Q3 2023 Asensus Surgical Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the that census, surgical Inc. Third quarter financial and operating results conference call.
This time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you required immediate assistance. Please press star zero for operator.
This call is being recorded on Tuesday November 14, 2033, I would now like to turn the conference over to Mark Klausner from Westlake Partners. Please go ahead.
Good afternoon, everyone and thank you for joining us for the census, surgical third quarter, 2023 business and financial update conference call.
On the call with me today are Anthony Fernando President and Chief Executive Officer, and Chemise ramp for GAAP Chief Financial Officer.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call, including any guidance provided are forward looking statements covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the companys business, including any geopolitical factors beyond our control.
The company undertakes no obligation to update the information provided on this call.
For a discussion of risks and uncertainties associated with the census, surgical business I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2020 to Form 10-K filed in March 2023, and the Form 10-Q expected to be filed later today and any other filings we make with the SEC.
During this call. We will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and the adjusted net loss per common share attributable to common stockholders management believes that these non-GAAP financial measures taken in conjunction with U S. GAAP financial measures provide you.
Full information for both management and investors by excluding certain noncash and other expenses that are not indicative of the company's core operating results.
Management uses non-GAAP financial measures to compare our performance relative to forecast and strategic plans to benchmark outperformance externally against competitors and for certain compensation decisions.
Reconciliations from U S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website.
It's my pleasure to turn the call over to a census, surgical's, President and Chief Executive Officer, Anthony Fernando.
Thanks, Mark and thank you everyone for joining us today.
To kick off I'll provide an overview of our recent performance and key achievements after which <unk> will detail our financial results.
Next I'll update you on our priorities for the remainder of 2023 before we open the line for questions.
Okay.
Before I dive into the quarterly review I would like to take a moment to acknowledge the recent events in eastern Europe.
Tax and escalating conflicts that have deeply affected.
I extended our deepest sympathies to those who have suffered losses injuries and to all impacted Baidu Islands.
Thoughts and support team in Israel and their families. During this time.
We are proud of the incredible.
They've shown one another with some of our own team members and as Paul says, having being called community service.
I would like to say, thank you to our team in Israel for managing through this trying time.
Turning to an overview of the third quarter. We are pleased to share that we've reached significant milestones recently.
One of the key achievements, including finalizing our advanced manufacturing partnership for our upcoming Luna surgical system, ensuring a reliable manufacturing process for this innovative technology.
Additionally, we partnered with the graphics hardware provider to enhance the capabilities of <unk>, which will contribute to improved performance.
Our ongoing focus remains on expanding the adoption of San hence increasing utilization advancing clinical evidence refining our portfolio to enhance enhances capabilities and deliver the value of pro forma guided surgery through the launch of Luna.
During the quarter for clinical papers published two of which I wanted to discuss.
These studies highlight the promising performance of Santander in comparison to the current market, leading robotic system and traditional laparoscopy in various procedures.
A study from Taiwan.
As cluster advantages of centers with shorter operative times and compatible patient outcomes.
Current market, leading robotic system.
The second study emphasises enhances comparable outcomes to laparoscopic procedures.
Benefit of shorter hospital stays.
In season to see Jack Times also showed a close match between Santana in laparoscopy.
More information on all the papers published can be found on our website.
Procedure volumes continue to be an important input to develop and improve digital surgery capabilities.
Year to date performance reflects a strong 17% growth in procedures.
During the third quarter, we saw a 2% year over year.
Growth and over 767 enhanced procedures performed.
A variety of specialties globally.
Our machine learning engine improves as we continue to gather surgical data, enabling us to offer useful clinical intelligence because surgeons.
<unk> you.
Another positive aspect of increased procedure volumes.
Expansion of our clinical registry.
As of this call.
Okay.
Grown to include data from over 3000 patients mid cases cross gynecology and general surgery and urology.
This growth signifies a notable step forward.
Accumulated valuable patient data and to help inform surgical decision, making and ultimately help improve patient care.
This enhanced clinical registry is one of a kind collection of data and the only registry focused on digital laparoscopy.
