Titan Medical Inc.
Q4 2020 Earnings Call Transcript
Published:
- Operator:
- Good evening, ladies and gentlemen, and welcome to Titan Medical's Year-End 2020 Earnings Conference Call. After the presentation, there will be an opportunity for call participants to ask questions. As a reminder, today's conference is being recorded. I will now turn the conference over to Kristen Galfetti, Titan Medical's Investor Relations consultant. Please proceed.
- Kristen Galfetti:
- Thank you, Operator. Good evening, everyone, and thank you for joining us for Titan Medical's year-end 2020 earnings conference call. During our call, we will review Titan's year-end 2020 financial results and key business highlights, which were summarized in our earnings press release issued earlier today. A copy of the release can be found on the Investor Relations section of our Web site, at www.titanmedicalinc.com.
- David McNally:
- Thank you, Kristen. Good evening, and welcome to Titan Medical's fourth quarter and year-end 2020 earnings call. I want to thank our supportive shareholders who are familiar with Titan Medical, and I'd like to welcome our new shareholders who are new to the Titan story. Most importantly, I want to thank everyone for their support and belief in our work to develop our Enos robotic single-access surgical system. Joining me on the call today will be Perry Genova, Senior Vice President Research and Development, and President of Titan Medical USA; and Monique Delorme, Titan Medical's new Chief Financial Officer. Titan made great strides forward in 2020, a year that proved challenging for individuals and organizations all around the world. We hope that our listeners are able to appreciate that in spite of COVID-19, Titan Medical has made substantial forward progress during the past year. And we wish all good health and rising spirits as we move forward together in 2021. Despite the challenges of last year, Titan has emerged stronger than any time in our history. Frankly, for any that have known Titan in the past, this is a completely different company. Progress in 2020 resulted in the addition of new members of our management team, an enriched Board of Directors including three new experienced industry veterans as independent directors, representing a majority of the Board, improved governance practices and policies, the establishment of our U.S. subsidiary in Chapel Hill, North Carolina, focused on development activities, the execution of development and license agreements with Medtronic and the receipt of license payments under those agreements, our rapidly growing intellectual property portfolio, and multiple successful fundraising activities providing a strengthened financial position. With all of these accomplishments, and with our new leadership team and substantial financial resources, we believe we're in a solid position to execute on our milestones. As many of you know, there is high demand for robotic-assisted technologies for a versatile single-access platform intended to perform abdominal surgery, which may result in improved clinical performance and operating room efficiency, better patient care, and less trauma in scarring, allowing faster recovery times and shorter hospitals stays. Especially relevant today is the observation that COVID-19 has shown us that patients and caregivers alike are looking to reduce the time in hospital. Titan is developing the Enos surgical system, aiming to become the new standard of care for single-access robotic surgery with dual 3D and 2D high definition vision systems for improved visualization, multi-articulating instruments for increased dexterity, and an ergonomic surgeon workstation for surgeon comfort. Based on this unique combination of clinically-relevant features and early validation from experts in minimally-invasive robotic surgery, we believe that our Enos robotic single-access surgical system is well-differentiated from single-port and multi-port robotic surgical systems currently on the market.
- Perry Genova:
- Thank you, David, and it is a pleasure to be addressing all of you this evening. As David mentioned, we had many successes during the past year despite the challenging environment. We established our U.S. subsidiary based in Chapel Hill, and significantly augmented our technical expertise in the areas of software, Electrical and Mechanical Engineering, quality assurance and program management. The strength of our technical competencies has risen to a level unprecedented for Titan Medical, and continues to drive innovation in robotic surgery at an exciting pace. Additionally, the advancement of the Enos surgical system continues as we improve instrument and camera designs for enhanced performance and invest in tooling and process development as we prepare for light assembly and manufacturing. Notably, we're developing manufacturing processes and advancing our in-house know how to manage the innovative technologies that are key to our multi-articulated instruments and 2D and 3D High Definition camera systems.
- Monique Delorme:
- Thank you, Perry. And it's my pleasure to be addressing all of you on my first earnings call in the capacity of Chief Financial Officer. I'm very pleased with what Titan has accomplished to date, and I'm proud to be a member of the executive team. During the year ended December 31, 2020, Titan generated its first ever revenue of $10 million from a license agreement and $10 million from a development and license agreement, both with Medtronic. In 2020, Titan raised aggregate net proceeds of approximately $23.3 million from equity financing and $2.7 million from the exercise of warrants. The company also received a loan from an affiliate of Medtronic in the amount of $1.5 million evidenced by an 8% senior secured promissory note. At December 31, 2020, the company had cash and cash equivalent on hand of approximately $25.5 million compared to $0.8 million at December 31, 2019.
