Q4 2023 Asensus Surgical Inc Earnings Call

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Good afternoon, ladies and gentlemen, and welcome to the essence of surgical Inc. Fourth quarter and full year 2023 financial and operating results conference call.

At this time all lines are in listen only mode.

Following the presentation, we will conduct a question and answer session.

If at any time during this call you require assistance. Please press star zero for the operator.

This call is being recorded on Thursday.

March 21 2024.

I would now like to turn the conference over to Mark Klausner from Westwood Partners. Please go ahead.

Good afternoon, everyone and thank you for joining us for the census, surgical fourth quarter and full year 2023 business and financial update conference call on.

On the call with me today are Anthony Fernando President and Chief Executive Officer, and Chemise ramp a cab 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 $19 95.

Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's 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 your census, surgical business I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2023 Form 10-K expected to be filed 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 useful 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 Rex.

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.

With that it's my pleasure to turn the call over to our census, Surgical's, President and Chief Executive Officer, Anthony Fernando.

Thanks, Bob and thank you all for being with us today.

Scott gave a summary of our recent performance and notable accomplishments in 2023.

<unk> will dive into our financial results.

Following that I'll discuss focus areas for 2024, and finally, we'll open the floor for any questions you may have.

I'm pleased to the progress we've made throughout 2023 and the solid foundation, we've built for the future.

We continue to drive greater adoption and utilization of both <unk> and <unk>, while at the same time, making significant progress towards the development of our next generation Luna surgical system.

Growing procedure volumes remains a critical fact, FCC to refine and enhance our digital surgery capabilities.

Globally over 3550 procedures.

Using this enhanced system in 2023, delivering 13% increase from 2022.

During the fourth quarter, we saw over 835% as procedures performed across a variety of specialties globally.

As we continue together surgical data.

<unk> learning engine improves enabling us to provide valuable clinical insights to surgeons through the ICU.

A testament to this last month.

Announced the completion of more than one successful cases, each at three hospitals.

The lasers Chronicon Houseware show in Germany.

<unk> University hospital in Lithuania.

And precedential cleaning costs Tyler in the CIA.

Another encouraging trend the bulbs you.

You said <unk> hospital.

In just four months since the programs <unk> in November 2023.

They have completed over 110 cases.

Achievements underscore the growing acceptance and confidence incentives and how our customers are realizing the value Tim has brings to deal up.

Due to the increase procedure volumes Trust registry now includes data from over 3200 patients with a growing number of cases, which has been aided by the continued expansion of sites participating in the registry.

Additionally, during the year nine peer reviewed clinical publications the published.

Including a paper exploring surgeon stress levels using centers.

Led by Trust investigators the study combat stress levels between surgeon using same heads.

Traditional laparoscopic surgery.

After analyzing 350 procedures. The research found that sin has uses experienced lower overall stress levels compared to laparoscopic surgeons due to recent reduced physical demand and distractions.

During procedures.

Moving to new program initiation, we initiated five NUCYNTA has programs in the fourth quarter, including one in Germany, one in Romania to in the region and one in Japan at Nagoya University hospitals, bringing the total for the year to eight.

One of these program initiation was a pediatric hospital in Romania.

Presenting the sixth hospital to be leveraging the same heads for pediatric procedures.

The specialized three millimeter and five millimeter instruments.

St has surgical system is uniquely designed for the delicate nature of pediatric procedures.

As more pediatric.

<unk> recognized a census unique system design.

Not only preserves minimally invasive surgery, but also advance.

Ross could be and robotics.

Does surgery solutions.

We expect interest in finance in the ICU for pediatric applications to continue to grow.

We are committed to meeting this rising demand in the pediatric market.

To wrap up I'm pleased with the progress we've achieved in the fourth quarter and continued to build on the groundwork for sustained success.

I will now pass the floor to Smes clarified NHL update.

Thanks Anthony.

Turning to the fourth quarter.

For the three months ended December 31, 2023, the company reported revenue of $5 4 million.

Paired to revenue of $2 $5 million in the three months ended December 31 2022.

Revenue in the fourth quarter of 2023 included $3 $6 million in system revenue.

<unk> million dollars in instruments and accessories.

<unk> $5 million in lease revenue and.

And <unk> 3 million.

In services.

For the three months ended December 31, 2023, total operating expenses were $17 2 million as compared to $18 3 million in the three months ended December 31 2022.

For the three months ended December 31, 2023, net loss attributable to common stockholders was $17 2 million.

<unk> per share as compared to a net loss attributable to common stockholders of $17 9 million.

<unk> per share in the three months ended December 31 2022.

For the three months ended December 31, 2023, the adjusted net loss attributable to common stockholders was $17 5 million.

<unk> <unk> seven per share.

As compared to an adjusted net loss of $16 7 million or <unk> <unk> per share in the three months ended December 31 2022.

Adjusted net loss as GAAP net loss adjusted for the following items.

Amortization of intangible assets.

Change in fair value of contingent consideration.

Operating equipment impairment.