The trust registry monetize specialty clinical registry that is investigator led and managed by a third party clinical research organization.
Full ethics committee approval at each institution.
The primary goal of this registry is to create a collection of 60 plus in operating data points and 12 month postoperative follow up data.
This information will serve as a foundation for a greater number of high quality clinical publication and play a likelihood role in advancing our market development strategy.
Moving to new program <unk>.
<unk> initiated two newest enhanced programs in the quarter ended September 32023.
In August we initiated a program with first <unk> hospital in Japan.
Enhanced system is being used in the urology and gynecology centers and gastroenterology departments.
We are seeing ongoing expansion in Japan, solidifying agreement with highly regarded institutions.
The encouraging progress in Japan is a testament to our efforts.
We are enthusiastic about further driving adoption in the region.
The second less Mayo Clinic Hospital, St Marys campus.
Campus, the leading United States based hospital that was announced in July this marks an important milestone as the first system to be exclusively utilized by <unk>.
Yes, Rick surgeons at a U S based hospitals.
This enhanced system is well suited for <unk>.
Take procedures, given our mix of unique features like augmented intelligence machine learning haptic feedback eye tracking camera control <unk> visualization and most importantly specialized three five millimeter instruments.
Subsequent to the end of the quarter, we initiated two additional enhanced programs. The first clinical <unk> hospital in Germany to be used by the attorney general throat and minimally invasive surgery.
The second system was sold to the company's distribution partner and will be placed in a pediatric cost pizza in the Commonwealth of independent States region.
In March of this year, we expanded our U S pediatric indication complementing our existing regulatory approvals in Europe and Japan.
This expansion allows us to engage with leading pediatric surgeons, especially those operating at top children's hospitals, who have recognized the distinct advantages of sin has for younger patients.
The systems smaller instruments, and digital fulcrum to minimize tissue trauma and haptic feedback for precise touch sense here has been particularly appreciated by surgeons.
Conservation after.
The benefits of minimally invasive surgery for delicate pediatric tissues.
As we discussed on our last call July marked an important milestone for pediatric surgeons from around the world.
And the first joint meeting of the European Society of pediatric endoscopic Surgeons and international pediatric in the surgery group societies in Sorrento, Italy.
Our census played a prominent role delivering an impactful robotic master class highlighting the integration of cognitive science data science and robotics, providing attendees valuable insights on the application of robotics in pediatrics as well as the opportunity if you could.
Gain hands on experience.
With hundreds of customer interactions at the surgical flora census went onto <unk> potential customers at our headquarters.
In research Triangle Park, and in Milan, as well as partner with leading children's hospitals to execute awareness events that engaged these leaders.
In considering how to incorporate <unk> into their clinical programs.
With pediatric surgeons and thought leaders recognizing a sense says Jeremy.
System design, which not only preserves minimally invasive surgery, but goes beyond advancing laparoscopy and robotics with digital.
Loosens the interest in <unk> hands, and I assume a pediatric applications continues to grow and we are committed to meeting this rising demand in the pediatric market.
I'd also like to highlight our recently launched E book titled Augmented intelligence, the onset of circling a shortcoming reached.
Which has generated positive responses from the medical community. The ebook explodes, how performance guided surgery can address surgical variability, providing operational advantages, but surgeons.
Cost action advancement for hospitals and improve patient outcomes.
It highlights the potential of our technology adoption.
Jack and nurture talent in the medical field ultimately enhancing speaking reputation.
The EBIT can be found on our website, our linkedin and I encourage everyone to read.
Now taking a look at the portfolio development front.
Starting with the recently announced agreement with Flex alumina system manufacturer.
Under this agreement flex he'll provide a range of design and advanced manufacturing and services across Luna product lifecycle to enable us to deliver the lunar platform at scale.
Flex is a proven track record of delivering complex electromechanical systems.
Cross diverse industries and deep understanding of the complex requirements for medical devices.
Enable us to accelerate time to market for alumina platform.
Also flexes focused portfolio advanced manufacturing capabilities and supply chain network.
