicensed patent portfolio that continues to grow as we continue to innovate and robotic assisted surgery.
Steven and I participated in Investor conferences in September and met with institutional investors as part of our increased communications activities.
In addition, we are strengthening our relationships with health technology journalists in order to develop the narrative of the email system and how it can benefit patients.
I was recently interviewed by Doctor Moira gun post of National Public Radio's technician.
The interview was aired across the U S through the networks affiliates and on podcast channels in early November.
As a former NASA scientists engineers and software programmer she was intrigued with the <unk> system development and purpose.
Podcast episodes is available on our website and NPR technicians website. So we encourage you to listen in.
As we have discussed on prior calls the single access robotic surgery environment is rapidly evolving with greater promise for market expansion than ever before.
We believe the market is underpenetrated and there was high demand for versatile single access robotic platform.
Scenting and exciting opportunity for our system to make a difference in patients' lives.
Hospitals, and surgeons are increasingly interested in improving patient outcomes with a focus on greater cost effectiveness and efficiency and improved functionality.
Tightens innovative technology is being designed to be both effective and easy to use enabling medical professionals to perform their best to improve patient outcomes.
Additionally, enhancing robotic assisted surgery using innovative technology to a single access point May result, in lower operating room, Cogs and greater patient throughput four surgical centers.
The system's initial clinical focus will include benign gynecologic surgery for the U S market.
With prospects of reducing trauma, hastening healing and minimizing scarring. We believe this patient population is particularly motivated to embrace our single access surgical solution <unk>.
Additionally, based on our successful preclinical studies, we anticipate the diversity of the system could be very attractive for broad use in multiple sub specialties.
We plan to work closely with our surgeon Advisory Board and other leading surgeons to obtain feedback and insights regarding opportunities for us to satisfy unmet needs across numerous procedures.
As I shared earlier, we will continue our dialogue with the FDA as we finalize details for the clinical study with the goal of obtaining regulatory marketing authorization for the system.
Communications with the FDA has indicated that the regulatory pathway for our E. No single access surgical system is expected via the de Novo process reserved for a novel medical devices.
We anticipate given information currently available to us that our IBD study will include total laparoscopic hysterectomies performed on 30 to 40 patients at three to four clinical sites.
Looking forward and while certain factors are outside of our control we're focused on.
Continued IRB site preparation.
Completion of product development and design transfer to manufacturing anticipated for mid 2022.
Testing for safety and verification of manufactured units anticipated by year end 2022 or early 2023.
Submitting an application in early 2023, and subsequent FDA review likely anticipated to occur in the first half of 2023.
Completing an IDE study and follow up by early 2024.
Submitting a de novo application in 2024 with an FDA review anticipated for completion in late 2024 or early 2025.
And ultimately.
With the requisite marketing authorization from the FDA.
Commercial launch of the <unk> system in early 2025.
We remain committed to providing an innovative single access robotics system that meets the needs of patients surgeons and hospitals and will continue to work diligently to accomplish our goal.
I will now turn the call to Steven Lemieux, our Chief Financial Officer.
To review our financial results.
Steven.
Thank you David in the following discussion of results. Please note that all numbers are in U S dollars.
As of September 30 of 2021, we had cash of $44 $7 million a decrease from 55 million at June 30 of 2021, but an increase from $25 5 million at December 31 2020.
In 2021, the company received $44 2 million in cash from the equity offerings completed in January and February.
From the sale of common shares to aspire capital under the terms of a common share purchase agreement.
And from the exercise of warrants.
We also earned $10 million in the second quarter from the completion of the Medtronic milestone.
We also have the ability to issue another $2 7 million common shares under the terms of the agreement with aspire to raise additional capital.
The company continues to carry alone from an affiliate of Medtronic and the amount of $2 $1 million, including accrued interest evidenced by an 8% senior secured promissory note on our books.
Research and development expense totaled $10 6 million for the three months ended September 32021, compared to $2 3 million for the three months ended September 32020.
R&D expenses are related to the development of the <unk> system and the development work required to achieve the milestones under the development agreement with Medtronic.
In the comparative period following the execution of the Medtronic agreement in June 2020, the company made the strategic decision to move a significant portion of its R&D in house.
