Asensus Surgical, Inc. (ASXC) on Q1 2022 Results - Earnings Call Transcript
Operator: Greetings and welcome to Asensus Surgical Inc. 2022 First Quarter Financial and Operating Results Conference Call. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Mark Klausner from Westwicke Partners. Sir, please go ahead.
Mark Klausner: Good afternoon, everyone and thank you for joining us for the Asensus Surgical First Quarter 2022 Business and Financial Update Conference Call. On the call with me today are Anthony Fernando, President and Chief Executive Officer; and Shameze Rampertab, 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 impact from the COVID-19 pandemic and other 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 Asensus Surgical business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2021 Form 10-K filed in February 2022 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 noncash and other expenses that are not indicative of the company's core operating results. Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans, to benchmark our performance 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 is now my pleasure to turn the call over to Asensus Surgical's President and Chief Executive Officer, Anthony Fernando.
Anthony Fernando: Thanks, Mark and thank you all for joining us today. On today's call, I will provide an overview of our recent accomplishments and then ask Shameze to review our financial performance, after which I will discuss our performance during the first quarter as well as our priorities for the rest of 2022, before turning to Q&A. Before turning the call over to Shameze, I would like to provide an overview of our recent performance. Despite headwinds associated with COVID spike early in the first quarter as well as the ongoing political instability in Eastern Europe, we drove strong procedure volumes as a result of continued increase in system utilization globally, with total case volumes increasing 29% year-over-year and 16% sequentially over the fourth quarter. While we are disappointed by the slowdown in new Senhance program initiation, we have experienced a slight in the year which in large part are due to the macro factors that I mentioned. During the quarter, we continued to leverage events aimed at driving awareness and growing our pipeline of hospital customers. During the first quarter, we attended multiple highly impactful industry events, including the Society of American Gastrointestinal and Endoscopic Surgeons or SAGES in March in Denver, Colorado; and the German Surgeons Congress also known DCK in Leipzig Germany in April. Feedback at both events was extremely encouraging as both surgeons and hospital administrators were highly engaged with Senhance and our vision for Performance-Guided Surgery. As we continue to focus on the development of Senhance and components of Performance-Guided Surgery, during the first quarter, we announced the expansion of our Digital Solutions R&D center in Yokneam, Israel. Since opening the center as part of our acquisition of MST in 2018, we have continued to put together an incredibly talented and growing team of engineers, developers and scientists who are working together to bring innovative augmented intelligence capabilities to the platform and we look forward to updating you on our progress in the quarters to come. With that, I will turn the call over to Shameze for a financial update.
Shameze Rampertab: Thanks, Anthony. Turning to the first quarter; for the 3 months ended March 31, 2022, the company reported revenues of $1.1 million as compared to revenue of $2.1 million in the 3 months ended March 31, 2021. Revenue in the first quarter of 2022 included $0.4 million in lease revenue, $0.4 million in instruments and accessories and $0.3 million in services. For the 3 months ended March 31, 2022, total operating expenses were $18.2 million as compared to $14.4 million in the 3 months ended March 31, 2021. For the 3 months ended March 31, 2022, net loss attributable to common stockholders was $19.1 million or $0.08 per share as compared to net loss attributable to common stockholders of $17.3 million or $0.08 per share in the 3 months ended March 31, 2021. For the 3 months ended March 31, 2022, the adjusted net loss attributable to common stockholders was $16.6 million or $0.07 per share as compared to an adjusted net loss of $12.2 million or $0.06 per share in the 3 months ended March 31, 2021. 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. 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, short-term and long-term investments, excluding restricted cash, of approximately $118.5 million and working capital of $110 million as of March 31, 2022. I would now like to turn the call back over to Anthony.
