Q3 2021 Ra Medical Systems Inc Earnings Call

Hello, and welcome to the Ross Medical systems third 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 the star key followed by zero. Please note today's event is being recorded and now I would like to turn 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 a news release announcing financial results for the third quarter of 2021, if you've not received this news release or if you'd like to be added to the company's email distribution list. Please contact allergy and three one O 691, 7100 and speak with Daniel Sure talk you can.

Also sign up for email alerts and access the news release in the Investor Relations section of the raw medical website at IR Dot Rambert dotcom.

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 these statements made by management are not descriptions of historical facts regarding one medical they are forward looking statements, reflecting the beliefs and expectations of management as of November 15, 2021.

You should not place undue reliance on forward looking statements because they involve known and unknown risks uncertainties and other factors that are in some cases beyond the company's control and could materially affect actual results. In particular, there is significant uncertainty about the duration and contemplated impact.

Of the COVID-19 pandemic. This means results could change at any time and the impact of COVID-19 on RA Medical's 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.

The company's SEC filings, including one Medical's annual report on Form 10-K for the year ended December 31, 2020, and Form 10-Q for the period ended September 30th 'twenty, 'twenty, one which was filed with the SEC earlier today.

So 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.

Medical believes the non-GAAP financial results to provide investors with useful supplemental information about the financial performance of the business enable the comparison of financial results between periods for certain items that marry very independently of business performance and allow for greater transparency with respect to key metric.

<unk> used by management in operating the business.

These non-GAAP financial measures are presented solely for informational 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.

Thanks, Jody good afternoon, everyone and thank you for joining us I'm.

Pleased to have this opportunity to update you on our progress in developing a competitive basketball or product portfolio targeting the large and growing market for medical devices to treat peripheral artery disease or P. E D.

With our pivotal clinical study that's underway and is designed to obtain an FDA atherectomy indication.

A reminder, study is approved for up to 10 clinical sites and 100 subjects seven.

Seven sites are currently cleared to enroll subjects. This is an increase of three sites since our last quarterly conference call in mid August.

Sites include the reactivation of one site following relocation and.

And the opening of two new clinical sites.

Michigan and Florida both of them.

Which are led by a highly regarded interventional cardiologist.

One of the seven sites has reached.

Maximum number of patients allow for enrollment in our study and the remaining six sites are actively screening subjects.

Have enrolled an additional 15 subjects in this study since mid August, bringing total enrollment to date to 85 subjects I.

Continue to be pleased with the pace of enrolment and appreciate the work of our clinical team to navigate continued challenges due to COVID-19.

Next I would like to provide an update on our engineering initiatives for next generation tablet catheters.

Have generated accelerated aging and real time agent data for various catheter configuration.

We believe support the achievement of a six month shelf life for our Nextgen catheters and are planning to generate additional data to support a shelf life of at least 12 months.

Our team made good progress on our catheter development projects last quarter as you will recall in Q2, we achieved design freeze of our Nextgen catheter that incorporates operated over jacket.

Facilitate deliverability and make the catheter more robust when navigating tortuous anatomy.

To expect we will complete all engineering work.

For regulatory clearance with the FDA for this nextgen Deborah catheter in the first quarter of 2022.

The engineering team is also proceeding with the development of an improved Deborah catheter that is compatible with standard Oh, one for interventional guide wires.

Project Leverages the work of the previously described Nextgen Deborah catheter with the added Guidewire compatibility design goal.

In response to physician feedback from the workshop, we held with interventional physicians in June.

Our engineering team is making a few design changes to further increase robustness and deliverability.

We intend to conduct another hands on workshop with interventional physicians later this year to confirm our design changes have achieved the desired performance improvements.

The timing of this project as well as other projects to a lesser extent has been impacted by supply chain delays and the availability of key resources due to a tight labor market.

We now believe that the overall design work for the Guidewire compatible catheter will be completed in the first quarter of 2022, rather than by the end of 2021.

Before leaving R&D I want to update you on two additional initiatives we discussed on our last quarterly call first we continue to execute on the laser development front with various upgrades to the dapper system and we anticipate completing design work for a new CPU over the next few months.

Second we continue to build upon our work showing the <unk> laser system can utilize can be utilized to create shockwaves of sufficient magnitude to fracture calcium and arteries.

Soccer procedure is commonly referred to as intra vascular lithotripsy.

