Asensus Surgical Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 14, 2023

There are 6 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to the Ascensus Surgical, Inc. 3rd Quarter Financial and Operating Results Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Tuesday, November 14, 2023.

Operator

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

Speaker 1

Good afternoon, everyone, and thank you for joining us for the Ascensus 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 Shamish Ramberg Gabb, 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 company's business, including any geopolitical factors beyond our control. The company undertakes no obligation to update the information provided on this call.

Speaker 1

For a discussion of risks and uncertainties associated with the Ascenta Surgical business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2022 Form 10 ks 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 useful information for both management and investors by excluding certain non cash and other expenses that are not indicative of the company's core operating results.

Speaker 1

Management uses non GAAP financial measures to compare our performance relative to forecast and strategic plans, the 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. With that, it's my pleasure to turn the call over to Ascensus Surgical's President and Chief Executive Officer, Anthony Fernando?

Speaker 2

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, Shamis 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. Before I dive into the quarterly review, I would like to take a moment to acknowledge the recent events in Israel. The attacks and escalating conflict there have deeply affected us all.

Speaker 2

I extended our deepest sympathies to those Who have suffered losses or injuries and to all impacted by the violence. Our thoughts and support are with our team in Israel and their families During this time, we are proud of the incredible care and support they've shown one another with some of our own team members and their spouses having been called to military 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 Q3. We are pleased to share that we've reached significant milestones recently.

Speaker 2

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 a graphics Hardware provider to enhance the capabilities of our ISU, which will contribute to improved performance. Our ongoing focus remains on expanding the adoption of Senhance, increasing utilization, Advancing our clinical evidence, refining our portfolio to enhance Senhancer's capabilities and deliver the value of performance guided surgery During the quarter, 4 clinical papers were published, 2 of which I want to discuss. These studies highlight the promising performance of Senhance in comparison to the current market leading robotic system and traditional laparoscopy in various procedures. The first study from Taiwan reveals cost advantages of Senhance with shorter operative times and comparable patient outcomes versus the current market leading robotic system.

Speaker 2

The second study emphasizes Senhance's comparable outcomes to laparoscopic procedures with the added benefit of shorter hospital stays. Incision to suture times also showed a close match between Senhance and 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 our digital surgery capabilities. Year to date, our performance reflects a strong 17% growth in procedures.

Speaker 2

During the Q3, we saw 2% Year over year growth and over 760 Fenhance procedures performed across a variety of specialties globally. Our machine learning engine improves as we continue to gather surgical data, enabling us to offer useful clinical intelligence To surgeons, we are the ISU. Another positive aspect of increased procedure volumes is the expansion of our clinical registry. As of this call, our trust registry has grown to include Data from over 3,000 patients with cases across gynecology, general surgery and urology. This growth signifies a notable step forward in our efforts to accumulate valuable patient data and to help inform surgical decision making and ultimately help improve patient care.

Speaker 2

The Senhance clinical registry is one of a kind collection of data and the only registry focused on digital laparoscopy. The Trust Registry is a multi specialty clinical registry that is investigator led and managed by a 3rd party clinical research organization with full ethics committee approval at each institution. The primary goal of this registry is to create a collection of 60 plus intraoperative data points and 12 month post operating follow-up data. This information will serve as a foundation for a greater number of Moving to new program initiations, we initiated 2 new Senhance programs in the quarter ended September 30, 2023. In August, we initiated a program with First Tawakai Hospital in Japan.

Speaker 2

We are seeing ongoing expansion in Japan, solidifying agreements with highly regarded institutions. The encouraging progress in Japan is a testament to our efforts, and we are enthusiastic about further driving adoption in the region. The second was Mayo Clinic Hospital St. Mary's Campus, the leading United States based hospital that was announced in July. This marks an important milestone as this is the first system to be exclusively utilized by pediatric surgeons at a U.

Speaker 2

S.-based hospital. The Senhance system is well suited for pediatric procedures Given a mix of unique features like augmented intelligence, machine learning, haptic feedback, eye tracking camera control, 3 d visualization and most importantly, specialized 3 millimeter and 5 millimeter instruments. Subsequent to the end of the quarter, We initiated 2 additional Senhance programs. The first was Clinikum Ida Oberstein Hospital in Germany to be used by their clinic for general, visceral and minimally invasive surgery. The second system was sold to the company's distribution partner and will be placed in a pediatric hospital in the Commonwealth of Independent States region.

