Q1 2022 Ra Medical Systems Inc Earnings Call

Good day and welcome to the wrong medical systems first quarter 2022 earnings conference call.

Participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press.

Star then two please note. This event is being recorded I would now like to turn the conference over to Bruce Voss. Please go ahead.

Thank you this is Bruce Voss with L. H I. Thank you all for participating in today's call. Joining me from Ron Medical are will Mcguire, Chief Executive Officer, and Andrew Jackson, Chief Financial Officer.

Earlier this afternoon, Ron Medical issued a news release announcing financial results for the first quarter of 2022, 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 LH a at 310 691, 7100 and speak with Daniel Chair talk you can also sign.

Up for email alerts and access the news releases in the Investor Relations section of the company's website at IR Dot Rahm add 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 <unk>.

Management are not descriptions of historical facts regarding raw medical they are forward looking statements, reflecting the beliefs and expectations of management as of May 16th 'twenty, 'twenty, two including financial regulatory product development and clinical trial expectations.

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 and could materially affect actual results.

In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19, pandemic and the military action by Russia, and Ukraine, as well as the impact other global economic conditions, including any economic effects stemming from adverse geopolitical events and economic downturn and changes to inflation or.

Interest rates may have on raw medical's business and results of operations, including its supply chain.

This means that results could change at any time and the impact of any of these events on RA Medical's operations financial results and outlook is the best estimate based on information for today's discussion before.

For details about these risks please see the company's SEC filings, including Raw Medical's report on Form 10-Q for the quarter ended March 31, 2022, which will be filed with the FCC. Later this afternoon and other filings by the company, including its annual report on Form 10-K for the year ended December 31 2000.

'twenty, one which was filed with the SEC on March 24th 2022.

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 Raw medical believes the non-GAAP financial results 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 may vary independently of business performance and allow.

For greater transparency with respect to key metrics used by management in operating the business.

These non-GAAP financial measures are presented solely for informational and comparative purposes, and should not be regarded as a replacement for corresponding GAAP measures a reconciliation between GAAP and non-GAAP financial measures can be found at the end of the financial news release that was issued earlier today with that I'd now like to turn the call over.

Over to will Mcguire well.

Thanks, Bruce Good afternoon, everyone and thank you for joining us.

We are reporting good progress in developing a competitive and differentiated vascular product portfolio targeting the large and growing market for treating peripheral artery disease or PID.

Our team's performance has been exceptional in the face of multiple challenges as COVID-19 continues to impact our industry's ability to conduct clinical studies and persistent supply chain issues affect our engineering project schedules.

This is in addition to other economic uncertainty, resulting from rising inflation and interest rates and the ongoing conflict in Ukraine.

Today I'll provide updates on our key objectives for 2022, we outlined during our conference call in late March.

Beginning with our pivotal clinical study to obtain an FDA atherectomy indication.

<unk> excimer laser system.

<unk> continues to proceed at a steady pace I am pleased to report that as of today 107 of the planned 125 subjects have been enrolled.

Nine additional subjects Jordan our trial since our last update.

Late March and 18 additional subjects being enrolled just at the beginning of this year.

I'm also pleased to announce the qualification last week of a new trial site with a highly regarded interventional cardiologists, serving as principal investigator.

Minder, our trial is approved for up to 10 sites and as of today, we have eight sites cleared for enrollment.

Three of these sites have reached their quota or active subject screening is underway at the other five including our newest site.

We are still unable to predict the exact date for enrollment completion due to the impact of COVID-19.

However, given the pace of enrollment over recent months and the addition of the new site. We continue to target full enrollment by the end of Q3 2022.

As I've said before obtaining FDA clearance for an atherectomy indication continues to be a top priority for our medical and a critical part of our business strategy. The atherectomy clearance will significantly expand our addressable market beyond our existing clearance for crossing chronic total occlusions, our CTO is.

A third party research group estimates the value of the combined CTO in atherectomy markets in the U S at approximately $900 million for the current year.

Turning to our engineering initiatives, we are actively working with the FDA to support the review of the five 10-K application. We submitted in February for our next generation data to point out a catheter.

This catheter features affrighted over jacket design at a six month shelf life, we believe the more robust design of the Diablo III porno improves deliverability and kink resistance when navigating tortuous anatomy, we continue to expect five 10-K clearance for the <unk> <unk> in Q3 2022.

The depth of 2.5 10-K filing represents a major engineering and regulatory milestone in our endeavor to commercialize our flagship Deborah Rx catheter.

