Corindus Vascular Robotics, Inc. (NYSEMKT:CVRS) Q3 2018 Earnings Conference Call November 6, 2018 4:30 PM ET
Lisa Wilson - IR
Mark Toland - CEO
David Long - CFO
Josh Jennings - Cowen & Company
Rick Wise - Stifel Nicolaus
Good afternoon. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corindus Vascular Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]
Thank you. Lisa Wilson, Investor Relations for Corindus, you may begin your conference.
Thank you, Emily. Welcome to Corindus Vascular Robotics third quarter 2018 earnings call. This is Lisa Wilson Investor Relations for Corindus. With me on today's call are Corindus's, Chief Executive Officer, Mark Toland; and Chief Financial Officer, David Long.
This afternoon, the Company issued a press release detailing financial results for the three months ended September 30, 2018. This press release and a webcast of this call can be accessed through the investor's section of the Corindus Web site at corindus.com.
Before we get started, I would like to remind you everyone that any statements on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the Company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.
And these statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. These forward-looking statements including without limitation for indices, activities, financial and operational expectations, including the expected to timing of commercial activities.
Timing of pre-launch clinical studies, Corindus's ability to expand its technology platform and they achieved the advances necessary for telestenting and remote procedures including in human Corindus's ability to expand its technology platform for use in other segments of the vascular interventional market including neurointerventional and other more complex Cardio Act Interventions obtaining necessary regulatory approvals for the use on humans and marketing of its products in the United States and in other countries and anticipated collaboration are based on information available to Corindus management as of today and involve risks and uncertainties including those described in this sections titled risk factors in the Corindus's filings with the Securities and Exchange Commission including its most recent and report on Form 10-K and Quarterly Reports on Form 10-Q as well as reports on Form 8-K, such forward-looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward-looking statements Corindus specifically disclaims any intent or obligation to update these for looking-statements except as required by law.
A telephone repay will be available shortly after completion of this call, you'll find the dial-in information in today's press release. The archive webcast will be available for one-year on our Web site corindus.com.
For the benefit of those who may be listening to the replay or archive webcast. This call was held recorded on November 6, 2018. Since then Corindus may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings.
And with that, I'll turn the call over to Corindus's CEO, Mark Toland.
Thank you, Lisa. Good afternoon, everyone. And thank you for joining us. Our third quarter was marked by several accomplishments and developments that continue to position Corindus for long-term success. The first is the completion of our remote PCI preclinical work. This allows us to remain on track to conduct the world's first in-human Remote Robotic PCI procedure in India by the end of the year. The second key development is the continued progress we're making with our neurovascular program. Assistant by our Neurovascular Steering Committee, we are preparing our neuro FDA submission by early 2019. And finally, we are making real progress on the peripheral front with greater acceptance of the benefits of the technology.
I'll begin with an update on our remote work. We continue to make significant technical advancements in a remote telestenting. On our last call, Dr. Ryan Madder from Spectrum Health in Michigan, highlighted the shortage of interventional as globally and the need to provide access to care via Remote Robotic Intervention.
During the third quarter, we reached two critical milestones in our remote development work. First, we successfully completed our preclinical work with the Mayo Clinic and Dr. Madder. We performed a number of cases from various statuses including one case where the physician was 103 miles away from the procedural site. And importantly, the Mayo Clinic performed a live remote PCI demonstration in front of thousands of attendees at this year's TCT Conference, the largest medical conference for cardiac physicians. These accomplishments position us well to successfully perform the first in-human remote PCI by the end of the year at Apex Heart Institute in India. India has a significant shortage of physicians who serve roughly four times the population of the U.S.
In our view, India is the perfect place to demonstrate the first and only remote PCI ever performed Dr. Tejas Patel who will be the operator has extensive robotic experience having done over 250 robotic cases this year alone. The K series is designed to build upon the safety and feasibility results of remote telestenting and tele-treatment established in our preclinical work conducted earlier this year.
On the neuro front, our new CMO and the neurovascular space Dr. Quill Turk has been deeply engaged in shaping our new neurovascular strategy. We wanted to pursue a few growth opportunities. We have been working on our FDA submission for CorPath GRX for neurovascular clearance and plan to submit in early 2019 for a potential clearance in the first-half of 2019. This would allow us to start commercializing neurovascular robotic systems in the second-half of this year.
