Soliton, Inc.
Q4 2020 Earnings Call Transcript
Published:
- Operator:
- Good afternoon, ladies and gentlemen. And welcome to the Soliton’s Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. . Please be advice that today’s conference is being recorded. I would now like to introduce your host for today’s conference, Carol Ruth, Founder and President of the Ruth Group, Soliton’s Investor Relations firm. Please go ahead.
- Carol Ruth:
- Thank you, Operator, and welcome to everyone participating on today’s call. This call is also being broadcast live over the Internet at soliton.com and a replay of the call will be available on the company’s website for 30 days.
- Brad Hauser:
- Good afternoon everyone and thank you for joining our fourth quarter and full year 2020 earnings call. During our call today we'll be referencing a webcast presentation. If you have not joined us via webcast already, we encourage you to go to our investor relations website at ir.soliton.com for a link to view the live webcast presentation. We've reached a significant milestone on our path to commercialization with the recent 510(k) clearance for rapid acoustic post device for the short-term improvement in the appearance of cellulite. We are confident that with these improvements we have made to our device, the clinical results behind our technology and our bolstered commercial staff and strategy we are optimally positioned for initial launch, which will begin in the second quarter. Our recent 510(k) clearance for the short-term improvement in the appearance of cellulite marks a sizable expansion to the addressable market for our RAP technology. Previously, our RAP technology was cleared by the FDA as an accessory to the 1064 nanometer Q-switched laser or black ink tattoo removal in Fitzpatrick skin types one through three patients. We believe the cellulite remains one of the largest unmet aesthetics and a market in which we can deliver strong value to our shareholders. Roughly 80% to 90% of the 91 million adult women between the ages of 20 and 65 in the United States suffer from some form of cellulite.
- Lori Bisson:
- Thank you, Brad and good afternoon everyone. For the fourth quarter ended December 31, 2020, operating expenses wee $4.6 million as compared to $3.3 million in the fourth quarter of 2019. Operating expenses for the full year ended December 31, 2020 were $14.7 million, compared to $12.9 million in the full year 2019. The increases in the three and 12 months ended December 31, 2020 were primarily attributable to an increase in general administrative and sales and marketing expenses. The increase in G&A was a result of the hiring of new employees, including executives, and the related stock-based compensation and incentives tied to these new employees. Additionally, the increase in G&A related to increase costs operating as a public company. Sales and marketing expenses increased as we prepare to commercialize our products, with specific increases attributed to social media marketing development, new brand website development and supporting explanatory video creation. Net loss for the fourth quarter ended December 30, 2020 was $4.5 million or $0.22 per share on a basic and diluted basis. For the same period in the prior year. net loss is $3.3 million or $0.20 per share. Net loss for the full year ended December 31, 2020 was $14.5 million or $0.77 on a basic and diluted basis compared with net loss of $13.9 million or $1 per share for the full year 2019. As of December 31, 2020 outstanding shares were $21.19 million. Total cash, cash equivalents and restricted cash was $31.8 million as of December 31, 2020, compared to $12.1 million as of December 31, 2019. The company's cash, cash equivalents and restricted cash on hand is expected to be sufficient to fund the company's operations into the third quarter of 2022, and is expected to fully support the initial phase of the commercial launch of the RAP device.
- RESONIC.:
- I'll now turn the call back over to Brad for closing remarks.
- Brad Hauser:
- Thank you, Lori. And thank you all for your continued support of Soliton. 2020 was truly a pivotal year for the company, as we made improvements to our device, bolstered our team and sales and marketing strategy, and importantly received FDA clearance for cellulite in early 2021. This will be an exciting year as we believe we've laid the foundation to execute a successful initial launch for RESONIC and further investigate the true extent of its potential across adjacent indications. With that, I'll turn the call over for Q&A. Operator?
- Operator:
- Our first question comes from the line of Louise Chen from Cantor. Your line is now open.
- Louise Chen:
- Hi, congrats on all the progress this quarter. And thanks for taking my questions here. I had a few. So first question I have for you is how do you plan to learn from your pre launch activities in 2021? And how can that be applied to your full launch in 2022? Second question is, how are you thinking about launching into a pandemic? It looks like it is subsiding. But still it's there and it might have sort of fits and starts. And what is your plan from that perspective to be flexible? And then the last question I have just on a fibrotic scar, you showed some good data there. And what indications can you go after? And what is the potential market size of those indications? Thank you.