It's new R&D Center in Chapel Hill, North Carolina to advance both the development of the system and complete the development work required to achieve the Medtronic milestones.
General and administrative expenses were $3 4 million for the three months ended September 32021, compared to $2 2 million for the three months ended September 32020.
The increase in G&A expenses in the quarter is primarily related to an increase in stock based compensation of 1 million.
The company uses adjusted G&A is a non <unk> measure to adjust for noncash items and one time charges to provide a more transparent view of the normal G&A cash burn.
Adjusted G&A was $2 1 million for the three months ended September 30 of 2021 compared to $1 9 million for the three months ended September 30 of 2020.
Tightens growth over the past year has been remarkable.
Established our development Center in Chapel Hill, North Carolina and are currently expanding it to build in house manufacturing capabilities.
We have tripled our workforce to support the development of the system and we are delivering on milestones in our development and license agreement with Medtronic.
Are all significant accomplishments for Titan.
We anticipate that our cash balance of $44 7 million at September 30th and the anticipated milestone payment from Medtronic net of the debt repayment will be sufficient to continue to fund the development of the system and operational expenses through 2022, including any cause.
We're soon to the development program with Medtronic.
With that I will turn the call back over to David.
Thank you Steven.
We believe that the <unk> surgical system will address an underpenetrated, but high demand segment of the robotic assisted surgical device market with the potential to provide less patient trauma and faster recovery times and savings on capital equipment service and procedure cost for hospitals.
Although the delay in timing as unexpected we recognize the importance of strengthening the body of preclinical evidence bench top tester safety data and manufacturing capabilities needed to support an IDE submission for the Enos system.
We believe the system will offer a differentiated option from currently available system that will better meet patient and surgeon needs.
We believe entering a global market that is less than 5% penetrated provides us a runway to expand the use of robotic assisted surgery and make a difference in this industry.
We look forward to keeping you apprised on tightened progress toward the exciting milestones ahead.
<unk> advancing our <unk> single access robotic surgical system towards commencing human clinical studies and meeting the final milestone under the Medtronic development program.
We will now open the line for questions.
Operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
First question today comes from Suraj Kalia with Oppenheimer <unk> co. Please go ahead.
Good morning, David Stephen Hope, everyone is safe and healthy.
Good morning Suraj.
So David Thanks for providing the updates I was wondering if I could just drill down a little bit more on the details.
Specifically on he knows.
When do you believe that we will have a complete design freeze.
Based on our scheduled Suraj, we will be.
Completing design elements of the system in our I'll call it a sequence of packages.
The.
Surgeon workstation.
We expect to have that completed in terms of design transfer by year end.
The patient cart entered the first quarter really it it's rather mature and it's the the central unit that interfaces with the disposables that will transfer over I'll say roughly in Q1 of next year.
And then we have the consumables and the sterile interfaces and alike. All in we would expect that the design would be complete.
The electromechanical perspective.
Mid year next year.
But we see a sequence of manufacturing rolling forward. So that it doesn't all happen on a particular day, we're sequencing it to be able to compress the time schedule as best we can.
Forgive me, David maybe I should rephrase I was referring more to Titan R&D, specifically not the manufacturing transfer.
The design freeze stage already or how much more time till the internal tightened teeth.
Okay.
Yes. The two are closely related suraj. So design transfer is not complete until we've frozen the design and the drawings are in a state.
Where they are the final version and so when I referred to the design transfer phases of Benson and in the sense that you're speaking to design freeze.
It follows that same sequence. So I would say as we look at the entire system buttoned up without further changes oh that substance going forward there and by the way there are always modifications that happened as we are transferring to manufacturing and developing test procedures and the like but to give you a.
Our simple answer I would expect that by midyear next year 2022 we would have frozen the design of all of the components of the system that you're speaking to.
Fair enough, David the safety systems.
The safety systems testing that you mentioned are additionally.
2022.
I'm curious.
Yeah.
Okay.
Or do you think that's true.
More broadly the Fda's safety concerns about existing systems on the market.
And pardon.
My question also includes a J&J also announced they are.
Out of our system is gonna be delayed I'm just curious if there is something more behind the scenes that is shaping up the fda's thought processes with our existing systems.
On the market.
That's an excellent question Suraj and while the circumstances of each company are different.
