Asensus Surgical, Inc.
Q4 2020 Earnings Call Transcript

Published: 11 Mar 2021

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Asensus Surgical Fourth Quarter and Full Year Business Update Conference Call. I would now like to turn the call over to Mr. Mark Klausner of Westwicke. Please go ahead.

[Mark Klausner:]

Thanks, operator. Good afternoon, everyone, and thank you for joining us on today's 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. The company undertakes no obligation to update the information provided on this call. For a discussion of risks and uncertainties associated with Asensus Surgical's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the Form 10-K expected to be filed later today, and other filings we make with the SEC.

[Anthony Fernando:]

Thanks, Mark, and thank you all for joining us today. On today's call, I will begin by reviewing our recent progress, then I will hand the call over to Shameze to review our financial performance, after which, I will discuss our priorities for 2021 before turning to Q&A. Now shifting to an update on our key focus areas for 2020. As a reminder, these are

[Shameze Rampertab:]

Thanks, Anthony. Turning to the fourth quarter. For the three months ended December 31, 2020, the company reported revenue of $1.1 million as compared to revenue of $0.7 million in the three months ended December 31, 2019. Revenue in the fourth quarter of 2020 included $0.3 million in systems leasing, $0.3 million in instruments and accessories and $0.5 million in services. For the three months ended December 31, 2020, total operating expenses were $14.2 million as compared to $18.1 million, excluding the gain from the sale of the AutoLap assets in the three months ended December 31, 2019. I would like to note that we are in the process of fully transitioning over to our new corporate headquarters in Research Triangle Park. The new office space was purpose-built for Asensus, allowing us to effectively pursue our commercial, clinical and research and development goals in a more cost-efficient manner. For the three months ended December 31, 2020, net loss attributable to common stockholders was $13.8 million or $0.13 per share as compared to a net loss of $13.7 million or $0.69 per share in the three months ended December 31, 2019. For the three months ended December 31, 2020, the adjusted net loss attributable to common stockholders was $9.7 million or $0.09 per share as compared to an adjusted net loss of $16.4 million or $0.83 per share in the three months ended December 31, 2019. Adjusted net loss is GAAP net loss adjusted for the following items

[Anthony Fernando:]

Thanks, Shameze. I would now like to provide our perspectives on 2021. A few weeks ago, we rebranded the company as Asensus Surgical. As we have been undergoing an evolution from a robotics company to a digital surgery company, we felt it fitting to rebrand the company to better reflect our vision. Our mission is focused on elevating robotic surgery to drive predictable outcomes, to optimize resources and cost and work with hospital systems that seek to strive to employ innovative health care strategies. We believe that by digitizing the interface between the surgeon and patient, we can unlock the clinical intelligence to pioneer a new era of surgery, which we are calling performance-guided surgery. As we set out to advance the capabilities of Senhance to deliver those outcomes, we reviewed the current surgical landscape to determine where we believe value could be added. We came to the realization that there's something missing in the way surgery is being performed today. Post-op complications are common, yet surgeons have little clinical intelligence at their disposal preoperatively and interoperatively in the operating room. This led us to imagine a future of surgery where we can leverage machine learning, advanced visualization, data analytics and augmented intelligence to dramatically improve critical decision-making, drive predictable and help level the field by gathering, analyzing and presenting information and insights to empower surgeons of all levels of experience with deeper situational knowledge. Over time, these technologies will support what we call the surgical assurance framework, which includes intelligent preoperative, intraoperative and post-operative capabilities. We have made early progress towards delivering on performance-guided surgery through the introduction of our ISU. We will introduce additional new applications in the coming quarters with the goal of driving surgical evolution towards perceptive real-time guidance. Turning to what you should expect from us in the near term. In 2021, our focus will continue to be driving the adoption of Senhance globally and expanding the technological capabilities of Senhance as we progress towards the realization of performance-guided surgery. While we will certainly be cognizant of delivering revenue, our priority is getting Senhance into the hands of as many surgeons as possible. With that said, our key areas of focus are

[Operator:]

The first question comes from Swayampakula Ramakanth from H. C. Wainwright. Please go ahead.

[Swayampakula Ramakanth:]

This is RK from H.C. Wainwright. You certainly crossed the great years despite COVID-19, and congratulations on that part. So as you stated in your remarks, you initiated operational leases that seemed to have gone pretty decent over 2020. But in general, how has that helped, especially in terms of sales cycle, the time it takes to get sales done? And also, do you feel you get more leads when you start talking to potential customers regarding operational lease than an immediate buyout?

[Anthony Fernando:]

RK, this is Anthony. On the cycle time, I would say that leveraging the operating lease model has definitely reduced the time it takes to go from beginning of a conversation to a signed agreement and installation. Because I think, as you know, some hospitals don't need to go through the same capital approval processes. So that's definitely helpful. And I think to the second part of your question, having a system installed and being utilized is the best evidence that anyone can provide. So when our system is up and running, doing surgery on a regular basis, whether it's other hospitals or surgeons go and speak with other colleagues, so it definitely helps accelerate that process.

