Motus GI Holdings, Inc.
Q2 2020 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by. And welcome to the Motus GI Holdings Incorporated Second Quarter 2020 Financial and Operational Update. At this time, all participants are in a listen-only mode. There will be presentation by the Motus management team followed by a question-and-answer session. I must advise you all that the conference is being recorded. I’d like to turn the call over to Bob Yedid of LifeSci Advisors. Please go ahead sir.
- Bob Yedid:
- Thank you, Operator. And thank you everyone for joining us for the Motus GI second quarter 2020 update call. 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 Securities and Exchange Commission. With those prepared remarks, it’s now my pleasure to turn the call over to Tim Moran, CEO of Motus GI. Tim?
- Tim Moran:
- Thank you, Bob, and good afternoon. Thank you for joining us today for our second quarter 2020 earnings calls. I’ll start by providing a business update and then turn the call over to Andrew to review our financial results for the second quarter. At the end of our prepared remarks, we will open the call for Q&A. I’d like to start by thanking all of our employees at Motus GI to the extraordinary result they’ve shown over the last several months as we’ve navigated through the unprecedented challenges of COVID-19. And most importantly, for their continued focus on driving our commercialization strategy for the Pure-Vu System. In addition to providing a progress update on the execution of our U.S. product launch, I will discuss three key topics today. First, while the current operating environment has been challenging due to the Coronavirus impact on U.S. hospitals, we are now seeing activities picking back up in certain areas of the country. Next, the impact of the pandemic has amplified the importance of hospital efficiency and Pure-Vu can play a key role in ensuring colonoscopy procedures are completed on time, the first time and can result in clear clinical outcomes and positive economic benefits. And finally, we believe there’s a strong need in the market for our technology. In this quarter we saw our first account, UC-Irvine, develop a new impatient protocol centered around the use of Pure-Vu. In spite of market issues, we continue to generate demand for Pure-Vu, adding new VAC approval and evaluations during the quarter. As it relates to the challenging operating environment due to COVID-19, our business during the last period was most directly impacted by two main themes. First, the volume of U.S. colonoscopy procedures was dramatically lower. According to a survey conducted by NYSGE, weekly endoscopy volumes declined by 57% to 96% for all GI procedure type. Hospitals turn their attention to addressing COVID related patients, and when possible, either cancelled delayed colonoscopies unless absolutely necessary. Second, due to CDC guidelines for social distancing, our salespeople were and continue to be unable to enter many of our accounts, which challenges our ability to drive both new system placement and support utilization for systems already placed. Most hospitals also temporarily halted their value analysis, committee meetings and any new technology evaluation. In spite of these significant roadblocks that affected us in Q2, I am pleased to report that our team found ways to continue to make solid commercial progress. In California, Texas, and the Mid-Atlantic, we successfully launched new Pure-Vu evaluation, while also restarting existing trial that had been interrupted by the COVID shutdown. As a reminder, our strategy aims to earn the endorsement and use of the Pure-Vu System by leading physicians and key opinion leaders, who through experience and peer-to-peer interaction helped to drive awareness of the Pure-Vu System in the U.S. hospital market. I’m pleased to report that we now have the Pure-Vu System in use at more than 20 major hospitals. In Q2, we also started new evaluations at additional target institutions including UC-Irvine Health, Geisinger Medical Center, Sinai Hospital in Baltimore, part of the LifeBridge Health System, and Memorial Hermann Health System. Additionally, several of our accounts including University of Texas, UCLA and VA Boston, began performing procedures again. Although, at a lower volume as they work through their existing inventory of Pure-Vu sleeves. I want to dive a bit deeper into a few highlights this quarter that we believe confirm that our commercial strategy is working and there is a significant need in the market for our technology. Despite the pandemic, UC-Irvine Health began evaluating Pure-Vu in early June. Their evaluation has gone extremely well and they’ve reported successfully using Pure-Vu to accelerate treatment of patients that historically would have been delayed. Dr. Jason Samarasena, a key interventional gastroenterologist at UCI has implemented a Pure-Vu protocol that aims to ensure UCI can provide a high quality exam in less than 24 hours on most patients. Regardless of how inadequate bowel prep the patient is when their colonoscopy is scheduled to be conducted, they are now avoiding delays and utilizing the power of Pure-Vu to ensure on time procedures. We believe the development of this protocol will serve well as a proactive