Motus GI Holdings, Inc.
Q4 2019 Earnings Call Transcript

Published: 31 Mar 2020

[Operator:]

Greetings and welcome to Motus GI Fourth Quarter and Fiscal Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions]. As a reminder, this conference is being recorded.I'd now like to turn the conference over to your host, Paul Arndt of LifeSci Advisors. Please go ahead.

[Paul Arndt:]

Thank you, operator. And thank you everyone for joining us for the Motus GI fourth quarter 2019 update call today. Representing the company are Tim Moran, Chief Executive Officer; Andrew Taylor, Chief Financial Officer and Mark Pomeranz, President and Chief Operating Officer of Motus GI.Before turning the call over to management for their opening remarks, I would like to take a minute to remind you that this conference call and webcast will contain forward-looking statements about the company. These statements are subjects to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake an obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Form 10-Q and 8-K filed with the SEC.I'd now like to turn the call over to Tim Moran, CEO of Motus GI. Tim?

[Tim Moran:]

Thank you, Paul and good afternoon, everyone. Thank you for joining us today for our Q4 2019 earnings call. I would like to start by providing a business update before turning the call over to Andrew to review our financial results for the fourth quarter. At the end of our prepared remarks, we'll open up the call for its Q&A session.My business update today will focus on three key points. First, we remain as the potential unmet need in large market opportunity for the Pure-Vu System being placed in a number of leading hospitals that we intend to make our key reference centers to support commercial expansion. And third, the current COVID-19 crises has created an unprecedented new reality in the healthcare and broader financial market and we're responding by streamlining our organization and we reducing overhead cost to more efficiently manage our capital resources. I will elaborate on each of these key points.In the fourth quarter of 2019, we launched the initial stage of our commercial program for the Pure-Vu System in the US. This marks a key inflection point for our business and I'm pleased by the early success we're seeing as we bring our revolutionary new technology to the market. We expected the Pure-Vu System can have a significant positive impact on patient care in the multibillion-dollar colonoscopy market as awareness of its capabilities grow throughout the medical community.In order to optimize our initial commercial focus, we completed an extensive market assessment and enacted a clear go to market strategy. We raised several factors including clinical need, economic benefit and reimbursement that ultimately focus our efforts on hospital base, critical colonoscopies, principally for emergency conditions such as lower G.I. bleed, severe anemia infection or undiagnosed abdominal pain.So offer greater context let me share a few key statistics. There are an estimated 1.5 inpatient colonoscopies performed each year in US hospitals. These are not elective, nor are they screened procedures but procedures that typically require immediate diagnosis. In terms of the significant unmet need, a new study conducted at the Cleveland Clinic that was published in 2019 demonstrated that 51% of the approximately 9,000 patients included in the study experienced inadequate bowel prep prior to their inpatient colonoscopy.To address this universal unmet need, we designed our Pure-Vu System to allow the GI physicians to rapidly and safely [ph] during the colonoscopy procedure thereby eliminating costly delays. The execution of our commercial strategy supports building brand awareness among leading physicians and hospitals, generating physician to physician dialogue and validating Pure-Vu as a critical tool in hospital GI program.We are focused on being at the right centers with the right physician and making sure we are providing the appropriate training to Pure-Vu and utilize for the right clinical scenarios and used cases.During our third quarter call, I set clear objectives for the fourth quarter including expand our sales pipeline and backlog of target hospitals, gain product evaluation with the national and regional hospital network, work through the value analysis committee or back purchasing process and begin to build further awareness of Pure-Vu in the market. I am pleased to share that we are executing against each of these objectives.Since our launch in October 2019, we've now placed the Pure-Vu system in more than 15 major hospital including several of the top rank GI centers in the United States. These include prominent hospital systems such as the Cleveland Clinic, UCLA, the University of Texas, USD and Day [ph] Medical Centers. Each of these initial hospitals are moving through the sales process as expected. Based on our current experience timing to complete the entire sales process is ranging from approximately four to six months or possibly longer depending on the complexity of the institution.I would think about this group of hospitals as each progressing through the various stages of the continuum towards purchase including one, the product is on-site and currently in evaluation; two, evaluation is complete and now pending final Value Analysis Committee approval to begin purchasing or three, the Value Analysis Committee has approved purchase and the hospital is now purchasing the Pure-Vu disposable sleeves on a repeat basis.Additionally although early in our launch we are encouraged by the fact that we have been approved for evaluation in all of our targeted hospitals and also have not been rejected by a single value analysis committee in the hospital that had submitted for approval. As it relates to the capital purchase of our Pure-Vu workstation, we're working with our hospital customers around their internal capital budget cycle which can vary widely by institution.As I mentioned previously we are offering a simple lead four monthly rental program as alternatives to outright purchase of the workstation. That said we are not delaying hospital conversion while we work through the capital purchase process. The long-term success of our business model is built on driving repeat utilization of the Pure-Vu system which ultimately drives repeat purchases of our disposable sleeves.In addition to our initial hospital placements our sales team has established a strong pipeline of scheduled evaluation. Of particular note our upcoming evaluation at the Mayo Clinic NYU and Northwestern University Medical Center, three prominent GI hospitals. I want to remind everyone that we are employing a thoughtful and strategic approach at each and every hospital where we Pure-Vu is being evaluated, ensuring we have well-trained and satisfied customer is critical to our success. We do not see this as a numbers game in terms of rushing to as many hospitals as we can for placement. It's all about driving utilization at these initial hospitals, which includes the repeat sale of our disposable Pure-Vu sleeves.Our goal is to establish key reference centers which will become a central component of our long-term growth. Creating a strong foundation is a critical first step to building this market and sustainable growth over time. In terms of driving utilization, our strategy is to target two to three GIs per hospital initially and then upon approval expand to additional physicians on a monthly basis. To that end, I am pleased to report that in Q4 we trained more than 50 GIs