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spk02: Good afternoon, ladies and gentlemen, and welcome to the Ascensus 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. I would now like to turn the conference over to Mark Klausner from Westwick Partners. Please go ahead.
spk06: Good afternoon, everyone, and thank you for joining us for the Ascensus 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 Shamiz Rampertab, 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 Ascensus 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 non-cash 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 to benchmark outperformance 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 a Census Surgical President and Chief Executive Officer, Anthony Fernando.
spk03: Thanks, Mark. And thank you all for being with us today. To start, I'll give a summary of our recent performance and notable accomplishments in 2023. Then Shamice 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 the ISU while at the same time making significant progress towards the development of our next generation Lunar Surgical System. Growing procedure volumes remains a critical factor as we seek to refine and enhance our digital surgery capability. Globally, over 3,550 procedures were performed using the Sennheis system in 2023, delivering 13% increase from 2022. During the fourth quarter, we saw over 835 Sennheis procedures performed across a variety of specialties globally. As we continue to gather surgical data, our machine learning engine improves enabling us to provide valuable clinical insights to surgeons through the ISU. A testament to this, last month, we announced the completion of more than 1,000 successful cases each at three hospitals, Evangelatius Krankenhaus Wesel in Germany, Klaipeda University Hospital in Lithuania, and Presidential Clinic Astana in the CIS region. Another encouraging trend we've observed is at Ida Oberstein 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 Senhance brings to the OR. Due to the increased procedure volumes, our trust registry now includes data from over 3,200 patients with a 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 were published, including a paper exploring surgeon stress levels using SELHEAD. 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 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 initiations 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. As more pediatric surgeons recognize a sensor's unique system design, which not only preserves minimally invasive surgery, but also advances laparoscopy and robotics with digital surgery solutions. We expect interest in Senhance and the 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 on the groundwork for sustained success. I'll now pass the floor to Sameesh for a financial update.
spk05: Thanks, Anthony. Turning to the fourth quarter, for the three months ended December 31, 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 revenue, 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 7 cents per share as compared to a net loss attributable to common stockholders of $17.9 million or 8 cents 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 7 cents per share, as compared to an adjusted net loss of $16.7 million, or 7 cents 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 a 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.
spk03: Thanks, Yamis. We wanted to provide an update on what lies ahead at the Census in 2024. Starting with LUNA, in December, we hosted a Surgeon Lab in Research Triangle Park, North Carolina, to conduct an in vivo evaluation of LUNA's hardware, software, and instruments in porcelain models. The lab allowed nine participating surgeons to evaluate the system's functionality in 13 different procedures across gynecology, urology, and general surgery. The surgeon lab highlighted Luna's notable range of motion and instrument dexterity essential for precise surgical maneuvers. Surgeons also appreciated the strength and reliability of the five millimeter true wrist instrument line offering versatility with different instrument types. Additionally, they found the ergonomic design of the lunar surgeon console and easy patient access to be noteworthy features. The 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 system's 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 Luna. We now intend to freeze the system's design in Q3 2024 and conduct verification and validation testing in Q4 2024. Subsequently, we will initiate pilot manufacturing and prepare for regulatory submissions. The submission is now expected in the second half of 2025, with clearance anticipated in the first half of 2026, followed by a launch thereafter. As we have shared before, we are following a clear and defined regulatory pathway for LUNA. Drawing from our interactions with the FDA and our proven success in submissions for SENHANCE, We anticipate following a traditional 510 pathway in the U.S. rather than the more rigorous WIDOVA pathway, which we believe will save both time and cost. Additionally, we have some important lunar 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 multi-point and plane measurement functions, innovative training and communication tools with telestration 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 Ascensus Cloud connectivity, providing useful resources like procedure-specific data, statistics, and downloadable or shareable videos. It is a significant step forward in improving collaboration and accessibility within our user community. Turning to our ongoing ISU 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. These configurations include the Luna ISU, which supports a robotic platform configuration, and the standalone ISU 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 eight to 10 new programs in 2024. Additionally, we expect procedure volume growth for 2024 to track close to 15 to 20% growth over 2023. The data gathered from the Trust Registry during these procedures has been immensely valuable, and with the adoption of the ISU 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 Luna. Additionally, we aim to enhance our cloud data architecture, leveraging Google Cloud's advanced technologies to provide surgeons with real-time intraoperative clinical intelligence. This initiative has the potential to achieve superior outcomes for patients. Looking ahead to 2024, we are optimistic about reaching important milestones in the coming quarters. Our lunar surgical system remains our primary focus in the year. Additionally, we are dedicated to expanding enhanced 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 for questions.