process for patient identification and as a protocol that we will continue to share with other hospitals across the U.S. Dr. Samarasena has shared the following thoughts based on his experience to-date, and I quote, Pure-Vu has been instrumental in addressing the clinical needs of our colonoscopy patients that present in the GI Lab with inadequate bowel prep. Inadequately prepped patients are a problem that we see regularly and before the Pure-Vu System’s availability, these patient’s procedures were either delayed or even aborted prior to completion, leading to unnecessary additional nights of hospitalization. Pure-Vu has allowed us to diagnose these patients earlier, which enables us to therapeutically treat when appropriate. Especially in light of Covid-19, we strive to avoid extended hospitalizations due to insufficient bowel prep and with Pure-Vu we believe we can get a high-quality exam in less than 24 hours on most patients. This has a significant impact not only on overall patient care but also hospital economics. This is the end of Dr. Samarasena quote and we greatly appreciate him sharing his perspective and developing a protocol to optimize the impact of Pure-Vu on procedures and patient. I believe we will eventually see broad adoption by hospitals across the country over time. We are building traction in our effort to generate demand for the use of our Pure-Vu System within targeted health system. Most recently, we additional hospitals within both the Mayo Clinic and the Cleveland Clinic System to our schedule of upcoming evaluation. This is a key part of our future expansion strategy and I’m pleased to see this broader adoption after just a few quarters into our commercial launch. The commercial team has proven to be nimble in adjusting to ongoing changes related to COVID-19. Some areas that previously were minimally impacted by the virus are now facing a surge. In order to continue driving our execution forward, we’ve focused on ensuring our pipeline remains full and we are currently tracking approximately 150 sites that we believe over time will perform evaluations. In order to overcome access issues for our salespeople at many of our sites, we launched a Virtual Customer Support Program in the second quarter. The early feedback has been positive and we’ve been able to support procedures remotely as well as conduct training for new sites. As part of this effort, in late May, we launched a new mobile Motus GI app that provides a plethora of valuable resources for Pure-Vu System users. Specifically, this app provides chaptered and narrated video support that covers the setup and the use of the Pure-Vu System. We are pleased with the early adoption of our app and have seen a growing number of downloads in just a couple of months. From a strategic partnership perspective, we continue to evaluate the potential for accelerating our commercial execution via partnership opportunities that could provide additional scale and a larger commercial footprint to bring the Pure-Vu technology to customers more quickly. Despite the difficult market conditions associated with COVID-19, I am pleased that we continue to make solid progress, gain new evaluations at the top GI hospital and are seeing many of them progress through the VAC process towards purchase and utilization. This is a challenging, as well as exciting time for Motus GI as we continue to introduce a new technology into an established market. We remain confident that over time, our solution can provide significant clinical and economic benefit to our customers. I will now ask Andrew to review our financial results for the second quarter. Andrew?
- Andrew Taylor:
- Thank you, Tim, and thank you everyone for joining us today. Revenues for the second quarter were nominal, which was attributable to the macro disruptions in the market caused by the ongoing COVID-19 pandemic, which Tim just detailed in his comment. For the three months ended June 30, 2020, we reported a net loss of approximately $4.4 million or a net loss per diluted share of $0.15, compared to $5.7 million or a net loss per diluted share of $0.26 for the same period last year. During the second quarter, net cash used in operating activities and for the purchase of fixed assets was $4.3 million, as compared to a similar $4.3 million for the same period of 2019. As reflected in our year-over-year comparisons of net loss and cash spend activity, the early results of our previously announced cost cutting measures began to take shape during this past quarter. We have largely implemented this plan, resulting in a significantly reduced cash burn rate of approximately 50% compared to previous forecast, as we enter the second half of 2020. The total restructuring charges under GAAP were approximately $625,000 and together with other expenses associated with this plan of approximately $300,000, we are under our previously provided range of $1 million to $1.5 million in one-time costs for this program. At June 30, 2020, we held approximately $17.1 million in cash and cash equivalent. This included the $8 million from our 2019 term loan agreement with Silicon Valley Bank with a maturity date of June 2024 and interest only payments through June 2022. And with that, I’ll now turn the call back over to Tim.
