Q4 2023 Asensus Surgical Inc Earnings Call

Participants

Mark Klausner; IR; Westwicke Partners, LLC

Anthony Fernando; President & CEO; Asensus Surgical Inc

Shameze Rampertab; Chief Financial Officer, Executive Vice President; Asensus Surgical Inc

Ross Osborn; Analyst; Cantor Fitzgerald & Co.

Swayampakula Ramakanth; Analyst; H.C. Wainwright Co., LLC

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Essentis surgical Inc. fourth quarter and full year 2023 financial and operating results conference call.
At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 21st, 2024.
I would now like to turn the conference over to Mark Klausner from Westwicke Partners. Please go ahead.

Mark Klausner

Good afternoon, everyone, and thank you for joining us for the Essentis surgical Fourth Quarter and Full Year 2023 business and financial update conference call.
On the call with me today are Anthony Fernando, President and Chief Executive Officer, and Jim East, Rand per cab, Chief Financial Officer.
Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including any guidance provided are forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the Company's business, including any geopolitical factors beyond our control. The Company undertakes no obligation to update the information provided on this call.
For a discussion of risks and uncertainties associated with the Essentis surgical business, I encourage you to review the Company's filings with the Securities and Exchange Commission, including the 2023 form 10-K expected to be filed today and any other filings we make with the SEC during this call, we will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and the adjusted net loss per common share attributable to common stockholders management believes that these non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain noncash and other expenses that are not indicative of the Company's core operating results. Management uses non-GAAP financial measures to compare our performance relative to forecast and strategic plans. We benchmark out performance externally against competitors and for certain compensation decisions. Reconciliations from U.S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website. With that it's my pleasure to turn the call over to Essentis Surgical's President and Chief Executive Officer, Anthony Fernando.

Anthony Fernando

Thanks, Mark, and thank you all for being with us today to start give a summary of our recent performance and notable accomplishments in 2023. Then Sheamus will dive into our financial results. Following that, I'll discuss our focus areas for 2024 and finally, we'll open the floor for any questions you may have.
I'm pleased with the progress we've made throughout 2023 and the solid foundation we've built for the future we continue to drive greater adoption and utilization of both Senhance and ICU, while at the same time making significant progress towards the development of our next-generation LUNA surgical system growing procedure volumes remains a critical factor as we seek to refine and enhance our digital surgery capabilities. Globally, over 3,550 procedures were performed using the Senhance system in 2023, delivering 13% increase from 2022.
During the fourth quarter, we saw over 835 Senhance procedures performed across a variety of specialties globally. As we continue to gather surgical data machine learning engine improves, enabling us to provide valuable clinical insights to surgeons through the ICU. A testament to this last month, we announced the completion of more than 1,000 successful cases each at three hospitals evangelism. This front-of-house vessel in Germany, Florida University Hospital in Lithuania and presidential clinical data in the CII. three. Another encouraging trend we've observed is that either of us the hospital where in just four months since the program's initiation in November 2023, they have completed over 110 cases. These achievements underscore the growing acceptance and confidence in Senhance and how our customers are realizing the value Tim has brings to be lower due to the increased procedure volumes. Our trust registry now includes data from over 3,200 patients with the growing number of cases, which has been aided by the continued expansion of sites participating in the registry.
Additionally, during the year, nine peer-reviewed clinical publications published, including paper, exploring surgeon stress levels using centers led by trust investigators. This study compared stress levels between surgeons using Senhance and traditional laparoscopic surgery. After analyzing 350 procedures, the research found that Senhance users experienced lower overall stress levels compared to laparoscopic surgeons due to recent reduced physical demands and distractions during procedures.
Moving to new program initiations, we initiated five new Senhance programs in the fourth quarter, including one in Germany, one in Romania, two in the CIS. region and one in Japan at Nagoya University Hospital, bringing the total for the year to eight. One of these program initiation was a pediatric hospital in Romania, representing the sixth hospital to be leveraging the Senhance for pediatric procedures with specialized 3 millimeter and 5 millimeter instruments. The Senhance surgical system is uniquely designed for the delicate nature of pediatric procedures, small pediatric surgeons recognize sensors unique system design, which not only preserves minimally invasive surgery, but also advanced laparoscopy and robotics with digital surgery solutions. We expect interest in Senhance and ISU. for pediatric applications to continue to grow. We are committed to meeting this rising demand in the pediatric market.
To wrap up, I'm pleased with the progress we've achieved in the fourth quarter and continue to build the groundwork for sustained success.
I'll now pass the floor to semis for a financial update.