on the Pure-Vu system.More importantly, our earlier sites have now moved from the initial two to three GIs to upwards of 10 GIs using the Pure-Vu system. We believe that these are positive early signs that our strategy is working. For modeling purposes, we expect customers over time to initially ramp up to approximately 5 to 10 Pure-Vu system procedures per month.I want to share a few additional commercial and product related updates. First let me share the story of remarkable procedure that was conducted this past quarter using the Pure-Vu system. A two-year male was admitted to the intensive care unit with hemorrhagic shot caused by post [indiscernible]. In order to manage this critical situation, the physician shows the utilized Pure-Vu without any procedural valve prep in order to expedite the case. The procedure was conducted at the bedside in the intensive care unit.Upon entering the [indiscernible] the use of the [indiscernible] mucosa were obstructed by blood at which time the physician utilized the Pure-Vu which he indicated worked perfectly, allowing for excellent visualization. As a result he was able to identify the sources of bleed and therapeutically treat the patient. The physician's conclusion was that the Pure-Vu system helped stop a massive lower G.I. bleed and avoided the extra time associated with bowel prep as well as the need for angiography. The patient was transferred out of the ICU in less than 10 hours after presenting the emergency room.This is the value that we believe Pure-Vu brings to the market. We continue to be encouraged to receive these real world used cases where our system enables the physician to perform critical therapeutic intervention.Next, from a product development and market expansion perspective I have two updates that I'd like to provide. First, we announced last week that we received CE Mark approval for the second-generation Pure-Vu system. This approval means that the system and disposable sleeves meet all of the regulatory safety and performance requirements for it to be commercially launched in Europe. This is a significant opportunity as we estimate there are approximately 1.2 million inpatient colonoscopies conducted in Europe annually making it one of the largest potential market for our system.Receiving the CE mark is an important milestone in our commercialization strategy for us. With this approval enhanced we are now able to further access potential strategic partnership opportunities with established medical device companies and distributors that have commercial operations in place across Europe.Next we're seeing a very compelling new opportunities develop as it relates to the potential future use of our Pure-Vu core technology. Multiple physicians that are using the Pure-Vu in lower GI colonoscopy have repeatedly inquired about using our system during upper GI endoscopies. Upper GI bleed which occur in the esophagus and stomach occur at a rate of approximately 400,000 cases per year in the United States. The mortality rate of this condition is upwards of 10% removing it [indiscernible] from the field of view is a significant need in terms of allowing the physician the ability to find and treat the bleed.We believe we can potentially adapt the safe and effective painting capabilities of this Pure-Vu system for use during upper GI cases. We are actively exploring the market, product requirements and the regulatory pathway, while we're early in our exploration, we believe this could be an opportunity to leverage our existing sales team and physician relationship. We will provide additional updates in this area.Finally I want to address the impact of the COVID-19 pandemic on Motus GI as well as the proactive and aggressive response we're implementing to allow us to continue to execute on our business plan, extend our cash runway and build long-term shareholder value. While the majority of all hospital have implemented rules that prohibit nonessential visitors including our sales team, we have maintained continuous contact with customer. Through the use of technology, I am pleased to say that we successfully reported several Pure-Vu enabled colonoscopies remotely.Additionally, we also build appropriate inventory of both workstation and disposable sleeves to support our customers for the next several months and our manufacturing partners continue to be fully operational. In the near-term we do expect the situation will caught a disrupted in the flow of inpatient colonoscopy as hospitals push resources towards treating COVID-19 patients.We anticipate device placements at new hospital could be limited and the advancement of value analysis committee reviews may likely be postponed on a near-term basis as hospitals purchase decision are put on hold. While this disruption process we recognize it will have an impact on our ability to begin new scheduled evaluation in our pipeline. That said, it is important to remember that we believe the utilization of the Pure-Vu system provides a means to complete inpatient colonoscopies more predictably allowing hospital patients to be discharged more quickly.The valuable role Pure-Vu can play aside we are taking decisive actions based on the assumption that the current market environment and unprecedented circumstances taking place in hospitals across the US will impact our business plan. After careful consideration, I am announcing today a plan that we will execute upon immediately with expected completion by the end of the second quarter. This plan will allow us to continue to successfully execute our commercial strategy by driving our technology into the large national and regional their hospitals.Significantly extend our financial runway by reducing operational expenses through a material reduction at departmental and project related spending. This program is expected to reduce our 2020 internally forecasted cash burn by approximately 50%. We will make material labor and non-labor related expense reduction in bold our Israel and US operations. We will also be reducing headcount by approximately 50% with reductions across all departments including a significant reduction in our sales and marketing organization. These are very difficult decisions, but also necessary to ensure that we protect our business, our customer and our shareholders.By reducing our cash burn and extending our runway, we believe we will gain the time needed for our hospital customers come back online, helping us continue to build a foothold with Pure-Vu in this very large market. While our organization will be leaner, our commercial focus developing reference centers at major national and regional influence their hospitals, we'll not change. We'll continue to focus on driving demand generation and Pure-Vu procedural volume which is our top priority. The more experienced the physician gets with Pure-Vu and the more clinical cases that they are exposed to, the better they are able to see the true value of our technology.In addition we will strategically work through our pipeline of targets and seek to complete the sales process and account where we are already engaged. The key metrics we'll be monitoring closely will be back approval, sleeve utilization and the number of physicians trained and performing repeat procedures. Finally, as we look ahead we believe this approach will enable us continue to build the necessary and foundation accounts and validation of our technology to allow for an array of strategic alternatives over time.I will now turn the call over to Andrew to discuss our fourth quarter financials, Andrew?