- Tim Moran:
- Thank you, Andrew. Let me summarize. While the current operating environment has been challenging due to the Coronavirus impact on U.S. hospitals, we are now seeing activities picking back up in certain areas of the country. Assuming this trend continues and we acknowledge that there’s ongoing risk, we believe the hostile environment is becoming more favorable for us to gain traction with the Pure-Vu System. The impact of the pandemic has amplified the importance of hospital efficiency and Pure-Vu can play a key role in ensuring colonoscopy procedures are completed on time, the first time, which can result in clear clinical outcomes and positive economic benefits. And finally, we believe there’s a strong need in the market for our technology, and in spite of market issues, we continue to generate demand for Pure-Vu, adding newly improved hospitals and evaluations during the quarter. I will now ask the operator to open the call for Q&A.
- Operator:
- Thank you. [Operator Instructions] Our first question is from Matthew O’Brien with Piper Sandler. Please proceed with your question.
- Matthew O’Brien:
- Good afternoon. Thanks for taking my questions. I guess for starters, Tim, can you just talk about what you saw on the utilization side throughout the quarter, because the revenue number is obviously attention getting, but it sounds like your hospitals are working on existing rev -- existing products. So, what did you see April, May, June, and then what are you seeing so far here in July from an actual utilization of Pure-Vu perspective?
- Tim Moran:
- Thanks, Matt. Thanks for the question. Yeah. So, first let me start by saying, in the early part of the quarter, obviously, the procedure volume, as I mentioned in the prepared remarks, was down significantly. We also saw VAC process, new technology evaluation process really halted in most of our sites. And a bit of a refocus, if you will, the mind share was not there for embracing new technologies. So, obviously, that had a direct impact on just consumption of sleeves in the early part of the quarter. As we would have expected, other reorders to happen that were internally forecasted, I’ve seen them now move to Q3. So, I think, we will start to see some of the planned reorders coming in. We’ve already seen some of it in the early part of Q3 here, but really was just directly impacted by the fact that procedure volume was down, and as I said, in some cases upwards of, call, it 80% to 90% in many of our key target hospitals.
- Matthew O’Brien:
- Okay. But so for June specifically, Tim, I mean, did you see utilization trends of Pure-Vu that were encouraging or are people still pretty locked down at this point, especially with respect to colonoscopy?
- Tim Moran:
- Yeah. So I think we start to see, from my view, we start to see encouraging signs in. It was interesting. So we start to see California, Texas come back early, which was very encouraging. As I mentioned, also some facilities that we’re working with in the Mid-Atlantic and Pennsylvania, which now the search has shifted there, so things have started to slow down, but we’re seeing things open back up in places like New York, believe it or not. So I think we’re seeing the signs, man, I think, about half of our accounts are back to actively doing procedures, but there’s still certainly a slowdown in the balance.
- Matthew O’Brien:
- Okay. Tim, when you say they’re doing procedures, are they employing Pure-Vu with those cases or…
- Tim Moran:
- Yeah. Doing -- yeah. Doing Pure-Vu procedures, that’s what I was quoting. Yeah.
- Matthew O’Brien:
- Okay. Okay. That’s really helpful. For UC-Irvine specifically, I know you have over 20 hospitals now where you’ve got a Pure-Vu placed. But for Irvine, they seem to have really adopted this. How impactful could they be? How many procedures could we think about them alone doing here in the third quarter and potentially even the fourth quarter?
