Edited Transcript of TRXC earnings conference call or presentation 16-Mar-20 8:30pm GMT

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MIAMI Mar 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Transenterix Inc earnings convention name or presentation Monday, March 16, 2020 at eight:30:00pm GMT

TransEnterix, Inc. - President, CEO & Director

TransEnterix, Inc. - Interim CFO

Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis

* Mark R. Klausner

Good afternoon, and welcome to the TransEnterix Fourth Quarter and Full Yr 2019 Enterprise Replace Convention Name. As a reminder, at the moment's name is being webcast reside and recorded.

(Operator Directions) Please be suggested that at this time's convention could also be recorded. (Operator Directions)

I might now wish to introduce your host, Mr. Mark Klausner of Westwicke. Please go forward, sir.

Mark R. Klausner, Westwicke Companions, LLC - Managing Companion [2]

Thanks, operator. Good afternoon, everybody, and thanks for becoming a member of us on immediately's name. On the decision with me right now are Anthony Fernando, President and Chief Government Officer; and Brett Farabaugh, Interim Chief Monetary Officer.

Earlier than we start, I want to warning listeners that sure info mentioned by administration throughout this convention name together with any steerage offered are forward-looking statements coated underneath the protected harbor provisions of the Personal Securities Litigation Reform Act of 1995. Precise outcomes might differ materially from these said or implied by our forward-looking statements on account of dangers and uncertainties related to the corporate's enterprise. The corporate undertakes no obligation to replace the knowledge offered on this name.

For a dialogue of dangers and uncertainties related to TransEnterix' enterprise, I encourage you to evaluation the corporate's filings with the Securities and Trade Fee, together with the Type 10-Okay anticipated to be filed in the present day and different filings we make with the SEC.

Throughout this name, we may also current sure non-GAAP monetary info associated to adjusted internet loss and adjusted earnings per share. Administration believes that non-GAAP monetary measures taken together with U.S. GAAP monetary measures present helpful info for each administration and buyers by excluding sure noncash and different bills that aren't indicative of the corporate's core working outcomes. Administration makes use of non-GAAP measures to match our efficiency relative to forecast and strategic plans, to benchmark our efficiency externally towards rivals and for sure compensation selections. Reconciliations from U.S. GAAP to non-GAAP outcomes are introduced within the tables accompanying our earnings launch which might be discovered within the Investor Relations part of our web site.

It's now my pleasure to introduce TransEnterix' President and Chief Government Officer, Anthony Fernando.

Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [3]

Thanks, Mark, and thanks all for becoming a member of us at the moment. On in the present day's name, Brett will briefly evaluate our fourth quarter monetary efficiency, after which I'll remind you of our key strategic priorities, the progress we've got made towards these priorities over the previous few months, and share our plans for the remainder of 2020. With that, I want to hand the decision over to Brett.

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Brett Farabaugh, TransEnterix, Inc. - Interim CFO [4]

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Thanks, Anthony. For the three months ended December 31, 2019, the corporate reported income of $700,000 as in comparison with income of $7.5 million within the Three months ended December 31, 2018. No income was recorded for This fall system gross sales. Devices and equipment income within the fourth quarter was $286,000. Service income within the quarter was $402,000. Gross margin for the fourth quarter was damaging $10.2 million because of the decrease income within the quarter and a $7.four million stock write-down because of the revised business technique that we employed within the fourth quarter.

R&D bills within the quarter have been $four.6 million as in comparison with the prior yr interval at $6.four million as a consequence of decrease personnel and know-how charges.

Gross sales and advertising bills within the quarter have been $5.6 million from $7.9 million within the prior yr interval. Bills have been decrease because of the gross sales restructuring accomplished in the course of the quarter, which end in decrease personnel and consulting prices.

Common and administrative bills within the quarter have been $Three.eight million, down from roughly $Three.9 million. Money and money equivalents, restricted money and short-term investments as of December 31, 2019, was $10.6 million. As Anthony will share with you later, we've got subsequently added further capital to the stability sheet. Now I'll flip the decision again over to Anthony. Anthony?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [5]

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Thanks, Brett. Earlier than I share our priorities and progress, I need to remind you of our distinctive market positioning and the inspiration we now have constructed for the Senhance system. We're the one firm with a technique that's targeted solely on changing laparoscopic surgical procedure to robotics. To execute on this technique, our system was designed to take care of the advantages of laparoscopy, present a robotic expertise that's naturally snug to laparoscopies and improve the laparoscopic surgical expertise by way of enabling applied sciences distinctive to our platform. This mix of technique and product providing permits us to focus on hospitals, surgeons and procedures that aren't economically viable for different robotic approaches, both available on the market at present or in improvement. We additionally understand how difficult it's to develop a robotic platform that may carry out surgical procedure safely and reproducibly and to navigate the worldwide regulatory panorama.