Concurrently, we plan to leverage our remote procedural success and apply the technical capabilities of remote technology to deliver treatment for ischemic stroke in a hub and spoke model. We all know time is brain and speeding up time to treatment by enabling a physician to conduct a procedure from virtually anywhere could revolutionize how stroke victims are treated.
I'm excited about this progress we're making. As you may recall, that on our prior earnings call, we indicated that we had commenced co-development discussions with large device manufacturers on a co-development strategy and how we might commercialize CorPath GRX for the neuro space in 2019.
Given current interest levels, we have chosen a higher city group to assist us in this process. We know there's momentum surrounding our technology by the ground swell of interest, we are receiving at several industry conferences during the quarter. There are a variety of vascular specialties interested in remote applications and a neuro vascular space in particular.
Let me share with you what we are seeing and hearing from the clinical community. You can feel the enthusiasm at the Transcatheter Cardiovascular Therapeutics conference in San Diego, also known as TCT. This year mark the 30th anniversary of TCT, the largest cardiovascular conference in the world, attended by almost 10,000 healthcare industry professionals. I've attended TCT for 16, of those 30 years this year, mark the first year in which robotic technology was at the forefront. The conference opened with three consecutive live robotic cases performed in a row.
Dr. Martin Leon, the Program Director of TCT started the conference with a series of robotic cases that included Dr. Bill Lombardi from the University of Washington performing a robotic CTO PCI one of the most complex cases in cardiology, and also one of the lengthiest procedures conducted with a high radiation dose.
Dr. Sharon Lu from the University of California, San Diego performing a robotic complex PCI and Dr. Gary Sandhu from Mayo Clinic, successfully performing the first ever live remote PCI or telestenting conducted at a conference in a porcine model.
TCT represented both the technological and clinical community validation of vascular robotics, it's available today for complex PCI cases, and we expect that in the near future, it will be widely available as a remote procedure, as the technical ability to perform cases for multiple miles away as already been demonstrated in porcine models.
It's clear that there has been a major shift and acceptance of robotic intervention as a key emerging component of treatment protocols. All this just the vascular robotics is becoming more widely accepted within the clinical community.
Leading institutions and major KOLs are not only starting to adopt robotics as part of their treatment protocols, but also beginning to demonstrate the advanced capabilities of robotics in front of thousands of their peers similar to TCT.
On the neuron, peripheral fronts, we see equal enthusiasm. At the 15th annual meeting of the Society for Neurointerventional Surgery in-depth conversations with the physician committee -- community revealed a significant unmet need for Telerobotic stroke treatment in robust enthusiasm for new and innovative technologies that could disrupt the existing treatment model and the peripheral conference dedicated to critical LIMA ischemia and amputation prevention.
Dr. Jihad Mustapha, the Course Director for the meeting and a pioneer in CLI treatment presented a tape case of robotic assistant CLI to a packed audience. In a session, he emphasized the valid robotic assistance for enhanced device control and the significant reduction, radiation exposure and time and lead for operators performing long and highly complex peripheral procedures.
I am confidently saying that we are starting to see a real shift within the physician community in terms of support of this technology. There is a better appreciation for precision of robotics, momentum is building an acceptance of the technology is gaining critical mass, we expect this will help administrators of hospitals make the choice to invest in the technology. And we are starting to hear just that in the ongoing dialogue we're having with hospitals.
So let me now turn to our quarterly performance where we are beginning to see success in the commercial sphere. Our revenues for the quarter totaled 3.0 million given the prolong selling cycle -- selling capital in the hospitals. We expect quarterly choppiness in our topline results in the near-term.
That said, now that the technology is gaining momentum amongst physicians, we believe it will positively influence administrators. Capital budgeting cycles are starting to open up, we remain confident in our platform and our ability to partner with hospitals to build robotic platforms and programs.
Hospitals are thinking of remote capabilities to help with efficiency. And it's more than just telestenting, it's improved performance with the expectation that overtime, we will begin to see better outcomes for patients. The hypothesis is that with robotic control and algorithms, we can get to a point where these procedures can actually be safer for patients, particularly in the neuro space. These positive signals in the market should contribute to top line growth and unit sales.
And we are starting to see utilization pick up as well. We were particularly pleased with the growth in our cassette sales 524 units for the quarter, reflecting 34% quarter-over-quarter growth despite an expected slower summer.