- Tim Moran:
- So, Matt, first of all, we’re really pleased with what we’ve seen from UC-Irvine. So Dr. Samarasena has been a tremendous collaborator here on the product. He sees the significant need, as I mentioned, the protocol, which I outlined, it’s really critical. I really can’t overstate how important this protocol is, because patient identification and coming up with a proactive process for where to use Pure-Vu is really, really important, particularly if we have that now coming out of a very prestigious facility and we have a KOL that folks are taking his guidance and input to actually even utilize him to help in a few other sites where he was part of training and in servicing remotely, which was tremendous. If you look at that site, it’s -- there’s significant upside opportunity, I’m not going to comment specifically, but I’ll tell you that they fall into that range of, I said it for a couple quarters now in that, call it, 500 to 1000 inpatient procedures a year. So I would like to think Matt that as we get towards the end of 2020, we can start to make an impact. I would say probably starting in, call it, 10% to 15% of the procedures and then that’ll ramp and accelerate quite nicely. The reason we will start at a lower rate is as you know, we are -- we start with just a couple of the docs trained and doing the procedures, as we bring more physicians on, I would expect that to -- each quarter continue to accelerate.
- Matthew O’Brien:
- Got it. And then last one for me is just on the financing side of thing, I think, you said, you expected to down about $3 million burn rate starting this quarter. Is that still the target if you can get that number lower, and then, how are you feeling about the capital situation of the company? I mean, is partnership the most likely avenue in terms of fresh capital or potentially some other options?
- Tim Moran:
- Yeah. So listen, I mean, I think, as you know, we were pretty decisive in making decisions on the cost reduction program. We announced that on, I call it, March 30th, April 1st. The team did a great job pulling together, executing that here in the second quarter. So that is behind us now. So I fully expect on a go-forward basis, we’ll be in the $3 million to $3.5 million a quarter cash burn range, which is as about a 50% reduction from our forecasted amount prior to the program being installed. So if you look at that and based on what Andrew just detailed, we have over a year of cash right now. We continue to have dialogue as it relates to financing of the company. But there’s a variety of different options that will continue to way, obviously the capital markets are available to us. But as you mentioned, we have - continued to have very good dialogue on the strategic partnership front. So I think some of that comes down to being able to get that executed and timing of that. We are also evaluating other non-dilutive avenues as well. So, I think, we’ve got time here and we’re just going to be opportunistic with what’s best for the company and for our shareholders.
- Matthew O’Brien:
- Fair enough. Thanks so much, Tim.
- Tim Moran:
- Thank you, Matt.
- Operator:
- And our next question is from Steven Lichtman with Oppenheimer & Company. Please proceed with your question.
- Steven Lichtman:
- Thank you. Hi, guys. I’m just was wondering on a commercial updates side. How many physicians have been trained to-date now? And then, Tim you mentioned, the 150 hospitals you’re engaged with. How many would you say are in a more definitive backlog in your mind now?
- Tim Moran:
- Yeah. So, Steve, we trained, call it, roughly about another 20 physicians this quarter. Obviously that was a smaller number than we’ve done in previous quarters for all the reasons that we outlined, but that obviously continues to become an important part of getting the broad awareness of the product and the market and comfort with the procedure. I will say just on a side note regarding training, I am pleased that the Motus GI app that we launched in late May is allowing us to actually do remote training successfully. So we’ve had a significant number of downloads by both physicians and staff in these facilities. And the feedback has been very, very positive in terms of, if the rep is either not allowed based on hospital protocol or can’t be there for the procedure. They now have a very easy to use tool to be able to get the procedure done without us there. From a pipeline perspective, one of the things that I’m pleased with is, last year in 2019, we spent a lot of time developing the market in terms of getting a backlog together of sites that have expressed interest. When we launched in Q4, we prioritize that grouping of hospitals. We’ve been very clear about the plan in terms of large national regional influencers being the types of facilities that we want to build our foundation with. But we’re continuing to chop away at that backlog. So we reported about 150 accounts in the pipeline. We already have seven of those facilities through the third quarter that are scheduled for evaluation before the year is out. All based on timing of when their hospitals are opening up for reps to be onsite and participate. But we continue to take, I think, a very methodical approach in terms of how we add new facilities into our evaluation process. And also keep in mind, Steve, as part of the cost reduction, we did reduce the number of sales people that we have out there. So we’re trying to continue to manage the right number of opportunities. So we have a good experience with any of these sites.