With no different firm targeted on digitizing laparoscopy and with our regulatory clearances behind us in addition to our significant medical expertise, we consider that we've got a robust head begin to understand this potential. Particularly, we now have regulatory clearances in Three key geographies; and importantly, because the Senhance system was cleared within the fourth quarter 2017, we have now acquired 7 further FDA clearances, together with probably the most just lately acquired clearance for machine imaginative and prescient, which is the primary of its sort in robotic surgical procedure. The Senhance system is performing persistently for surgeons, supporting robust medical outcomes. We've an growing variety of foundational websites performing a big and rising variety of surgical procedures with a number of surgeons throughout a number of specialties, and we've got continued to broaden the indications to be used of the Senhance, so as to add high-value devices and have a -- and a line of sight to including augmented intelligence options to Senhance system in 2020.

Regardless of all we've completed immediately, we nonetheless have work to do to construct a profitable business enterprise. There are four key areas that we're targeted on in 2020. Market improvement, medical validation, portfolio enlargement and capital funding. The primary space of emphasis is market improvement, which includes constructing consciousness of the Senhance system and successfully demonstrating the medical and financial worth within the market by growing the visibility of the success that our clients are having with the Senhance. To do that, we're targeted on the next: growing the constant utilization of the system; growing the variety of surgeons utilizing the system and increasing into further specialties; implementing new Senhance packages at strategic websites throughout the U.S., Europe and Japan; growing the variety of surgeon advocates; driving expanded medical knowledge and speaker packages.

The second space of emphasis is the event of medical proof. Whereas we've got seen most of the Senhance worth propositions turn into actuality within the subject, particularly at our foundational websites, it's important that we proceed to increase real-world proof of our capacity to help these beliefs, particularly that Senhance process prices which might be just like laparoscopy and subsequently, considerably decrease than different robotics platforms. Senhance packages, whereas sustaining OR effectivity, notably when it comes to case occasions and studying curve, Senhance can reduce bodily and cognitive fatigue, each when it comes to the influence it may well have on surgical efficiency in addition to the standard of life and longevity of the surgeon's profession.

And eventually, that Three-millimeter devices on the Senhance will allow an extra discount within the invasiveness of a number of high-volume procedures, which can impression cosmesis, affected person restoration and ache.

All of those themes align extraordinarily properly with the challenges that hospitals are dealing with immediately. And by intentionally accumulating proof on these fronts, we'll improve our potential to develop gross sales sooner or later. The third space of emphasis is the enlargement of our instrument providing, process indications and providing differentiated applied sciences. The restricted launch of our 5-millimeter articulated devices in Europe is ongoing, and as soon as full, we anticipate to launch these devices in Europe and subsequently work in the direction of regulatory approval within the U.S. We even have ongoing packages to increase our regulatory indications to common surgical procedure that features bariatrics. We have now accomplished the instances and picked up knowledge and now compiling our 510(okay) software, which we anticipate to file within the second quarter. We now have already obtained a CE Mark for pediatric use of the Senhance within the first quarter of this yr.

Lastly, we'll proceed to pursue further initiatives in digitizing surgical procedure by means of our clever surgical unit, or ISU, to increase the capabilities of Senhance via the mixing of augmented intelligence and machine studying. Our remaining space of focus is on capital funding, an space the place we now have made vital progress in current months, permitting the corporate to proceed to execute towards the initiatives that I spoke about earlier, and show the medical and financial worth of the Senhance system.

Now let me talk about what we now have completed since our third quarter name in November, beginning with our market improvement efforts. With respect to increasing the variety of websites utilizing Senhance, Three new hospitals have initiated Senhance digital laparoscopy packages to date in 2020. Ochsner Well being System in Louisiana; Klinikum Esslingen, a hospital in Southern Germany near Stuttgart; Kitakyushu Common Hospital, the hospital in Southwestern Japan. And as well as, we've signed 2 further agreements with hospitals who will start their Senhance packages through the second quarter. St. Marianna College Faculty of Drugs, Tokyo Hospital, the hospital within the Higher Tokyo Metropolitan space; LKH Feldkirch, a serious college educating and multi-specialty hospital in Austria.

On the finish of February, we had accomplished 337 instances in 2020. This was a 28% improve in comparison with the identical interval within the prior yr. Moreover, we've got added 2 extra foundational websites to our portfolio, bringing the present complete to 9 and proceed to make progress when it comes to Senhance medical adoption. One other key focus inside our market improvement efforts is growing the variety of surgeon advocates talking at impactful peer-to-peer Senhance occasions. In December, we hosted a webcast dialogue with a number of of our U.S. surgeon customers. Every of those surgeons highlighted their expertise with the Senhance system and the way it matches into their follow and their hospital surgical robotics program. For these of you who haven't had the prospect to observe this, I might encourage you to observe the video replay, which is out there within the Buyers part of our web site.

