Asensus Surgical Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 10, 2023

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to the Ascensus Surgical Second Quarter 2023 Business and Financial Update Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark Klausner.

Operator

Please go ahead.

Speaker 1

Good afternoon, everyone, and thank you for Joining us for the Ascensus Surgical's Q2 2023 Business and Financial Update Conference Call. On the call with me today are Anthony Fernando, President and Chief and Shamesh Rampartab, 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 risk 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 Ascensus 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 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 to benchmark to outperformance externally against competitors and for certain compensation decisions. Reconciliations from U. S. GAAP to non GAAP results 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 I'd like 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, Shamiz will detail our financial results. Next, I'll update you on our priorities for the rest of 2023 before we open the line for questions. During the Q2, we made good progress across all our key areas. Our focus remains on expanding the adoption of Senhance driving broader utilization of our intelligent surgical unit or ISU, advancing our clinical body of evidence and refining our portfolio to further enhance the capability of Senhance.

Speaker 2

Looking ahead, We are excited about the future with plans in place for the development of our new Luna Surgical system. Procedure volumes remain a key factor in our ability to expand and optimize our digital surgery capabilities. As we continue to collect surgical data, our machine learning engine becomes more effective, allowing us to provide Valuable Clinical Intelligence to Surgeons through the ISU. During the Q2, We continue to see robust positive trends, delivering 27% year over year growth and over 11% sequential growth with over 1,000 Senhance procedures performed across a variety of specialties globally. Over the past quarters, we have maintained consistent 10% sequential growth rate, reflecting our commitment to progress and stability.

Speaker 2

Another positive aspect of increased procedure volumes is the expansion of our clinical registry. Our TRUST Registry now includes data from over 2,500 patients with a growing number of cases across gynecology, General surgery and urology, which has been aided by the continued expansion of sites participating in the registry. The primary goal for this registry is to create a collection of intraoperative and 12 month postoperative follow-up data. This data will be used to support an increased number of quality clinical publications and contribute to our market development strategy. Moving to new program initiation.

Speaker 2

We initiated 2 new Senhance programs year to date. The first was Fukuoka tokusukai Hospital in Kasuga City, which we highlighted in our previous earnings call. In Japan, our growth continues as we enter into agreements with prominent institutions. We are pleased with the positive momentum in the country and are looking forward to supporting further adoption in the region. The second is a leading U.

Speaker 2

S. Hospital that has initiated the Senhance program exclusively within their pediatric surgery department, highlighting Senhancer's unique suitability of pediatric applications. This marks an important milestone as this is the 1st system to be exclusively utilized by pediatric surgeons at a U. S.-based hospital. We continue to be active at key industry meetings to generate excitement about Senhance, the ISU and ultimately Luna.

Speaker 2

In July, we participated in the Society of Robotic Surgery or SRS Annual Meeting held in Melbourne, Australia. SRS is a unique event where all robotic surgical technologies from various specialties come together. During the event, we had several podium presentations and symposiums featuring both Company representatives and surgeons providing an excellent opportunity to showcase the unique capabilities of Senhance, Luna and the ISU. The substantial interest and engagement we received regarding ISU and Luna were particularly encouraging and our presence at this event signifies our commitment to driving innovation in robotics and digital surgery. Additionally, we attended the 1st joint meeting of the International Pediatric Endosurgery Group or IPEG and the European Society of Pediatric Endoscopic Surgeons or ESPRESS meeting.

Speaker 2

We hosted a number of key events, including our sponsored Espers Robotic Master Class, which allowed surgeons from around the globe to explore robotics in pediatric surgery. The master class received positive feedback and our hands on training sessions showcase the precision and efficiency of the Senhance system in pediatric procedure. After attending several of these conferences over the past few quarters, we've seen strong validation of Senhance's potential Amidst the influx of new systems planning to be on the market, our understanding of market needs backed by real world experience and valuable user input sets us apart. The unique offering Real time augmented intelligence has generated excitement from surgeons and hospital administrators alike, and we are confident we hold an edge over future market entrants. Turning to other recent developments.

Speaker 2

As we stated earlier, During the quarter, we made progress in expanding our presence in the pediatric space. Since having received FDA clearance In March 2023, we have seen strong interest from pediatric surgeons. Our efforts to develop pediatric specific real world data have shown promising results demonstrating the safety and feasibility of using Senhance in pediatric cases. The combination of Senhancer's features such as 3 millimeter instrumentation and haptic feedback along with the ISU's clinical intelligence makes it highly effective for pediatric procedure. We have obtained the necessary clearances and approvals including CE Mark and FDA 510 clearance allowing us to support surgeons globally and improve outcomes.

Speaker 2

We continue to see increased interest in Senhance and ISU for pediatrics and are committed to meeting the growing demand in the market. In conclusion, I'm happy with the progress we've made in the second quarter and our strategic positioning for long term success. Now I will hand over the call to Samish, who will provide a financial update.