- Steven Lichtman:
- Got it. Thanks, Tim. And then in terms of placement, I know you’ve said system placements are obviously is important to you over the long-term versus consumable. So should we continue to think that looking forward the sort of I guess in the near-term overwhelming majority of systems would be sort of in the lease model versus buy?
- Tim Moran:
- Yeah. That’s what it’s looking like. We kind of expected that I think even upon launch that the capital budgets have typically just been very constrained, but with COVID where we’re seeing more of that. As a matter of fact, I just had dialogue today with one of our larger facilities that has been a revenue account from a sleeve perspective and now is working towards capital and basically came back and indicated that due to the impact of COVID on their facility, they’re going to have to either go to a lease a rental or to commit to a usage model. So I would expect to see that over the next couple of quarters as we start to lock down capital programs on some of these early sites. My best estimate would be they would be typically amortized over the course of the next year or two.
- Steven Lichtman:
- Got it. And then just lastly from me, obviously, you mentioned procedure volumes given the environment are overall low right now. Can you talk to the potential for data collection from Dr. Samarasena or others over the next several months such that you could start getting publication or podium presence as look out sort of over the next few quarters? Thanks.
- Tim Moran:
- Sure. Yeah. Thanks, Steve. So one of the things before I mentioned specific data, but as that you may have seen, we launched on social media the Motus GI Pure-Vu podcast series. So we’ve now launched three podcast into the market with three significant KOLs, talking about specifically how they’re utilizing Pure-Vu, I am talking about real world cases and the impact it’s had on both patient care, as well as economics. So we’re going to continue to do that. As it relates to data collection, we continue -- now that we’re starting to see some of the procedures ramp back up, we continue to work on creating patient case studies. I think we’re up to high-single digits approaching double digits in terms of the number of case studies that we are now out in the market with that our salespeople use as key tools to drive awareness. As some of these conferences come back hopefully in the next several quarters, we will have -- we will expect to have more of a podium presence with some of the KOLs that have had experience now. The other thing I’ll mention is, we are embarking on some additional clinical study work that we’ll get into more detail here in the future, but one of the most prominent healthcare institutions in the U.S. We are working with right now on final stages of kicking off a clinical study that will be focused on the most critical ICU type patients. So more to come on that, but that’s actually something that we’ll continue to invest in, I think, will be important part of accelerating the commercialization in the end of 2020, but also 2021.
- Steven Lichtman:
- Great. Thanks, Tim.
- Tim Moran:
- Thank you.
- Operator:
- And our next question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
- Jeffrey Cohen:
- Hi, Tim, Andrew, and Mark. How are you?
- Tim Moran:
- Hi, Jeff. How are you?
- Jeffrey Cohen:
- Good. I guess, first question for Andrew, when you spoke about the $625,000 in Q2 disruptions post modeling more on a separate line of thought a million and change or so. So is $625,000, I’m assuming fell within your G&A and then going forward in Q3 do you expect any further disruptions and will that also show up in June as well?
- Andrew Taylor:
- Yeah. So the - hi, first of all. Hope everyone is doing well. Yeah. The $625,000 restructuring charges, they actually fell a little bit in across the Board G&A, marketing and sales, and R&D, primarily in severance payments, personnel related payments and we’re not any restructuring charges in Q3 or Q4. So I think we are at the low end of what was expected and it’s behind us.
- Jeffrey Cohen:
- Got it. Okay. And can you talk about, Tim, I remember how should you talk about the other 20 plus users. Let me talk to you’ve been trained on average per hospitals are closer to one or two or three or four?
- Tim Moran:
- It’s closer to three or four. Jeff, I think, that’s probably a good number. It doesn’t necessarily translate in an average like that some of the early sites have upwards of seven or eight or more physicians. But I think that’s probably the way to think about it. We start typically with somewhere between call it two to three and then quickly start to bring on additional docs.
- Jeffrey Cohen:
- Okay. And could you talk lastly about your manufacturing and assembly are both units on the sleeves, currently it looks like the inventory change from Q2 was just a minimally higher, but talk about the inventories and the build and the process there? Thank you.
