Q1 2023 Vicarious Surgical Inc Earnings Call

[music].

Good afternoon, and welcome to Vicarious Surgical's first quarter 2023 earnings conference call.

My name is Elisa and I will be your operator for today's call.

At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Caitlin Bosco with vicarious surgical for a few introductory comments.

Thank you Melissa and thank you all for it.

Today's call earlier today like your surgical released financial results for the three months ended March 31, 2023, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities Law, which are made pursuant to the safe Harbor provisions.

The private Securities Litigation Reform Act of 1995.

Any statements contained in the call that relate to expectations or predictions of future events results or performance are forward looking statements.

All forward looking statements, including without limitation, those relating to our operating trends and future financial performance.

Management market opportunity and commercialization are based upon our current estimates and various assumptions. These.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors set forth in our securities and Exchange Commission.

<unk>, including our most recent Form 10-K and Form 10-Q.

Conference call contains time sensitive information and is accurate only as of the live broadcast today may eight 2023.

Like Jerry surgical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise with that.

I'll now turn the call over to Adam <unk>, Chief Executive Officer.

Good afternoon, and thank you all for joining us and vicarious surgical we envision a future where exceptional surgical outcomes are achieved for every patient and every surgeon.

Driven by our vision, we re engineered surgical robotics from the actuator up enabling superior capabilities streamline training and how our workflow and compelling economics.

More than that our unique system architecture is the key that unlocks best in class visualization sensing and data collection, all designed to collect key information.

It will enable incorporation of automated safeguards in Robotically performed procedures.

It is our unique combination of practical and efficient architecture with sensing for safety automation that will enable us to unlock the true potential of digital surgery.

In the last month, we took an important step toward realizing our vision with the design lock of our version one point.

Yeah.

Our team spent the first quarter of 2023 collecting extensive feedback on our beta two system across our surgeon Luminary Group Center of excellence partners and a handful of other leading surgeons.

Form and shape the design of RV 1.0, sorry, sorry.

In total we had almost two dozen surgeons test drive our latest robotic system in Q1 alone with numerous hospital system administrators and operating room assistance also providing invaluable insights as we continue to refine our robotic platform.

As a reminder.

We are not just iterating on our system perpetual hernia.

By garnering garnering feedback from a number of specialties, we better understand the potential of our system across a broad spectrum of indications. In addition to ventral hernia. We've used our beta two system category models for hysterectomy, inguinal hernia, cholecystectomy and Gi procedures, such as bowel resection.

For instance, we recently hosted a high volume Gynecologists from one of our center of Excellence partners for a full day at our headquarters.

This surge and spent the morning training with our system for the first time and performed core steps of a cat of Eric Hysterectomy in the afternoon.

Not only was it encouraging to watch them progressing through the cataract procedure with just our assembly are already using.

The current vicarious system, but the team walked away from the procedure excited and with a renewed confidence in our system, the versatility and potential to work around the year and leverage our greater range of motion and dexterity to provide additional value across a diverse set of procedures.

Informed by the insights gathered in the first quarter. Our V. One point out design incorporates a number of enhancements, which we believe will improve our system for long term value proposition.

These include reducing the length of the system arms for greater dexterity and confined spaces refinement to the motor and joint controls into our video processing pipeline, along with the restructured software and electronic architecture.

We believe these changes will enable further refined motion profile and higher image quality with increased system safety.

With V. One Plano design work, we are now focused on assembly of units and the development of manufacturing processes ahead of formal verification testing, we believe that through extensive testing we will ensure our system achieves the technical specification and functional capabilities required to deliver.

Our best in class safety profile.

While our team remains hard at work a challenging market environment for emerging growth companies processes.

In response, we are maintaining a more streamlined organizational structure.

To extend our cash runway.

Our efforts to reduce expenses requires we no longer parallel path multiple contingencies to mitigate timeline risk.

As we expressed in our prior call this naturally introduces.

Risks of delays to current timelines.

Our team remains flexible and adaptable as we've worked toward defining our formal FDA submission and we're excited to continue collaborating with the agency on the path to bringing our technology to market.