Speaker 2

In March of this year, we expanded our U. S. Pediatric indication, complementing our existing regulatory approvals in Europe And Japan. This expansion allowed us to engage with leading pediatric surgeons, especially those Operating at top children's hospitals who have recognized the distinct advantages of Senhance for younger patients. The system's smaller instruments, a digital fulcrum to minimize tissue trauma and haptic feedback for precise touch and feel Have been particularly appreciated by surgeons as they enable the preservation of the benefits of minimally invasive surgery for Delicate Pediatric Tissues.

Speaker 2

As we discussed on our last call, July marked an important milestone for Ascensus played a prominent role delivering an impactful robotic master class, highlighting The integration of cognitive science, data science and robotics providing attendees with valuable insights With hundreds of customer interactions at this surgical forum, Ascensus went On to host potential customers at our headquarters in Research Triangle Park and in Milan as well as partner With leading children hospital to execute awareness events that engaged these leaders In considering how to incorporate Senhance into their clinical programs. With pediatric surgeons and thought leaders recognizing Ascensa's unique system design, which not only preserves Minimally invasive surgery, but goes beyond by advancing laparoscopy and robotics with digital surgery solutions, The interest in Senhance and the ISU for pediatric applications continues to grow and we are committed to meeting this I'd also like to highlight our recently launched e book titled Augmented Intelligence, The Answer to Surgery's Shortcoming, which has generated positive responses from the medical community. The e book explores how performance guided surgery can address surgical variability, providing operational advantages for surgeons, cost efficient advancements for hospitals and improved patient outcomes. It highlights the potential for technology adoption to attract and nurture talent in the medical field, ultimately enhancing hospital reputation.

Speaker 2

The e book can be found on our website or LinkedIn, And I encourage everyone to read it. Now taking a look at the portfolio development front. Starting with the recent announced agreement with Flex for Luna System Manufacturing. Under this agreement, Flexil provides a range of design and advanced manufacturing services across Luna's product lifecycle To enable us to deliver the Luna platform at scale, Flex's proven track record of delivering complex electromechanical systems across diverse industries and deep understanding of the complex requirements For Medical Devices, we'll enable us to accelerate time to market for our Luna platform. Also Flex's focused portfolio of advanced manufacturing capabilities and clustered supply chain network We'll be instrumental in scaling Luna globally.

Speaker 2

In September, we announced a collaboration with NVIDIA to enhance the capabilities of the ISU. By directly collaborating on NVIDIA's advanced tools, We aim to refine the ISU's augmented intelligence features and further develop advanced features based on surgeon feedback. The ISU already powered by NVIDIA hardware has been providing real time support to surgeons since 2021. This announced collaboration will expand the relationship to facilitate shared access to product roadmaps. We are exploring innovative models for the development and deployment of digital surgical solutions, Leveraging NVIDIA's AI computing platform, Holoscan.

Speaker 2

This collaboration highlights the potential and highlighting the growing importance of data driven technologies that support surgeons and advanced surgery. With an overarching focus on data, our collaboration with Google also holds immense value, particularly in our joint effort in data collection and analysis. This partnering integrates Google's cutting edge machine learning tools and secure cloud data architecture with our performance guided surgery framework. By harnessing the data gathered Through the ISU, in tandem with Google Cloud's leading technologies and providing surgeons with real time intraoperative clinical intelligence, Regarding card storage, Our discussions are ongoing. Both organizations are dedicated to expediting the finalization of an agreement, And we will provide an update once these conversations conclude.

Speaker 2

To wrap up, I'm pleased with the progress we've achieved in the Q3 and continue to build on the groundwork for sustained success. Now I'll pass the floor to Sameer for a financial update.

Speaker 3

Thanks, Anthony. Turning to the 3rd quarter, for the 3 months ended September 30, 2023, the company reported revenue of $1,100,000 as compared to revenue of $2,600,000 in the 3 months ended September 30, 2022. Revenue in the Q3 of 2023 included $500,000 in lease revenue, $300,000 in instruments and accessories and $300,000 in services. For the 3 months ended September 30, 2023, Total operating expenses were $18,500,000 as compared to $17,200,000 in the 3 months ended September 30, 2022. For the 3 months ended September 30, 2023, net loss attributable to common stockholders was $18,300,000 or $0.07 per share as compared to a net loss attributable to common stockholders of $18,900,000 or $0.08 per share in the 3 months ended September 30, 2022.

