ViewRay, Inc.

Good day, and thank you for standing by. Welcome to the second quarter 2021 ViewRay Incorporated 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 this session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Ashley Kluth, Head of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to V-Ray's second quarter 2021 financial results conference call. Joining me today are Scott Drake, our president and chief executive officer, and Zach Stassen, our chief financial officer. Earlier today, V-Ray issued a press release and presentation for today's call. The presentation can be viewed live on our webcast or downloaded from the financial events and webinars portion of our site at www.investors.vrae.com. Today's call is being broadcast and webcast live, and a replay will be available on our website for 14 days. Before we begin, I would like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors. For a description of these risks and uncertainties, please see V-Ray's annual report on Form 10-K for the fiscal year ended December 31, 2020, and its quarterly reports on Form 10-Q as updated periodically with the company's other SEC filings. Furthermore, the content of this conference call contains time-sensitive information. accurate only as of today, August 5th, 2021. V-Ray undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I will now turn the call over to Scott.

Thank you, Ashley. Good afternoon, everyone, and welcome to our Q2 call. Today, we'll begin with key patient metrics. We'll discuss our second quarter results and highlight recent events. We'll share some color on the value of Meridian directly from our customers. Zach will cover our financial results and guidance for the remainder of 2021, and then we look forward to answering your questions. If you're not on the webcast, I'll be referring to slides from the presentation on our investor relations site. Turning to slide three, our mission is to treat and prove what others can't. We now have 45 Meridian systems treating patients, We've surpassed 14,300 patients treated and have about 3,200 patients with clinically reported outcomes. This growing body of clinical data is critical to our efforts to change and improve the paradigm of care. Let's begin with our Q2 results on slide four. We continue to have solid performance. We delivered seven meridian orders in the quarter versus four in Q2 2020. In the first half of the year, we have booked 14 orders, a step up from eight in the first half of last year. Our backlog grew $46 million, or a nearly 20% increase from Q2 last year, bringing the balance to $278 million. Revenue was about $15 million for the quarter, based primarily on two revenue units. And finally, from a cash perspective, We used approximately $15 million in the quarter. This represents a $13 million sequential improvement from Q1. We ended the quarter with $167 million of cash on hand and continue to drive efficiencies in our business. Beyond financial results, we continue solid execution on our clinical, innovation, and commercial pipelines. Everything begins with and flows from the amazing clinical results our customers deliver with Meridian. Turning to slide five, it's important to stay anchored in two critical customer desires. First, the number one thing our customers desire is meaningful clinical data. And second, they are very clear about how they define clinical success. Customers want to deliver an ablative dose with tight margins, no implants, five or fewer fractions, and low to no grade three or higher toxicity. These elements represent the critical Meridian 5. Meridian continues to drive the only meaningful body of work that meets these criteria. Customer input has shaped our clinical pipeline and goals, which are twofold. Number one, to expand the utilization of Meridian Smart, and number two, become frontline therapy. The cycle of more clinical proof leading to more therapy adoption is greatly benefiting our customers' cancer programs and patient care. Slide six highlights some recent events in our three pipelines. Our customers have made significant progress on the clinical front, specifically on the SMART-1 and LungSTAR trials. We'll take a closer look at these trials in just a moment. On the innovation front, We're driving toward our goal of sub-20-minute treatment times and improving workflow and automation. In the future, you can expect enhanced MRI imaging, increased dosing, a brain treatment package, and remote access. We are concurrently driving cost efficiencies to improve margin over time. Efforts on the clinical and innovation pipelines are leading to commercial success. Our early pioneer customers who have purchased incremental systems such as AOMC have led others to follow suit. We are seeing more and more customers purchase incremental systems. Recently, customers such as Penn State, Jefferson Health, Henry Ford, and Genesis Care have doubled down on Meridian. The incremental system purchases are direct evidence of the value of Meridian. While we are bullish on our therapy adoption path, I will