We launched our first automated movement rotate on the track earlier this year, which showed a reduction in wearing time with reduced variability between operators. This launch is helping drive higher cassette sales and robotic usage by incorporating advanced software features into the procedure.
Two examples of robotic program growth are at the University of Washington and OhioHealth Riverside in Columbus, Ohio. At the University of Washington, one of the leading CTO PCI programs in the world where live demonstrations are performed globally, such as TCT. As the TCT conference I previously mentioned.
over 35 robotic cases were performed in the first two months of obtaining a robot. OhioHealth Riverside, one of the busiest and most respected PCI and peripheral programs in the world started a robotic PCI program and a robotic peripheral program in Q3.
Leading institutions such as UW, Riverside, Mayo, Baylor, Columbia, others are building their vascular robotic programs today, which is why we generally expect revenues to continue to grow in the coming quarters.
Lastly, I'd like to mention that we're continuing to broaden our addressable markets by expanding our global footprint. During the second quarter, we received PMDA approval in Japan and are working with our partner Japan Medicalnext to obtain reimbursement or robotic PCI through the Japanese Insurance System, which we expect in early 2019.
Included in our backlog, we have also received additional international orders this quarter in India and Dubai. We expect that the first in-human remote angioplasty case plan for later this year in India will continue to be the interest in robotics throughout Asia Pacific.
With that said, I'd like to turn the call over to David Long to review our financials and results in more detail. David?
Thanks, Mark, and good afternoon everyone. Revenue for the three months ended September 30, 2018. Totaled $3.0 million compared to $2.4 million in the same period of the prior year. The revenue increase is due primarily to increased average selling price on system sold, incremental system upgrade revenue and increase the cassette revenue.
GRX installed based systems totaled 45 at the end of the third quarter and increase of four units from 41 at the end of the second quarter. We shipped 524 cassettes in Q3, up 34% quarter-over-quarter and 42% year-over-year gross profit for the third quarter of 2018 totaled $1.1 million appeared to a gross profit of $0.2 million in the prior year period.
SG&A expenses for the third quarter of 2018 totaled $6.4 million compared to $5.69 million in the third quarter of 2017. The increase is primarily due to increased investment in industry trade shows and related commercial activities, stock compensation costs and external audit fees.
R&D expenses for the third quarter of 2018 totaled $2.0 million compared to $2.5 million in the third quarter of 2017. The reduction was primarily due to reduced prototype and product development costs.
Net loss totaled $7.6 million for the third quarter of 2018, compared to a net loss of $7.9 million in the third quarter of 2017. We ended the third quarter of 2018 with $29.6 million in cash and cash equivalents.
With that, I'd like to turn the call back over to Mark.
Thanks, David. The clinical community witnessed advanced robotics in action this past quarter with several live case demonstrations across complex PCI, the first ever remote PCI demonstrated at a medical conference at TCT and peripheral robotics at AMP. The interest in building vascular robotic programs is growing and feeds our confidence of increased demand for our devices and our ability to continue to be the worldwide leader in vascular robotics.
Looking ahead, that we expect several key milestones over the next 12 to 24 months. These include completing the first in-human remote PCI case in India by the end of this year. Completing the first U.S. in-human case in 2019 submitting our neurovascular indication to the FDA in early 2019, anticipated FDA clearance of CorPath GRX for neurovascular applications in 2019, completing proof of principle for remote stroke robotic system in 2019, anticipated approval of our next series of automated movements in the technique series; and lastly, a potential partnership to go develop and commercialize a neurovascular robot. We look forward to continuing to update you on our progress.
We will now open the call up for questions. Operator?
[Operator Instructions] Your first question comes from the line of Josh Jennings with Cowen. Your line is open. Please go ahead.
Hi, good afternoon. Thanks for taking the questions. I guess just to start I was hoping to just hear from you how you think the remote capability will impact demand. Clearly, you're experiencing an uptick in demand. It was great to see the remote case of TCT in the app, the taped case. I just wanted to understand that your view on that remote capability getting the first demand done in India. First in the U.S. next year, how big of a deal is that? Do you think this part adoption trends in for the PCI indication?