[Swayampakula Ramakanth:]

Great. Then regarding the number of procedures and the procedure, you stated that there was greater than 1,450 procedures done in 2020. So there are two questions based on that comment. One, what is, in general, per procedure revenue? I understand that it varies depending on, obviously, the procedure. But in general, what could be procedure revenue? And then the second part is, as you're getting more of these approvals done, especially the recent one, which is for general surgery, do you - when you get such a very important, impactful approvals, how should we think about two things

[Anthony Fernando:]

Okay. So RK, we don't directly track per procedure revenues because it varies from different geographies and also with the leasing model. So that's not something we proactively track to look at revenue per procedure for multiple reasons. Because no matter which procedure you do, you tend to use a certain set of standard instrumentation. And then if there's any specialty instrumentation like vessel dissectors used, that has also a standard incremental cost associated with it. So we don't track the revenue side of it. But I think the second part, with respect to the general surgery, the expanded indication that we recently received in the U.S., I think this just opens up bariatric and the upper GI side for us to be able to proactively speak with surgeons in those areas, whether it's gastric sleeves or Nissen fundoplication kind of procedures, those were new procedure areas that have opened up. So we are looking forward to encouraging surgeons to use our system for those types of procedures that we didn't have previously.

[Swayampakula Ramakanth:]

Then one last question. On the geographical expansion, you are talking about the Russian market - I mean Russian approval. So how big is the Russian market? And in your thinking, how long do you think it could take to develop that into a meaningful market for yourself?

[Anthony Fernando:]

Okay. That's a great question. So as we've kind of alluded before, we've been building a distributor relationship in the Russia - to cover the Russian market for some time. We've been working with a distributor out of Germany, who's also a device manufacturer who has a really good presence in the Russian market. They're very well established. They have sales teams, clinical teams and even field service support function. So we are really leveraging that infrastructure of the distributor to be able to enter that market and grow that market. With respect to market size, I would say that there's definitely good opportunity there because the robotic penetration in Russia is relatively low. And cost is also a concern with respect to procedure cost. So I think we can offer the lower per procedure economics with Senhance. So we believe that there's a really good opportunity for us and hope to put some points on the board this year in that market.

[Operator:]

The next question comes from Frank Harris from Raymond James. Please go ahead.

[Frank Harris:]

This is Frank on for Larry. I guess just to start off, last quarter, you noted that the procedure TAM in the U.S. was about 1.4 million and would expand by 800,000 with the general surgery indication, bringing it to 2.2 million. But obviously, in the press release and then today, you mentioned the general surgery indication expanded the TAM to about 2.7 million procedures. So could you just help us reconcile the difference there? Or is there something that we're missing?

[Anthony Fernando:]

Frank, yes, good question. So the 2.7 million that we just recently talked about and just talked about today is the overall general surgery. Because, as you know, previously, our previous indication for use included colorectal procedures, hernia and gall bladders. That was all part of general surgery. So in addition, with the new clearance that we received, it's a total of 2 point - addressable 2.7 million, which includes the colorectal space that we previously had. That's what gets us to the 2.7 million number.

[Frank Harris:]

Okay. Great. And then now that you have the plans for general surgery, could you break out the various procedures and annual opportunity for each that you've added?

[Anthony Fernando:]

Yes. I couldn't give you exact numbers right now. Maybe I can answer that offline. But I can tell you that the incremental procedures are more in the upper GI and bariatric space. Those are the procedures that were not originally included. And with the most recent approval, the upper GI and bariatric cases were included. So we can follow-up with you and give you the exact numbers.

[Frank Harris:]

Okay. Perfect. Okay. And then obviously, since you just got the clearance last week, but how are you thinking about the impact of increased interest from hospitals and going forward and wanting to lease a system?

[Anthony Fernando:]

Yes. So I think we believe that the interest will definitely increase for two reasons. One, the bariatric procedures and reflux procedures have a high level of interest from patients and also from the surgeons to be able to use technology. And the reimbursement levels applicable are also in that same direction. So for those reasons, we believe that interest will be higher for these kinds of procedures.

[Frank Harris:]

Okay. And then just two quick last ones, one being a follow-up to that one. How should we think about the pace at which general surgery procedures should start to ramp up within current system placements within the U.S.? And then I have one quick one after that.

[Anthony Fernando:]

Sure. So currently, for the procedure mix for us in the U.S., it's, I would say, not to be very precise, but probably majority of the procedures are in the general surgery space in the U.S. and also gynecology. So we believe that with this clearance, the general surgery portion of procedures performed will definitely see a faster growth rate compared to the gynecology procedures in the U.S. with the new placements and even with current - with existing placements.

[Frank Harris:]

Okay. That's helpful. And then I guess, just to close out. So obviously, it's good to hear about the pediatrics, and obviously, you have a unique opportunity there with the 3-millimeter instrumentation. Could you just update us how you're thinking about the size of the pediatric market and the expectation for penetration going forward?

[Anthony Fernando:]

Yes, Frank. So again, primarily, we are - we have the pediatric approvals for Europe. So that's our primary market. We are now at two hospitals in Europe for pediatrics now. So we are trying to work through that in Europe and get - collect some data on performance and also even see if there's any breakthrough outcomes that we can find in some initial procedures. So the market's not - I would say, the market's not large. But even though it's a relatively smaller market, there's very little technology adoption and available technologies from a surgical point of view available to the pediatric space and that are more tailor-made for the pediatric space. The use of 3-millimeter instrument is relatively common in pediatrics. But what we offer is not just the 3-millimeter instrument. When you combine a 3-millimeter instrument with a 5-millimeter scope and add haptic feedback to that, it becomes a real powerhouse for the surgeons, and that's what the surgeon - that has been the feedback we've gotten from surgeons is that the combination, 3-millimeter instrument, 5-millimeter scope and the layer of haptic feedback. They're able to manipulate these instruments with ease and also gain good stability using the 3-millimeter instrument with less incision trauma to the patient. So that's really how we are building the value proposition there. And once we get more procedures completed in Europe, I think we'll be able to size up the opportunity much better.

[Operator:]

That concludes our question-and-answer session for today. I will now turn the call back to Anthony Fernando for closing remarks.

[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:]

That concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.