point out that the pandemic continues to have a dampening effect on our business from an order and revenue standpoint. I'm very proud of the work our team has done in the face of these headwinds and how they have set us up for future growth. We have solid traction in each of our three pipelines. Changing the paradigm of care is underway. Now diving deeper into our clinical pipeline on slide seven. Everything begins with and flows from our clinical value. We view the process of developing clinical evidence longitudinally. Phase one represents feasibility work that can result in an interesting signal that leads to phase two confirmatory trials. When required, effort progresses to definitive phase three. Currently, our customers are conducting over 60 trials. The breadth and depth of this work reflects extraordinary clinical curiosity. Other than the SMART pancreas trial, our pipeline is predominantly investigator-led. Let's turn to slide eight and highlight recent activity in two of these studies. Last month, MCI enrolled initial patients in the SMART-1 trial, which is being led by Dr. Michael Chung. Conventional LINACs are used to deliver single-fraction therapy in tumors distant from vital structures such as peripheral lung. SMART-1 is a feasibility study to demonstrate safe and effective delivery of ablative doses in a single fraction to multiple tough-to-treat tumors, including lung, pancreas, liver, kidney, adrenals, and lymph nodes. Another advancement in our clinical pipeline is in central lung. Central and ultracentral lung represents a sizable opportunity for Meridian to treat patients with limited treatment options. Alarming numbers were published in April regarding a multicenter, prospective central lung study on conventional LINACs. 34% grade 3 or higher toxicity were reported, along with a stunning 15% grade 5 or patient death. the limitations of conventional radiation therapy are sadly evident for these patients. LungSTAR is a prospective multi-center phase two trial led by Dr. Rupesh Kotecha at MCI, intended to demonstrate that Meridian can safely and effectively treat these patients. Preliminary Meridian data published in high-risk lung cancer patients reported only 8% grade three toxicity and zero treatment-related death. This is a positive signal the investigators and we hope to confirm. As you can see, we're striving to do in lung what we're doing in pancreas. Our goal is to open new avenues of Meridian therapy for patients in need. As we've stated many times, Meridian's clinical value unlocks strategic and economic value. Let's take a closer look at this value chain through the eyes of our customers. On slide nine, we see the department chairs and executives from two leading cancer centers, Dana-Farber Brigham and Women's and the Miami Cancer Institute. During the quarter, we held a customer roundtable to demonstrate how Meridian programs can deliver clinical value, which translates into strategic and economic value. This webinar is available on our website. Each customer shared their experience, and they were effusive in their praise. We were delighted to hear their quotes regarding Meridian, such as game-changer, mind-blowing, exceeded all clinical and financial expectations, and highlights around net new patients due to Meridian, especially those they could not or would not treat on any other system. More specifically, turning to slide 10, Dana-Farber referenced several important facts that are illustrative to what we see time and again with our customers. For example, they expected to treat 50% of Meridian patients with SBRT, and they are actually treating 98%. Conversely, they expected to treat 50% of patients via IMRT versus actual results of only 2%. They expected 13% net new patients and achieved 25%, a significant number of them coming to the program specifically because of Meridian. Perhaps most importantly, they're thrilled by the fact that they are treating many patients on Meridian that they would not or could not treat on any other system. We heard similar thoughts from MCI. About a quarter of patients treated on Meridian came from outside their traditional catchment area. By year three, they have nearly doubled the expected ROI, they are adapting a significant percentage of fractions, and believe that Meridian will be APM-friendly. These proof points give us confidence that we're on the right track. Turning to slide 11. Our customers' feedback on Meridian's clinical, strategic, and economic value Combined with the momentum in our clinical, innovation, and commercial pipelines gives us the confidence to accelerate investments in our R&D and commercial teams. We've proven that a successful Meridian program can and increasingly does lead to another. These investments will help us accelerate customer success and system enhancements. Obviously, our goal is to speed the virtuous cycle of a successful Meridian program leading to more successful Meridian programs. With that, I'll turn it over to Zach to review our Q2 financials and guidance for 2021. Zach Lowenstein Thank you, Scott.