All in all the vicarious surgical team is heads down hard at work executing on the task at hand, and ensuring the rest of 2023 is a continued success.

With that I'll turn the call over to Bill Kelley, Our Chief Financial Officer Bill.

Thank you Adam.

You all for joining us today.

Start with our first quarter 2023 results.

Total operating expenses for the first quarter of 2023 or $22 3 million or <unk>.

<unk>, 3% increase from $18 2 million in the first quarter of 2022.

R&D expenses for the first quarter of 2023 were $13 4 million compared to $9 $8 million in the first quarter of 2022.

General and administrative expenses were $7 million in the first quarter of 2023 compared to $6 $9 million in the first quarter of 2022.

Sales and marketing expenses for the first quarter of 2023 were $2 million compared to one $4 million in the first quarter of 2020 to the.

The increase in operating expense year over year was primarily driven by higher overall head count partially offset by a $1 $5 million increase in interest income due predominantly to increase interest rates.

Adjusted net loss for the first quarter of 2023 was $28 million equating to an adjusted net loss of <unk> 17 per share as.

As compared to an adjusted net loss of $18 $2 million or an adjusted net loss of <unk> 15 per share for the same period in the prior year.

GAAP net loss for the first quarter of 2023 was $26 $9 million equating to a net loss of 21 per share and this compares to a net income of $42 5 million or a basic and diluted net income of 35 and 33 per share respectively for the same period.

In the prior year.

Prior year benefited from a $67 million reduction in the fair value of our warrant liability.

For a reconciliation of all non-GAAP measures to GAAP. Please review our earnings press release.

At the end of the first quarter cash cash equivalents and short term investments were approximately $97 million, representing an overall cash burn of $18 $7 million.

Cash expenditures were slightly elevated for the quarter and can vary due to timing of payments. We continue to expect our full year 2023 cash burn to be between $55 million to $65 million.

As you heard Adam State earlier, we continue to be continue to be committed to disciplined spending, particularly in this market environment and investing in only high value generating initiatives that advance our development and regulatory processes.

The first quarter required a number of difficult decisions regarding personnel and expense investments, but I am proud of our bike carrier surgical team has rallied together and remain focused on delivering a differentiated robotic system with the potential to meaningfully expand the robotic market and allow patients to benefit worldwide.

And now I'll turn the call back over to Adam for closing remarks.

Thank you Bill in closing our organization is focused on executing on the build it has as well as the regulatory pathway ahead.

The fundamental DNA of our company is innovation and innovation required grit and perseverance, especially in today's market. We believe it is essential to achieving our pursuit of revolutionizing surgery, and enabling greater access to exceptional surgical outcomes.

We remain confident that our thoughtful approach to our developing development process.

<unk> approach and market strategy will set the foundation for a bright future.

With that I'll turn the call over to our operator for Q&A operator.

We will now begin the question and answer session.

If you would like to ask a question. Please press star followed by one on your telephone keypad.

If for any reason you would like to remove that question. Please press star followed by Q.

Again to ask a question press star one.

As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

Our first question comes from the line of Ryan Zimmerman with <unk> your.

Your line is now open.

Okay.

Hi, This is Sam on for Ryan and congrats on all the progress this quarter I was wondering if you could provide us with any updates on the ventral hernia clinical trial based on discussions youre, having with the FDA and then I have one follow up thank you.

Yeah. Thanks, so much for the question.

We are still in discussions with the agency about the details of this trial and the details of our submission.

I candidly I do realize that we are.

It's been a while since we provided an update on this and the conversations continue to progress with the agency our meeting on a regular basis and have been really pleased with the relationship and the progress so far and we're looking forward to providing a more detailed update on that in the near future.

Thank you.

Have you received any reimbursement related feedback from the University of Pittsburgh Medical Center partnership given their large insurance umbrella. Thanks again for taking our questions.

It's a really good question, we've been involved in the conversations and understanding the details of the procedural economics with them as well as our other partners.

I don't have a detailed answer for that right now, but I can definitely get back to you with the answer.

Thank you.