- Brad Hauser:
- Great. Thanks, Louise. So yes, I'll go ahead and address the questions you had. So from the original launch that we intend to the 25 key opinion leaders, we will be heavily supporting and following very closely to really learn how we're going to transition from the clinical study setting into a full commercial release. So, we'll be learning about patient experience as well as throughput and the work process inside of the office and enhancing our own training and materials as we go into our full national rollout in 2022. Addressing your second question on launching into a pandemic. I think when we look at our accounts overall, especially the accounts that we're targeting, there we've seen a very nice return of patients to those practices. Yes, they have safety procedures in place. But overall, the patient demand seems very high for a whole host of aesthetic procedures. So we think that the timing to do this initial KOL launch is actually ideal and a full rollout, hopefully with the pandemic continuing to subside throughout the year, but the full national rollout into 2022. And then your last question on the fibrotic scars. We're extremely excited by what we've seen so far with keloids that we talked in our prepared remarks about the collaboration with the Navy. And that'll be looking at not only keloid scars, but other types of hypertrophic scars and looking at multiple treatments, because our original proof-of-concept was just a single six minute treatment. We want to see what we can achieve with more than one treatment. So Lori, did you have anything to add on any of those three questions?
- Lori Bisson:
- Now, I would just add in conjunction with the fibrotic scar results that we've seen. It's encouraged us to look at other fibrotic indications, which is candidly why we undertook the animal study and liver fibrosis. We're beginning to build just a very good understanding of our ability to impact the fibroblasts and substantiate our belief that we can impact multiple fibrotic conditions across the spectrum and it opens large market to scars are about a $10 billion market opportunity. Liver fibrosis, for example, is $28 billion market opportunity. So we're encouraged that we're seeing results across a number of fibrotic indications, and we'll continue to pursue those.
- Louise Chen:
- Okay. Thank you.
- Lori Bisson:
- Thank you, Louise.
- Operator:
- Thank you. Our next question comes from the line of Scott Henry from ROTH Capital. Your line is now open.
- Scott Henry:
- Thank you. Good afternoon. I've got a couple questions. So I guess you're going to put 25 units out in the field. How should we think of the mix of tattoo versus cellulite? Or will most of these be doing both? Just trying to get an idea about that?
- Lori Bisson:
- Sure.
- Brad Hauser:
- Yes. Thanks Scott. I think we'll see a little bit of a mixture. We are once again going after some of the premier plastic surgeons and dermatologists, many of whom do both procedures in their office. There has -- we have seen a trend for tattoo removal to also include more higher volume tattoo clinics and centers. So we will be heavily focusing on the dermatology and plastic surgeons that are doing cellulite and other body contouring procedures, with some of them doing tattoo removal, and then a few distinct sites will be focused on high volume tattoo removal. So I would say. cellulite is the focus in many of the accounts, some are doing both. And then we have a few key accounts that are just heavily focused on tattoo.
- Scott Henry:
- Okay. Thank you. That's helpful. And when we think about these 25 placements, but do you think, how should we think of that trajectory of placement? Will that be dispersed between I guess the late part of 2Q, 3Q and 4Q? Or do you think you'll have all these accounts lined up? And then, as soon as it's approved. it'll go out to those 25?
- Brad Hauser:
- Yes. That's a good question. There will be a rollout plan. And there's two primary things that we'll be making sure we can we can execute on to ensure that these 25 are successful getting underway with the technology. So first, obviously, with production, there is a production timeline. But that's going to be fairly, fairly fast, the more limiting factor is our ability to get in, train them effectively, watch treatment. So we do have a training program that we'll be executing with each of these accounts. So I would say in general, we're likely going to be rolling this over a few months, it's not going to be over the entire year. But it will start in Q2 enroll through a few months.
- Scott Henry:
- Okay. And thank you. And when it comes to the revenue model for these initial 25 accounts, will you book revenues? And will they pay full price? A lot of times early adopters get a discount? Will that that booking of the revenue, will that be spread out over multiple quarters? Just trying to get a sense of how we should model that.
- Brad Hauser:
- Lori, do you want to take on?
- Lori Bisson:
- Yes, I'll tackle it. So we are selling these devices, and we are recognizing revenue with these accounts. We're not going to get into specific detail on, what we're selling devices at because there are arrangements with some of these doctors that are confidential. So, we -- but we do expect to recognize revenue for all the devices that we're placing.