Shameze Rampertab

Thanks, Anthony. Turning to the fourth quarter for the three months ended December 31st, 2023, the company reported revenue of $5.4 million as compared to revenue of $2.5 million in the three months ended December 31, 2022. Revenue in the fourth quarter of 2023 included $3.6 million in system revenue, $1 million in instruments and accessories, $0.5 million in lease revenues and $0.3 million in services. For the three months ended December 31, 2023, total operating expenses were $17.2 million as compared to $18.3 million in the three months ended December 31, 2022.
For the three months ended December 31, 2023, net loss attributable to common stockholders was $17.2 million, or $0.07 per share as compared to a net loss attributable to common stockholders of $17.9 million, or $0.08 per share in the three months ended December 31, 2022. For the three months ended December 31, 2023, the adjusted net loss attributable to common stockholders was $17.5 million or $0.07 per share as compared to an adjusted net loss of $16.7 million, or $0.07 per share in the three months ended December 31, 2022.
Adjusted net loss is GAAP net loss adjusted for the following items, amortization of intangible assets, change in fair value of contingent consideration, property and equipment impairment, and change in fair value of warrant liabilities, all of which are non-cash charges.
Adjusted net loss attributable to common stockholders is a non-GAAP financial measure. Reconciliation from GAAP to non-GAAP measures can be found in our earnings release.
Turning to the balance sheet, the company, had cash, cash equivalents and short-term investments, excluding restricted cash of approximately $21.1 million as of December 31, 2023. In the third quarter of 2023, we initiated a cash burn reduction plan to streamline expenses as a result of the plan, we saw cash burn decrease in the fourth quarter and into the first quarter. Based on the recent financing and our current operating plan, we project that available cash will now sustain operations until early June 2024.
I'll turn the call back over to Anthony.

Anthony Fernando

Thanks, sameer. is we wanted to provide an update on what lies ahead that the census in 2024, starting with LUNAR. In December, we hosted a surgeon lab in Research Triangle Park, North Carolina, to conduct an in vivo evaluation of LUNA as hardware software and instruments in policy model. The lab allowed nine participating surgeons to evaluate systems functionality in 13 different procedures across gynecology, urology and general surgery. Surgeon lab highlighted LUNA as notable range of motion and instrument dexterity essential for precise surgical maneuver. Surgeons also appreciated the strength and reliability of the 5 millimeter crew with the instrument line offering versatility with different instrument types. Additionally, they found that ergonomic design of the LUNA surgeon console and easy patient access to be noteworthy feature positive feedback from participating surgeons underscores our dedication to developing and delivering a surgical robotic platform that exceeds expectations. Insights gathered during this evaluation will aid in refining the system design, bringing us closer to a final product for a closer look at the surgeon lab and insights from the participating surgeons. A video is available on our Investor Relations website. The video provides an overview of the LUNA systems features demonstrating its range of motion instrument strength and ergonomic benefits. In order to conserve capital, we are adjusting our development timeline. This decision allows us to maintain physical stability while still advancing towards key milestones for Illumina. We now intend to freeze the systems design in Q3 2024 and conduct verification and validation testing in Q4 2024. Subsequently, we will initiate pilot manufacturing and prepare for regulatory submission. The submission is now expected in the second half of 2025 clearance anticipated in the first half of 2026, followed by a launch data. As we have said before, we are following a clear and defined regulatory pathway for LUNAR, drawing from a interaction with the FDA and a proven success in submissions for Senhance. We anticipate following a traditional 510(k) pathway in the US rather than the more rigorous de novo pathway, which we believe will save both time and cost. Additionally, we have some important Luna digital solutions milestones to highlight in the near term. By Q2 2024, we aim to integrate several new features into our digital platform, including advanced analytical tools with multipoint and plan measurement functions. Innovative training and communication tools with the illustration capabilities and enhanced safety features. Furthermore, we are striving to conduct prototype testing for our digital features. Within the same timeframe, surgeon advisors will give us valuable feedback on functionality and user experience, helping us ensure that our digital solutions are user-friendly and effective.
In parallel, we are planning to launch our customer portal website globally, during Q2 2024. This platform will be accessible to all Senhance users with a sense of cloud connectivity, providing useful resources like procedure-specific data statistics and downloadable or shareable video it is a significant step forward in improving collaboration and accessibility within our user community.
Turning to our ongoing, I assume development efforts, our primary goal for the year is to ramp up manufacturing for the future ISU. hardware with our partners. Additionally, we are working on completing the design for two ISU. configurations and expect that we will be finalizing the hardware by the second quarter of 2024. This configuration include the Luna ISU., which supports a robotic platform configuration and the standalone, I assume aimed at enhancing laparoscopic procedures. These configurations will offer flexibility and efficiency to meet various surgical needs and preferences.
Regarding Senhance initiations, we intend to initiate 8 to 10 new programs in 2024. Additionally, we expect procedure volume growth for 2024 to track close to 15% to 20% growth over 2023. Data gathered from the trust registry during these procedures has been immensely valuable. And with the adoption of the I assume by more sites in the coming months, our data pool will expand further. This data collection from the trust registry and independent studies plays a vital role in bridging Senhance and Noah. Additionally, we aim to enhance our cloud data architecture, leveraging Google Cloud advanced technologies. It provide surgeons with real-time interoperative clinical intelligence. This initiative has the potential to achieve superior outcomes of patients.
Looking ahead to 2024, we are optimistic about reaching important milestones in the coming quarter. Luna surgical system remains our primary focus in the year. Additionally, we are dedicated to expanding Senhance adoption, increasing utilization, advancing clinical evidence and enhancing our digital capabilities. We sincerely appreciate the hard work and dedication of our global team in bringing these innovations to life, underscoring our commitment to advancing surgery technology and improving patient outcomes.
With that, we would now like to open the line of questions.

