Viveve Medical, Inc.

Good afternoon and welcome to the Verveve Full Year 2020 Financial Results and Corporate Update Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Speaking today are Verveve's Chief Executive Officer, Scott Durbin, and Jeanne Swindle, Senior Director of Corporate Communications. After today's prepared remarks, there will be a brief question and answer session. Please note that this event is being recorded. I will now turn the call over to Jeanne Swindle.

Jeanne 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 to 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 will now turn the call over to Scott Durbin, FVIV's Chief Executive Officer.

Scott Durbin Thank you, Jeanne. Good afternoon, everyone. We really appreciate you joining us today. I'd like to start the call this afternoon with a short strategic business summary, followed by a high level review of our 2020 full year financial results. I'll then remark on our stress urinary incontinence clinical development program and the pivotal pursuit trial that is underway in the United States. Before opening the call to questions, I will close with our plans to achieve an SUI indication and the enormous commercial opportunity it represents. 2020 was a challenging yet transformational year for Vaviv as a result of the dedicated efforts of the entire company and the achievement of critical milestones for our SUI program. Vaviv successfully pivoted in 2020, becoming a urogynecology company with a focus on SUI and launched our Pivotal US Pursuit Trial. As we move forward over the next 18 to 24 months, our core areas of strategic focus will be to first continue to advance the clinical development program in SUI by successfully executing the currently underway pursuit trial and achieving a positive data readout. Thereafter, if positive, to commercially launch the first FDA-approved, patent-protected, endovaginal office-based treatment for urethral hypermobility to improve SUI in women. Secondly, continue to focus our commercial efforts on the United States and Asia Pacific regions and expand the installed base of systems throughout the world. Additionally, targeting core specialties of urogynecology, urology, and gynecology. And finally, third, continue to support our customers through our internal customer care team and successful initiatives which continue to drive increased consumable treatment tip utilization and sales. Before I cover our financial results for the year, I'd like to comment qualitatively that after a challenging commercial market in 2020, conditions are improving. Receptivity to new technologies from practices is increasing, patient flow and procedure volumes are improving, and the stagnant and often dormant market we experience, particularly in the U.S., is showing strong signs of improvement in early 2021. Today, we reported total revenue for 2020 of approximately $5.5 million from the global sale of 31 systems And in the U.S., under our recurring revenue model program, an additional 29 systems were placed. As of December 31, 2020, we now have a total installed base of 857 systems worldwide. Additionally, a total of approximately 8,900 disposable treatment tips were sold globally in 2020. Total operating expenses for the year were approximately $18.8 million compared to $31.7 million for 2019. This significant decrease is the result of the company's strategic alignment, along with taking operational measures to lower costs and reduce cash burn as we focus our efforts on our SUI program. On a pro forma basis, we ended the year in a strong cash position. Cash and cash equivalents, including the net proceeds of $25.2 million from the company's January 2021 financing, were approximately $31.7 million. The success of this upsized public offering in January was a testament to the enormous market opportunity for Vaviv's non-invasive, dual energy technology in SUI and underscores the confidence in the company's strategic path, capability to execute, and potential to achieve positive clinical results in our U.S. Pivotal Pursuit Trial. Importantly, this financing provided us with the capital resources to support operations through the end of 2022, including the planned completion of the Pursuit Trial. and as we continue to operate efficiently and at a significantly reduced cash burn rate of $3 to $4 million a quarter. I'd now like to direct my remarks to our Stress Urinary Incontinence Clinical Development Program. Our successful pivot to SUI in 2020 was fostered by many important milestones that were achieved. These include the positive preclinical and SUI feasibility study results reported, positive data that validated our new inert sham treatment tip that produces no tissue nor clinical benefit, FDA approval of a strengthened pursuit trial investigational device exemption, formation of our preeminent clinical advisory board in incontinence, and the issuance of a newly issued U.S. SUI method patent. At this point, I'd like to summarize the condition of SUI and the opportunity it represents for those on the call who may be new to VIVV. SUI is a condition that affects an estimated 25 to 30 million women in the United States alone, and based on our estimates, represents a $10 to $12 billion total available consumable market opportunity. Today, few effective non-invasive treatments exist that reduce leakage associated with SUI. In fact, the current spectrum of therapeutic options for women is limited to physiotherapy at one end of the spectrum, such as Kegel exercises, electrical muscle stimulation, or biofeedback, which are all designed to strengthen the pelvic floor musculature. to the other end of the spectrum in invasive approaches such as bulking agents or sling procedures. Accordingly, there's a large gap in the treatment spectrum that represents a tremendous unmet need and an opportunity for a clinically proven treatment option. We believe Vaviv has the potential to expand this continuum of care. Our non-invasive endovaginal office-based treatment, which can be completed in a physician's office in approximately 45 minutes, may safely and effectively improve urethral hypermobility and significantly reduce leakage for women who suffer from SUI. Moving to an overview of the PURSUIT trial. PURSUIT is a randomized, double-blinded, sham-controlled trial with an intended enrollment of 390 subjects with moderate SUI, defined as greater than 10 milliliters up to 50 milliliters of urine leakage on the one-hour Padway test at up to 30 study sites in the United States. Randomized in a two-to-one ratio, subjects in the active treatment arm will receive our cryogen-cooled monopolar radiofrequency, or CMRF, treatment, while subjects in the control arm will receive an energy-less or inert sham treatment. And again, I want to highlight that the sham treatment administered in the control group for the study is a clinically inert or true sham treatment. The primary efficacy endpoint of the PURSUIT trial is a comparison of the proportion of patients who experience greater than a 50% reduction in urine linkage compared to baseline on the standardized and objective one-hour Padway test at 12 months post-treatment versus the inert sham procedure. The study also includes several secondary endpoints also assessed using the one-hour Padway test, the three-day bladder voiding diary, and other behavioral and quality of life questionnaires. Subject safety will also obviously be monitored throughout the study. I'd like to take this moment to acknowledge the guidance and support from the many experts who make up our newly formed Clinical Advisory Board and who contributed to our strengthened and enhanced study design. Currently, patient enrollment is underway and is going well. and we continue to expect full 390 patient enrollment by the end of the second quarter or very early in the third quarter of this year. And again, positive data results from PURSUIT may support a marketing application for a new SUI label in the United States and abroad and open a multi-billion dollar commercial opportunity for Vaviv. Today, Vaviv is in a strong position to successfully execute our core strategies over the next 18 to 24 months in advance of and in preparation for a potential FDA approval of an SUI indication in the U.S. In 2021, we now have the capital and resources to execute this strategy, a lowered cash burn rate, a newly designed and highly powered pivotal SUI trial underway in the United States, and a shifted commercial priority to the two largest markets in the world, the United States and Asia Pacific region, with a focus on expanding our core market installed base and procedure volumes, all in a 2021 commercial environment that has begun to significantly improve. I thank the talented and dedicated team at Vaviv for their tenacity throughout 2020, which has provided us with this tremendous opportunity to potentially expand the SUI continuum of care with a non-invasive endovaginal treatment option for millions of women who suffer from SUI. Again, I'd like to thank everyone for participating in our conference call today. Operator, this concludes our prepared remarks and we can open the call to any questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Our first question today will come from Jeffrey Cohen with Ladenburg-Salmon.