[Andrew Taylor:]

Thank you, Tim and thank you, everyone for joining us today. We reported revenue for the fourth quarter of approximately $100,000 from sales related to the Pure-Vu, which first became available for sale in October 2019. As Tim mentioned earlier, we continue to gain new system placements at leading hospitals across the US and are ramping up the training of GI. However, the majority of these centers we're operating under an evaluation period and working through the elements of the hospital back purchase process at yearend.For the three months ended December 31, 2019, we reported a net loss of approximately $5.9 million or a net loss per diluted share of $0.21 compared to $5.6 million or a net loss per diluted share of $0.34 for the same period last year. The fourth quarter of 2019 included non-cash expenses of approximately $727,000 principally related to stock-based compensation compared to $623,000 of non-cash expenses for the same period of 2018.For the year ended December 31, 2019, we reported a net loss of approximately $23.1 million or a net loss per diluted share of $0.92 compared to $22.3 million or a net loss per diluted share of $1.47 for the same period last year. The year ended December 31, 2019 included non-cash expenses of approximately $3.6 million principally related to stock-based compensation compared to $6.8 million of non-cash expenses principally related to stock-based compensation and warrants expense for 2018.During the quarter, we entered into an $8 million secured term loan with Silicon Valley Bank. The term loan requires monthly interest only payment through December 31, 2021 followed by monthly payments of principal and interest until December 01, 2023. Additional material terms related to the loan can be found in our 8K filed with the Securities and Exchange Commission.We reported approximately $28.7 million in cash, cash equivalents and investment as of December 31, 2019. As Tim noted we are taking important strategic action across the organization to reduce costs with minimal impact to our commercial business objective. This plan is expected to be implemented during the second quarter with our new normalized quarterly cash burn taking effect as of the beginning of the third quarter, which is anticipated to be approximately 50% less than our previously internally forecasted rate.Once this cost reduction plan is in place, we believe our cash, cash equivalents and investments will be sufficient to ensure compliance with our Silicon Valley Bank liquidity covenant into late fourth quarter 2020 and meet our anticipated cash requirement into 2021.And with that, I'll now turn the call back over to Tim.

[Tim Moran:]

Thank you, Andrew. I want to conclude where I began my business update reiterating three key takeaways. There remains a substantial unmet need and large market opportunity for this Pure-Vu system. We're making solid progress with the initial stage of our commercial launch in the US and we are responding to the current COVID-19 crises by streamlining our organization and overhead costs to more efficiently manage our capital resources.In closing, we are receiving positive response from GI and some of the leading hospitals in the world. We believe that this speaks volume about the opportunity for the Pure-Vu system in the market. We remain bullish about the compelling technology we created, our substantial first mover advantage and the significant positive impact we can have in terms of improved patient care, health economic and hospital resource utilization. We believe these metrics have becomes even more critical with the COVID-19 pandemic.While we're faced with an unprecedented external situation that requires immediate intervention and leadership, we're acting with urgency to adapt to the circumstances while remaining steadfast in our commitment while creating long-term shareholder value.I would now like to open up the call for questions. Operator?