Thank you Mr. Zimmerman. Our next question comes from the line of Kyle Rose with Canaccord your.

Your line is now open.

Yeah.

Great. Thank you very much for taking the questions.

I guess just a few from me one is just to the prior question on the FDA conversations could you just confirm.

<unk> trial timelines, just as far as where we are now the conversations with the FDA and then when you are when you will expect to complete the trial and get to market and then secondarily, obviously you made some.

Some decisions from a streamlining perspective can you just remind us.

Online.

Our cash runway.

And thoughts about future cash needs.

Yeah, So I'll definitely start with the first question there.

The conversations have been really good but the details of exactly when these sort of interim submissions happen are highly dependent on a variety of things, including the specific test and build outs as well as the balance of what's being tested through verification and specifically actually through the validation and testing like summative testing versus <unk>.

What's being tested in a clinical trial that being said, we are still tracking to an FDA submission for authorization of the use of our device.

At year end of next year end of 2024.

I'll pass off the specific details.

Bill for the <unk>.

Reduction, but kind of as a reminder, we are really focused that production around.

G&A, specifically in non R&D in order to minimize the risk of.

Of an impact to a timeline that it might have.

Yes, exactly so as you may recall that we closed last year with $116 million of cash and we've guided to $55 million to $65 million of cash burn.

As Adam alluded to we made some very difficult decisions, obviously to streamline our operations.

In retrospect, it's given us.

A much longer runway since if we stay at this years burn rate, we have effectively two years worth of cash so that gives us a lot of optionality, obviously in a difficult market, we announced those changes and obviously you saw the banking upheaval almost immediately thereafter.

We're comfortable with that.

Virtually every financing option remains available to us and at the right time.

Conditions, obviously, what look to be opportunistic.

Great and then just one last one for me is.

The feedback you're gathering from other specialties.

Any expectations for that to change.

The robot that we're seeing and how it functions and its utility or.

I get that I guess, what would impact the regulatory timelines for the ventral hernia. Thank you.

Yes, so to start.

We are gathering this feed back we've actually been gathering it and have on beta two and have already incorporated a lot of it into the version one point out of system.

Hernia and incredibly exciting indication, but it is the first step of many indications and we remain committed to and frankly really excited about rapid follow of additional indications. After our initial launch so what it really has done it confirmed that our system has a lot of it.

Capability in order to do these additional indications.

And that it really does provide meaningful value around them. So it's started by confirming that and then actually moved in a little bit into really making sure. We map out the refined workflow and all of the detail around these additional indications so that when we're ready to bring them to market we have an.

Walker.

Thank you. Our next question comes from the line of Josh Jennings with TD Cowen.

You May proceed.

Hi, This is Eric on for Josh. Thanks for taking the question was just curious with the designs made to design changes made to version one point out.

Does that impact your pricing strategy with the vicarious robotic system, just curious to get your thoughts there.

So yes I can.

If we take the started this one.

We are really fortunate from a cost of goods position.

You have.

Cost of goods that sufficiently low that it gets fairly flexible pricing, so and that remains true with the changes Q from beta skew to version one point out so we remain incredibly flexible and the pricing that we can have.

Remain encouraged by the feedback that we've had about pricing capability and tolerance for pricing of our initial system after launch.

Okay, that's great to hear and then as Youre approaching validation and verification testing how many systems do you think youll need to accomplish that and are there any supply.

Ponant issues that we should keep in mind as youre approaching those testing milestones.

Yeah. So the the number of systems that will need is small handful in order to do a bnb testing and clinical data collection.

Overall, the quantity is low enough that it is not.

Directly constrained by supply chain issues because of quantity. It is more just around ability to source components of a complex system and frankly needing equity single component to be in before we're ready to integrate and test our system Everything's on order and we're already seeing parts coming in for our version one point in our system.

And we're really excited about it and haven't seen any any reason to expect supply chain delays to date.

Okay. That's great. Thanks for taking the questions.

Thank you Mr Jennings.

Okay.

That concludes today's call. Thank you all for your participation you may now disconnect your lines.

Okay.