Hi, Scott.

How are you? Hi, Jeff. How are you? Thanks for joining today.

No problem. It's a pleasure to be here. So, a couple questions on the enrollment. You expect that, how is that occurring throughout these centers, number of centers that are enrolling now, or how many?

Yeah, we're up to, I'd say, a little over 20 centers right now who are currently enrolling. We've got a handful that are in the IRB process or going through site initiation visits and training, but we expect them to be up to speed in the next couple of weeks.

Okay, and there's no type of interim look, so the pad weight measurement is at month 12, or are you taking looks at earlier months?

So we are taking both three- and six-month looks on pad weight from a responder perspective and also from a mean change from baseline perspective, as well as three-day voiding diary, collecting those at those time points as well. But we won't have an unblinded look at any of those time points, but we will have them at the end of the 12-month study.

Okay, got it. And then back to your base business currently. Could you talk about that a little more? It feels like there's some upside to be had on the utilization and the revenues. Could you call that out as far as geographies that you're seeing recently? And obviously, we don't expect any guidance, but it feels like at the moment, 21 could be better than 20 on the top line, at least from how we're looking at it.

Yeah, we certainly expect it to, Jeff. You know, 2020 was obviously difficult, particularly in the United States, where the Asia-Pacific region recovered far more quickly in 2020 and actually contributed quite strongly to the 2020 results. But here at the beginning, as I mentioned in the prepared remarks, in 2021, I think we're certain the market is improving significantly. We're seeing clinics that had to close down in 2020 reopen up, order tips, start to treat patients, see improved patient flow. So, you know, we're optimistic that, you know, we're on the uptick here, and that should translate into, you know, a better year for us from a financial perspective.

Okay. And then as far as OpEx going forward, it sounds like – the baseline from 2020 carries through to 2021 plus, I don't know, 10% to 30% based upon the clinical work as well as perhaps additional resources needed for a higher trajectory on the revenues?

Yeah, I think 10% to 30% is probably a good range in terms of increasing OPEX for 2021. We've worked hard, as you know, over the last 18 months or so to sort of reduce the cash burn and start to level set the financial statements and improve just operational efficiency. And so we're going to continue to improve that as we go into 2021. And while we'll see an uptick in 2021 on the R&D line due to the trial being mostly conducted this year, these aren't tremendously expensive trials. And so it won't be significant.

Got it. And then lastly for us is just walk us through the share count as of current inclusive of the additional shares from end of year or beginning of year.

Yeah, so we ended 2020 with 10.3 or we filed the 10K with 10.3 million common shares outstanding, which reflects the common shares issued in the January financing.

Okay. Got it. Perfect. That does it for us. Thanks for taking the questions.