Anthony Fernando: Thanks, Shameze. I would now like to provide an update on recent performance as well as the progress we have made on the key focus areas for 2022. As a reminder, those are: First, the continued market development of the Senhance system; and second, the ongoing development of our product portfolio and continuing the technological advancements of Senhance. Starting with market development. As one of our key focus area is raising awareness of the Senhance system and the health economic benefits of digital laparoscopy, we continue to seek out publications that provide relevant data to support increased adoption. During the year, we will continue to work to publish additional peer-reviewed papers that focus on the clinical, economic and workflow benefits of digital laparoscopy performed with Senhance as compared to traditional laparoscopy and also showcase how digital technology and real-time clinical intelligence can be helpful to surgeons and patients. During the quarter, we had 4 papers published which further demonstrate the safety and feasibility of Senhance across gynecology, urology and colorectal procedures. In addition to focusing on expanding our list of clinical publications, we have continued to leverage our growing body of real-world clinical data through the utilization of our clinical case registry that we refer to as trust. We believe that trust is the largest robotic assisted laparoscopic registry in the industry with more than 1,700 patients enrolled as of the end of the first quarter. The registry includes a variety of procedural specialties, including abdominal, thoracic, urologic and gynecological procedures performed at select sites across Europe. The primary purpose of the registry is to collect safety and efficacy data from procedures performed using Senhance as well as build a unique collection of intraoperative and 12-month postoperative follow-up data. We expect to continue to grow this body of clinical data to facilitate an increased number of high-quality clinical publications demonstrating the value of Senhance and Performance-Guided Surgery and support our commercial adoption strategy. These publications and the trust registry are incredibly important in order to provide data that supports and validates the benefits of Senhance and the continued technological development of the platform. The next segment of our market development efforts is the expansion of our global footprint, including the growth of our installed base, the acceleration of procedure volumes and the increase in the number of foundational sites. Beginning with new program initiations. The first quarter was very challenging given the macro headwinds associated with COVID, in particular, the resulting reduction in hospital access across all of our key geographies during January and February. These challenges were compounded by the ongoing unanticipated political instability impacting Russia and Eastern Europe which has negatively impacted us and our commercialization partners' ability to access hospitals and grow our installed base in that part of the world. A portion of our commercial pipeline for 2022 had ties to Russia and the CIS region, as we had recently secured the necessary regulatory approvals to commercialize in Russia and had worked over a period of years with our distribution partner in that region. Given the political climate, we believe it is unlikely those accounts will convert anytime soon. As a result, we have shifted our commercial organizations focus to other areas within the EMEA region, including countries in Western Europe to help further strengthen our pipeline for the year. While we are disappointed with the slower-than-expected start in 2022, we continue to build our global pipeline of hospitals and surgeons and we continue to expect to have 10 to 12 new program initiations by the end of the year. Now, turning to procedure volumes. Despite the backdrop of an unstable macro environment, we drove very strong volume trends performing over 650 procedures, our highest quarter to date. Total procedure volumes increased 29% compared to the prior year and 16% compared to the fourth quarter of 2021, representing the third consecutive quarter of growth, primarily driven by volumes in EMEA which grew 43% compared to the prior year as well as low single-digit growth in both U.S. and Asia which were both heavily impacted by COVID spikes early in the year. This quarter, we were pleased to see significant milestone accomplishments from surgeons in Europe and the United States. Dr. Narimantas Samalavicius and his team at Klaipeda University Hospital in Lithuania performed their 100th colorectal surgery; Dr. James Freedmen at Southern Surgical Hospital in Louisiana reached their 100th Senhance case and Dr. Amit Trivedi and the team at Hackensack Meridian Health at Pascack Valley Medical Center in New Jersey performed their 300th procedure with the Senhance system. I would like to take a minute to help you understand why we are so focused on increasing procedure volume in a wide variety of surgical specialty. When a case is performed with a Senate system, we have the ability to collect system data and surgical video. Over time, as we accumulate this rich digital library of surgical data, we will have the ability to generate powerful clinical insights that will enable Performance-Guided Surgery to help surgeons reduce surgical variability and drive consistently superior surgical outcomes. We are also focused on increasing awareness of Senhance and educate the surgical community on the benefits by leveraging industry events. We had a strong start to the year on this objective. This quarter, we attended the Annual SageS meeting where we received very positive responses and audience engagement from surgeon presentations. Dr. Amit Trivedi of Hackensack Meridian Health, Pascack Valley Hospital discussed the clinical utility of center and system and augmented intelligence in the operating group. Dr. Francesco Bianco of Mount Sinai Hospital in Chicago; and Dr. Michael Cook of LSU Health New Orleans, both emphasized the advantage of being able to transition from laparoscopy to the Senhance system effortlessly, due to the Senhance system's deliberate design and replicate laparoscopic methods, a unique advantage of alternative robotic solutions. We also attended the DCK Congress that was held in Germany where Senhance surgeons, Dr. Olaf Hansen, Dr. Florian Stelzle and Dr. Dietmar Stephan, also highlighted the clinical value of our digital laparoscopy system and importance of innovative technology in all fields of surgery. Turning to the expansion of our product portfolio. We are excited to build upon our accomplishments and reach additional regulatory milestones which will further develop the Senhance system and broaden its applicability. We continue to expect commercial launch of 5-millimeter articulating instruments in the second half of the year which is currently in a pilot launch in the U.S. and Europe. We also expect to submit our 510(k) application of pediatric clearance in the U.S. following strong early clinical utilization in Europe and increasing demand from U.S. surgeons. This will broaden the applicability of the Senhance system's unique combination of 3-millimeter instrumentation with 5-millimeter camera scope combined with haptic feedback to benefit more patients with digital laparoscopic options in pediatrics and minimally invasive surgical solutions. More broadly, we continue to expand the utilization and applicability of the Intelligent Surgical Unit, or ISU, globally and we expect to receive CE Mark approval for expanded machine vision capabilities in Europe in late 2022. While the macro landscape has continued to present unique challenges, we've made good progress towards our 2022 goals such as the ongoing growth in Senhance utilization, the development of high-quality clinical data and the progression of our innovative product portfolio. We believe we are very well positioned to continue to execute on our strategy and drive the long-term adoption of Senhance. Before I open the line for Q&A, I'd like to express gratitude to all of our employees throughout the world for their tireless efforts and dedication. With that, I would like to open the line for questions.