Deborah Rx will incorporate many of the Diablo 2.0 features for our robustness and improve deliverability and that Guidewire compatible version of the Diablo catheter. We selected the Rx design. Following our preclinical study last December with interventional is evaluating its use handling and overall performance.

We anticipate finalizing the engineering sorry, the engineering work for the Davita Rx later this year and are targeting a five 10-K application seeking regulatory clearance at the end of this year.

I would also like to update you on a few other important engineering initiatives underway.

First we continue to make very good progress on the Debra laser development front and are on track to submit a 500 10-K to the FDA in Q3 2022 that incorporates various upgrades to the laser system, including a new CPU.

Second we are building upon preliminary work that we believe shows our laser system can be utilized to create shockwaves of sufficient magnitude.

Fracture calcium and arteries and a procedure.

One as Intravascular lithotripsy, we have fabricated several new prototype systems, putting us on track to conduct further preclinical studies in the next few months to verify our initial bench top and preclinical findings.

Anticipate completing the design concept work and initiating a development project in the second half of this year.

This is an exciting application for our technology, given the potential to create significant shareholder value with a competitive product in the emerging intravascular lithotripsy market.

Before opening the call to questions I want to announce that Andrew Jackson has tendered his resignation as CFO at Rob Medical.

Andrew has accepted a position as CFO of another company and will be leaving Rob Medical later this quarter.

Andrew has been a valued member of the raw medical management team, including steering the company through the IPO and multiple financings.

Seamlessly stepping in as interim CEO prior to my appointment.

I'm currently in discussion with potential interim CFO candidates and Andrew has committed to assist us through the transition we wish Andrew well in his future endeavors.

Lastly, given the challenges faced by Microcap companies from raising capital in the current economic environment management and our board of directors are currently reviewing strategic alternatives to our current path with the goal of maximizing shareholder value.

That review is being conducted along with an investment bank and could result in changes to our business strategy and future operations at.

At this time I cannot commit as to the timing of our determination or the strategy. We may adopt if different from the current path.

Certain alternatives may require us to refocus our efforts our rebuild Rob medical around a new strategic initiative and may require us to raise additional capital again I'm unable to provide further detail at this time because the review is still ongoing.

In the meantime, the team and I continue to be committed to advancing our business under the current strategy and against the current timetables.

Now I will turn the call over to Andrew Jackson to route to review our financial results Andrew.

Thank you will and thank you for those kind words.

As a reminder, raw medical completed the divestiture of its dermatology business in August 2021, and a transaction that provided non dilutive cash to fund our initiatives in the large and growing vascular market.

Our reported Q1, 2021, operating result, and related assets and liabilities of the dermatology business as discontinued operations.

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

Also recall that in late 2020, we paused, our commercial shipments of catheters and our early supply in catheters to support our atherectomy clinical study. We do however recognize revenue on product used in that study.

Revenues for the first quarter of 2022 consisted of product sales of $9000. This compares with product sales of $4000 for the first quarter of 2021.

Gross loss was 86000 for the first quarter of 2022, compared with <unk> 4 million for the first quarter of 2021.

SG&A expenses for the first quarter of 2022 were $2 3 million versus $3 7 million for the prior year period.

The $1 $4 million decline include <unk> 7 million in legal expenses, <unk> 2 million in personnel costs and <unk> 8 million in stock based compensation, partially offset by a <unk> 5 million decrease in the gain on sale of assets.

SG&A expenses for the first quarters are 2022 and 'twenty 'twenty. One included stock based compensation expense of <unk> 1 million and <unk> 9 million respectively.

R&D expenses for the first quarter of 2022 were $3 1 million compared with $2 8 million for the prior year period, the zero point $4 million increase reflects.

Cost associated with engineering efforts on our next generation catheter is including increased shelf life and improve deliverability and also progress on the atherectomy clinical study.

R&D expenses for the first quarters of 2022 and 'twenty 'twenty. One included stock based compensation expense of 49000, and 0.1 million respectively.

GAAP net loss from continuing operations for the first quarter of 2022 was $5 5 million or 27 cents per share on 20 million weighted average shares outstanding. This compares with a GAAP net loss from continuing operations for the prior year quarter of $6 9 million or $3 36 per share and $2 9 million.

Weighted average shares outstanding.

Adjusted EBITDA for the first quarter of 2022 was negative $5 1 million compared with negative 6.0 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 $8 $6 million in cash to fund operating activities. During the first quarter of 2022. This compares with $8 1 million used to fund operating activities for both continuing and discontinued operations during the first quarter of 2021.