[Operator:]

[Operator instructions] Our first question today comes from Matthew O'Brien of Piper Jaffray. Please go ahead.

[Matthew O'Brien:]

Tim, just for start the Q4 results was good. I think we were expecting a little bit more I know yearend capital purchases tend to be a little bit stronger, but it sounds like you got caught up in some back analysis. You’ve some other processes there. So can talk about what was some of the gating factor that you saw in Q4 specifically as far as placing Pure-Vu?

[Tim Moran:]

If I look on a whole at the work that we did in Q4, I would say that the progress we've made is really in line with you know what we see from the typical value analysis committee process then the internal processes that these hospital go through to make final purchasing decision. So there is always a handful of priorities that these hospitals are dealing with in addition to Motus G.I. in getting the approvals done.So I would say there is nothing out of the ordinary Matt. I feel like we've made very good progress the earliest accounts that we started with back in October have been able to move through that process and call it roughly that 90-day period and the others are now continuing and are getting close here to being across the goal if you will in becoming full purchasing customers.So really the guidance that we gave around the sales process timing of roughly 46 months I think is pretty much nailing in terms of accuracy. Some of the larger multi hospital IDNs can be a little bit more complex from a bureaucracy perspective, but I think the way to think about this is probably four to six months roughly to kind of work through from the beginning of the process till ultimate purchase.

[Matthew O'Brien:]

Okay. And those 50 hospitals that you pointed out last quarter to engage with, again it sounds like none of those have fallen off as far as being in the funnel.

[Tim Moran:]

No it's a really good point actually. As a matter of fact so we've had really none of them fall off the final and quite frankly on the front end in terms of generating leads we've been able to generate a backlog of leads well beyond what the size of our organization could immediately follow up with. So from the standpoint of activity and account target the final has been built very nicely Matt.

[Matthew O'Brien:]

Okay. And then two more for me. First one is I don’t know how much you want to actually get into this but I think it would probably be helpful given how far we are in the Q1 here. Just talk or provide any kind of commentary that you can as far as how things are trending in January or if you want to go into February or pre-COVID just to help us get a sense for the demand that you're seeing. I know that it's off the court of capital but how things are trending before all this, this really broke out because we're trying to get a sense for the demand side of things?

[Tim Moran:]

Yeah absolutely. So I would maybe give you a couple examples. So as I said earlier, very pleased with the progress we're making and we continue to set up new installations and evaluations in all of really the accounts that we targeted and we feel are the right facilities to be and to build this foundational group of facilities that will become our reference site. So that has continued on track in January and February and for the most part even early part of March, and then obviously given the situation things came to a pretty abrupt halt as hospitals started to become overwhelmed with the with the current environment of COVID.But what we've seen in those earliest accounts where we started with a couple physician we've been able to expand that and multiply from call it two to three docs to upwards of 10 or more in some cases 14 or 15 physicians that we've trained and have now done procedures. So when I look at that, to me those are the metrics that you want to see happening in account that you’ve converted have gotten approval or buying the sleeves and you’ve been able to expand to more docs.And what that's led to in those accounts is repeat orders. So our intention now is to continue to focus on this group of accounts that are in the pipeline and get them off of that place, but really leading into the COVID situation, everything was moving along as expected.

[Matthew O'Brien:]

Okay. Thanks and then last one for me is just on the financing side. So I just want to make sure I'm summing up everything and then I've got some comments as far as we go forward strategy but $28 million of cash exiting 2019 with the Silicon Valley Bank loan included in their gets you through to the end of this year roughly with enough cash to make sure that you don't have any covenants on this will be pretty lenient as far as covenant go with you and everybody and then you have enough cash to get you in the 2021 public like the first half, is that fair?And then more importantly, I am sure you're not sitting idle by but can you -- you’ve not given any details but just give us a sense of some of the options that you're potentially pursuing be it strategic other options that you're maybe pursuing on the financing side give investors confidence that you'll be able to come through this to come out of it and then we can get back to a growth trajectory that we all think you'll deliver going forward. Thank you.

[Tim Moran:]