Be instrumental in scaling Luna globally.
In September we announced the collaboration with Nvidia to enhance the capabilities of the ASU.
By directly collaborating on <unk> advanced tools, we aim to refine the Ias use augmented intelligence features and further develop advanced features.
Just on surgeon feedback.
The Ias you already powered by Nvidia hardware has been providing real time support for surgeons since 2021.
This announced collaboration will expand the relationship to facilitate chat access to product roadmaps.
We are exploring innovative models for the development and deployment of digital surgical solutions, leveraging Nvidia edge AI computing platform policy Ken.
This collaboration highlights the potential for improved decision, making in surgical procedures through the application.
Advanced AI tools aligning the goals of both companies and highlighting the growing importance of data driven technologies that support surgeons and advanced surgery.
We then overarching focus on data our collaboration with Google also holds immense value, particularly in a joint effort in data collection and analysis.
This partnering integrate google's cutting edge machine learning tools and secure cloud data architecture with outperformance guided surgery framework.
By harnessing the data gathered from the ICU in tandem with Google cloud, leading technologies and providing surgeons with real time intra operative clinical intelligence, we have the potential to achieve superior outcomes for patients.
Regarding cause toward our discussions are ongoing.
Both organization dedicated to expediting the Finalization of an agreement and we will provide an update once these conversations.
To wrap up I'm pleased with the progress we've achieved in the third quarter and continuing to build on the groundwork for sustained success now ill pass the floor to <unk> for a financial update.
Thanks Anthony.
Turning to the third quarter for the three months ended September 32023, the company reported revenue of $1 1 million as compared to revenue of $2 $6 million in the three months ended September 32022.
Revenue in the third quarter of 2023 included <unk> 5 million in lease revenue of <unk> $3 million in instruments, and accessories and <unk> $3 million in services.
For the three months ended September 32023, total operating expenses were $18 5 million as compared to $17 $2 million in the three months ended September 32022.
For the three months ended September 32023, net loss attributable to common stockholders was $18 3 million or <unk> <unk> per share as.
As compared to a net loss attributable to common stockholders of $18 9 million or.
Or <unk> <unk> per share in the three months ended September 32022.
For the three months ended September 32023.
Adjusted net loss attributable to common stockholders was $15 6 million or <unk> <unk> per share as compared to an adjusted net loss of $16 9 million.
<unk> per share in the three months ended September 32022.
Adjusted net loss as GAAP net loss adjusted for the following items amortization of intangible assets change in fair value of contingent consideration and change in fair value of warrant liabilities, all of which are noncash charges adjust.
Adjusted net loss attributable to common stockholders is a non-GAAP financial measure reconciliations from GAAP to non-GAAP measures can be found in our earnings release.
Turning to the balance sheet in July we completed a registered direct offering bringing in gross proceeds of approximately $10 million. We plan to allocate these funds to reinforce our working capital contribute to research and development.
The company had cash cash equivalents and short term investments excluding restricted cash of approximately $33 1 million as of September 32023.
Based on the recent financing and our current operating plan. We project our cash runway has been extended through late second quarter of 2024.
I will turn the call back over to Anthony.
Thank you Jeremy.
As we look ahead.
Let's delve into what lies on the horizon for Sensus and Mark you can anticipate in the coming months.
With regards to the lunar program, our timeline remains on track and we expect to complete fluid system integration and testing and the preclinical evaluation by the end of the fourth quarter. This year.
We will freeze the system's design in Q1, 2024 conduct verification and validation testing and ramp up pilot manufacturing and prepare for regulatory submission.
In terms of our lunar go to market strategy I'd like to reiterate.
Two key advantages.
Firstly, we've established a clear regulatory pathway a little bit.
Yes.
Based on our communications with the FDA in house regulatory expertise.
And our track record with successful submissions for San Hence, we anticipate leveraging the time and cost effective traditional 510.
In the U S as opposed to a more rigorous de novo pathway.
Second Luna innovative economic model, coupled with its clinical performance is poised to drive commercial adoption.