Speaker 3

For the 3 months ended September 30, 2023, The adjusted net loss attributable to common stockholders was $15,600,000 or $0.06 per share as compared to an adjusted net loss of $16,900,000 or $0.07 per share in the 3 months ended September 30, 2022. Adjusted net loss is 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 non cash charges. Adjusted net loss attributable to common stockholders is a non GAAP financial measure. Reconciliation from GAAP to non GAAP measures can be found in our earnings release. Turning to the balance sheet.

Speaker 3

In July, we completed a registered direct offering bringing in gross proceeds of approximately $10,000,000 We plan to allocate these funds to reinforce our working capital and contribute to research and development. The company had cash, cash equivalents and short term investments, excluding restricted cash of approximately $33,100,000 as of September 30, 2023. Based on the recent financing and our current operating plan, we project our cash runway has been extended through late Q2 of 2024. I'll turn the call back over to Anthony.

Speaker 2

Thank you, Shamish. As we look ahead, Let's delve into what lies on the horizon for our census and what you can anticipate in the coming months. With regards to the Luna program, our timeline remains on track and we expect to complete full system integration and testing and the preclinical evaluation by the end of Q4 this year. We will freeze the systems designed in Q1 2024, Conduct verification and validation testing and ramp up pilot manufacturing and prepare for regulatory submission. In terms of our Luna go to market strategy, I'd like to reiterate our 2 key advantages.

Speaker 2

Firstly, we've established a clear regulatory pathway for Luna. Based on our communications with the FDA, In house regulatory expertise and our track record with successful submissions for Senhance, we anticipate leveraging The time and cost effective traditional 510 pathway in the U. S. As opposed to a more rigorous de novo pathway. 2nd, Luna's innovative economic model coupled with its clinical performance is poised to drive commercial adoption.

Speaker 2

Beyond our current leasing and capital purchase options, we are exploring the subscription based model for hospitals. Turning to our ongoing ISU development efforts. We have one milestone for the remainder of the year, The ramp up of manufacturing for the future ISU, which we believe we will have by the end of the 4th quarter. Regarding Senhance initiations, we are refining our expectations to initiate 8 to 10 New programs in 2023, down from 10% to 12%. This adjustment is in response to the evolving capital environment.

Speaker 2

We are taking into consideration factors like market trends and tightened budget consideration. We believe this refined outlook provides a balanced approach that aligns with the current landscape. In conclusion, we are significant milestones in the coming quarters. With the Luna program's timeline remaining steady, Our ongoing focus remains on expanding the adoption of Senhance, 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 a reality, our commitment to advancing surgical technology and delivering exceptional outcome for

Operator

Thank you. Ladies and gentlemen, we will now conduct a question and answer

Speaker 4

One moment please for your first question. Your first question comes from the line of Swayampakula Ramakanth from H. C. Wainwright. Your line is now open.

Speaker 5

Thank you. This is RK from H. C. Wainwright. Good afternoon, Anthony and Shanice.

Speaker 5

Hope you guys are doing good. Yes. So to start off With the installations from where you ended the conversation, so You have currently 5 installations so far for the year And with less than 4 or 5 weeks of business weeks, What gives you confidence that you can get 3 installations done before ending the year?

Speaker 2

Thanks for the question, RK. I mean, we are quite bullish about The forecast that we put out, again, these are 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 there are few more steps in the process. And so far they are all tracking to be completed Before the end of the 4th quarter, time is short, but we feel pretty good about getting to the 8% to 10% number From where we are.

Speaker 5

Very good. In terms of procedures, it's nice to see that cadence of growth in terms of the procedures itself. But is there a way for you to kind of amplify that into What sort of procedures you're seeing? Are there certain kinds of procedures which are being Performed on a regular basis and that's so that we understand where the utility is Of this enhanced system itself? And also any commentary at all From the folks at Mayo Clinic in the pediatric hospital.

Speaker 2

Yes, RK. So I think when it comes to procedure mix, we have not seen a big change per se. General surgery kind of leads the charge with gynecology following and then urology being a third Specialty and this is pretty it's been relatively consistent through the year and even moving from last year. I think the one piece that's added on to it and kind of increasing or growing this year is pediatric, Because we've seen increased pediatric use in Europe and then also with Mayo Clinic Starting their program, that's going extremely well. And we are the case numbers are increasing Week over week with them scheduling more cases.

Speaker 2

So we are still at an early point. We have served more than 1 surgeon trained there And I think 1 or 2 more to be trained, but procedure numbers are growing and they are doing quite well in getting started In at the Mayo Clinic.