Change in fair value of warrant liabilities, all of which are noncash charges adjusted net loss attributable to common stockholders is a non-GAAP financial measure.

A reconciliation from GAAP to non-GAAP measures can be found in our earnings release.

Turning to the balance sheet.

The company had cash cash equivalents and short term investments excluding restricted cash of approximately $21 1 million as of December 31 2023.

In the third quarter of 2023, we initiated a cash burn reduction plan to streamline expenses.

As a result of the plan, we saw a cash burn decreased in the fourth quarter and into the first quarter.

Based on the recent financing and our current operating plan, we projected available cash will now sustain operations until early June 2024.

Turn the call back over to Anthony.

Thanks Denise.

We wanted to provide an update on what lies ahead that the census in 2024.

Starting with Luna in December we hosted a surgeon lab in research Triangle Park, North Carolina to conduct an in vivo evaluation.

Luna is hardware software and instruments in policy models.

The lab allowed nine participating surgeons to evaluated system functionality in 13 different procedures across gynecology urology and general surgery.

The surge in lab highlighted organized notable range of motion and instrument dexterity, essentially a precise surgical maneuvers.

Surgeons also appreciated the strength and reliability of the five millimeter true risks the instrument line offering versatility with different instrument types.

Additionally.

They found ergonomic design of the lunar surgeon console and easy patient access to be north of the fetus.

The positive feedback from participating surgeons underscores our dedication to developing and delivering a surgical robotic platform that exceeds expectations.

Insights gathered during this evaluation will hit in refining the system design, bringing us closer to a final product.

For a closer look at the surgeon lab and insights from the participating surgeons.

<unk> is available on our Investor Relations Web site.

The video provides an overview of the Luna systems features demonstrating its range of motion instrument strength.

Ill make benefits.

In order to conserve capital we are adjusting our development timeline.

This decision allows us to maintain physical stability, while still advancing towards key milestones aluminum.

We now intend to freeze the system's design in Q3, 2024, and conduct verification and validation testing in Q4 2024.

Subsequently, we will initiate pilot manufacturing and prepare for regulatory submissions.

The submission is now expected in the second half of 2025.

Clearance anticipated in the first half of 2026, followed by a launch thereafter.

As we have said before we are following a clear and defined regulatory path for <unk>.

Donna.

Drawing from our interactions with the FDA.

And our proven success in submissions for <unk>.

We anticipate following a traditional 500 10-K pathway in the U S rather than the more rigorous de Novo path, which we believe can save time and cost.

Additionally.

We have some important Luna digital solutions milestones to highlight in the near term.

By Q2 2024, we aim to integrate several new features into our digital platform, including advanced analytical tools with multi point and planned measurement functions.

Innovative training and communication tools with Telus tracing capabilities and enhanced safety features.

Furthermore, we are striving to conduct prototype testing for our digital features within the same timeframe.

So I Didnt advisors will give us valuable feedback on functionality and user experience, helping us ensure that our digital solutions are user friendly and effective.

In parallel we are planning to launch our customer portal website globally during Q2 2024.

This platform will be accessible to us enhance users with our sensors cloud connectivity, providing useful resources like procedure specific data statistics and downloadable are shattered the videos.

It is a significant step forward in improving collaboration and accessibility within our user community.

Turning to our ongoing development efforts our primary goal for the year is to ramp up manufacturing for the future <unk> hardware with our partners.

Additionally, we are working on completing the design for two <unk> configurations, and expect that we will be finalizing the hardware by the second quarter of 2024.

These configurations include the lunar ICU, which supports a robotic platform configuration and the Standalone ASU.

That enhancing laparoscopic procedures.

These configurations will offer flexibility and efficiency to meet various surgical needs and preferences.

Regarding San has initiations, we intend to initiate eight to 10 new programs in 2024.

Additionally, we expect procedure volume growth for 2024 to track close to 15% to 20% growth over 2023.

The data gathered from the trust registry. During these procedures has been immensely valuable and with the adoption of the IAA assumed by more sites in the coming months.

Data pool will expand further.

This data collection from the Trust registry and independent studies plays a vital role.

In bridging sand heads and Lula.

Additionally, we aim to enhance our cloud data architecture, leveraging Google cloud advanced technologies to provide surgeons with real time intra operative clinical intelligence.

This initiative has the potential to achieve superior outcomes for patients.

Looking ahead to 2024, we are optimistic about reaching important milestones in the coming quarters.

Our lunar surgical system remains a primary focus in the year.

Additionally, we are dedicated to expanding to enhance adoption, increasing utilization advancing clinical evidence and enhancing our digital capabilities.

We sincerely appreciate the hard work and dedication of our global team in bringing this innovation to life underscoring our commitment to advancing surgery technology and improving patient outcomes.

With that we will.

I'd now like to open the line for questions.

Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you have a question. Please press star followed by the number one on your telephone keypad.

If you wish to cancel your request please press star two.

Please ensure to lift the handset if youre using the speaker phone before pressing entities.

One moment for your first question.

Your first question comes from Ross Osburn from Cantor Fitzgerald.

Your line is now open.