Operator: We have a first question from the line of Swayampakula Ramakanth with H.C. Wainwright.
Swayampakula Ramakanth: This is RK from H.C. Wainwright. Certainly, on the volume front, it was a great quarter, as you said, probably the first quarter where you had a huge increase in the procedures. And thinking through that number and it also seems that the most of the procedures like came from EMEA. Having said -- what you said regarding the macro situation in Europe, going forward, do you think that situation could impact the growth in procedures in the European region? And then obviously, we have all kinds of other things going on, including COVID and shutting down of some of the places around the world. But just on the macro -- on the European front, what do you think?
Anthony Fernando: RK, thank you for your question. From the European front, I think we are seeing some of the COVID-related issues that transpired in the early part of the year, January, February timeframe is definitely settling down and we're seeing a good procedure traction. So I don't think even at a macro level, looking at the U.S. and even Asia, feeling pretty good that the COVID impact is continuing to reduce at least the way that we see it now. So that -- we are not hoping to have a greater impact than we had earlier in the year from the COVID front but on the Eastern European political front, that is a challenge. So that -- but again, from a system point of view, we do have our largest installed base in the European region and they're mostly in Western Europe. So, we are not anticipating any big impact in terms of volume because all the other hospitals are continuing to perform with some hospitals in the Eastern European region that have slowed down. But in a global sense, we're not anticipating it to impact us negatively. And we hope to continue the growth trend that we've been looking for.
Swayampakula Ramakanth: Perfect. On the revenue front, yes, you did not achieve as much of a revenue base as you have seen in the first quarter of '21, however, there was, I think, at least one conversion or maybe even 2 conversions during that time period in the first -- in '21. Now that you have some of these machines out there on the leasing front for a while, I'm not asking for a specific number but I'm just trying to understand, is there a certain percentage of missions that potentially could get to the stage where they could convert over the, say, next 3 to 6 months?
Anthony Fernando: Yes, RK. I think trying to nail down a number of what's going to convert, it's a bit difficult because they're all -- it's situational. The different hospitals have different criteria and they are trying to make a decision to convert. But the only thing that I'd say is that it is part of our strategy and we are actively speaking with these hospitals to find the right time to make that conversion. But I couldn't give you a percentage to say that this percentage is going to convert other than say that it is our intent and that's what we are continuing to pursue.
Swayampakula Ramakanth: Perfect. And then last question from me on the clinical registry which you call trust. So the information that you collect, the data that you collect, as you said, it is digital, it is rich. You have the complete data starting from the procedure to the metrics of how the system operates. Is -- that database, can you use it in your regulatory filings or is it only for publications and commercial side of things where you can show folks potential customers, what these machines can do?
Anthony Fernando: Yes. Great question, RK. It can be used for regulatory and/or customer-related matters or whatever it may be. It's a CRO controlled mechanism that we put data into. So it's a managed database and we can use it for any purpose that we want to use the data for.
Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Anthony Fernando, President and CEO for closing remarks. Over to you, sir.
Anthony Fernando: Thank you again for your interest in Asensus Surgical and we look forward to updating you on our progress on our next quarterly call. Thank you.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