Beyond our current leasing and capital purchase option, we are exploring a subscription based model for hospitals.
Turning to our ongoing development.
Development efforts, we have one milestone for the remainder of the year.
The ramp up of manufacturing for the future ICU.
Clearly, we will have by the end of the fourth quarter.
Regarding San hence the initiations, we are refining our expectations to initiate eight to 10 new.
Grams in 2023 down from 10 to 12.
The adjustment is in response to the evolving capital environment.
We are taking into consideration factors like market trends and tightened budget considerations.
Believe refined outlook provides a balanced approach that aligns with the current landscape.
In conclusion, we are poised for significant milestones in the coming quarters with the lunar programs timeline remaining steady ongoing focus remains on expanding the adoption of <unk>, hence increasing utilization advancing our clinical evidence and advancing.
Our digital capabilities.
I want to thank our global team for their hard work and dedication.
To make these truly novel technologies.
Our commitment to advancing surgical technology and delivering exceptional outcomes for patients remains strong.
With that I would like to open the line for questions.
Thank you, ladies and gentlemen, we will now conduct a question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone.
Here at Raytheon acknowledging your request.
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Please ensure you lift the handset if you're using a speaker phone before pressing net's.
One moment. Please for your first question.
Your first question comes from the line of.
William Pakula Mccahon.
H C. Wainwright your line is now open.
Thank you. This is RK from H C. Wainwright good afternoon Anthony.
Hey, guys something.
Okay.
Yes.
Yes.
Yeah.
Donald.
Good day installations from that.
<unk> ended the conversation.
So I'm sure you will.
Currently.
Installations.
So far.
Sure.
Yeah.
Yes, Ben.
Four or five weeks of business weeks.
What gives you confidence that you can.
Get the installations done before.
Before ending the year.
Thanks for the question RK.
I mean, we are quite bullish about.
The forecast that we put out again.
Already pipeline accounts and we've been working through.
Some of these transactions over.
The months during Q3 and into Q4, so I think therefore for most of these pipeline accounts that a few more steps in the process.
And so far they are tracking to be completed before the end of the fourth quarter time is short, but we feel pretty good about getting to the eight to 10 number.
From the area.
Hey, guys.
In terms of procedures, it's nice to see that cadence of growth.
In terms of the prestigious itself but.
Is there a way for you to kind of amplify that into what's the startup procedures you are seeing there.
Certain kinds of proceeds Joseph.
<unk>.
Perform that on a regular basis.
So that we understand where the utility yes.
All of this enhanced system itself.
Also yes.
Any commentary at all from.
From the folks at Mayo clinic, and the pediatric hospitals.
Yeah, Okay. So I think when it comes to procedure mix.
We have not seen a big change per se in our general surgery kind of leads the Taj.
With gynecology.
Following and then urology being a third.
And this is.
It's been relatively consistent.
Through the year and even moving from last year.
I think the one piece thats added onto it and kind of increasing or growing this year is pediatrics.
Because we've seen increased pediatric use in Europe and.
And then also with.
<unk> clinic, starting that program, that's going extremely well and we are the case numbers are increasing.
Vehicle a week with them scheduling more cases, so we are still at the early.
We have more than one surgeon trained.
And.
I think one or two more to be trained.
Procedure numbers are growing and they're doing quite well and getting started.
At the Mayo clinic.
Alright good.
Then.
In terms of the.
The Japanese installation.
In your commentary you were saying.
No.
Uh huh.
And how comfortable you are with the growth.
Yeah.
The adoption of <unk>.
Going in terms of in Japan.
How much of the market is still left because I think couple of years ago, Japan kind of jumped in terms of your installations have been revised and then this year, we have not seen as many.
So.
What are your thoughts on that.
Do you think you need to add more resources in Japan in October.
To make sure.
That you can suddenly.
Utilize that that opportunity.
Historically with respect to Japan.
To date, we've done the.
The two systems in.
We have some pipeline to close that between now and year end.
Sure.
I think the thing is trying to find the right institutions, who can.
Some cases demonstrate really good utility and then be able to publish and Chad <unk>.