All in this business acknowledged the technical complexity of robotic assisted surgical system in the highly regulated environment in which we operate.
And notably we new entrant space, a new standard for regulatory clearance to market that earlier robotic assisted surgery entrants did not face and.
And so when we look at the comprehensive package, we need to supply in an <unk> application.
The safety data, including our electro mechanical.
<unk> interference I should say electrical interference.
Electromagnetic interference data.
Human factors evaluation has to be performed on manufactured units with the as we view it with all of the software safety precaution built into the system.
And this is something that this standard requires at a level that originally we did not anticipate when we were looking at going to five 10-K pathway, which is more related to proving substantial equivalents to previously.
Previously approved device. So so that standard is now higher it's become crystal clear as we've communicated with the FDA what those requirements looked like.
And then performing or our review of where we stand.
Over the past month.
We determined that first of all this market is highly underpenetrated. So there's time to do it right.
And we're much better off to put the extra time and now to develop a robust filing for the <unk> with all the safety data.
And software implementation performed on manufactured units and get that package right rather than submitting a package that might be incomplete or have missing park.
That exposes us to much greater delays down the road. So there's time to do it right it's painful but.
We're committed to doing it right and getting this package and a comprehensive form that would rather long winded, but I hope I answered your question Suraj.
Fair enough and David last question I'll hop back in the queue and let others take the baton and so David you mentioned the training schedule I'd be curious to understand what is the key differentiation in the training schedule vis a vis because one of the things in the field as you you would have talked in the past.
Has always been that is.
Sufficient cleaning inadequate training on existing systems on the market right. So.
So I'd be curious to understand how you all are thinking through training programs and also you mentioned something about licensing.
And maybe.
Maybe I misheard that.
What was licensing specifically related to.
I would greatly appreciate any color. Thank you for taking my yes.
Very good Suraj and I'll handle that is two questions with respect to training, we're already working with our surgeon. It buyers advisors to develop training curriculum that begins with operation of the system in a dry lab environment.
As well as operation of the simulation software that we've integrated into the workstation and they're presently this 14 training modules implemented on the system, where surgeons can train and virtual reality and this is very important.
As surgeons can hone their skills before operating even in a preclinical environment on human cadaver or <unk> subjects.
That would be the next step however, having worked through dry lab training as well as training and simulation software where surgeons can assess their skills.
Then moving to a.
And an animal and cadaver lab environment, and then ultimately to Proctor procedures for early procedures.
And as I say, we're working with our surgeon Advisory Board.
Led by Doctor Arnold Adventure of Columbia University Medical Center, who is our medical advisor to develop the right sequence of curriculum.
One to train for performing the I D E studies, our clinical studies and then ultimately a program that can be rolled out upon marketing clearance to train an expanding group of surgeons.
So that's first question second with respect to license technologies, we will continually seek opportunities to license, our IP and know how and where it makes sense as we did with the Medtronic development and licensing agreements, where we've retained rights.
All of that technology to implement in the system. There may be other opportunities for us to out license as well as licensing technology from other companies that would be complementary to what we have in terms of the system. So we'll remain opportunistic in that regard.
We're one of the few companies in this industry thats been able to monetize its IP and with a growing portfolio will continue to look for those opportunities.
And thank you for participating today suraj.
Again, if you'd like to ask some questions.
Sorry about a one.
Star then one to ask a question.
There being no further questions at this time this will conclude our question and answer session I would like to turn the conference back over to David Mcnally for any closing remarks.
Actually grant we do have a couple of questions from webcast, we'd like to share.
Oh I apologize. Please go ahead.
I've tried to group them as best I can so the first one would be what changed in the past quarter that has resulted in the timeline to market in July.
I'll be happy to take that one Christian this is David.
During the prior quarter in recent weeks following discussions with the FDA provided clarity on information required to complete a comprehensive E application.
And Additionally, as we prepare for transfer to manufacturing communications with an OEM manufacturer regarding transfer to manufacturing and supply chain management, and the surgeon workstation and patient cart.
As well as product and software testing resulted in a determination that we need additional time to address these areas before filing our comprehensive I D E submission.
Again reiterating.
My response to the question from Suraj Kalia.
It's time to do this right with an Underpenetrated global market and we're much better off to take the time now even though it delays our timeline, we believe that ultimately that affects the long term timeline less than not having a complete call. Some application for the I V.