Shifting on to our medical proof efforts. Whereas we've got seen lots of this enhanced worth propositions develop into actuality within the area, particularly at our foundational websites, it's essential that we proceed to broaden real-world proof of our means to help this perception. We're presently working with a number one well being care financial agency with the objective of publishing impactful knowledge.

Shifting gears to our indication enlargement efforts. Since November, we have now made vital progress associated to our product portfolio initiatives. As famous on Friday, March 13, we introduced that we've acquired FDA 510(okay) clearance for the Clever Surgical Unit, enabling augmented intelligence and machine imaginative and prescient capabilities on the Senhance within the U.S. We're thrilled with the velocity at which we have been capable of obtain this clearance and sit up for a pilot launch within the second quarter. As well as, as introduced in mid-February, we acquired CE Mark approval for pediatric use of Senhance. We're enthusiastic about this chance and look ahead to working intently with main European hospitals to serve the wants of their pediatric sufferers. The Senhance System is designed to maximise management of devices as small as Three millimeters, and be suitable with small 5-millimeter scopes, whereas additionally retaining the sense of contact via haptic suggestions. This makes our know-how uniquely positioned to satisfy the necessities of pediatric surgeons. Because it pertains to further indications, we proceed to pursue basic surgical procedure, together with bariatric indication within the U.S. and anticipate to submit our software within the second quarter.

I might now like to offer an replace on our capital funding standing. Since our final name, we've got been very lively in elevating capital to fund our enterprise and help our long-term technique for driving the adoption of Senhance. Because the starting of 2020, we have now raised roughly $11.6 million at a mean worth per share of $1.73 via our ATM program. On February 24, 2020, we entered right into a Collection B warrant change settlement with holders of Collection B warrants initially issued as a part of a public providing in Might 2017. Beneath the phrases of the settlement, every Collection B warrant is canceled in trade for zero.61 of a share of the corporate's widespread inventory. The warrant holders collaborating within the change at present held roughly Three.four million of the roughly Three.6 million Collection B warrants excellent and acquired an combination of two,040,757 shares of widespread inventory. The aim of the warrant trade was to scale back the potential of a dilution overhang going into an fairness financing.

In February, we introduced a standard inventory buy settlement with Lincoln Park Capital. This settlement supplies the corporate as much as $25 million, which might characterize the proceeds from the issuance of shares of the corporate's widespread inventory over a 36-month interval to Lincoln Park. On March 5, we introduced our plan to launch an underwritten fairness financing via Ladenburg Thalmann. We've subsequently closed the transaction, offering us with gross proceeds of $15 million. Beginning in Q3 2019, we've been evaluating one of the simplest ways to restructure the group at the side of our new technique and focus for 2020. Since this time, we've got lowered our headcount by roughly 40% in comparison with the height in 2019. Our present headcount is 135 globally. With respect to our annual spend, we anticipate that the numerous modifications we've got made will scale back our money burn by roughly 35% in comparison with 2019. Because of these value optimization measures, we consider that present money available would give us the capital to run the enterprise into the fourth quarter of 2020.

Earlier than discussing my ideas on the stability of 2020, I want to touch upon our strategic options course of and the impression of COVID-19 on our group. We initiated exploring strategic options in October of 2019. Since then, we've actively explored a number of potential value-driving initiatives, together with the sale of the corporate, the strategic financing of the corporate, a strategic partnership, a collaboration or another type of business relationship. Right now, we've decided that the sale of the corporate is just not at present a viable choice, though we're persevering with to pursue business partnerships and strategic financing choices.

Turning to the influence of COVID-19 on our enterprise. We do have a cloth portion of our operations situated in Milan, Italy. Most significantly, none of our staff have been personally impacted by the illness, and we'll proceed to work remotely till the state of affairs is resolved. Our methods are manufactured at a contract manufacturing facility in Milan. And provided that staff are working remotely, the meeting of latest methods has been disrupted. Nevertheless, we presently have sufficient techniques able to be shipped, and we don't anticipate that system availability will trigger any new system set up to be delayed or canceled. We've, nevertheless, seen an impression on case volumes and surgeon coaching. Given the varied journey restrictions which were put in place and the closure of our Milan coaching middle, we now have been unable to help new installations as a consequence of delays in new surgeon consumer coaching in current weeks. Whereas it's unclear as to when the journey state of affairs will probably be resolved, we'll proceed to work diligently to get as many surgeons up and operating as shortly as potential throughout our international put in base of techniques. Now shifting on to our expectations for 2020 with every of our focus areas.