- David McNally:
- Thank you, Monique. Despite headwinds that 2020 brought, it has not impacted our fundamental goal to become the global standard of care for robotic single-access surgery. We look forward to keeping you apprised of progress toward the significant milestones ahead, including those related to our Enos' robotic single-access surgical system and the development and license agreement with Medtronic. We believe that the Enos surgical system will address an under-penetrated, but high demand segment of the robotic assisted surgical device market promising less patient trauma and faster recovery times, and savings on capital equipment, service, and procedure cost for hospitals and ambulatory surgical centers. We remain committed to corporate governance and investor outreach. And we believe we'll continue to communicate through news releases, our Web site, and participation in virtual investor conferences. Currently, we plan to participate in several upcoming virtual healthcare-focused investor conferences, including H. C. Wainwright, ROTH Capital Partners, and Oppenheimer, in March, and Bloom Burton, in April. We will be publicly announcing our participation in these conferences via press release in advance. Thank you for your support. We will now open up the line for questions. Operator?
- Operator:
- Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from David Martin with Bloom Burton. Please proceed with your question.
- David Martin:
- Hi there. I was just wondering if you could give us an idea of how final the design of the Enos is at this point, and when you think you'll be able to start the clinical trial?
- David McNally:
- Thank you, David. This is David McNally here. So, we've made many improvements to our system, focusing particularly on the multi-articulating instruments, the camera system, and the sterile interface to the central unit of the patient cart. That has been the focus of the refinements based on KOL input that we've received. We're also doing some work with software in expanding the use of overlays for augment reality to provide surgeons more real-time information related to operation of the system. How that relates to our march forward toward planned commercialization is that we expect to complete the refinements this year, including the validations that Dr. Genova spoke of. With respect to our plan for FDA market authorization and how fast we can get to market, the FDA has indicated that they would expect us to pursue the de novo pathway for device classification and subsequent clearance to market for the Enos surgical system. We expect to continue to engage with the FDA to further define the investigational device exemption study requirements; those are the clinical study requirements that are going to be very important for our application for marketing approval. Our current plan is after completing product development this year and following FDA approval of our application for the investigational device exemption, we expect to proceed with human surgeries under the IDE next year, in 2022. Following successful completion of the IDE studies and requisite follow-up, we intend to submit the de novo application. And from where we are today, based on our current estimates, we could potentially achieve clearance to launch commercially in 2023.
- David Martin:
- Okay, thank you. One other question and I'm not sure if it's been answered. But if Medtronic develops their own robot with the IP that they've licensed from you, are there royalties that you would stand to receive beyond the milestone payments?
- David McNally:
- There are no provisions for royalty payments under the existing agreements. They are royalty-free license payments associated with the technologies that we are developing under the development and license agreements.
- David Martin:
- Okay. But Medtronic is -- their intention is to build their own robot, is that correct?
- David McNally:
- Yes, it is public information that Medtronic is developing its own Hugo robotic platform. And they have a vision that we believe is a vision that diverges in certain ways from Titan's platform in that, and therein we see the relationship is synergistic.
- David Martin:
- Got it. Thank you.
- Kristen Galfetti:
- And following along with that, we have a couple questions from the webcast. Is the company considering…
- David McNally:
- Very good, Kristen.
- Kristen Galfetti:
- Is the company considering FDA's breakthrough designation status for Enos?
- David McNally:
- We have run that ground with our in-house regulatory executive leadership and determined that it is unlikely we will meet breakthrough designation based on the requirements of achieving a breakthrough designation, including that there would be no cleared alternatives. On a positive note, that fact that there already exists a single-port system and accessory for single-port surgery in the market, we view that as positive in that the market acceptance of single-port surgery appears to be robust and growing. And we're very excited to have the opportunity to serve that growing need.
- Kristen Galfetti:
- And following along with that, is Titan planning to take Enos to the market themselves?
- David McNally:
- Presently, our plan is to launch the Enos surgical system ourselves, with focus particularly in the U.S. However, we believe that based on the market potential and our value proposition, as well as the simplicity of the Enos surgical system, our ideal for partnering with established global distribution companies, we'll continue to assess strategic partnering opportunities as we move forward, and we're free to do so.
