Vivani Medical, Inc.
Q2 2019 Earnings Call Transcript

Published: 7 Aug 2019

[Operator:]

Greetings, and welcome to the Second Sight Second Quarter 2019 Results Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 6, 2019.I would now like to turn the conference over to Lisa Wilson, Investor Relations for Second Sight. Please, go ahead.

[Lisa Wilson:]

Good afternoon, and welcome to Second Sight's Second Quarter 2019 Results Call. This is Lisa Wilson, Investor Relations for Second Sight. With me on today's call are Will McGuire, President and Chief Executive Officer; and John Blake, Chief Financial Officer of Second Sight. At the close of market, the Company issued a press release detailing financial results for the three months ended June 30, 2019. The press release can be accessed through the Investor Relations section of the Second Sight website at secondsight.com. You can also access the webcast of this call from there.Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the Company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Second Sight management as of today and involve risks and uncertainties, including those noted in this afternoon's press release and Second Sight's filings with the SEC.Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Second Sight specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A telephone replay of the call will be available shortly after completion of this call for the next two weeks. You'll find dial-in information in today's press release. The archived webcast will be available for one month on the Company's website, secondsight.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 6, 2019. Since then, Second Sight may have made announcements related to the topics discussed, so please reference the Company's most recent press releases and SEC filings.And with that, I'll turn the call over to Second Sight's CEO, Will McGuire.

[Will McGuire:]

Thank you, Lisa, and thank all for joining our call this afternoon. On this call, I would like to provide an update on the progress we are making with the development of our Orion platform as we execute the strategy laid out in our Q1 call. We made great strides developing the overall clinical and regulatory strategy for Orion during the past 90 days.We completed a pre-submission to the FDA as part of the Breakthrough Devices program, held an in-person meeting with the FDA in Maryland and most recently developed – I am sorry, received a written response to our pre-submission from the agency. We also remain on track with our Orion programs while adding key talent to support our R&D and clinical teams.Finally, the Orion subjects in our early feasibility study are performing well and lastly, CMS created a payment pathway for devices with a breakthrough designation. I look forward to sharing more details on these topics during the call today.Let me begin with an update on our early feasibility study. We continue to be encouraged by the performance of our six subjects. Five of the six subjects have now had their implants for more than a year and they continue to show improvement across multiple measures. Most importantly, subjects are finding success with Orion for everyday visual test.On June 25th, the study’s principal investigators from UCLA and Baylor presented top-line 12 months results at the World Society for Stereotactic and Functional Neurosurgery Annual Meeting. The primary outcome measure of the study is safety.Secondary outcome measures include the ability produced phosphenes, assess the long-term functionality of the device and evaluate the benefit to subjects in terms of visual function, functional vision and quality of life.The clinical team has done a fantastic job executing this study and I am pleased to say that for both the primary safety and secondary outcome measures the results have been positive. Current safety and performance data are as follows

[John Blake:]

Thank you, Will. Our financial results for the second quarter are in line with expectations as we shift our organizational focus to Orion. Net sales were $1.3 million in the second quarter of 2019 compared to $1.9 million in the same period in 2018. Revenue was recognized for ten implants on a GAAP basis with an average selling price of $128,000 in the second quarter of 2019 as compared with 17 devices with an ASP of $112,000 in the same period of 2018.We expect our net sales to decline as we sell through our existing inventory of Argus II. Research and development expense net of funding received from grants was $3.4 million in the second quarter of 2019 as compared to $2.4 million in the second quarter of 2018. The increase primarily reflects additional headcount and costs to make internally produced prototypes.We expect our research and development expenses to increase as we accelerate our transition to the Orion platform. Clinical and regulatory expense, net of funding from grants decreased $0.6 million from $1.1 million in the second quarter of 2018 to $0.5 million in the second quarter of 2019. This decrease is attributable to both decreased cost associated with the Orion feasibility study and grant funds from the NIH that offset costs in the period.We expect clinical and regulatory cost to increase in the future as we conduct additional clinical trials for Orion and related enhancements to our user experience.Selling and marketing expense was $1.7 million in the second quarter of 2019 compared to $2.9 million in the second quarter of 2018. We expect selling and marketing expense to decrease as we reduce our Argus II commercial activities and sell through our existing inventory.General and administrative expense was $2.3 million in the second quarter of 2019 compared to $2.6 million in the second quarter of 2018 and is expected to remain consistent for the remainder of 2019.During the second quarter of 2019, we recorded a restructuring charge of $0.9 million consisting of $0.7 million related to severance and other employee termination benefits, as well as $0.2 million on cash inventory impairment charges in connection with our plans to suspend Argus II.As of June 30, 2019, we had cash and cash equivalents of $25.2 million. Our cash burn for the second quarter of 2019 was $6.5 million and we continue to expect our cash on hand to fund operations into the second quarter of 2020.With that, I’ll open the call to questions. Operator, please go ahead with the introductions.