Speaker 3

Thanks, Anthony. Turning to the Q2. For the 3 months ended June 30, 2023, the company reported revenue of $1,100,000 is compared to revenue of $1,000,000 in the 3 months ended June 30, 2022. Revenue in the Q2 of 2023 included $500,000 in lease revenue, dollars 300,000 in instruments and accessories and $300,000 in services. For the 3 months ended June 30, 2023, Total operating expenses were $18,900,000 as compared to $18,200,000 in the 3 months ended June 30, 2022.

Speaker 3

For the 3 months ended June 30, 2023, net loss attributable to common stockholders was $20,700,000 or $0.09 per share as compared to a net loss attributable to common stockholders of $19,600,000 or $0.08 per share in the 3 months ended June 30, 2022. For the 3 months ended June 30, 2023, The adjusted net loss attributable to common stockholders was $20,300,000 or $0.09 per share as compared to an adjusted net loss of $17,300,000 or $0.07 per share in the 3 months ended June 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 impairment of property and equipment, 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.

Speaker 3

Turning to the balance sheet. The company had cash, cash equivalents and short term investments, excluding restricted cash of approximately $40,000,000 as of June 30, 2023. In July, subsequent to the end of Q2, 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. 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. Turning to the balance of 2023 and what we expect to achieve during the back half of the year. With regard to the Luna program, we have made significant progress in R and D and are now focused on testing and evaluation ahead of preparing for regulatory filings in 2024. By the end of the Q3 2023, we intend to complete full system integration and system testing and finalize our manufacturing strategy. Preclinical evaluation, which includes surgeons performing several procedures with the LUNAR system on a foreseen model is scheduled for completion by the end of Q4 of this year.

Speaker 2

Looking ahead beyond 2023, our plan is to freeze the systems designed in Q1 of 2024, conduct verification and validation testing and ramp up pilot manufacturing. By the end of 2024, we aim to submit to the FDA and other regulatory bodies in Europe and Japan with the expectation of receiving FDA clearance in mid-twenty 25. Following this milestone, we will proceed with the commercial pilot launch during the second half of twenty twenty five. As it relates to our Luna go to market efforts, 2 key advantages I would like to highlight. First, we believe that we have a clear regulatory pathway outlined for Luna.

Speaker 2

In the U. S, Based on our continued communications with the FDA, significant in house regulatory expertise and our series of successful regulatory submissions for Centanz, we expect to be able to leverage a time and cost effective Traditional 510 pathway in the U. S. Rather than a more intensive de novo pathway. We believe this streamlined regulatory strategy applies not only to the United States, but also to the European Union, Japan and other parts of the world.

Speaker 2

This derisked regulatory process will significantly contribute to time to market advantages compared to other new entrants to this space. This approach positions us favorably for expanding Luna's market presence globally. 2nd, we believe Luna's disruptive economic model, which when combined with the platform's innovative clinical performance, will allow us to drive strong commercial adoption. In addition to our current leasing model and capital purchase model, There is the potential for Luna to be available to hospitals through a subscription based model. This innovative approach aims to provide a greater level of economic flexibility for our customers, offering increased accessibility, thereby paving the way for broader adoption of the Luna system without a significant increase in procedure costs compared to laparoscopy.

Speaker 2

Turning to ongoing ISU development efforts. We anticipate reaching 2 milestones during 2023. The first being entering into an agreement with a strategic graphics hardware provider in the second half and second, to finalize and ramp up pilot manufacturing for the future ISU by the end of the Q4. These developments are crucial steps in advancing our Luna program and expanding our digital capabilities with the ISU. As it relates to Senhance, we continue to expect to initiate 10 to 12 new programs throughout 2023.

Speaker 2

Additionally, we are optimistic that procedure volume growth will follow A similar trajectory as seen in the 1st and second quarter of the remainder of this year. The data collected from these procedures has been crucial and we anticipate even more valuable insights as additional sites adopt the ISU in the coming months. Lastly, we are excited to make progress with Luna, particularly in the preclinical evaluation, which we aim to complete by year end. These are exciting times at Ascensus. We have continued to push the boundaries of what is possible in robotics and digital surgery, and we will keep pushing to deliver the tools and capabilities that surgeons need to deliver better, more consistent outcomes for their patients.

Speaker 2

With that, I would like to open the line for questions.

Operator

We will now begin the question and answer session. First question comes from RK at H. C. Wainwright. Please go ahead Mr.

Operator

Remekan.

Speaker 4

Thank you. This is RK from H. C. Brandeis. Good afternoon, Anthony and Shamiz.

Speaker 4

So, couple of questions from me. Certainly, it's very encouraging to see the 11 sequential growth in the procedure volume and also seeing that you're growing at least 10% Quarter over quarter for 3 quarters now. What is driving that growth? And What have either you when I say you, what has ASUNS has done to assure yourselves that sustained growth of 10% and above.

Speaker 2

Hi, RK. Thanks for the question. So I think the how we see this is the more familiarity that The hospitals gain and also when they gain familiarity, as you know, when you start, we start with a few number of surgeons. And once time passes, there are more surgeons that at the same hospital that try to use the system. So the procedures have been growing.