- Kristen Galfetti:
- Great. Could you cover what advantages the Enos system offers compared to other robotic systems in the same surgical space?
- David McNally:
- First, the Enos surgical system is based on a single-access architecture, meaning that it enters the body through a single incision or a natural orifice. This distinguishes our system from most other robotic-assisted surgical devices in the market today, as well as those contemplated for market entry in the coming years. Next, our multi-articulated instrument technology provides a unique combination of dexterity and ease of movement with appropriate force for performing surgical tasks and maneuvers that include suturing, tissue approximation, cutting, coagulation, and other tasks. Finally, our dual-view HD camera system provides a new element of safety and visualization during initial exploration for surgery, with a two-dimensional camera in the camera insertion tube, as well as our 3D HD endoscopic camera, which provides a clear view of target anatomy during surgery, and our heads-up flat panel display which allows for situational awareness in the operating room.
- Kristen Galfetti:
- Great. Another question, is it possible that Titan Medical could be sold to Medtronic?
- David McNally:
- It would certainly be premature to think about any sort of, I'll call it, strategic move of that level. I can say, however, that even under the Medtronic development and license agreement we are free to pursue all strategic options for the company.
- Kristen Galfetti:
- Another question, how long do you expect the cash balance to be able to fund the company?
- David McNally:
- I'd like to turn that one over to Monique Delorme. Monique?
- Monique Delorme:
- Sorry, David. I am just getting off my mute button here as I'm listening. Thank you very much for that question, Kristen. In 2021, after a successful January raise of $11.5 million, Titan has also received $10 million of proceeds from the exercise of warrants into year-end. So, our current cash is approximately $40 million in the financing that's expected to close later this week, we'll bring in another $20 million anticipating that we will meet the deliverables related to the next two Medtronic milestones this year. Our current cash on hand, plus the Medtronic licensed payments, and including the proceeds of the current offering that is going to close at the end of this week, should really fund our operations through to 2022. So, we're in good shape. Thank you.
- Kristen Galfetti:
- A little different question, can you talk about the importance of Enos' ergonomic benefits for the surgeons in regards to enhancing surgeon's dexterity as well as reducing their fatigue?
- David McNally:
- I'd like to turn that one over to Perry, and Dr. Genova has spent a great deal of time with our KOLs in both dry and wet lab, and he's been able to gain firsthand the feedback of their experience with respect to the ergonomics of the system. And Perry, I'll turn it over to you.
- Perry Genova:
- Yes, thank you, David. And thank you, Kristen. Well, first, the system is a very comfortable system to use. We have a provider chair, which is unusual, I understand for robotic surgery, and it's a heads up system. So the surgeon does not have to lean into a box and observe in that manner. So, they're familiar with the technology, the 3D visual laser technology, as well as being able to stay in touch with what's going on around them in their periphery. The ergonomics provide not only surgeon comfort, but longevity for surgical careers, as we're seeing in the literature, and so forth. So, I'm very excited to bring new people, new surgeons into assess and use our system. Another thing that we found universally popular with our system is the simplicity and the natural orientation of the hand pieces. Surgeons seem to not need any explanation about what the features and benefits of these pieces are. And they're very comfortable using these hand pieces, and therefore, the entirety of the surgeon console for surgeries that can last up to several hours. So, thank you for the question. I hope I've addressed it appropriately.
- David McNally:
- Yes, and that's my opportunity to say and see more at Titan Living Labs on the hand pieces?
- Perry Genova:
- Yes, true.
- Kristen Galfetti:
- I think we've addressed most of the questions coming from the web. I'm just seeing if there's any more that we didn't cover. I think that's good. I'd like to turn it back over to David for closing.
- David McNally:
- Well, I'm delighted to be here in Chapel Hill today feeling the buzz of what's going on among our engineering team here. It is thrilling to see the evolution, the refinements that are coming together here. So, in closing, I'd like to thank you all again for joining us today and for your support of Titan Medical. We believe that Titan is on solid footing to validate our vision of providing a leading-edge robotic single-access surgical system for the benefit of surgeons and patients. We're proud of our progress, and recognize that our success is a direct result of the commitment and hard work of our employees, strong governance, and the leadership of our Board of Directors, and the support of our shareholders. We're very excited about the future, and look forward to keeping you informed of our progress. Thank you again, and have a great evening all.
- Operator:
- This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.