But it's really the convergence of inputs from F D. A manufacturing at our own internal design review.
Thank you David there are a couple of questions regarding little bit delay in email timeline affect achieving the final medtronic milestone or affect the medtronic relationship in any way.
I'll take that one as well for the two programs are independent we've been very mindful to remain focused on our E mail system, while our other development is with separate resources under the development and license agreements with Medtronic. So the two are unrelated now we do share that.
<unk> of the global supply chain issues, but we're navigating in each of those programs, notably of course, the Medtronic deliverable moved into the fourth quarter based on supply chain. So both programs suffered those challenges, but at the same time, we're navigating and managing each independently.
Okay.
Thank you.
<unk> announced a delay to the market with your current cash balance to be able to fund the company through to commercialization.
Okay Christian it's Stephen I'll take that one.
As we communicated the paas or we do have sufficient capital to get through the development program for 2022, but we do not have sufficient cash to get to commercialization and as I mentioned on earlier calls our plan is to raise capital to fund the business through commercialization.
Thank you.
It seems that today's announcement follows the pattern not only of Titans medical history RIS companies in general continuing moving out milestones and time to market what seems to be the underlying problem.
Hi, This is David I'll take that one and again as I responded to Suraj the circumstances for each company are different.
But so I'll really focus on on Titans situation.
The.
The technology development and commercialization commercialization of these devices require substantial capital and human resources.
I think it's important to note that during COVID-19 contrary to much of the rest of the industry tightened actually staffed facility. We went in June of 2022, one employee to now over 40 employees in Chapel Hill. So we have been able to in spite of Covid staff of facility and move.
Forward.
That being said these systems are highly regulated they're complex.
And.
It is challenging to predict with great accuracy as we have seen with others in the industry as well precisely where these milestones will fall.
But most importantly the.
Ability of a company to navigate through this is based on the quality of the team and its tenacity. We have an excellent team that is committed and tenacious to succeed in realizing the vision for single access robotic surgery.
And we expect to be able to not only endure but to succeed ultimately and bringing the product to market with that being said again, it's a it's a very challenging business and we are facing a new standard for regulatory clearance to market that has just emerged.
With clarity over the past year. So we've got a higher hurdle than companies that have gone before.
And certainly the early entrants into the space, we take that very seriously and we have to do it right.
Excellent.
Even with all the progress that Titan has made and clearly today's announcement of the share price has continued to slide downward is there anything that the company can do to raise it.
Well Kristen I actually I welcome you to take a hand in that one in terms of what we're doing.
I'll start I'll take the first part Christian which is.
There's nothing more important than execution execution, and making progress toward commercialization of our system and that requires completion of development, including software implementation.
Transfer to manufacturing and then of course testing, including safety and verification testing.
And they robust application for I D E and then de Novo application. So those are the big pieces.
Execution that we have to continue to March forward on and demonstrate progress now I'll turn it over to you to share some of the things that we're doing the spread the word.
Sure. So I think you know today's news, it's obviously all about having clarity on the path forward and what we need to do.
In parallel with this updated time frame, we will continue to increase our investor outreach and make sure that our story is known to institutions that traditionally.
Provide added stability in the stock.
Additionally, you probably noticed we have increased our outreach to.
Public relations and journalist and we're seeing a lot of uptake in those audiences. So it's really about getting getting the story out there when you spun off the REIT investors, who believe in us and who are on the same timeframe as we are.
We have a final question what does the future look like for Titan and the Medtronic post accomplishing the milestone the first milestone the last milestone.
I will say that we are focused presently on the final milestone in achieving that in this present quarter by year end.
I can say that we have an excellent working relationship and we share an inspiration to improve patient outcomes through robotic technologies.
With that I can't speak to the future it would be inappropriate at this point.
And I'll leave it at that.
Yeah.
I think that concludes the groups of questions that we received on the webcast.
And then final comments David.
Yes.
Thank you Kristen.
Closing I want to thank everyone for joining us on the call. This morning.
We remain focused on bringing our robotics single access surgical system to the market for the benefit of patients and surgeons.
We remain very excited about the opportunity that lies ahead for Titan and we look forward to keeping you informed of our progress.
Thank you all again for joining us today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.