So let me start by saying what we've announced today in terms of this cost reduction program first of all we felt as I said it was very critical that we were decisive and we took immediate action here to make sure that we protect our business, our shareholders, our customers ,which is why you heard me layout that plan and part of it is the current environment as you know with hospitals there is disruption and there is a degree of uncertainty about when things start to come back to any degree of normalcy.But the other part of that is the financial market and I think the way we're thinking about this is we've now taking the action to give ourselves more time to gain that clarity and hopefully for the market to come back a bit and for us to be able to get right back on our trajectory in terms of the progress that we're making and be able to show the validation of Pure-Vu being utilized in these major centers the types of facilities that I commented on earlier.I think what that does is it allows us to continue to consider a variety of different strategic options and I think those include neither things that we've actively been discussing and working prior to COVID and will continue moving forward. Obviously there's the potential for strategic partnerships not necessarily even financial but strategic partnerships for commercialization and that could include obviously OUS territories and that's an opportunity to potentially bring cash infusion into the company. We'll continue to explore that and I think the vices of interest to folks that we've been speaking with.But on the other side listen we've shown that we can raise money in the equity market through publicly marketed deals but given where our stock is trading right now and given the current environment that is not a top priority for us as a leadership team or the board. So we'll continue to engage with large potential financial partners as well of there are many that we've been speaking to see the value of the market that we're building and we're the only one in the space. It's multibillion-dollar market, we've got an incredible technology and an unmet need I think that resonates in every hospital small and large and whatever job you're talking about the US or abroad.So I think we'll continue to explore that and make the right decisions when the time comes, but it's important that the take away from this is the reason we've acted so quickly is to allow for the world to get back to little bit more of a normal place and not be up against having to make a decision in the short run. So we would like to think that we have put the control back in our court to make those decisions down the road. I hope that helps Matt.

[Operator:]

The next question is from Kyle Bauser of Dougherty & Company. Please go ahead.

[Kyle Bauser:]

So just to follow up on Matt's science question and just to be clear so I think the burn rate previously was about $6 million a quarter and so are we looking at around this 50% reduction about $3 million per quarter after you're able to complete this next month going forward.

[Tim Moran:]

So Kyle that's the right way to think about it. So obviously we haven't put specific burn rate guidance out but if you look at our history and what we've talked about for 2020, this will be approximately a 50% reduction off of what we were expecting the quarterly burn to be throughout 2020. And to your last comment yes, the plan is underway. We fully expect that this will be completed by the end of Q2. So only a matter of Q2 we will be looking at a new normalized run rate in Q3 in terms of cash burn.

[Kyle Bauser:]

Okay. Got it and can you highlight a little bit about what departmental and projects related spending cuts encompass and specifically I know you mentioned there will some cuts in sales and marketing. Are we still looking at 10 territories or are retrieving that back and it sounds like normalize market and then ramp back up.

[Tim Moran:]

This decision to do this does not come easily and a lot of time and careful thought was put into doing this with both the leadership team and our board and I know it when we're faced with really an unprecedented situation such as this pandemic, we had to take action. So as we looked at the department, what we did is we went back to what's our strategy and what are the key priorities for this business that need to have happen and the number one thing by far is continuing demand generation and validation of our technology in the market with Pure-Vu.So from a commercial perspective and what we said for the last year is we believe that the first step in that process is getting this core group of large national regional influencer hospital the Cleveland clinic of the world as our customers and references. So as we went through the process of looking at the various reductions we kept that as our guidepost in terms of making these decisions. So things that without going into granular detail, things that were not a key priority to allow us to do that are things that we're going to put on hold for now. But we don't believe it impact the most important objective which is validating the commercial viability and scalability of this business.With then as we do that leads to a variety of different strategic options that we can take later in the year. So specifically from a commercial perspective want I to comment on there is the way I would think about it is roughly about a 50% reduction in terms of the fields facing organization and part of the way we looked at that Kyle is as I was saying earlier to Matt, we've been able to generate a significant pipeline of opportunities. So the places that we can go is not something that we need to focus on right now. We've got a very, very large backlog of sites of scheduled evaluations. So basically with a leaner team, we believe that we can still penetrate these large facilities.we've obviously are making decisions where we have the appropriate geographic coverage, the relationship in place with the key centers that are in the works already or already customers of ours and where we continue to expand. But I would think about it similarly across the department then in sales in marketing roughly a 50% reduction.The other point I would make is we think it is important that we take this decisive measure now. It allows us to pull our head up 90 days from now or six month from now and if we need to add back in certain areas we'll actually do that, but we're confident this is absolutely the right decision for the current environment that we're working within and the uncertainty that is still out there with our customers.

[Kyle Bauser:]

And COVID is unprecedented I think the spending cuts is wise and certainly having $29 million on the balance sheet and enviable position for a small-cap tech company currently in commercialization. So I think that makes sense. Maybe just one more, from your early commercial efforts in the US, can you talk a little bit more about when the docs are using Gen2 when they're deploying it? Are there any trends that you're seeing? Is it primarily in GI bleed or is it in other conditions like colitis and do you have a sense for how frequently these operators are utilizing Pure-Vu in their poorly prepped case in general?

