Tenon Medical Inc. Q1 2023 Earnings Call

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Greetings and welcome to the tenant medical first quarter 2023 financial results. As a reminder, this call is being recorded your host today are Stephen Foster Chief Executive Officer, and President and Stephen Van Dyk, Chief Financial Officer, Mr. Foster and Mr. Van Dyk will present results of <unk>.

Operations for the first quarter ended March 31, 2023 before turning the call over to questions from covering analyst a press release detailing. These results was released today and is available on the Investor Relations section of our company's website www dot tenant med dot com before we.

Again, the formal presentation I would like to remind everyone that statements made on the call and webcast may include predictions estimates and other information that might be considered forward looking while these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause act.

<unk> results to differ materially you are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obliging ourselves to revise or publicly release the results of any revision to these forward looking statements in light of new information.

Or future events throughout today's discussion we will attempt to present some important factors relating to our business that may affect our predictions for a more complete discussion of these factors and other risks you should review our prospectus dated April 26, 2022, particularly under the heading risk factors.

Which is on file with the Securities and Exchange Commission at Www Dot SCE.

S E C dot Gov at this time I'll turn the conference over to tenant Medical's, Chief Executive Officer, Steve Stephen Foster. Please go ahead Sir.

Thank you Colin and good afternoon to everyone I am pleased to welcome you to today's first quarter 2023 financial results and corporate update conference call for 10 on medical.

During the first quarter, we continued to ramp surgical procedure revenue with our fully commercialized catamaran system designed to deliver refined surgical option for patients with chronic sacroiliac joint pain or degenerative secret lightest failed conservative care.

20, <unk> primary focus is on building, our commercial infrastructure and sales management team to support topline growth and delivering on our go to market strategy.

We are targeting physicians, who have been trained on ESI procedures or apps.

Significant experience with Si surgical technologies utilizing area sales managers clinical specialists and independent distributors and conducting an aggressive local workshops training program.

We are showcasing our unique solution through a wide variety of channels conferences and hands on workshops.

So an aggressive informational marketing and promotion program that includes surgical training manual White papers website, social media is also supporting our outreach and education efforts.

We continue to deploy a combination of our local synthetic model cat of Eric lab workshops to train physicians on the cat brand system, creating a timely and efficient process.

For our physicians.

All of these critical activities are designed to drive acceleration in the number of procedures completed with catamaran system.

Confirming our approach during the first quarter, our surgical procedures increased 489% compared to a year ago quarter, resulting in a 510% revenue growth year over year, and a 56% growth sequentially.

Turning to our clinical research timeline during the first quarter, we continued to advance our clinical research with our two strategic post market studies.

The objective of our post market multi center strategic study.

Report on clinical outcomes in patients the sacroiliac joint disruptions or degenerative sacral latest treated with catamaran system.

The study is designed to enroll up to 50 patients and up to 10 clinical sites across the country.

The <unk> study will assess patient pain scores fusion as well as other patient reported outcomes out to 12 and 24 months.

This investment allows our designated catamaran study centers to begin recruiting and enrolling patients into these respective studies and represents our continued commitment validating a differentiated patient outcomes and radiographic assessment with catamaran system.

We now have seven sites recruiting patients into our two street strategic post market studies, and I look forward to providing enrollment updates in the coming quarters.

Looking ahead, we are well positioned to build revenue and growth with catamaran system is now FDA cleared reimbursement secured and commercially launched.

We are encouraged by our revenue ramp from the increasing number of surgical procedures utilizing the system.

Early results show the system delivering on its promises and providing our physician customers with an enhanced option to treat their patients suffering from debilitating Si joint issues were.

We are also encouraged by the significant increase in reimbursement for the Si joint fusion procedure CMS increased the 2023 Medicare facility fee by approximately 26% for Si joint fusion procedures performed in <unk> and 33% for these procedures done in a hospital outpatient setting.

We believe the increase will drive further adoption of catamaran system and allow us to maintain our average selling price.

With that I'll turn it over to Mr. Van <unk>, our chief financial officer to discuss our financials.

Thank you Steve I'll give you a succinct review of our financial results.

A full breakdown is available in our press release that crossed the wire this afternoon.

Our revenue was 433000 in the first quarter of 2023, an increase of 510% compared to the 71000 in the comparable year ago period.

The increase in revenue in the first quarter was primarily due to an increase of 489% in the number of surgical procedures in which the catamaran systems used.

Gross loss in the three months ended March 31, 2023 was 47000 compared to a gross loss of 204000 in the comparable year ago quarter.

Gross margin percent was a negative 11% in the first quarter of 2023 and a negative 287% in the quarter ended March 31 2022.

Gross margin percentage.

Improved due to higher revenue associated with the increase in the number of surgical procedures.

Based on our first quarter results the company expects to produce a positive gross margin in the second quarter.