Yes. Great question Josh. Thanks for that. Yes, we're very excited about the capabilities of remote. And when you think about applications for that we see broad applications particularly associated with the time to treat patients where minutes, seconds really count. And obviously that applies significantly in the PCI space for heart attacks and in the neuro space for stroke. Where we see the growing interest is physicians are taking the stand today that they need to build a robotic program to gain robotic experience in their own lab where they're gaining expertise similar to what Dr. Tejas Patel has done with over 250 robotic cases this year.
If you said, "Hey, who has done the most robotic cases in the room with patients," it would definitely be Dr. Patel. And that's I think, a mindset that we are building off that is allowing us to position a robotics in a different light for institutions that are thinking about telerobotics and how telerobotics fits in there overarching, Telehealth strategy within their healthcare ecosystem. Most physicians are looking at this say and I need to be a robotic expert before I can be a remote robotic expert. And I think that's driving significant interest and provides us more and more confidence and our continued growth strategy.
Great. Now that's helpful. And just to think about the neuro submission, what is needed from Corindus to push that forward, my assumption is a 510K submission. But is there any safety bench testing or a mandate that you need for that submission and for that approval?
Another good question Josh. Thanks. We are -- we've been working with our Neuro Steering Committee and with Dr. Turk on our neuro submission and we plan to ascend to the FDA in early 2019. You're right, we submit a 510K approval process. And essentially, the two components that the FDA looks for from us is what's the use case? And so, we provide them an algorithmic approach on use case, which we did on the PCI and peripheral fronts and as well as, what's the safety of our system in terms of compatibility with devices. In other words, do we have compatibility with devices and do they operate effectively within our robot.
So both of those components of data we're currently gathering today and we feel confident that we'll be able to submit that early part of 2019.
Excellent. And just the update to your pursuit of a development partner or partnership for the neurovascular indication, any updated thoughts in terms of how aggressively you could pursue partnership for the PCI and peripheral indications. And then lastly, just any update on your thoughts in terms of a partnership in China as well. Thanks for taking the question. I'll get back in queue
Yes, so great, great points on that Josh and terrific questions. Those are exactly what our strategy is. And as we think about a partnership, what we think of there's two elements of it, there's -- how do we codevelop for stroke, typically stroke treatment done remotely in a hub and spoke model?
And then secondly, how do we use a large strategic company selling ability and just broad scale to help build out more robotic programs globally and obviously that has the potential depending upon who your partner might be to cross pollinate over multiple different disease states, that included just on neuro, but also PCI and peripheral. So I would answer that by saying it depends on who your partner would be. But we are full steam ahead on a neurovascular co-development and neurovascular co-selling arrangement. If your partner app has to be playing in other spaces, we may look at that and/or may potentially even broaden our scope around how we think about commercializing that maybe with an additional partner maybe.
As we think about the China really falls in the category of -- I'm excited about Asia Pac. I also think the remote case we do in India is going to continue to fuel the interest in Asia, Asia Pacific and I think the interest level in China is going to continue to grow because of that. I think the interest level in India is going to grow because of that.
And, we really look at both India and China as an opportunity for us to engage a potential strategic partner in these geographies, to see if they're interested in helping us build a strategy that brings correctness into both markets in a bigger way. So, that's our current thinking on China is potentially build it into the partnership arrangement that we might have with the larger strategy.
[Operator Instructions] Your next question comes from the line of Rick Wise with Stifel. Your line is open. Please go ahead.
Good afternoon Mark. Let me start domestically first you had three new systems installed this quarter, maybe just a little more color on both systems are these new installs, current customers and I'd be curious to hear your perspective. I mean, was it remote telestenting the neuro, the peripheral, the aspects what got them excited specifically or maybe with different mix for each one?
Yes, great questions. And thanks for that Rick. We really highlight in the call, I think two perennial programs that started in Q3. One was the University of Washington and the reason that they got into it was not actually telerobotics, it was more complex interventional procedures done robotically though, that entails precision, micro movements. It entails radiation protection in really long complex cases.
And one of the elements that they really like is the fact that we are building automation and some open loop algorithms and AI capabilities into robotic approaches to some of the most complex cases that we see in interventional medicine and as a result, the University of Washington even though they just got the robot. They're also the one that opened up the TCT conference in front of a live audience on Saturday morning to kickstart the whole meeting with Dr. Bill Lombardi doing a complex robotic CTO case.
