Viveve Medical, Inc.
Q1 2020 Earnings Call Transcript

Published: 15 May 2020

[Operator:]

Good afternoon. Welcome to the Viveve First Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Speaking today for Viveve are Viveve’s Chief Executive Officer, Scott Durbin; and Jeannie Swindle, Senior Director of Corporate Communications. Please note that this event is being recorded.I will now turn the call over to Jeannie Swindle.

[Jeannie Swindle:]

Thank you, operator, and welcome, everyone. Before we begin, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company. Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the corporation’s projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.These risks and uncertainties are described more fully in the company’s annual report on Form 10-K and other filings made with the SEC, which are also available on the company’s website. Also, any forward-looking statements represent management’s view only as of the date of this conference call and should not be relied upon as representing management’s views as of any subsequent date.I would now like to turn the conference call over to Scott Durbin, our Chief Executive Officer.

[Scott Durbin:]

Thank you, Jeannie. Good afternoon, everyone. Thank you for joining us today. I’d like to begin the call this afternoon with summary of our first quarter results and milestones. Next, I’d like to discuss the commercial impact of COVID-19 and outline the deliberate actions we’ve executed to significantly cut costs throughout the organization, in order to reduce cash burn and to strengthen our balance sheet. Finally, I’d like to outline the trajectory of our SUI clinical development program, and highlight the important upcoming milestones as well as provide our perspective for our business going forward.To begin, 2020 started with a quarter that demonstrated strength from a commercial, clinical, regulatory and financial perspective. The effectiveness of our new U.S. recurring revenue model designed to increase physician adoption rates by reducing upfront costs and barriers to adoption, was continuing to show traction, and momentum was building well into the quarter.Armed with confirmation of the commercial model’s growing success and increasing physician enthusiasm, we began the initial steps early in the quarter to scale the program within our U.S. sales, customer support and marketing departments. As previously stated, this model was designed for rapid scalability. It was implemented in June of 2019 to provide the company with greater long-term revenue per customer, lower selling costs, improve revenue from consumable sales, provide more predictable quarterly and annual sales growth and improved profitability. At scale, we believe this model can quickly lead us to cash flow breakeven.As a reminder, the change to the recurring revenue model from the former capital sales model in the U.S. was a massive transformation for the company. And its results were continuing to be realized through the end of February of this year. However, in March, we began to directly experience the disruptive commercial effects of the coronavirus pandemic.Despite the commercial impact in Q1, we are reporting total revenue of $1.3 million. And as of March 31, 2020, the company had an installed base of 849 Viveve Systems worldwide, 479 of them in the U.S., of which 91 had been placed under the recurring revenue model.On the regulatory front during the first quarter, clearances for our next generation 2.0 system and treatment tips in Taiwan, a global key market and in Canada were reported. These clearances are a testament to the company’s continuing achievement of regulatory milestones. Manufactured at a significantly lower cost than our first generation system, the Viveve 2.0 platform and consumable treatment tips are now commercially available throughout North America, Asia and in over 30 European countries.In Q1, we also achieve significant clinical milestones in our stress urinary incontinence or SUI clinical development program that advanced our 3-arm short-term feasibility study, and with timely efficiency. This progress, however, preceded the top-line readout of our U.S. sexual function trial. And unfortunately, as reported in early April, the VIVEVE II study did not meet its primary endpoint of demonstrating a statistically significant improvement in the mean change from baseline in the total Female Sexual Function Index at 12 months.Although there was substantial improvement demonstrated in the active study hour, there was not sufficient statistically significant separation from the sham treatment group.As I’ll discuss in detail in a few minutes, continuing evidence, both commercially and through multiple studies of the benefits associated with our CMRF treatment, and the company’s enduring potential to realize a multi-billion dollar consumable market opportunity has resulted in our strategic business decision to focus all of our near-term efforts and resources on advancing our SUI clinical development program.Next, I’d like to discuss the commercial impact of COVID-19 and discuss the deliberate actions we’ve executed to significantly cut costs throughout the organization in order to reduce cash burn, and strengthen our balance sheet. Viveve like the majority of companies in all industries had to respond swiftly to the unprecedented health, market and economic challenges resulting from COVID-19 crisis.Let me summarize our organizational response first and then provide some detail. First, we implemented a range of operational changes, designed to support and protect the health and safety of our employees, customers, distribution partners and other contacts as necessary. The majority of our organization continues to work remotely, despite restrictions that are beginning to lift in some cities and states. The company’s financial health and commercial business likewise required an urgent response.As reported in April, a series of significant cost cutting actions were implemented to drastically reduce expenses and reposition resources to support our current customers and our pivotal clinical development program in the treatment of stress urinary incontinence. Although the expense cutting and realignment actions involve extensive sales team and staff reductions, we have retained our ability to resume full operations and rescale commercial growth quickly as conditions improve.Additionally, the successful warrant exercise transaction that was recently announced, combined with existing cash, has strengthened Viveve’s balance sheet and have provided the resources necessary to maintain our business strategy and advance the SUI clinical development program in the coming months as the COVID-19 crisis continues to evolve. The ultimate goal of the important actions that we have taken is to preserve and create long-term value for the company.In April, reductions made to our commercial organization were significant. And a result of approximately 70% to 80% of our existing U.S. customers either temporarily closing or dramatically reducing services and staff and their medical practices. This was the same with targeted or prospective physician practices and customers. As you know, this was a result of the COVID-19 stay-at-home orders and directives to hold non-essential medical treatments and elective procedures in an effort to combat the spread of coronavirus and protect public health and safety.As a result of the commercial organization, we’re significantly but temporarily reduced and refocused to support existing customers. The reductions were done as full and partial furloughs to help ensure our ability to rapidly rescale the commercial team and operations when conditions improve. We anticipate that until the COVID-19 pandemic abates, practices begin to reopen, and elective patient safety concerns are reduced, that we will continue to experience reduced revenue from existing subscription customers as well as a greatly reduced number of new and prospective customers.However, in the meantime, our talented commercial customer care and marketing teams are focused on support of our existing customers and engaging with new practitioners through a variety of digital means. Our Viveve University, practice development and marketing programs are now available in virtual formats and participation is in fact at a record-high level with existing customers and targeted physician prospects.Many practitioners are using the forced downtime to take advantage of our educational resources that will help build and support treatment volumes in their practices as elective procedures restart. Overall, we are confident that the recent changes made to our U.S. commercial activities will support customers, reduce costs and preserve cash.Sale of our products outside the United States continues to be supported by the company’s current distribution partners without significant change to the international business model. Our predominant focus since the second half of 2019 has been on growing the business in key countries and regions in Asia.As we know, this region was initially the epicenter of the coronavirus. But thankfully, countries within Asia have been showing signs of commercial recovery. Currently, we anticipate a return to near-normal physician utilization and distributor sales activity in the coming quarter, and through the remainder of the year.However, as in the U.S. elective patients’ continuing health and safety concerns may somewhat throttle the speed of return to pre-COVID procedure rates. And we continue to support existing distributors and customers in Europe and other global markets as COVID-19 recovery efforts are less advanced.Finally, I’d now like to address the advancement of our stress urinary incontinence clinical development program. It is the achievement of near-term key milestones in this program that we believe will set the course for our CMRF technology and the company going forward. SUI is a condition that affects an estimated 25 million to 30 million women worldwide, and represents a $10 billion to $12 billion total available consumable market opportunity.We have demonstrated in 3 previous clinical studies that the Viveve treatment safely improves SUI symptoms and reduces leakage for women. Our resolute focus, to which the entire organization has been repositioned, is to

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.