IRIDEX Corporation

Good day and thank you for standing by. Welcome to the fourth quarter 2022 ERADEX earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tripp Baylor, Investor Relations.

Thank you, and thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fawad Ahmad, Interim Chief Financial Officer. Earlier today, Iridex released financial results for the quarter ended December 31, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call are not statements of historical fact, including but not limited to statements concerning our strategic goals and priorities, product development matters, sales trends, and the markets in which we operate. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place reliance on these statements. For discussion on the risks and uncertainties associated with our business, please see our most recent Form 10-K and Form 10-Q filed with the SEC. Geardex disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 9, 2023. And with that, I'll turn the call over to Dave.

Thank you, Tripp. Good afternoon, and thank you all for joining us. Today, I'll provide updates on our recent business progress and discuss our 2023 outlook. Then Fuad will provide details of the 2022 fourth quarter and full year financial results. Then we'll open the call for questions. As we preannounced on January 10th, for the full year 2022, we generated revenue in line with our guidance of $57 million. representing an increase of 6% compared to 2021. Beyond the financial results, 2022 was highly productive for Iridex. We achieved regulatory clearance to market and sell the Cyclo-G6 platform in China, introduced suite management software for the Cyclo-G6, maintained a strong presence at Glaucoma Society meetings, and published the two-part expert consensus to raise awareness of the clinical benefits of micropulse PLT. Despite a soft first half to the year from COVID and international challenges of dollar strength and inflation, these activities meaningfully advanced G6 adoption and G6 probe growth in the second half of 2022. And we continue to experience solid growth this quarter to date. Additionally, we received FDA clearance for the next generation Iridex Pascal scanning laser platform in November. and are today announcing clearance of the year at X532 and 577 single-spot laser platform received in February. We've already begun the U.S. launch for Pascal and will begin the single-spot platform launch at mid-year. We expect all these achievements to build momentum for our business in 2023. Turning to the fourth quarter, revenue total $15.2 million in line with the prior year period driven by growth from the Cyclo-G6 product family, U.S. retina sales, and other revenue being offset by declines in some retina products internationally. We also reduced our cash used in operations by half to under $1 million in the quarter. Looking closer at the glaucoma business, Cyclo-G6 revenue increased by 9% year-over-year to $4.2 million. In the quarter, we achieved record international G6 probe unit sales and sold a worldwide total of 16,400 probes, representing growth of 8% compared to the fourth quarter of 2021. G6 system sales decreased slightly compared to the prior fourth quarter, but results were at the midpoint of our overall annual guidance. We see significant opportunities to increase G6 probe volume and adoption, by staying focused on four key initiatives. First, continuing our advanced physician education, keying on proper dosing and broader patient selection criteria. Second, targeting comprehensive ophthalmologists who see the most moderate stage pre-incisional patients. Third, adding users at surgery centers that already have D6 systems. And fourth, expanding clinical evidence supporting adoption of micropulse TLT. The main components of our education strategy are peer-to-peer discussions on dosing recommendations based on clinical study evidence and sharing updates on micropulse TLT use on a broader patient population. In particular, earlier in the glaucoma treatment continuum, at the AGS just completed in Austin, Texas, Dr. Cyril Doraraj presented his early results from a prospective randomized dose escalation study demonstrating 31% to 44% intraocular pressure reductions with greater treatment efficacy resulting from slower probe sweep speeds while still providing the same consistently excellent safety profile. It's becoming clear that the key to consistently high ILP reduction is proper sweep speeds and that this technique maintains the very benign safety profile. To facilitate excellent treatment technique, we launched and promoted our sweep management systems software upgrade. This software helps guide users to select and execute proper sweep speeds during treatments according to best practices developed by our clinical consensus panel. It's working. Users are reporting. This helps reduce variability of technique and helps them deliver more consistently strong results to meet their outcomes expectations. The next component of our growth strategy is to increase awareness of the benefits of micropulse PLT earlier in the glaucoma treatment continuum as an effective pre-incisional intervention. About 50% of the 2022 proctored cases supported by our field team were pre-incisional patients treated by both glaucoma specialists and increasingly with targeted comprehensive ophthalmologists who typically diagnose and treat patients with earlier stages of glaucoma. This targeted cohort of clinicians and patients has the potential to meaningfully expand G6 penetration in the continuum of glaucoma care. Internationally, we initiated the G6 launch in China in the second half of last year alongside our distribution partners with 15 key opinion leader pilot sites and approximately 120 patients. While China's COVID policy lockdowns in 2022 slowed the initial adoption ramp, patient flow is increasing again, and we believe this can drive growth in 2023. In addition, last year we increased our international commercial team to provide more expert resources in support of our distribution partners and customers. And finally, we have great confidence. We have the right probe design and clinical proof of efficacious and very safe dosing guidance executed through user software supporting proper treatment protocols. We believe we have a stable procedure ready to design and launch a larger scale multicenter prospective trial. The study will target demonstrating the safety and substantial effectiveness of micropulse DLT for moderate stage glaucoma patients. Active discussions on proper study design and protocols are underway with key opinion leaders. Once we've determined the optimal protocols for the study, we can begin to recruit participating centers. We are making this investment in 2023 and hope to begin enrolling patients in the study by year end. We have high conviction in our ability to grow the glaucoma business over the long term. We're excited to provide this on a larger scale and ultimately capture a substantial role in the continuum of care for glaucoma sufferers. Altogether, as we look ahead to 2023, we expect to increase the growth rate of our glaucoma business. We expect probe revenue growth of 9% to 12% compared to 2022. We expect to sell 65,000 to 67,000 probes and grow the installed base by 225 to 250 glaucoma laser systems. Now turning to our retina business, for the fiscal year 2022, product revenue increased by 2%, to $31.7 million compared to 2021, despite some softness in international markets leading to a decrease of 11% in the fourth quarter compared to the prior year period. On our last call, we announced we had received US FDA clearance for our new Pascal laser scanning platform. We began shipments to US customers in the fourth quarter. And we anticipate regulatory filings and approvals internationally throughout 2023. The new Iridex Pascal platform offers the ultimate combination of the leading pattern scanning engine, endpoint management technology, pattern scanning laser trabeculoplasty, which is a glaucoma treatment for early stage patients. And now with Iridex's proven micropulse technology, It provides physicians with expanded treatment capabilities in an integrated system with one-half the footprint of the prior platform. And today, we're pleased to announce that we received FDA clearance in February for our single-spot platform consisting of the Iridex 532 green laser and the Iridex 577 yellow laser. We'll share more details as we launch them in the U.S. around mid-year. We believe both updated laser platforms can drive replacement cycles for the significant installed base of older equipment reaching end of life. The improvements we've made not only include technology updates that will produce clinical benefits, but also provide manufacturing efficiencies that will translate to pricing flexibility for share gains or improved margins. Our investments over the last couple of years have resulted in material improvements to our retina business and is now operating from a significantly stronger competitive position in both product and sales channel potential. Now I'd like to turn the call over to Fuad.