Hey, guys. Thanks for taking the questions and I apologize for the background noise traveled today.

Starting off would you walk through your thoughts around financing.

The size and structure.

The company going past June and then as a follow up where were you able to cut costs during the fourth quarter and has been improved during the first quarter.

Hey, Ross Thanks for the question.

I think as we noted on the cash.

And that.

Fourth quarter with $21 million in cash.

And obviously for our capital raise in cash we are exploring.

Several options.

<unk> equity non dilutive transactions licensing agreements.

And we will look to execute something obviously, that's in the best interest of the company.

And the shareholders.

That's kind of the plan.

Then on the cost I think it came out from.

Several areas.

Some under R&D.

Front, which is why we had to shift the timelines.

For Laura development.

And also from all the other.

Functions across the company.

Streamlining of.

Expenses.

Planned budgets.

Okay understood and then just one more question if I may.

Yes.

Financing thrill need.

You need to add.

I was going to be at about at that point, how much capital do you think youll need to raise cash.

Hopefully develop I think from our side, especially given the cuts.

A couple of quarters.

So I think you can kind of.

But through the burn rate I mean based on what we've done before.

The previous quarter.

Trajectory that we need to continue.

To intersect with the timelines.

That we have outlined.

So I think we have the right we have the team in place and then we have been doing all the right things.

To get to where we need to and now it's just a matter of time purely for execution. So.

I'm sure you can look up.

Numbers based on historical band and that will continue on through to.

Our regulatory.

Pruitt.

Understood. Thanks for taking my questions.

Thank you Ross.

Your next.

<unk> comes from.

Our tier one come from HC Wainwright. Your line is now open.

HC Wainwright: Thank you.

Good afternoon Anthony.

No.

Looking at your past history and how.

Being able to add.

New initiations.

A year.

Yes.

Have you understood.

Now the market is working for you.

In the sense because.

You come up you certainly managed to get you an eight to 10 initiations, but.

<unk>.

<unk>.

In terms of trying to get a.

Better than that what needs to be done.

And also.

Paul.

How are you thinking of.

Managing.

The growth of the procedure volumes as well.

Okay. Thank you for the question so I'll take the two parts.

I'll take the latter part first with respect to procedures I mean.

Some other sites.

Mature sites that have seen the benefit of.

San hands in terms of efficiency and cost and familiarity.

With laparoscopy and Theyre training, so that is driving increased usage at some of the mature sites and then some of the newer sites have seen this.

And they're trying to mimic that kind of performance and obviously over the years. We've also gained a significant amount of experience about how best to stand up a site in dry.

Volume.

Specific site efficiently. So all of that is kind of playing.

Through quite nicely for us to continue to grow.

Jason.

<unk> said before if we look at the trend.

Of utilization on a per system basis globally that has been increasing year after year after year.

So it's not just the new systems doing.

More cases.

So that's one part and the second part driving <unk> adoption.

In terms of systems.

Pediatrics has been helping us quite a bit because we are seeing a really good interest in pediatrics and in Japan in Europe.

And even in the U S.

Last year. This time, we had maybe one or two pediatric sites that will be up to six and we anticipate that to continue.

To grow.

And also the other sites that are working.

Working with us.

They do.

You may have.

They want economics to be responsible in terms of procedure.

Cost.

And there is a priority forecast, obviously, we have a proven track record there so.

<unk>.

Kind of.

Able to work together. So those are the two things out I would say that so we continue to be able to do that and obviously to continue to grow beyond that once we.

Get further ahead.

Okay. Thank you for that.

In terms of the ICU.

Yes.

I'm trying to come up with novel configurations. So.

Ill.

I'm just trying to understand what the development.

Timeline on this and how do you plan to commercialize this at the end of the day.

Yeah, Okay. So the two configurations, obviously, we have the first generation <unk> on the market today.

And we are in the process of developing the second generation ASU.

One version of that will be part of Luna.

That is the robotic version of <unk>. So it does have.

Some of the features that we currently have and continue to evolve in terms of performance features applications. So on.

Related to robotic.

Platform robotic medical laser.

The second version of the.

The new ASU.

Primarily for Standalone use.

For used on laparoscopy without a robot.

So we have seen interest in that area and we're going to continue to build some of the applications better.

Relative and relevant to <unk>.

Non robotic.

And Thats, all commercialization I think multiple ways that and again several options are being <unk>.

Explored.

Do we do it ourselves and other partnership opportunities.

For us too.

Leverage the commercial infrastructure.

To be able to.

Gain adoption so.

The commercial parts say exploratory, but we know days a need for this and we had.

Renal clear regulatory path and also the.

Fetus relatively well.

So that's the reason why.

Sided that we're going to go down to part ways and be able to offer these not only for robotic but also standalone use.

Okay.

Speaker Change: Thank you for taking my questions.

Thank you RK.

Yes.

There are no further questions at this time Mr. Anthony Fernando. Please proceed.

Thank you operator, thank you everyone for joining today's call and we look forward to updating you on our progress throughout the year.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining you may now disconnect.