Operating losses totaled $4 9 million in the first quarter of 2023 compared to a loss of $2 1 million in the first quarter of 2022.

Increases in operating expenses were the result of an increase in stock based compensation.

Increases in sales and marketing and general expenses as the company builds a sales function and infrastructure to support future growth.

Net loss was $4 8 million for the first quarter of 2023 compared to a loss of $2 4 million in the same period of 2022.

The company does expect to incur additional losses in the future.

As of March 31, 2023, cash and cash equivalents and short term investments totaled $4 9 million.

As compared to $8 6 million in December 31, 2022 period.

I'll now turn the call back to Steve for closing thoughts.

Thank you Steve.

With the National launch of Catamaran increased medical Medicare reimbursement and accelerating surgical procedures were very optimistic for continued growth and the commercialization of our proprietary FDA cleared surgical implant system.

We are driving this growth with the continued buildout of our commercial infrastructure and our sales management team in order to ramp our commercial outreach and introducing and educating physicians to our optimized surgical approach for Si joint fusion.

We are also focused on delivering clinical research reinforces the promise of this distinct technology or.

Our post market clinical studies represent our continued commitment to validating a differentiated patient outcomes and radiographic assessment with catamaran system.

Now have seven sites recruiting patients into our two strategic post market studies.

I look forward to providing our shareholders with further updates in subsequent quarters as we scale commercialization and develop our clinical studies data.

I. Thank all of you for attending and now I'd like to hand, the call back over to our operator.

Again, our question and answer session with our covering analysts call.

Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you'd like to ask a question. Please press star followed by one on your telephone keypad, if you'd like to withdraw. Your question. Please press star followed by two if you're using a speaker phone. Please lift the handset before pressing any keys one moment for your first question.

Sure.

Okay and your first question comes from Bruce Jackson from the Benchmark Company Bruce. Please go ahead.

Hi, Thank you for taking my question.

So.

A little bit of color maybe on the 34 surgeons that were treated I'm, sorry, not treated that trained during the quarter.

With a trained earlier in the quarter later in the quarter.

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How many procedures to debt.

Pull through.

Hello, Bruce Thanks for joining us and appreciate your question, so a pretty even mix between the three months of the quarter. We had two big training sessions in January So January is probably a little heavier.

And then February and then we had a big bolus in the end of March as well.

So January March the heavier months.

The cycle is variable once we once we can compel a physician into a workshop environment and they get exposed to the technology should they be interested there is a process to go through to gain access to their facility established pricing things of that nature in that process can be very short and quick.

If it's in a smaller ASC environment, frankly can be a bit long and laborious if it's a bigger hospital system and what have you. So lots of variability. There. We did have three positions that adopted from a training session in February or I'm, sorry in January that did their first surgeries in.

So we move them along as quickly and as efficiently as we can.

And we love that 30 that 34 that were trained in that mix, we have great expectations for their adoption and.

And their growth going forward.

Okay and how.

How did they respond to the synthetic training model.

Yes, Thats a great question.

The Big go if there's a learning curve in this mix in the imaging they need to get comfortable using bi planer floro fluoroscopy and imaging the pelvis. The trainer gives them a lot of great access and rep repetitive access to shooting the various views and getting comfortable.

With placing our guidewire and getting the instrumentation.

Where they wanted in the anatomy, so there's been actually a very positive response.

Two the synthetic trainer.

The trainer gives us a lot of flexibility in going to local locations.

Anatomic material can be hard to get it can be pretty pricey things of that nature. So lease incentive model really gives us a lot of flexibility lets us respond very quickly to desires for training.

Okay.

And then last.

Question for me.

Are the are the procedures that youre doing now or are they sort of exclusively six msas you on succession or are they doing that.

Physicians doing these procedures in conjunction with other fixation in.

In the spine.

Another good question. These are the answer is a little bit of both.

Merrily our procedures are done.

As a single level, if you will as a single implant.

<unk> focused on a specific Si joint that has been targeted.

During the diagnostic process there have been cases done that are part of a bigger.

Fixation and fusion procedure, which can be impactful to the Si joints.

With long construct or even short contract construct up and down the spine. So there have been a few of those procedures. There is a lot of work to do on the clinical research side in this area. It's a growing area lots of conversation about when do we when we fused these multiple levels up and down.

Spine Theres a lot of load share change there can overload. These ISI joins what do we do about them. So we see that is.

A very dynamic discussion in the physician community right now and something that we will be watching very carefully.

Okay.

That's it for me. Thank you for taking my questions.

Thank you Bruce.

There are no further questions at this time I'll turn it back to Stephen Foster for closing remarks.

Thank you Colin and I appreciate it and I'd like to thank everyone for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress in growth. If we are unable to answer any of your questions. Please reach out to our IR firm MZ group and we'd be happy to assist in that way.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.