Fracturing calcium in coronary or peripheral arteries can make their arteries less rigid thus, making subsequent procedures easier and safer to perform well.

Fabricated a prototype system and intend to conduct a preclinical study in the next few months to confirm our initial bench top results.

Although it's still very early I continue to be quite excited about this application given the potential to create significant shareholder value.

Next as announced in August we completed the divestiture of our dermatology business during the third quarter that transaction provided immediate cash proceeds to further our initiatives in the large and growing vascular market.

We will provide further details on the divestiture at the moment.

Lastly, I would like to thank everyone at raw medical for their hard work and dedication in addition to making real progress on our engineering projects and supporting enrollment in our pivotal clinical study.

The team also executed the divestiture of our dermatology business and continued building more robust quality and compliance systems.

To support our future growth plans now I will turn the call over to Andrew to discuss our financial results Andrew.

Thank you will.

As will just noted we completed the divestiture of the dermatology business in August.

The transaction provided us with net cash proceeds of approximately $3 5 million.

We reported Q3, 2021 and historical operating results and related assets and liabilities of the dermatology business.

Discontinued operations in our financial statements.

Otherwise noted the financial results I'll discuss today relates to continuing operations.

In addition to the proceeds from selling the dermatology business during the third quarter.

We further bolstered our cash position by raising approximately $4 4 million in net proceeds from our at the market facility.

We exited the third quarter of 2021 with cash and cash equivalents of approximately $20 6 million.

As a reminder, in late 2020 report commercial shipments of catheters.

And are there any supply and catheter to support our atherectomy clinical study.

We do however recognize revenue on products used in the clinical study.

Net revenue for the third quarter of 2021 consisted of product sales of 5000.

This compares with net revenue for the third quarter of 2020 of 68000, which consisted of product sales of 66000 and service and other revenue of 2000.

Gross loss was <unk> 2 million for the third quarter of 2021 compared with <unk> 5 million for the third quarter of 2020.

SG&A expenses for the third quarter of 2021, with $4 2 million versus $4 7 million for the prior year period.

SG&A expenses for the third quarters of 2021, and 2020 included stock based compensation expense of 0.1 million <unk> 8 million respectively.

SG&A expenses for the third quarters of 2021 and 'twenty 'twenty included legal expense of $1 5 million and <unk> 6 million respectively.

Increase in legal expenses is primarily due to amounts accrued relating to the class action lawsuit.

R&D expenses for the third quarter of 2021, with $2 9 million compared with $2 3 million for the prior year period.

The 'twenty to 'twenty, one quarter reflects an increase of zero point $7 million in personnel supplies and consulting expenses related to work with our next generation catheters, including increased shelf life and improved deliverability and also progress with atherectomy clinical study.

R&D expenses for the third quarters of 2021, and 2020 included stock based compensation expense of $30000 and 0.1 million respectively.

GAAP loss from continuing operations for the third quarter of 2021 was $7 4 million or $1 15 per share on $6 4 million weighted average shares outstanding. This compares with a GAAP net loss from continuing operations for the prior year quarter of $7 5 million or $3 15 per share on too.

4 million weighted average shares outstanding.

Net income from discontinued operations for the third quarter of 2021 was $3 1 million or <unk> 48 cents per share on $6 4 million weighted average shares outstanding.

This compares with a net loss from discontinued operations for the third quarter of 2020 of <unk> 3 million or <unk> 11 per share on $2 4 million weighted average shares outstanding.

Net income from discontinued operations in the third quarter of 2021 included a gain on sale of the dermatology business of $3 5 million.

Adjusted EBITDA for the third quarter of 2021 was negative $6 9 million compared with negative $6 1 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.

We used $7 2 million in cash to fund operating activities for both continuing and discontinued operations. During the third quarter of 2021. This compares with 6.0 million used to fund operating activities for both continuing and discontinued operations. During the third quarter of 2020, the increase was primarily due to higher spending in R&D.

In compliance with that I'd like to open up the call for questions.

<unk>.

Yes. Thank you.

As a reminder, if you wish to answer a question for today's Q&A session. You will need to press Star then the number one on your telephone.

Or do you wish to Australia Poling requests you may do so by pressing Star then two.

Speakerphone, please pick up your handset before entering your request.

Before answering questions I want to mention that earlier today, a stipulation of settlement that resolved. The claims asserted in the Securities class action was filed with the court to.