- Tim Moran:
- Yeah. Sure. So what I’ll say and Andrew can expand on this if necessary. But right now we have a good number of workstations on hand that we think are enough to allow for the additional evaluations and conversions that we expect between now and the end of 2020 and really into probably the first quarter of 21. And similarly we did a large enough build to have enough of our disposables. It seems that when you look at the breakout, our slim disposable is probably the most preferred. So we have ample inventory on both and we feel good about being able to serve our customers, both of our manufacturing partners they’re also up and running and have not been directly impacted by COVID.
- Jeffrey Cohen:
- Yeah. Okay. Perfect. That does it for me. Thanks for taking the questions.
- Tim Moran:
- Thank you.
- Operator:
- And our next question is from Kyle Bauser with Colliers. Please proceed with your question.
- Kyle Bauser:
- Hi. Good evening. Thanks for the updates here. Maybe following up on one of Matt’s earlier questions, for new accounts, they of course get the machine placed. And then I believe a five pack of sleeves is samples. Do counts typically get more than five samples? I’m just trying to get a sense of how many sleeves have been recognized, the marketing expense line item, but not revenue, particularly in the early adopting hospitals? And then, secondly, I think, you mentioned, sales reps haven’t been able to, obviously, enter the hospitals to drive utilization. Do the reps typically need to be present or available virtually for the Pure-Vu procedures to take place?
- Tim Moran:
- Hey, Kyle. Thanks for the questions and hope you’re well. So the first part of that, so from a rep perspective or let me take the latter part of that. From a rep perspective, if you think about the process right with the new technology and how we’ve been clear about wanting to build this large group of reference sites, right, with key KOL support. We’ve, I would say, overemphasized in the early quarters here, being available on site, making sure that the physician, the staff, the supporting cast, if you will, so nurses on the floor understand the technology, right? So there’s some legwork that needs to be done there to do it, right? But as we continue, further along than with these accounts, they become self-sufficient and they don’t need the rep there to perform the procedure. So we do have call it a handful of accounts that are doing procedures without the help of any Motus personnel on site. And we’d expect that over time that’s what we’re able to bring all of these accounts, right? So, just answer your question. This is not a procedure that requires rep to be there in perpetuity if you will.
- Andrew Taylor:
- And Kyle remind me the first part of the question.
- Kyle Bauser:
- Just about the samples if…
- Andrew Taylor:
- Oh! Yeah.
- Kyle Bauser:
- …new account.
- Andrew Taylor:
- I am sorry.
- Kyle Bauser:
- Yeah.
- Andrew Taylor:
- Yeah. Yeah. So on average, we typically will give a site two boxes for evaluation and we try to get the evaluation done over the course of 10 procedures. Now that can go a little bit one way or the other, so some facilities could get done, call it, seven or eight procedures, some of the larger sites where they want more physician input could be potentially a third box, but on average, call it, 10 sleeves.
- Kyle Bauser:
- Okay. Got it. And thanks for the updates on the latest burn rate really nice progress here. So adding to the headcount sounds like likely won’t take place in the near-term. Can you remind me if you’re still at five reps down from 10 and has that been sufficient through COVID or do you envision needing to get back to 10 in the near-term to cover the initial target hospitals?
- Tim Moran:
- Yeah. So we’re taking -- so nothing has changed. We haven’t made any changes to the headcount since we did the cost reduction program. We’re taking a very close view on demand in certain markets. So Kyle, the way we’re looking about it, as we add back, I think, it’ll be primarily in commercial and we’ll do it in places where the rep is so far stretched, that we just can’t continue with the number of folks that we have. But right now we’re taking a very cautious view. As you know, it’s a bit of a moving target in terms of where the virus surge has taken place. And we’ve been able to handle, if I think about this quarter, we were able to get a couple of VAC approvals completed, right? So through the entire purchasing process and approved, so we’ll start to see orders coming in from Ohio State that was done this quarter, which is a great accomplishment by the team. We completed three evaluations that have now been submitted to the value analysis committee for approval and we actually started some new evaluations. All within a quarter that was very, very difficult and that was with the size team that we have today. So I’m comfortable with the size of the group that we have for accomplishing what we’re working to accomplish, but we’ll keep a very, very close eye on that. And I think as ad backs come in, we will be in commercial and sales people.