Speaker 2

So that's one area that we've seen growth coming from existing hospitals, doing more cases with additional surgeons. And the second is, as you remember, at the back half of last year, we placed A significant amount of systems, majority were placed in second half. So that also is playing in now because they've Done the installations and getting up to speed and coming up their learning curve. So they have begun to produce. So I think those are the two factors that are continuing to contribute.

Speaker 2

And when you look at it on a Year to date basis, we've grown procedure volume 27% Compared to last year and I think that's kind of what we think we can continue given these two factors coming together.

Speaker 4

Thanks for that. And in terms of the installations itself, as you said, we have For the last couple of years at least, we have been watching more installations happen in the second half rather than in the first half. And it probably is going to be the same situation this year. What drives it to be a second half event? Is it because These things take a longer sales cycle and I It doesn't have to be an outright sale anymore.

Speaker 4

You folks are have a subscription and the lease model, which helps. But still it seems like it is taking a bit long. I'm not saying a bit longer, but longer. And I'm just trying to understand the dynamics of the sales cycle.

Speaker 2

Sure, okay. So again, I think The interest and the pipeline exists. It's trying to convert the pipeline Into a placement of a system, whether it's a sale or operating lease. And that decision, economics It's one part of that decision, but also the hospital and the staff, they also have to be ready and trying We're willing to do their training, get up to speed and start using the system. So It is I know just looking at last year and this year, it's beginning to see like somewhat of a pattern, but it's It takes time and it is continuing to take time for the hospitals to come to that decision to say, okay, now let's start this program.

Speaker 2

But from a pipeline point of view, I can say that we feel very bullish about the pipeline And know that we can deliver on this commitment of 10 to 12 Systems, but the decision cycle is a long one because hospitals are doing the diligence and trying to get as much Consensus internally as they can with surgeons so that they can make the program successful.

Speaker 4

Thanks for that. And then on the pediatric install that you had, which is Obviously, trying to kind of expand beyond the other indications. How attractive is it to some of these hospitals? And also to are there any conversations in the hospitals that Already have some of your initial adopters. How are they thinking about extending it into the pediatric surgical suites as well.

Speaker 2

Yes. So RK, I think great points. I'll talk about 2 things. 1, I'll talk about the existing sites. There are, I would say, a few existing sites, that happened to have pediatric specialty within the hospital.

Speaker 2

In cases like that, obviously, we can consider it. But many Sites didn't consider Senhance before for pediatrics because pediatrics, it was somewhat separated And they looked at Senhance for other procedures. But now with Pediatric, I think it is somewhat of an underserved space. And given the unique The nature of Senhance, the pediatric surgical units and the surgeons are looking to it saying, okay, here's a device that Have significantly smaller instruments and have certain features like haptic feedback and the digital capabilities and they're seeing the value of what it could do In pediatric, especially in the U. S, because we've been doing pediatric cases in Europe for some time now.

Speaker 2

And at this the Mobi share the data from some of these congresses and surgeons presenting about their Case performance, those get kind of that's also influencing, especially the U. S. Surgeons to start a pediatric program. So we just announced 1 and we are continuing to build on that, but we've had Pretty good inbound interest from pediatric surgeons from different hospitals saying that they are Seeing interest in the smaller instruments and they feel that this is something that they can adopt. So we are having those conversations now.

Speaker 3

But

Speaker 2

pediatrics in general tend to be there's space between pediatrics and Other surgical decisions and choices and even surgical centers. So that's the reason why it's not all in one.

Speaker 4

So this is my last question. Talking about feedback, you said that Luna It was demonstrated in Melbourne at a conference. So what's the feedback you received When this was done and how much of the learnings from that presentation Are you incorporating into your preclinical studies and also future studies that you need to do As you get the approval for marketing Luna?

Speaker 2

Yes, RK. So, what we meant by sharing Luna, it was a video presentation of The Luna system, not a physical system presentation. I just want to clarify that in Melbourne. But the team is making extremely good progress on the R and D front. And our goal is to perform This animal lab or preclinical lab at the end of this year where surgeons could do a complete procedure.

Speaker 2

So that will kind of be the key gating milestone, where we can Get a surgeon to do a complete procedure and once that milestone is met, then we would start to proceed to doing all the final validation And kind of test to prepare the regulatory submission. But overall, the feedback from Suraj, we've been engaging with surgeons for the past, I would say, couple of years, specifically on the Luna program and Continuing to evolve the system, but I think when surgeons look at the system As at what it can deliver and how it's going to help them perform surgery with 5 millimeter Instruments and having the ability to use 5 millimeter fully listed instruments and straight instruments, low as 3 millimeter. So that kind of options and also some other things they like on Senhance very much, eye tracking and Haptic feedback and independent arms, etcetera. So when they see that's already been done and they can also see the improvements, That's kind of what's driving a high level of interest there.

Speaker 4

Thanks, Anthony. Thanks for taking all my questions.

Speaker 2

Thank you, RK.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Anthony Fernando for any 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.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Asensus Surgical Q2 2023
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