We exited the quarter with cash and cash equivalents of $17 7 million.

In February 2022, we completed a public offering that resulted in net cash proceeds to rami to cool off a $9 7 million after deducting offering costs paid and payable with that I'd like to open the call to questions operator.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys. If at any time. Your question has been addressed and you would like to withdraw your question. Please.

Press Star then two.

At this time, we will pause momentarily to assemble our roster.

While we're waiting for the first question I'd like to again, thank the raw medical team for their hard work and perseverance and continuing to make progress in a challenging environment.

Okay, operator, I think we're ready for the first question.

The first question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Oh, Hi, willing Andrew how are you.

Hey, Jeff.

So firstly a couple for Andrew I, just wanted to clarify what's the latest share Carol.

Currently.

It'll be in the 10-Qs are around $31 million Adobe in the 10-Q.

Okay got it and then could you talk about the so the opex on slide 25, the cash usage was 8.6.

What comprise most of that differential for the quarter.

This is a cash used.

In Q1 included 600000 Securities Litigation settlement and also 300000 from the Pago settlements that we had accrued in.

In prior years food the cash from operations included expenses that were accrued in prior quarters.

Okay got it and then what you call it out.

Legal personal installed 47 point 248.

Was that inclusive on the AR on the GAAP SG&A correct the 2.3.

Just repeat that question Jeff.

The legal expense personnel expense and stock expense of approximately one.

$1 $7 billion was included.

And the SG&A for this quarter and it was partially offset by <unk>.

Correct.

Correct.

Okay got it and then we'll kind of talk a little bit about the laser system itself and.

The time frame in the engineering involved.

Adding.

Duke Energy's to that.

The ultrasound as well and could you talk a little bit about diverse utility the power as well.

Sure.

Yeah, so for the laser system right now what we are.

The next regulatory filing that we're planning in Q3 as I mentioned it includes an upgraded CPU.

As well as some other improvements of the laser system, Jeff two to increase the reliability.

And then the CPU starts, allowing us to do things such as a touch screen and other.

Other a more user friendly type interfaces going forward.

Also we haven't talked much about it from a from a flexibility of power perspective.

If you look at the power output of the laser system in the past years. The team has identified a.

Different things that can be done from an engineering and gas kind of I think looking at the gas as well perspective to increase the power and to give it up.

Our systems and overall higher power output, but thats not something that we've a real.

<unk> quantified.

And can share right now, but we do know that we have abilities to really.

Increased power output and one thing we're looking at in conjunction with the Intravascular Lithotripsy is.

Tried to make a determination if you need to kind of tweak up the average power output of the laser system to be successful that's something that we'll determine as we do some more preclinical studies.

In the coming months, but right now, let's say, we're comfortable with the output and we're also comfortable that if we need to to raise the output that we have the ability to do that in the coming months.

Okay and that would be somewhat in line with similar offerings out there as far as the.

The output of power for the shockwaves.

That's right, yes, when we're looking at when we're looking at our output right now we're measuring against some of the some of the.

The outputs that are quoted in the literature for example for Shockwave medical so.

We think we're.

Close to be in the same if not greater than them, but what we want to do Jeff is do some actual more testing in a preclinical setting and just make sure. We're getting the expected results with our system and determine if we need to increase the power output right now where we are.

Got it.

The Rx I'm.

Just doing that.

Youre going to be filing Sydney and does this year.

We will be laser only or there'll be laser as well as the capability for shockwaves.

This system would just be would be the atherectomy only system.

It would be a.

The laser and the catheter.

Catheter.

Point, though we don't have any reason to think that our.

Our same laser system would not be able to power eventually.

The lithotripsy.

Lithotripsy catheters.

Require some additional work on the interface and things like that but but really the base laser system, we would envision one day being used for atherectomy as well as for lithotripsy, but just to be clear the lithotripsy interface interface and some of the other things required to do lithotripsy.

Would not be NDA filing later this year that would be in a subsequent following Jeff.

Okay got it that does it for us thanks for all your help Andrew.

Yeah Youre welcome Jeff just a follow up on that on your question real quick so the shares outstanding at March 31 was 32.301 million.

And thank you Jeff.

No problem. Thanks again.

Q.

Again, if you have a question. Please press Star then one.

This concludes our question and answer session I would like to turn the conference back over to will Mcguire for any closing remarks.

Thank you again for joining us this afternoon and for your interest in raw medical as always we are committed to our mission of saving lives and limbs have a nice afternoon.

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

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