[Tim Moran:]

Yeah sure. So listen broadly speaking the value prop that we provide is the ability to control delays and give predictability to the procedure that is clearly not a predictable procedure for hospitals and it was I mentioned earlier the new study that was done this past year at Cleveland clinic again showed very similar numbers within their system 51% of the patients that were poorly prepped after going through 24 hours clear liquid diet and valve prep right.So where Pure-Vu comes in is having the ability to impact that entire population. That said what I think resonates immediately is the ability to get after the most difficult clinical cases which is absolutely GI bleeds and GI bleeds make up about 60% of the procedures what we're seeing in the real world and what we saw in our Reduce study. So getting after GI bleed immediately where you want to get in and get diagnosis where if you don't get there quick enough, oftentimes they can clot over and then you can't identify the bleed which obviously could potentially lead to a re-bleed something that you absolutely don't want to have occur.So I think that clinical conviction and the excitement comes around for these positions comes around being able to treat a patient that they otherwise couldn't treat, and then as the device is on sight and they get more comfortable and more used with it, it starts to expect to more and more patients, but I would say that's probably the largest trend that we've seen. And the other piece too is we're really an enabling technologies. So we're providing visualization. So there is so many different technologies that are now being introduced in into medicine but even into GI like artificial intelligence and other things that provide the ability to identify props more quickly.But the reality is without a clean colon, none of those technologies are a benefit right. So we've also been adding to our value props to talk about it from that perspective is we're able to enable a better use of some of these other things that they've invested in.

[Kyle Bauser:]

Okay That's helpful. Thanks for taking my questions and congrats on the progress particularly given the unfortunate COVID situation.

[Operator:]

The next question is from Steven Lichtman of Oppenheimer & Co. Please go ahead.

[Steven Lichtman:]

Tim you mentioned I world hop halt in terms of the current situation. You also mentioned of course that the procedure that you guys are focused on are not elected per se, but these are unprecedented times. So can you talk maybe a little bit more about what you're seeing on the ground right now in terms of how many or what portion of procedures that you thought would've gotten done are actually still getting down or any other color you can provide on front?

[Tim Moran:]

Yeah sure. Listen, it's a bit of a moving target based on where the hospitals are obviously if you're in New York or Chicago and other parts of the country, things are a bit different and I've been in contact with many of those GI positions in getting their take but there's a couple things here. One, I do want to comment that GI bleed is not an elective procedure obviously right. But given the unprecedented situation in these hospital being overrun if they have the ability to delay depending on the degree of the bleed I've talked to some of the physicians they will actually delay the procedure if it can be delayed.Obviously they're going to provide care as needed but certainly any of the procedures that are being done in their hospital base outpatient for the most part are not happening right now. And we were picking up some of those procedures as well. So it's a bit of mix bag but what we've been able to do and I think it's really important is virtually be able to support these accounts. So we've had GI bleed procedures where patient did need care and they're using the Pure-Vu system and the variety of different tools based on things like that, we've been able to support the physician or the staff and help them get through that procedure.So we've been really happy about that and quite frankly even before COVID we've been thinking about just from efficiency and efficiency perspective, how do we remotely provide support, so we don't have to be there each and every time and we've now with the COVID situation have accelerated some of our planning there. So things like an app that would provide a very user friendly walk-through of set up of the device and other tips and tricks and things like that. So we've accelerated that and we anticipate that the ability to launch something like that here pretty soon.But right now it's really hard Steve to get a prediction on like what percentage of the cases are being done. I know it's a critical GI bleed may have to do it and they're doing it but other than that really most of the resources that we're hearing are being put towards COVID patients as you would expect.

[Steven Lichtman:]

Tim to your answers to the prior question you were talking about the value proposition, the physicians who have begun to use Pure-Vu are seeing and the breadth of uses. Just given guidance and the size of the officers you're targeting, it seems like the per month target I think you mentioned earlier, I think you said 5 to 10 per month that we should be thinking about seem conservative to me. Can you talk a little bit about the assumptions going into that utilization?

[Tim Moran:]

Sure, listen the best way to think about this is let's not forget that we've got a brand-new technology that we've launched to the market right and despite the significant unmet need and how well the Pure-Vu system works and does everything that we expect and say that it does, it's all around change management. So part of the reason we've taken this approach of targeting just a couple docs at the outset to get approval based on their support and input is because we've got to get initially that buy-in and support and then once the products has been approved, we going to work towards expanding to other physician.But again there is training that has to happen. We've got to get folks to get out of old mindset of doing things the way they’ve always done it and change management is never easy and my experience says many, many years of commercializing devices when you have something new, it takes time. So I think we've tried to be as conservative as possible but as realistic as possible if it is in the early quarters here purposes we're about a quarter and half if you look at COVID due to this commercialization. So as we get later in the year Steve, we will absolutely update if those metrics are indeed too low but right now we think given the number of docs that we're training and the fact that we're trying to be in there and ensure that they have a tremendous high quality experience to become proponent and we have peer-to-peer dialogue and there up on the podium talking about Pure-Vu we're putting the extra time up front to ensure that they're well-trained. So really that's the biggest reason why we've put that number out there to start.Certainly over time that we anticipate that that number will grow given the number of procedures that these large sites are doing.