Experiences. So that's really the focus that we really wanted to drive.
In Japan to make sure that we have a very robust foundation.
Of procedures and institutions.
We did a nice kols network, Okay, and speak about our performance and enhance performance so that it will become even simpler for us too.
I mean, the team in Japan is doing for the size of team, they're doing extremely well.
And even looking at the proceeds of growth I think.
Japan this year.
Is really having a record year in terms of procedure volume growth compared to last year.
So that's the reason why we feel really good about.
How things are progressing.
In Japan, it's growing and you've seen the two and we are hoping to be able to close the year.
Some additional sites in Japan this year.
And the last question for me.
You made some commentary on ongoing discussions with Kohl's stores.
What sort of discussions are we talking about because.
Alright.
Yes that was one I know youll have like two or three different.
Different conversations going on with them and I'm, just trying to understand rich conversation is about.
I think it's.
I wouldn't say, that's a drastic difference to the client base and its just trying to I mean.
It becomes very complicated.
Given that for you that we are in and also looking at.
What.
We intend to do in the future in our portfolio and roadmap and what they are intending to do so.
Still talking about <unk>.
<unk>.
Potentially the digital element of it and try to find.
The right balance in terms of what the right relationship might look like and be mutually beneficial.
Thank you thanks for taking all my questions.
Thank you okay.
The final question comes from the line of Ross Osburn from Cantor Fitzgerald. Your line is now open.
Hey, guys. Thanks for taking my questions.
So following announcement that Mayo is without peer set have you seen an increase of inbound interest given their reputation, particularly from a pediatric sales.
Hey, Ross Great question.
The simple answer is yes, I think after the.
Announced mail and also some of the pediatric meetings that we attended.
In Europe, and then subsequent Dev as another smaller meeting in Texas.
All of that have generated.
Really good interest so we continue to have.
Discussions with multiple.
Hospitals in the U S primarily focused on pediatrics.
Having.
A leading hospital.
Mayo clinic already using the system.
Definitely is.
Kind of validates that thesis so that.
That has also opened.
Some good opportunities and we are.
Pretty active.
And having conversations with other pediatric institutions.
Great glad to hear it.
And then trying to volumes.
Volumes are up year to date relative to the last year, but could you provide more color on what drove versus our volume is balance our quota for the year on year.
Yes, Ross I think primarily the slowdown came from Europe.
And the European filing between the holidays and summer breaks et cetera.
Had a contribution.
To that.
Which I think was the primary player for the reason why we didn't see a quarter to quarter over quarter growth.
And also in the U S. We didn't see as much growth compared to what we saw.
Last year.
The primary reason for the quarter, but.
On an annualized basis, I think 17% is where we are and we are hoping to keep driving that number up in the fourth quarter as well.
Okay got it and then lastly could you provide a little bit.
Background on slags, and white JV to partner with them currently.
So I think.
Lunar platforms.
The really complex system and for us.
Always strive to focus on what we are good at.
And really where we can add value so.
We understand the robotic space in the digital space and have very strong R&D regulatory capabilities to execute on that and when it comes to manufacturing several years ago, probably about two two and a half years ago.
Came to the conclusion that it doesn't make sense for us to deploy capital in the sense vendetta specialists in the field like flex who understand medical device, who have really extensive supply chain networks.
That can provide us really good.
Cost.
In terms of procurement. So that we started this dialogue almost two years ago and we've been working on multiple smaller.
<unk> with them.
And that led to us trying to take a much bigger a holistic view and say, okay why don't we.
With you guys on the entire platform and set up this hub assemblies sub components that we've been talking about over the last.
Yes, which led to this agreement.
Dave will help us and David Saturday expertise and will collaborate on them ultimately taking over the full manufacturing bad debt very well suited.
To take this on.
Got it thanks for taking my questions.
Thank you Ross.
Yes.
There are no further questions at this time I will now hand, the call back to Anthony Fernando for closing remarks.
Thank you operator, thanks again for joining us today and for your support of our Sensus.
Look forward to updating you on our next quarterly call. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.