- Kyle Bauser:
- Okay. Got it. Thank you. And then just lastly regarding the pipeline opportunities, you’ve identified upper GI is a natural target for expanding the indication. How would a regulatory paths look here, would it be too simple special 510(k) or you think you’ll need to make some additional modifications for potential Gen 3 version? Thank you.
- Tim Moran:
- Thanks, Kyle. Great question. So we remain bullish on the opportunity for upper GI. The last time I had mentioned it, I think, to the team here. We talked about the size of the market and the fact that this is emerged really organically. So a large majority of the facilities that we’ve been working in for colonoscopy have indicated interest in potentially using our technology for upper GI. So we believe that can be very interesting in terms of a kind of a platform expansion. We do have an authorized and funded internal project on the product development. We’re not ready to, say, specifically the regulatory path, but right now I think the viewpoint is it would be a 510(k), potentially a standard 510(k), but we’ll update everyone as we get a little bit closer.
- Kyle Bauser:
- Okay. Great. Well, thanks for the updates, Tim and Andrew.
- Tim Moran:
- Thank you.
- Operator:
- [Operator Instructions] Our next question is from Yi Chen with H.C. Wainwright. Please proceed with your question.
- Boobalan Pachaiyappan:
- Hi. This is Boobalan dialing in for Yi Chen. Can you hear me okay?
- Tim Moran:
- Yes. How are you?
- Boobalan Pachaiyappan:
- Yeah. Great. How are you?
- Tim Moran:
- Good.
- Boobalan Pachaiyappan:
- So, few questions. The first one, I wanted to hear your general thoughts about inpatient and outpatient colonoscopy landscape, especially like this quarter versus the previous quarter? And then what might or might not change moving forward for the remainder of the year?
- Tim Moran:
- Sure. So, I talked about colonoscopy procedure per study that was done by NYSGE that looked at facilities called the New York region. Of course, there have been significant reductions in overall colonoscopy and GI procedure types. And I think that translated through both inpatient and outpatient. More specifically, I’ll speak to inpatient as you know that’s the market that we’re currently focused on. And what we saw and I communicated, I think, last quarter, at least the initial feedback was the fact that these procedures aren’t necessarily elective, but due to the surge of patients related to COVID hospitals had to make the difficult decision to really delay these procedures wherever they were able to. In many cases, our GI colleagues were working from home and their units had been converted to kind of makeshift units to handle COVID patients. So that’s what I think attributed directly to the decline. But the feedback that we’ve gotten and we did a few data points here, has been a lot of these patients are the sicker patients that do need to be seen. So we’re expecting as these procedures start to ramp up, they are going to be patients that Pure-Vu will be very important to, right? One from the standpoint of, they oftentimes have comorbidities or other issues where getting through the bowel prep is very difficult and arduous and time consuming. As we discussed earlier with the patient protocol that’s being implemented at UCI, that’s directly related to the fact that they don’t want patients spending any more than their desired 24 hours in the hospital if they don’t need to, and obviously, Pure-Vu allows for that. So we think on the message in the market is really resonating, particularly with the types of procedures that they’ll be doing as they ramp that up. And we did see some of our facilities that have bounced back pretty significantly. But I would say on average, it’s probably about 50% of the pre-COVID procedure volume for inpatient.
- Boobalan Pachaiyappan:
- And so, I’m not sure I got the answer for the second part of the question, which is what might or might not change moving forward for the remainder of the year?
- Tim Moran:
- So, I think, the one obvious thing in our mind that could change, obviously, is a resurgence of the virus, right? So I think the procedure volume could continue to be impacted. If not and things remain stable in many markets, then we would expect many of these facilities to get back up to their normal volume, if not higher their previously managed volume, many of these physicians have talked to us about the fact that, they want to try to get up above their prior COVID levels to start to recoup some of the lost revenue at these facilities as well. So it’s difficult right now, as you know, as I said, it’s a bit of a moving target in terms of the virus. But that’s the way we kind of see it over the next quarter or two. Is that -- was that what you’re looking for Yi?