[Operator:]

[Operator Instructions] And our first question is from Amit Dayal with H.C. Wainwright. Please go ahead.

[Amit Dayal:]

Thank you. Hi guys. Thank you for taking my question.

[Will McGuire:]

Hi, Amit.

[Amit Dayal:]

Just start with what exactly are you discussing and negotiating with the FDA?

[Will McGuire:]

Sure, Amit. This is Will. I’ll take that. Number one, and probably most importantly, we are just working through the specifics of the pivotal study. And so, items such as what are the primary efficacy and safety endpoints, how do we define those?What type of validation is needed for those endpoints, as well as themes such as the number of subjects, the follow-up and some other things like our ability, can we pool data from the Orion – current Orion system when we are applying for approval for the Orion system that’s currently in R&D right now. So, are we able to pool data from two different systems?Those type of things as well as some of the post market study requirements. So, what type of data do we need to collect, post-market, after approval, how many subjects, and how long do we follow-up those subjects as well.And that’s pretty important in a breakthrough devices program, because as we’ve talked in the past, the agency looks at both the pre-market as well as the post-market data collection plans as a whole to determine if you are collecting enough for the right data. Hopefully that answers your question, Amit.

[Amit Dayal:]

Yes, so just also in regards to the two paths do you have options actually you are considering.

[Will McGuire:]

Yes.

[Amit Dayal:]

Is that also being discussed with the FDA or is that more internal in terms of how you might approach the FDA.

[Will McGuire:]

We’ve discussed it at a high level with the FDA absolutely in our in-person meeting. We discussed it. We also – we’ve also submitted some questions to them relative to both paths. To be clear, the majority of our discussions – the overwhelming majority of our discussions and interfaces with the FDA have been relative to the PMA path.So, in which we would go from where we are today to a pivotal trial or a pivotal study and ask only to a PMA approval. That’s been the majority. But as I said, only recently have we started exploring what an HDE followed by a PMA would look like from a timing and requirement standpoint.

[Amit Dayal:]

So, in terms of this process with what is sort of the next catalyst or steps that we should be looking for?

[Will McGuire:]

Yes, so, good question. We – as we stated in the prepared remarks, we received a written response to our last pre-submission that response came, I guess, the second half of last week. So we are still working through that response and a next step would be for us to probably then respond back to the FDA with a written response of our own.But could include answers to questions that they posed as well as us asking additional clarifying questions and giving additional information from the agency. We also – so there could be some back and forth – written back and forth like that, Amit. We also may decide to – at some point to request a conference call or request another in-person meeting.So, I’d say, it’s probably going to end up being a combination of written correspondence back and forth, as well as then sometime on the phone and or sometime face-to-face to make sure we completely understand the requirements for each of the options and make the best decision for the company.

[Amit Dayal:]

Understood. And then, with respect to the technology that you are developing with partners for distance filtering et cetera, how soon can patients, kind of experience all the new features?

[Will McGuire:]

Sure. Good question. Yes, so, I expect that we can conduct some human testing with the distance filtering technology, sometime during the second half of this year towards the end of this year and we would do that with current Argus users once the Argus 2s is available. So, we can take this technology.It’s going to be able to compatible and integrated with Argus 2s and we’d start doing some testing with current Argus users. The human testing for the thermal imaging and eye tracking, that would probably start sometime near the end of this year or maybe first quarter of next year, assuming that, we keep those projects on track.And again, we would do that testing with current Argus users utilizing the Argus 2s or next-gen externals. So, hopefully, for all three of these technologies within a six to nine months from now, we would have test data and performance data that we could start sharing and describing what we see is the benefit.

[Amit Dayal:]

And with respect to the CMS ruling on the reimbursement for breakthrough devices is this already in effect or is this going to have effects then?

[Will McGuire:]

Yes, I think it goes on their fiscal year. So I believe it becomes in effect on October 1 of this year. So, it was announced. So it is the final rule and then it would go in effect on October 1st of this year. So just around the corner.

[Amit Dayal:]

Understood. Just one final one for me in regards to the NIH grant. How big is this grant if you could remind us? And how much has been already used and what is remaining?

[John Blake:]

Hi, Amit. This is John. I’ll take that one. So, yes, thanks. On the NIH grant, this year we expect to receive approximately $1.1 million for calendar year 2019 and we are eligible for approximately $5 million of additional funding on that grant and that’s subject to annual approval by the NIH.

[Amit Dayal:]

Understood. Thank you so much. That’s all I have.

[John Blake:]

Thank you.

[Will McGuire:]

Alright. Thank you.

[Operator:]

No further questions from the phone. So I’ll turn the call back to you.

[Will McGuire:]

So, thanks again for joining our call today and we look forward to providing further updates later this year. Have a good day.

[Operator:]

That does conclude our conference call for today. We thank you all for participating and you may now disconnect.