Question and Answer Session

Operator

(Operator Instructions)
Russ Osburn from Cantor Fitzgerald.

Ross Osborn

Hey guys. Thank your second question on and I apologize for the background noise. Travel today. But starting off with you, what are your thoughts around financing in terms of size and structure to keep the Company going after June? And then as a follow-up, where were you able to cut costs during the fourth quarter and hedges turn improved during the first quarter?

Anthony Fernando

And Ross, thanks for the question on. I think as we noted on the cash. We kind of ended the fourth quarter with $21 million in cash. And obviously for capital raise and cash, we are exploring several options, including equity, nondilutive transactions, licensing agreements and we will look to execute something. Obviously, that's in the best interest of the Company and the shareholders, and that's kind of the plan.
Then on the cost, it came out from several areas, some on the R&D side front, which is why we had to shift the time line for rural development and also from all the other functions across the Company streamlining of expenses and planned budget.

Ross Osborn

Okay, understood. And then just one more question, if I may. Yes, assuming financing comes through as needed on our stories, I'm just going to be at about Luna at that point, how much capital do you think you'll need to raise to successfully develop and then commercialize Luna, especially given the cuts for the past couple of quarters.

Anthony Fernando

Ross, I think you can kind of work through the burn, right, I mean, based on what we've done before the previous quarters, and that's the trajectory that we need to continue to intersect with the time lines that we have outlined. And I think we have the right, we have the team in place and then we've been doing all the right things to get to where we need to. And now it's just a matter of time purely for execution. So you can I'm sure you can work up the numbers based on historical burn, and that will continue on through to regulatory approval.

Ross Osborn

Understood. Thanks my questions.

Anthony Fernando

Thank you, Ross.

Operator

RK, Ramakanth from H.C. Wainwright.

Swayampakula Ramakanth

Thank you. Good afternoon. Anthony and ocean is So looking at your past history and how and you've been able to add some new initiations on year after year and have you understood how the market is working for you in the sense because you come up, you certainly managed to get you an 8 to 10 initiations, but and denied some in terms of trying to get a better than that, what needs to be done on? And also on how on how are you thinking of we're managing of the growth, the procedure volumes as well?

Anthony Fernando

Again, thank you for the question. So I'll take the two parts. Take the latter part first. With respect to procedures, I mean the some of the sites are mature sites that have seen the benefit of Senhance in terms of efficiency and cost and familiarity with laparoscopy and that training. So that is driving increased usage at some of the mature sites and then some of the newer sites have seen this, and they are trying to mimic that kind of performance. And obviously, over the years, we've also gained a significant amount of experience about how best to stand up the site and drive volume at a specific site efficiently. So all of that's kind of playing through quite nicely for us to continue to grow utilization. And like I said before, if we look at the trend of utilization on a per system basis globally, that has been increasing year after year after year. So it's not just the new systems doing more cases. So that's one part.
And the second part are driving Senhance adoption in terms of systems, I mean, pediatrics has been helping us quite a bit because we are seeing really good interest in pediatrics in in Japan, in Europe and even in the US, you know that last year this time we had maybe one or two pediatric sites. Now we are up to six, and we anticipate that to continue to grow. And also the other sites that are working with us are they do they have a lot. They want economics to be responsible in terms of a procedure costs, tell you that there is a priority for cost. Obviously, we have a proven track record there. So we we kind of able to work together. So those are the two things out. I would say that we continue to be able to do that and obviously to continue to grow beyond that once we get further ahead.

Swayampakula Ramakanth

Okay. Thank you for that. And then in terms of the ISU and trying to come up with this two novel configurations so on, I'm just trying to understand what the development done on time line on this and how do you plan to commercialize this at the end of the day?

Anthony Fernando

Yes. Okay. So the two configurations, obviously, we have the first generation I see on the market today, and we are in the process of developing the second generation ISU. and one version of that will be part of Luna. That is the robotic version of dye issue. So it will have or some of the features that we currently have and continue to evolve in terms of performance features, applications so on is that related to robotic platform robotic manipulation, the second version of the new ISU. have primarily for stand-alone use for used on laparoscopy without payroll. And so we have seen interest in that area and we are going to continue to build some of the applications that are relative and relevant to non-robotic surgery and that's for commercialization. I think there are multiple ways that and again, several options are being explored. You know, do we do it ourself and other partnership opportunities for us to leverage other commercial infrastructure to be able to again adoption. So that's the commercial, Bob, say exploratory, but we know there is a need for this, and we have the readout, clear regulatory pathway and also the features relatively well developed. So that's the reason why we decided that we're going to go down to part ways and be able to offer this not only for robotic but also standalone deals.

Swayampakula Ramakanth

Okay, thanks. Thank you for taking my questions.

Anthony Fernando

Thank you, RK.

Operator

There are no further questions at this time, Mr. Anthony Fernando, please proceed.

Anthony Fernando

And thank you, operator, and thank you, everyone, for joining today's call, and we look forward to updating you on our progress throughout the year.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.