So that was one we highlight and really are proud of. The other one is a perennial or call a cardiovascular powerhouse. OhioHealth Riverside has been one of the top 10 in volumes across coronary and peripheral for many, many years. One of the thought leaders in structural heart, one of the thought leaders in developing technology and to get a robust program like them up and running doing both coronary and peripheral interventions in Q3 is a really a powerful statement for us. I think the driver for them was a combination of things that includes tele robotics, that includes advancements and capabilities around both coronary and peripheral from a complexity standpoint and being involved in the future. I mean, they see that the future has a lot of interesting capabilities that can evolve and they want to be a part of it and that drove their decision to jump in. And we continue to see multiple different systems, have different reasons for pursuing robotics, but I do believe with advanced neuro movement that we've seen as well as our progress in telerobotics. Those are becoming the driver of why do robotics now? versus wait.
Yes, Mark. I think you -- if anything, understate the excitement of TCT in a lot of cases. Maybe help us in any color you could give us, coming out of TCT. It's always hard to frame customer reactions and impact on the orders. But can you give us any color about customer reactions, doctor reactions, hospital administrator reactions to that event and the impact on the pipeline. And that sort of part A, and B would be; does that translate? Should we expect or anticipate that translates into sort of positive continued sequential momentum just directionally as we contemplate the seasonally strong fourth quarter, which is typically a period when capital gets allocated before budget switch for the new year?
Yes, that's a great lead into -- I agree with you on TCT. If you were there, you felt the foundation of two technologies. Number one was mitral valves from the great data from Co-App [Ph], but number two robotics and it was very clear that robotics was almost a -- the main stage at TCT particularly with three live cases in a row, several symposiums that we had post that they were standing remotely. So thanks for that. I think the impact is big, the funnel is never been bigger for us in terms of interest. And we've got over 150 accounts that we're working with right now in the funnel that continue to move through the funnel in different stages.
I'll tell you that anecdotally though, as I think about just a quick story maybe after TCT, I got a call from an account in Milwaukee that I know well, and they asked me to apply up on Sunday night for an executive meeting with their administration on Monday morning to have a cut to the chase meeting on how they build a robotic program because there were no longer going to stand on the sidelines and wait and see. They were going to be a part of the action. And that's an indication that I think TCT had a very big impact on the psyche of physicians that, they're going to move to "Do-mode versus wait-and-see mode," which is I look at as a very positive sign or your last question, which is this question around sequentially growing quarter-over-quarter and we as you know our business has been choppy Rick and we feel confident at the back half of this year, is going to continue to be a highlight for us.
And similar to what Q4 was last year in 2017, we expect Q4 to be a good robust quarter for us as we finish out the year and particularly covered off the tailwinds, such a strong conference like TCT and AMP and all the progress we're making on the neuro front too.
That sounds great. One last one for me, maybe I'm sorry, turn to ask about India or Japan, maybe just update us since they hadn't come up. Maybe update us on what's going on in Japan? I mean, I know that you got your approval in Japan in early June. And you shift your first commercial system and if I remember correctly or something like purchase order like 12 ultimately from that distributor. But where are we now with reimbursement? And how would you frame our expectations sort of looking had not just next quarter, but in the next into 2019.
Yes, Japan for us is an exciting market. They have a real affinity for robotics, I believe that they are really excited about reducing their radiation as well. Big value driver and we saw a significant interest in the latest meeting I call CBIT, we had almost 200 people in our symposia in Japan. So that market is continuing to feed us with a level of excitement that I think will be impactful for us in 2019.
You're right. There is two elements of the story. There's the distributor that we have with Mitsubishi Japan Medicalnext, they have agreed to acquire 12 robots as you know, we've shipped 10 of those. So we have two more to go between now and in the year. The reimbursement decision is early part of 2019 for us. So once that gets granted, there will be a quote off to the races in Japan. So I think we'll be commercializing and doing robotic cases after the reimbursement decision. And our timeline for that we're saying is early 2019.
Thanks very much.
Thanks for the questions, Rick. Thanks for everybody who join the call today. We truly appreciate your interest in Corindus and we look forward to continue to update you on later calls. Thank you.
Thank you to all of our participants for joining us today. We hope you found this presentation informative. This concludes our webcast. You may now disconnect. Have a great day.