- Boobalan Pachaiyappan:
- I think that’s helpful. Yeah. And then switching gears a little bit, what are some of the early comments did you receive regarding the launch of the mobile app, and if you can, maybe other areas for improvement?
- Tim Moran:
- Sure. Yeah. So the first bit of feedback was the fact that, one is, accessible, on their iPad or iPhone, very easy download. But it’s got a significant amount of resources in there, right? So detailed in-service that, as I mentioned is, really high quality video, but also narrated. Not only is it the full in-service from beginning to end, but what they like about it, and I would say, probably, the most positive comments have come around the fact that we’ve chaptered it. So these physicians and clinicians don’t have time to sit and watch 30-minute video, right? So they can go to a specific part of the device So let’s say, for example, they’re setting up the device and they’re new to setting it up, they can go to the setup and they can look at a specific part of that and what they need to do as a refresher. So I think the fact that we’ve made it easy, we also did take some feedback over the quarter about being able to customize the app for facilities. So we’re in the process of now making the app customizable. So if you’re at a specific health system, you could actually input other tools and documentation around the procedure, say, for example, physician preference on the type of scope that they like to use and it would obviously only be available to folks that have access and approval at that site. So we’re working on making those adaptations to the app. But we think that this is something that, obviously is not only important during COVID, but will be important just on a go-forward. And I think the team -- the marketing team did a great job getting that together in really less than a month.
- Boobalan Pachaiyappan:
- All right. Great. And then, I would like to hear your thoughts on the approval of Gen2 approval in Israel, and what kind of impact will this approval have on the topline growth during the near-term and long-term?
- Tim Moran:
- So, I would put that in the category of kind of the way that we are looking at least today for opportunities outside of the U.S. So our sole focus is on building out the U.S. market commercially with our direct team. We continue to engage in partnership discussions, whether that be with large well-recognized distributors in certain markets or other med-tech players that may bring scale and size that could accelerate our commercialization. But I think the way to think about Israel, but also really Europe and OUS today, we’d be looking to access those markets through a partnership as opposed to building out a team directly, at least in the near-term given the current environment.
- Boobalan Pachaiyappan:
- Great. This maybe hypothetical, but thinking long-term, do you think the bowel prep process will be eliminated entirely by the Pure-Vu System?
- Tim Moran:
- Well, that would be nice. But so what I’ll say about that is, we have shown now in multiple clinical studies several which are Pure-Vued that physicians were able to administer a significantly reduced prep or a micro prep if you will and get results in terms of cleansing the colon, both in a rapid fashion and to a significantly high degree very pristine colon with the reduced prep. So in our first couple quarters here commercialization I’ve shared a few case studies previously where physicians have used our device for patients that needed an urgent procedure and they did so without any prep at all. And they were able to get a high quality exam done and diagnosis and therapeutically treated those instances. So I think clinicians as they continue to get comfortable with our device will start to challenge the status quo. I can’t forecast if and when bowel prep would be eliminated, but I do think that there’s an opportunity for them to reduce the amount of time. In our minds, it just -- it seems a bit archaic to think that a patient would remain in a hospital bed, particularly for longer than 24 hours to have a colonoscopy procedure done. And our sole focus is bringing the technology to both our hospitals, but also the benefit of the patient.
- Boobalan Pachaiyappan:
- All right. That’s it for me. Thanks so much.
- Tim Moran:
- Thank you.
- Operator:
- And we have reached the end of our question-and-answer session. And I will now turn the call back over to Tim Moran for closing remarks.
- Tim Moran:
- Great. Thank you. And I appreciate everybody’s time today. As we said, it’s a difficult operating environment right now. Obviously, there has been some headwinds. But I’m very pleased and hopefully we were able to share some of the things that we were able to accomplish even in this very difficult quarter. I think the cost reduction program as we mentioned was the right decision. It has put us in a position now to be able to weather the storm. We reacted quickly with digitizing our go-to-market model and our support tools that is starting to resonate and allowing us to overcome some of these access issues. And we remain focused on driving these accounts through each stage of the sales process ultimately to purchase and then over time broad utilization. So we’ll continue to update everyone and look forward to speaking during next quarter. So stay safe and stay healthy.
- Operator:
- This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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