Available on the market improvement entrance, we can be specializing in persevering with to extend the variety of foundational websites in an effort to drive vital medical case quantity progress. As a reminder, foundational websites are these which might be performing procedures at an annualized fee of higher than 100 procedures per yr. As we said beforehand, we intend to provoke roughly 12 Senhance packages through the first Three quarters of the yr and are happy with the progress we've got made thus far towards this objective. The bigger base of techniques and customers will permit us to meaningfully improve the variety of audio system and advocates who can cascade our key messages by way of publications and talking engagements.

Shifting on to medical proof. In 2020, we will probably be specializing in the event of well being financial knowledge, primarily round the fee influence of Senhance relative to conventional laparoscopy in addition to different surgical robotic techniques. As well as, we'll proceed to develop knowledge on using Three-millimeter devices and the good thing about smaller incisions.

Shifting to our portfolio enlargement efforts. Following up on our current approval on the ISU, we'll proceed to pursue incremental options, which might be out there inside the ISU, specifically the next-generation of further machine imaginative and prescient and augmented intelligence capabilities, which we plan to submit in Q3 to the FDA. We will even give attention to the enlargement of our indications to be used with the system, with the preliminary efforts dedicated to a common surgical procedure indication, which we anticipate to file the 510(okay) submission to the FDA in the course of the second quarter of 2020.

With respect to our capital funding wants, as famous earlier, we at present have funds obtainable to help the enterprise into the fourth quarter 2020, and we'll proceed to execute on our plan.

Shifting to our monetary outlook for 2020. Because of the technique we've got outlined, our main focus this yr shouldn't be on producing close to time period income, however relatively constructing the business and medical basis to help business actions sooner or later. Having stated this, we do anticipate revenues for the complete yr 2020 to be within the vary of $Three million and $Three.2 million, pushed primarily by leasing, present system service contracts, and devices and equipment income. Any conventional system gross sales would materially add to this expectation.

To recap. We're very excited concerning the alternative that exists for Senhance, and I am very pleased with what our staff has been capable of accomplish within the brief time since I stepped in as CEO in November of 2019. We've got bolstered our stability sheet, enabling us to proceed to execute on our strategic imaginative and prescient into This fall. We have now added to our put in base of techniques with Three hospitals initiating packages to date in 2020 and with one other 2 set to provoke within the close to time period. We've progressed the capabilities of Senhance, most notably with the current FDA approval of the ISU, which we'll proceed to leverage going ahead. We have now broadened applicability of Senhance with the CE Mark for pediatrics. Trying to the stability of 2020, with near-term capital funding wants taken care of, we'll proceed to execute inside our focus areas: market improvement, medical proof and portfolio enlargement efforts. I might now wish to open the road for questions.

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Questions and Solutions

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Operator [1]

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(Operator Directions)

Our first query comes from the road of Jeffrey Cohen of Ladenburg Thalmann.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [2]

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So I am going to maintain it simply to some questions. So that you stated earlier that the whole case quantity in 2020 was, did I hear that right, 337?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [3]

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Sure, that is right. That is for January and February, simply the primary 2 months.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [4]

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Received it. Did you disclose something so far as 2019 on case quantity?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [5]

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Sure. So 2019, for the complete yr, it was barely over 1,600 instances.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [6]

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Okay, good. And may you give us a greater sense of particular forms of procedures that you simply're seeing materials quantity in, no less than throughout 2019, if not 2020?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [7]

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Sure, I feel -- so in case you take a look at 2019, Jeff, we -- majority was basic surgical procedure, intently adopted by gynecology. After which we did even have some urology and colorectal instances there. However I feel simply in case you take basic surgical procedure and gynecology, they accounted for about 70% of general case quantity.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [8]

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Received it. After which so far as the Clever Surgical Unit, you are going to file that 510(okay) within the first half of the yr? You stated you'd submit within the second quarter, is that proper?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [9]

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So the Clever Surgical Unit, we truly submitted it in January and we obtained it authorised final week.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [10]

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I am sorry. I used to be complicated that with the IFU.

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [11]

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Sure, that is the ISU. So we had 2. So we've got a follow-on submission. We acquired the preliminary options authorised, and now we now have a follow-on submission that we plan to submit within the third quarter, which can add extra purposes to that very same gadget.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [12]

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Okay. And what are your plans for including that onto the prevailing platform on the market? That might be a software program improve or a software program buy?

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Anthony Fernando, TransEnterix, Inc. - President, CEO & Director [13]

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So will probably be a software program improve and in addition a hardware element that must be sorted out. So initially, given the set up base, small set up base within the U.S., we plan to improve this, in order that we get this into all of the websites as a sort of a pilot launch in all probability by second half of Q2, we'll begin to get it out as a pilot launch within the U.S., after which we'll go from there taking a look at how greatest we will combine it into all of the methods globally because the regulatory approvals come via.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Analysis Division - MD of Fairness Analysis [14]

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Obtained it. Okay. So we might anticipate to listen to extra towards the again half of the yr?

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