[Steven Lichtman:]

Okay. Understood and then just lastly on data any opportunity to use email over the next 12 months to get additional data out? I know you’ve expedited late last year. Obviously I assume that's on hold but I didn’t enough patient in order to be able to show data at some point. Anything you could talk to on front will be helpful.

[Tim Moran:]

Sure. So in the very near-term I think just like all clinical studies there's been a bit of a slowdown if not stop and I think you expedite would fall into that realm but we would expect by the end of the year we should be able to put out expedited data unless there is a delay longer than any of us are expecting. So that is one area. There are other conversations that we're having.When we look at this reduction in spending there'll be some investments that we will continue to do as it relates to clinical programs and these will be clinical programs that allow for commercialization to be bolstered. So there's some big systems in the US that we've been talking to and I fully intend that we will go forward with some clinical work there and that would be around economic validation in the real world setting and some of the other things that I think will be helpful to bolster things for us commercially later in the year.We'll provide more updates on timing of those once they're initiated. I will as Mark and as you know Mark is one of Mark's responsibility he heads up our clinical program. I will Mark to comment briefly on a few of the other thing that we have underway as it relates to some publications that we would expect to be coming through here in the near-term. So Mark, could you add a bit of color for Steve's question?

[Mark Pomeranz:]

So to add a little color to what Tim mentioned, we do look at when it works with a few publications on some data. So a more full detailed manuscript on reduce study should be coming out and some interesting sub analysis that we think will help from a commercial standpoint. Also we have some health economic data that will also be published in the fairly near term as well and to mention what Tim about, about some studies we're talking some of the major centers about as well really looking at some of those critical patient and really looking at the urgent bleed to get folks out of the ICU especially in the current environment as quickly as possible. We think we got some exciting things in the works around that as well.

[Operator:]

The next question is from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead.

[Jeffrey Cohen:]

So I was wondering could you give a little further clarity I guess for Andrew as far as this reduction. Has any of that taken place this quarter in Q1 or would you expect all to hit during Q2 including the $1 million to $1.5 million charge at which point you will have it temporary baseline back to Q3?

[Tim Moran:]

Jeff, let me just make a quick comment and Andrew can add color if necessary. So we are enacting this plan in real time. So this will be enacted here starting this week and will be taking place in Q2. So that's the way I would think about it. So Q2 will be the time that we will work through the entire plan, the cost associated with managing the changes and then we come out of Q2 with that new reduced spend and normalized run rate for Q3. That's your question hopefully that answers it.

[Jeffrey Cohen:]

And then as far as placements could you comment about the first quarter beyond the reference in the press release in totality by the end of last year?

[Tim Moran:]

So what I would just say may be clearly is we continue to place more devices in targeted accounts and the way I would think about it is approaching 20 sites and obviously when things come back online, we will continue to work with those institutions. So literally we have sites that we shipped went into complete staff and physician training and then a week later things got put on hold. So we anticipate we've been in contact with those facilities. We expect to get back on track once they get back to a bit of a normal cadence with things. So things continued in Q1 on plan.

[Jeffrey Cohen:]

And then lastly for me can you talk a little bit, I know Matt asked a bit about the backlog as far as last quarter was I believe 50 or so facilities are now talking about our pipeline more than double that. So what's the plan is as the market pauses for who knows how long but pretty much the pipeline is more of an initial pipeline now and will be the first number of targets that you approach when things kind of free up as far as the hospitals go?

[Tim Moran:]

Yeah I think that's a fair way to think about it right and the reality is as I've said we're going to have a reduced footprint but we're very comfortable with the footprint that we're to go with and the folks that will be leading these Pacific regions in terms of the accounts that they're working with, that we're already in and accounts that will be moving to when things come back online.But we will continue to take a hard look because at the end of the day, I think what's most important and I've said it many, many times about building this foundation of reference sites. The reality is we want the major GI centers the large national influences, the big IDMs right that I think carry both the name recognition, the physician recognition in terms of thought leaders in the field. So we will make sure as we look at that pipeline that we are focused on the facilities that we feel accomplish that for us.So I will say as we look at the pipe, we feel like we've got a plenty as I mentioned earlier in the works and now it's about continuing to get those sites across the goal line and become purchasing customers and that's exactly what we'll do and we're taking this downtime to continue to engage with them. One thing I am not sure I mentioned earlier but it's important to remember about Pure-Vu is the value proposition the black-and-white value proposition of this device is we are able to help hospitals get patients out of the hospital or out of an intensive care unit more quickly and if you think about what they're dealing with now with the pandemic, it may be hard to focus on a new technology but we believe this pandemic brings shines even a brighter light on the investments that need to be made to ensure they're running as efficient approach as possible and we don't have physicians in beds longer than they need to be.So that's something that I think we really need to be focused on when we come out of this. It's absolutely a tremendous benefit and COVID is really pointing that out. Patients need to not be in a bed when there's a device to get them out more quickly.