Speaker 5

Very good. And then in terms On the Japanese installation, in your commentary you were saying How comfortable you are with the growth and where the adoption is Going in terms of in Japan, how much of the market is still left because I think couple of years ago Japan kind of trumped In terms of your installations of the device and then this year we have not seen as many. So what are your thoughts on that? And do you think you need to add more resources In Japan to make sure that you can fully utilize that opportunity.

Speaker 2

So RK, with respect to Japan, year to date we've done the 2 systems and We have some pipeline to close there between now and year end as well. I think the thing is trying to find the right institutions who can perform cases, Demonstrate really good utility and then be able to publish and share their experiences. So that's really the Focus that we really want to drive in Japan to make sure that we have a very robust foundation of procedures and institutions and build a nice KOL network who can speak about performance and Senhance performance So that it will become even simpler for us to expand. I mean the team in Japan is doing for the size of team, they're doing extremely well. And even looking at procedure growth, I think Japan this year has is really having a record year in terms of Procedure volume growth compared to last year.

Speaker 2

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 2 and we are hoping to be able to close the year with some additional sites in Japan this year.

Speaker 5

And the last question from me, you made some commentary on ongoing discussions with call. What sort of discussions are we talking about? Because I thought Yes, there was one I know you had like 2 or 3 Different conversations going on with them. And I'm just trying to understand which conversation is this about?

Speaker 2

I think it's I wouldn't say there's a drastic difference in the conversation. It's just trying to I I mean, it becomes very complicated given the field that we are in and also looking at what We intend to do in the future in our portfolio and road map and what they are intending to do. So We are still talking about visualization and even 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.

Speaker 5

Thank you. Thanks for taking all my questions.

Speaker 2

Thank you, RK.

Speaker 4

The final question comes from the line of Ross Osborne from Cantor Fitzgerald. Your line is now open. Hey guys, thanks for taking the questions. So following the announcement that Mayo has adopted your system, have you seen an increase in inbound interest given the reputation, particularly from a pediatric stance.

Speaker 2

Hey, Raj, great question. The simple answer is yes. I think after we announced Mayo and also some of the pediatric meetings that we Attended in Europe and then subsequent there was 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.

Speaker 2

S. Primarily focused on pediatrics and having Leading hospital here like Mayo Clinic already using the system definitely is It kind of validates that thesis. So that has opened some good opportunities and we are pretty active In having conversations with other pediatric institutions.

Speaker 4

Great. Glad to hear it. And then turning to volumes and I realize volumes are up year to date relative to the last year. But could you provide more color on what drove Precision volumes

Speaker 2

Yes, Ross. I think primarily the slowdown came from Europe And the European pricing between the holidays and summer breaks, etcetera, that had a contribution To that, which I think was the primary player for the reason why we didn't see a quarter over quarter growth. And also in the U. S, we didn't see as much growth compared to what we saw last year. That was the primary reason for the quarter, but on an annualized basis, I think 17% is where we are and we are hoping to I keep driving that number up in the Q4 as well.

Speaker 4

Okay, got it. And then lastly, could you provide a little bit Background on Flex and what you're going to partner with them for Luna?

Speaker 2

Yes, Ross. So I think The Luna platform is a relatively complex system. And for us, we've always tried to focus on what we are good at and really where we can add value. So we understand the robotic space And the digital space and have very strong R and D regulatory capabilities to execute on that. And when it comes to manufacturing several years ago, probably about 2, 2.5 years ago, we came to the conclusion that It doesn't make sense for us to deploy capital in a sense when there are 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.

Speaker 2

So with that, we started this dialogue almost 2 years ago and we've been working on multiple small Projects with them and that led to us trying to take a much bigger holistic view and say, okay, why don't we I worked with you guys on the entire platform instead of the sub assemblies or sub components that we've been talking about over the last 2 years, which led to this agreement where they will help us and they will share their expertise and we'll collaborate on Them ultimately taking over the full manufacturing where they are very well suited to take this on.

Speaker 4

Got it. Thanks for taking our questions.

Speaker 2

Thank you, Russ.

Operator

There are no further questions at

Speaker 4

this time. I will now hand

Operator

the call back to Anthony Fernando for closing remarks.

Speaker 2

Thank you, operator. Thanks again for joining us today and for your support of Ascensus. We look forward to updating you on our next quarterly call. Thank you.

Operator

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

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Asensus Surgical Q3 2023
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