- Scott Henry:
- Okay. Great. And then I'm almost done here, but the 510(k) filing in March. Is there any risk to that? I mean, we're already in March, is it pretty much just, dotting the eyes. Crossing the T's at this point or does anything have to be done prior to that filing?
- Brad Hauser:
- Well, we've accomplished a few of the key criteria for a filing. One is the required safety testing for certain regulatory the basic 601 requirements that you have to meet. So we have met those requirements. So now we're in the final process of getting the documents together, as well as the final test reports in place to be able to do that submission appropriately for this special 510(k) in March.
- Scott Henry:
- Okay, great. And I guess just the final question on the pipeline, certainly getting more interesting. And any expectations for proof-of-concept trials. Or what should we think about particularly with liver fibrosis over the next kind of 12 to 18 months?
- Brad Hauser:
- Yes. So liver fibrosis, we we've just announced the preclinical work, we will be completing some confirmatory studies in the preclinical model. And then, we will look-- the next step will be to look for bench level testing to make sure that our device in human could meet the levels that the treatment was having in the mouse model. So we there is an engineering step there that needs to take place. So we see the confirmatory study happening this year. And then as we go into the next 12 to 18 months, working on with the engineering team to make sure that we can achieve that level of treatment in human safely before we would move to human studies. Lori, anything else out there?
- Lori Bisson:
- No. I think you've covered it. Yes.
- Brad Hauser:
- Okay.
- Scott Henry:
- Okay, great. Thank you for taking the questions.
- Lori Bisson:
- Thank you, Scott.
- Brad Hauser:
- Thank you, Scott.
- Operator:
- Thank you. Our next question comes from the line of Anthony Vendetti from Maxim Group. Your line is now open.
- Anthony Vendetti:
- Thank you. Yes, so I just had a couple of questions on some of the trials that you're doing, and also the filing for the long term reduction cellulite. So on that filing, is that, do you need to do any additional trials there? Or is that just following up on the trials that you've already done to see if it has a long term effectiveness? And then I have a follow up on skin laxity?
- Brad Hauser:
- Yes. Thanks, Anthony. So yes, the submission that we have planned for this year, to get the longer term indication, or a reduction, at least not a reduction in results would be using the same data set. And going out and having the 52-week photos graded, as we did with the 12-week photos by blinded independent reviewers and then presenting that data back to the agency.
- Anthony Vendetti:
- Okay. And then thank you. And then on the skin laxity, you said, you're looking at doing a trial before the end of this year. What will that look like? How many patients?
- Brad Hauser:
- Yes. It's a very good question. We're still working through that, honestly. We're looking at the results that we had in the cellulite trial. And we'll be working with our clinical team, our statistician, as well as some of our scientific advisory board to come, pull together a plan for that proof-of-concept study. So that's still in development, and we plan to execute that here in the back half of the year.
- Anthony Vendetti:
- Okay. And then just the last question on the manufacturing of the product. Obviously, you're using a large contract manufacturer in Sanmina. Now that you've had the time waiting to launch the tattoo removal with cellulite, how prepared is the contract manufacturer? If there is a large demand post, the 25 KOLs. Are they ready to ramp immediately to meet demand?
- Brad Hauser:
- It's a great question. The capability or the throughput inside Sanmina is significant given their size and scale and they have multiple facilities. But even the facility where our devices manufactured has a tremendous ability to respond very quickly to an increase in demand. We feel like it's important that we give enough time for these 25 accounts to generate enough information and data that we can successfully train and roll out on a larger scale. So we are intentionally going to allow time for that feedback to come in the results. Honestly, our goal is to have over 1000 patients treated and really understand the best patient experience and the best office experience before we go into a full national rollout. So that's part of that timing. It's more around allowing that time rather than any production constraints or limitations.
- Anthony Vendetti:
- Okay, great. Very helpful. Thank you. I'll hop back in the queue.
- Lori Bisson:
- Thanks, Anthony.
- Brad Hauser:
- Thanks, Anthony.
- Operator:
- Thank you. I'll now pass the call back to Brad Hauser for closing remarks.
- Brad Hauser:
- Great. Thank you so much. I really appreciate everyone joining and your continued support in Soliton. And we look forward to keeping you updated as we produce our first unit and get them in the field. I hope you have a great day.
- Operator:
- Ladies and gentlemen, this concludes today's conference call. Thanks for participating. You may now disconnect.