spk02: Thank you, ladies and gentlemen. We will now conduct the question and answer session. If you have a question, please press star followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. Please ensure to lift the handset if you're using a speakerphone before pressing any keys. One moment for your first question. Your first question comes from Ross Osborne from Cantor Fitzgerald. Your line is now open.
spk00: Hey, guys. Thanks for taking the questions. I apologize for the background noise traveling today. But starting off, would you walk through your thoughts around financing in terms of size and structure to keep the company going past June? And then as a follow-up, where were you able to cut costs during the fourth quarter, and has Vern improved during the first quarter?
spk03: Hey, Raj. Thanks for the question. 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, non-dilutive transactions, licensing agreements. And we will look to execute something, obviously, that's in the best interest of the company and the shareholders. That's kind of the plan. Then on the cost, I think it came out from several areas, some on the R&D front, which is why we had to shift the timelines for lunar development, and also from all the other functions. It was across the company, streamlining of expenses and planned budgets.
spk00: Okay, understood. And then just one more question, if I may. You know, assuming financing comes through as needed, the story is obviously going to be 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 over the past couple of quarters?
spk03: You know, so I think you can kind of – work through the burn, right? I mean, based on what we've done before, you know, previous quarters, and that's the trajectory that we need to continue to intersect with the timelines that we have outlined. So I think we have the right, we have the team in place, and 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 So I'm sure you can work up the numbers based on historical burn, and that will continue through to regulatory approval.
spk00: Understood.
spk04: Thanks for taking my questions. Thank you, Ross.
spk02: Your next question comes from RK Ramakant from AC Wainwright. Your line is now open.
spk01: Thank you. Good afternoon, Anthony and Shamice. So, you know, looking at your past history and how you've been able to add new initiations year after year, you know, have you understood, you know, how the market is working for you in the sense because, you know, you come up, you suddenly manage to get your 8 to 10 initiations, but, you know, in terms of trying to get better than that, what needs to be done? And also, how are you thinking of managing the growth of the procedure volumes as well?
spk03: Okay, thank you for the question. So I'll take the two parts. I'll take the latter part first. With respect to procedures, I mean, some of the sites are mature sites that have seen the benefit of Senhans in terms of efficiency and cost and familiarity with laparoscopy and their 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 a 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've 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, driving Senhance adoption in terms of systems, I mean, You know, pediatrics has been helping us quite a bit because we are seeing a really good interest in pediatrics in Japan, in Europe, and even in the U.S. You know, like 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, they want economics to be responsible in terms of procedure costs and that there is a priority for cost. Obviously, we have a proven track record there, so we are able to work together. Those are the two things 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.
spk01: Okay. Thank you for that. And then in terms of the ISU and trying to come up with these two novel configurations. So I'm just trying to understand what's the development timeline on this and how do you plan to commercialize this at the end of the day?
spk03: Yeah, okay. So the two configurations, obviously we have the first generation ISU 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 the ISU. So it will have some of the features that we currently have and continue to evolve in terms of performance, features, applications, so on, that are related to robotic platform, robotic manipulation. The second version of the new ISU, primarily for standalone use, for use on laparoscopy without a robot. 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 as for commercialization, I think there are multiple ways that, and again, several options are being explored. You know, do we do it ourselves and other partnership opportunities for us to leverage other commercial infrastructure to be able to gain adoption. So that's the commercial part, say, exploratory, but we know there is a need for this, and we have the 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 two pathways and be able to offer this not only for robotic, but also standalone use.
spk01: Okay. Thanks. Thank you for taking my questions.
spk04: Thank you, RK.
spk02: There are no further questions at this time. Mr. Anthony Fernando, please proceed.
spk03: Thank you, operator. Thank you, everyone, for joining today's call, and we look forward to updating you on our progress throughout the year.
spk02: Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.
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