The settlement provides for a payment to the plant to class a $10 million, we expect that Rob medical will pay approximately 1 million towards the settlement.

Mt remaining on our self insured retention deductible and our insurers will pay the remaining balance the proposed settlement requires both preliminary and final approval by the court also want to mention that we will be presenting at the H C. Wainwright virtual bio connect conference and we will be holding in person investor meetings during the Jpmorgan.

<unk> healthcare conference in San Francisco with both events, taking place January 10 through 13 2022.

We invite you to view the webcast of our bio connect presentation, which will be posted to our corporate website, beginning January 10th and to contact law change to arrange an in person meeting with us.

Yeah.

Okay and.

Actually we do have a question on the phone know that comes from Vernon Bernardino with H C. Wainwright.

Hi, guys. Thanks for taking my question and congrats on the progress.

And congrats on the successful divestiture of Pharos I just wanted to.

Actually a few questions as far as the lithotripsy.

Program.

You know that steps would be to complete prototype systems.

What kind of timeframe would.

At Intel as far as getting our prototypes are developed.

Hi, Vernon. This is we'll tell you. Thanks, thanks for the question.

Yeah, we're completing some prototypes right now I've actually seen one in the.

In the lab.

Here at Ross Medical and.

I'm not sure if we'll have several prototypes of just how many for the for the next study, but we do have one prototype completed now and the next step for US is to do some preclinical work. So we will actually test a couple of prototypes systems in a preclinical setting and if we get the same results.

We've gotten in our bench top settings, which is that we can facts.

Fracture calcium either in.

Coronary or peripheral arteries, so hopefully that that should happen here very soon I expect that to happen actually.

For the end of the year and then we can provide an update.

Next year or during our next call.

And what what kind of preclinical models, what kind of work is entailed too.

Just they're prototypes.

Is it.

Hey, guys get a rebate or what kind of preclinical systems models I used to Oh I do tend to test.

Test the prototypes.

Yeah. So you know what we're looking for is basically oratory that have calcium and.

So in this case it will probably be excised arteries that are calcified, sometimes it can be difficult and and some of the animal models to have calcium so those will probably be exorcised excised arteries with concur.

Confirmed calcium to actually test, how we how we performed in that setting.

So once you have the prototype and you start conducting two clinical studies it should be a relatively quickly on our end.

Yes, I think in the next probably in the next few months and what that would do is kind of we think.

We have a pretty high confidence will be successful.

But we do want to to to conduct that work and then as successful kind of our next step would be to.

Plan what comes next from a development standpoint, and really start plotting the path there, but we're not getting ahead of ourselves we want to first have this preclinical work done so the kind of success that we expect to and then start putting our plans together to move this project forward.

And that would be something again that we could talk about early next year are certainly at our at our next call kind of how the work went and then what our plans are going forward and what you should expect from us in 2022.

And our last question from me and I. Appreciate you taking all these questions.

Yeah, well, you know hundreds of thousands of PD procedures, and such a large coronary market.

Could address that is that people are calcified vessels what is the current treatment for these people.

Yes.

For the if you look at both the peripheral and coronary markets.

Current treatment for for calcified vessels would be either another atherectomy product.

Psi has built a.

Nice business treating calcified vessels, both in the periphery as well as in the coronary.

And then there is a company.

Which has also really built our business on lithotripsy and Theyre fairly early on but they are treating both peripheral and coronary arteries. It's a different system than what we have it really is more of a system, where you have a balloon and you inflate a balloon and then do you have something deters.

That that creates the shockwaves that company is called Shockwaves medical and if you take a look at them you can see that there's a large market out there and pretty big expectations regarding their future revenue because they have a market cap of around $7 billion. So I.

I think market plenty of room for other technologies.

We think we have something that could be very competitive in that marketplace early on for us, but again, we're quite encouraged and look forward to moving this project forward.

Thank you I appreciate those insights that will help me to take a look at the market them closely I appreciate that.

Sure. Thanks for your question.

Thank you.

I would like to return to Florida will Mcguire for any closing comments.

Thank you again for joining us this afternoon and for your interest in RA Medical I believe focusing our resources on the large and growing 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 and a nice afternoon.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Yeah.

Okay.

Yeah.

[music].

[music].

Both of them.

Yes.

Okay.

Yes.

Yes.

[music].