Great. Thanks so much for joining, Jeff. Appreciate it.

Yep.

And our next question will come from Ben Hainer with AGP.

Good afternoon, guys. Thanks for taking the questions, and congrats on the transformation and the progress over the last year or so.

Thanks so much, Ben. Welcome, and thanks for joining.

Yeah, no problem. So you said you're at 20 or so sites, a handful more kind of going through the process. It sounds like the way you're characterizing the enrollment, it's effectively on track with what you expected there. Is that the right read? And then also, is there a chance that you ultimately don't get to the 30 sites just as you know, maybe some of these sites that are more impacted, you know, from COVID or other matters just ultimately don't get ramped up before you enroll the thing.

Yeah, I think it's fair to say, you know, we're at where we expect it to be. It's always a ramp up when you begin, and we announced enrollment on January 21st, so it's been a little less than two months here. And then it tends to accelerate. as you get all the sites up and screening and treating patients and dealing with the flow through of, you know, the various advertising campaigns that are going on locally around each of our clinic sites. And so, you know, right now we feel like we're on track to hit our enrollment target of the end of the second quarter or, you know, very early in July. Okay. So by the 4th of July, you'll have it all enrolled, right? We certainly hope so. And we're certainly on track for that right now. You know, we obviously always wanted to go quicker. We knew we were going to face certain challenges coming into, you know, the execution of the trial from an enrollment and follow-up perspective in this environment. But I think we learned a lot in 2020 having run the feasibility study and, you know, tried to incorporate those learnings into the you know, this very important study for us, and I think we're on track. And I expect we'll get, you know, right up to or at or very near to the 30 sites at the end of the day.

Okay. That's definitely helpful. And then, you know, just looking at some of these secondary endpoints, and it looks like you've kind of altered them or at least a couple few of them since the original trial design came out and, you know, before you boosted the patient count. Can you maybe talk about some of these secondary endpoints and why you added some or certain ones are chosen? I mean, it seems like there are a few that maybe could help docs kind of give the patient guidance on when they could expect results. I mean, was that a consideration? What went into some of these changes?

Yeah, I think the most important change is really the addition of the three-month time point. And that was really done for precisely the reason you just highlighted, which is, you know, if as we expect, you know, sort of to get to a positive outcome from this trial, it will be important from there as we achieve an FDA clearance and begin to be able to finally market on label in the United States and elsewhere for SUI, that, you know, physicians have a sense for the onset of improvement in symptoms or leakage. And by adding the three-month endpoint, it really gives a nice time history of improvement because we can look back at voiding episodes. We can look at mean change from baseline on the Padway test. in addition to responder rates, and really get a sense of the time sequence of outcome. And that can be communicated to patients once we're on label from the physician in terms of setting expectations. Because as you know, ours is a tissue mechanism of action that, you know, based on our history and the many clinical trials we've run and the, you know, sort of vast commercial experience we have today, we know that it takes 30 to 90 days for the tissues to remodel and for women to start seeing, you know, clinical improvement in their symptoms. And so that's the main change to is really adding the three-month time point, you know, to the Padway test and to the, you know, voiding diarrhea. Got it. That makes a lot of sense.

And then, you know, obviously, SUI is an embarrassing condition. So, you know, it makes sense that people are suffering from it or kind of reluctant to discuss. And that's why you get the kind of broad spectrum of estimates in terms of, you know, what's the number of women in the U.S. that have it. But I did notice it sounds like you're looking more at, you know, 25 to 30 million based upon some of the prepared remarks and what you said in the press release. Whereas, you know, we caught you previously talking more of kind of, you know, the 11 million range. Is that, you know, maybe including a little bit more of the mixed UI or why the higher figure now?

Yeah, so, yeah, it's a great question, and thanks for asking it because I think it's important to clarify that when we talk about, you know, 25 to 30 million women in the U.S. with, you know, with stress incontinence, it's with some form of stress incontinence, and, you know, as you know, there's, you know, pure stress incontinence, there's pure urge incontinence, and then there's this enormous population of patients who have, a little bit of both, which they refer to as mixed. And so when we talk about 25 to 30 million women in the United States have some form of stress urinary incontinence, it's including pure SUI and most of the mixed patients. But as you drill down on that, and really what we're focused on with stress in particular is making sure we're identifying patients who have predominant SUI And so when we talk about 10, 11, 12 million of those patients who would be candidates for a VIV procedure, we're really honing in on those patients who are predominantly SUI. And there are a variety of clinical mechanisms to differentiate whether a patient has more stress incontinence or more urge incontinence. And so that's the difference in those two numbers, Ben.

Okay, that makes sense. You know, obviously, either way, it's a fairly massive market. It certainly is. Good deal. Well, I think that's all I had for this afternoon.

Good luck with the enrollment, and thanks for taking the questions again. Really appreciate it. Thanks, Ben. Thanks for joining, and appreciate everybody joining the conference call today. Thanks so much. Thanks so much.

An answer session as well as today's conference call. Thank you for attending today's presentation. You may now disconnect.