[Jeffrey Cohen:]

I would concur with and kudos on the pause as we deal with this pandemic. Thanks for taking the questions.

[Operator:]

Your next question is from Ben Haynor of Alliance Global Partners. Please go ahead.

[Ben Haynor:]

First of all for me you mentioned that you’ve got over 50 docs trained at over 15 hospitals. Is that as of the end of 2019 am I understanding that correctly or is that as of today?

[Tim Moran:]

That was at the end of Q4. So we've continued to train more docs in the early part of Q1 Ben if you do the math on that obviously it's right in that target of the number of physicians that we would expect at each facility and with others growing to now the size that I mentioned earlier that started with one or two or three and now are doing -- having more physicians trained.That's the logic that we will continue to focus on as well. Getting experience and giving these physicians experience with the device, what we found is when they start to do five, six, seven procedures, that's when they really see the value in the clinical use case across the number of patients of the device. So that's an absolute focus for the team.

[Ben Haynor:]

And then you mentioned in your prepared remarks that you expect more docs to be trained at these facilities ultimately from a one, two, three that you mentioned. Should we take that to me that as the facilities that you're in at the end of the year that's somewhere in the neighborhood of 150 total docs that need to be trained.

[Tim Moran:]

So I don’t know if the math is that simple because obviously there is a different number of physicians depending on the facility and if you some sites have multiple docs that could have 15 GI docs that rotate through and manage inpatient procedures. Other facilities and even some of the largest utilities dedicate their inpatient work to just a small number. So there's four or five physicians that handle all of the for example GI bleeds. So you can extrapolate the math that every facility will have 10 physicians but I think you're right in thinking about it that way.The only caution I would put out there is and we'll provide further updates obviously on a quarterly basis but given the reduction in the size of the team that'll obviously be tied to the number of facilities that ultimately we are in at year-end.

[Ben Haynor:]

Just how you think about the utilization of these individual docs? Is there a way that the first two or three are -- they're early adopters and I would think that they will have higher utilization going forward then the full and do you expect the model to use it on a pretty similar level once they're all trained up and very institution…

[Tim Moran:]

First of all, I do think that as they get more experienced, the number of procedure that they do will increase naturally and we've seen that where a physician gets trained, they do five procedures and next thing they think about is hospital-based outpatient, one of their patients that they know has had a history of poor preps. They immediately start the life of those oftentimes like this is a perfect used case for Peer Vu and then suddenly they're now doing a hospital-based outpatient.So just naturally if they get comfortable with the device they start to use it more often. So I would expect that to continue. The other thing that I would think about is these physicians often have kind of sub specialties to some are interventional GIs and they may be doing other types of procedures. So depending on what their daily focus is drives the number of Pure-Vu cases that they would ultimately be doing right. So some doctors doing you surely colonoscopies and they're probably over time going to do more Pure-Vu cases where some of the interventional guides may be doing other types of procedures and when they do have a colonoscopy, they’ll then use Pure-Vu that they’ve been trained and they're comfortable on it. So I think it will be vary depending on the actual doc and what they're their focus is.

[Ben Haynor:]

And then finally the upper GI bleed opportunity that sounds pretty exciting but how does the headcount reduction impact to the development capabilities on that front?

[Tim Moran:]

So great question. First of all we are let me make a couple of comments. One, I want to make it clear that our focus is driving the US inpatient colonoscopy market. That is priority number one. But when you hear time and time again voice of the customer and physician talking to us about and an opportunity for our device to help them therapeutically treat patients in an area where in speaking to docs sounds like there's not been a terrific solution for them. It's something that we look at and take seriously.So I think that the change that we've just announced in terms of giving ourselves more runway and therefore more options over time, at it coincides pretty nicely with the upper GI opportunity because we will continue to do the work necessary with the team that we have here and we contemplated that upper GI was something that we wanted to continue. So there is market analysis that's underway. There's a significant amount of regulatory work that we were doing and then obviously there is R&D work.So that will continue. So this is an opportunity that is not going to be tomorrow but I think will be in that call it next 18 months or so. So we've got the time to continue the project, learn the things we need to learn to potentially enter this market and we believe that we'll execute on our plan and will have the options both financially and resource wise to be able to attack that market. So more to come on that Ben but we will not stop on that project in terms of the upfront work that needs to be done to access it.

[Tim Moran:]

I just want to say in closing, first of all I appreciate everyone's time today. I know we provided a lot of information but I think this was really important to not only give kind in the state of the union on the business commercially, but also how we are proactively addressing what is just an incredible and in real-time in all of our lives live with the pandemic.As I said multiple times today, we're bullish about the unmet need and the opportunity, the size of this market that we are building, the value of the technology that we've created and the fact that we're taking the necessary approach to give ourselves the ability to weather this storm and get right back on track when things start to subside. So we appreciate the support of everyone who joined the call today and will look forward to providing further update in the near-term. So thank you very much and stay safe and healthy.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation