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Corindus Vascular Robotics Inc (CVRS) Q4 2018 Earnings Conference Call Transcript

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Corindus Vascular Robotics Inc  (NYSEMKT: CVRS)
Q4 2018 Earnings Conference Call
March 12, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is David, and I'll be your conference operator today. At this time I'd like to welcome everyone to the Corindus Vascular Robotics Q4 and Full Year 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. (inaudible), Investor Relations, you may begin your conference.

Unidentified Speaker --

Thank you, David. Welcome to Corindus Vascular Robotics fourth quarter 2018 earnings call. This is (inaudible), Investor Relations for Corindus. With me on today's call are Corindus' 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 and year ended December 31, 2018. This press release and a webcast of this call can be accessed through the Investors section of the Corindus website at www.corindus.com.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express beliefs, expectations, projections, 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. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements.

These forward-looking statements including without limitation, Corindus's future financial and operational expectation, including the expected timing of commercial activities, timing of pre-clinical studies, Corindus's ability to expand this technology platform and achieve the advances necessary for telestenting and remote procedures, including in humans, Corindus's ability to expand this technology platform for use in other segments of the vascular intervention market, including neuro interventional and other more complex cardiac 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 collaborations are based on information available to Corindus's management as of today and involve risks and uncertainties including those described in the sections titled Risk Factors in Corindus's filings with the Securities and Exchange Commission, including its most recent annual 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 forward looking statements. Corindus specifically disclaims any intent or obligation to update these forward-looking statements except as required by law.

The archived webcast of this call will be available for one year on our website corindus.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 12, 2019. 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.

Mark J. Toland -- President and CEO

Thank you, Judy. Good afternoon, everyone, and thank you for joining us. Since our last call, Corindus has made significant progress on several important fronts. The fourth quarter of 2018 proved to be our best to date, reflecting what we believe is the beginning of an industry shift to embrace robotic intervention and indications of a longer term commitment to commercializing remote capabilities.

Let me share some highlights with you now. Revenue was $4.7 million up from $3.1 million in Q3. We installed six new CorPath GRX systems and performed one system upgrade during the quarter, bringing the total installed base up to 52 systems. We sold 522 cassettes in Q4, a 15% increase over last year, a number we expect to continue to grow as many of the new and existing robotic programs ramp up.

We've also expanded our global footprint with new system installations in India and Singapore. In addition, we received our first European order from the Clinique Pasteur in Toulouse, France.

Finally on the international front, our Class A-1 reimbursement listing was granted by the Japanese government on March 5, which will allow us to start our post-market approval trial in Japan. Our global expansion strategy is working, and we expect more purchases in 2019.

Exciting things are also happening on our research and development front. In December, we successfully completed the world's first in-human remote PCI study in India, a significant milestone for our remote robotic program. In 2018, we completed our preclinical remote work at TCT live case demonstration and all five cases for our first in-human remote PCI trial, all of which has driven significant interest from the clinical community on the future robotics and liability of robotic program now is important.

In fact, a leading US hospital recently placed an order to become a core development site for telerobotic capabilities. I'll tell you more about that shortly. And just a few weeks ago, in mid-February, we submitted for pre-market clearance of our neurovascular indication for CorPath GRX with the FDA. Clearance to treat neurovascular conditions, which could come as early as this summer, would be a significant step in transforming the current standard of care for stroke patients.

To support these activities, we strengthened our cash position through a $19.5 million (ph) private placement in Q1, with a large institutional investor and existing shareholders. The proceeds will allow us to fund ongoing growth, enable us to pursue new products and capabilities. At the same time, we remain actively engaged with Citi to advance partnership discussions to co-develop and commercialize a neurovascular robotic platform with remote capabilities.

Against this backdrop, let me begin with the robotics business. Following the TCT Conference, where robotics was at the forefront, the selling cycle for our technology accelerated with select customers. There appears to be an increased sense of urgency within the clinical community to establish robotic programs. Aurora St. Luke's Medical Center in Milwaukee, Wisconsin for instance, a very busy Top 20 research facility in the US, widely considered a thought leader and a premier provider of cardiac services, purchased a CorPath GRX system in less than 10 weeks.

We're seeing this trend hold in the first quarter as well. HCA, one of the leading providers of healthcare services in the country, purchased its first robot in a transaction that closed within 60 days. What's particularly exciting about this sale is that it opens the door to roughly 185 hospitals in the HCA network that can potentially purchase our technology. We expect to see momentum build as we move through 2019 from both a sales perspective and with regard to utilization. The University of Washington performed a 100 cases in its first five months. Our Singapore site recently launched and performed 20 cases in its first month. And OhioHealth Riverside in Columbus, Ohio is now doing both peripheral and coronary robotic procedures. In fact, using CorPath GRX, they recently became the first hospital in Ohio to perform robotic assisted treatment of peripheral artery disease.

We are currently preparing a dossier to the FDA for a next wave of automation, which we call the technIQ Series. Designed to speed up cases and increase procedural success in some of the most complex PCI cases, we're working on a digital (ph) four movements that we call smart procedural automation or (inaudible). By that, I mean we would be able to take the best physicians hands from all across the world, automate their movements and put them in a robot so that physicians anywhere in the world have the same capabilities to the use of our system.

As doctors and hospitals around the world increasingly embrace robotics, we will continue to enhance the capabilities of our technology, expanding our global footprint, and we'll be poised to build a very strong platform for growth with CorPath.

With this in mind, the big news for Corindus in Q4 was the success of the world's first ever human remote intervention performed in India using the CorPath technology. In December, internationally renowned surgeon Dr. Tejas Patel, Chairman and Chief Interventional Cardiologist of the Apex Heart Institute, successfully conducted the first in-human telerobotics coronary intervention. Notably, as part of the study we completed five successful remote procedures from a distance of 20 miles away.

This study represents the world's first percutaneous coronary intervention conducted from a remote location outside of the cath lab. The success of this study paves the way for large-scale, long-distance telerobotic procedures around the world, ultimately providing access to highly specialized and timely cardiovascular care to multiple patient populations anywhere, anytime.

Importantly, during these procedures, we validated that we have solved for any potential mechanical latency issues. There was no discernible delayed reaction from physician movement to device movement over the 20-mile distance. What we plan to do next with our remote technology ties into revenue. The value proposition of remote procedures is compelling for both doctors and hospitals. For time to treat patients like stroke victims, it would allow patient to be treated by a specialist from any hospital, what we call hub and spoke model, and the impact on the time to treat these patients, would be significantly enhanced.

In addition, remote procedures could be in the four walls of their hospital by allowing a physician to do multiple cases in a command control center like model. This enables doctors to maximize the efficiency of their day which could give him the ability to do multiple cases back to back, without any downtime. Hospitals likewise, could increase their throughput by performing more procedures in a day. At the forefront of this value proposition is Houston Methodist Hospital, which placed a significant order in Q4 to become a core development site for telerobotics. On that pathway, Houston Methodist will eventually become the first institution in the world to have telerobotic capabilities for interventional procedures across multiple disease states. This recent purchase is a notable outcome from the success of our remote clinical cases in India and confirms our belief that our technology has the potential to revolutionize the treatment of vascular disease by making specialized, timely medical care available to patients, regardless of their location.

We believe robotics applications and opportunities ultimately for remote, are extensive. In peripheral procedures for example, patients wouldn't have to travel for elective peripheral treatment, which could potentially reduce the number of amputations. For PCI, patients could be treated by the best physicians in the world, and in neurovascular, a remote therapeutic option applies to one the biggest unmet needs in healthcare, faster stroke treatment times, for best patient outcomes and recovery.

So by demonstrating a remote technology solution with the success of the world's first telerobotic interventional procedures in humans and defining a path to build revenue, we believe we have a one-two punch for success.

Turning to our neuro program, we're continuing to build a strategy to solve remote access to care and time to treat for stroke. Among stroke survivors, about two-thirds live with disabilities that could have been prevented with appropriate earlier treatment. Ultimately, our goal is to enable physicians to deliver treatment for ischemic stroke through through a hub and spoke model that extends their reach to patient populations across the globe, speeding up time to treatment by enabling physician to conduct a procedure from virtually anywhere could revolutionize patient outcomes.

As part of this goal, we submitted our dossier for 510(k) review for our neuro indication with the FDA on February 14th. If FDA clearance is granted, possibly as early as this summer, we could potentially be selling robots for neuro by year end for the treatment of aneurysms and stroke. The neuro indication has also garnered a lot of interest from the clinical community. At our headquarters in Boston, we are currently hosting one to two neuro VIP visits per week. Physicians are coming away with nothing but positive feedback around automation, procedural safety, and precision movements. They want to build and improve their own robotic skill sets in their comprehensive stroke centers. To fully realize the potential of a neurovascular solution, we're actively pursuing a partnership deal. As disclosed previously, we engaged Citigroup to help us evaluate the strong interest we have received from potential partners.

We believe that there are three elements to successful partnership, core developing, cross-selling and funding, and we will carefully consider our options to ensure that we collaborate with the right partner and in the right way. We know that hospitals are starting to budget for this in their institutions. Given the high level of clinical interest, potential FDA clearance for a neurovascular indication by the summer of this year and a potential partnership deal, we believe the neuro indication could be a 2019 event in the US and be reflected in our performance this year.

Robotics has the potential to fundamentally change the paradigm of how patients are treated. We believe we're now beginning to see a real shift in support of the technology. What's really exciting it is that by the end of this year, we expect to be able to provide physicians with the robotic tools necessary to treat the entire body, from head to toe.

There are multiple upcoming milestones this year that will continue to drive the business forward. Number one, receiving FDA clearance of CorPath GRX for neurovascular applications. Number two, submission of the next wave of CorPath GRX automation to the FDA for clearance. Number three, a planned US trial for remote intervention. Number four, completing a potential partnership to co-develop and commercialize a neurovascular robot. Number five, completing proof of principle for a remote stroke robotic system. And as we advance these initiatives, we'll continue to be prudent about how we use our cash, a record low cash burn of $2.1 million per month in Q4, reflects our commitment to actively managing our resources.

The recent financing validates our efforts as we pursue the compelling opportunities in neuro and remote robotics, with the goal of extending the reach of the highly skilled physicians to areas where access to specialized healthcare is limited and time to treatment is critical. We hope to have more to share about the potential strategic partnership with the funding component for the company. A portion of which we expect to be non-dilutive very shortly.

With that, I will turn the call over to David Long to review our financial results in more detail. David?

David Long -- Chief Financial Officer

Thanks, Mark, and good afternoon, everyone. Revenue for the three months ended December 31, 2018 totaled $4.7 million compared to $4.2 million in the same period of the prior year. The revenue increase is due primarily to increased volume and average selling price on systems sold, partially offset by lower system upgrade revenue.

During Q4, we installed six new CorPath GRX systems and performed one system upgrade, increasing the installed base of CorPath GRX to 52 units. We sold 522 cassettes in Q4, up 15% year over year. Gross profit for the fourth quarter of 2018 totaled $1.9 million compared to a gross profit of $1.2 million in the prior year period.

SG&A expenses for the fourth quarter of 2018 totaled $6.6 million, compared to $7.2 million in the fourth quarter of 2017. The decrease was primarily due to cost controls, reallocation of spending toward technology development, and timing of certain tradeshow costs. R&D expenses for the fourth quarter of 2018 totaled $2.6 million compared to $2.0 million in the fourth quarter of 2017.

The increase was primarily due to increased headcount investments, development costs and clinical spending, partially offset by research grant reimbursements. We have been actively managing our cash burn at $2.1 million per month for the quarter compared to $2.3 million per month in the prior year -- quarter (ph) and $2.9 million per month in Q4 of 2017.

We had a record low burn rate reflecting our commitment to the ongoing management of our resources. Loss from operations for the period totaled $7.3 million compared to an operating loss of $8 million in the fourth quarter of 2017. Net loss totaled $7.4 million for the fourth quarter of 2018 compared to a net loss of $8 million in the fourth quarter of 2017. Net loss per share, basic and diluted, was $0.04, unchanged from the fourth quarter of 2017. We ended the fourth quarter of 2018 with $23.8 million in cash and cash equivalents, and in Q1, we completed a $19.8 million gross private placement, providing us with additional financial flexibility toward funding our programs.

With that, I'd like to turn the call back over to Mark.

Mark J. Toland -- President and CEO

Thank you, David. Let me close with a brief anecdote that I believe illustrates where we are headed and why our technology resonates with physicians and investors alike. As I mentioned before, we recently installed a system in Singapore. The physician was in one room and the patient was in another. Our controls were in a control room that allowed the physician to do the procedure in their street clothes, and the picture noted from the physician in quotes, this is the first percutaneous coronary interventions I've ever performed in my career wearing street clothes. Our technology, we believe, holds the potential to change the future of medicine, and that's an example of that. As always, we appreciate your support, and we continue -- as we continue to expand our capabilities as the worldwide leader in vascular robotics.

I'll now open the call up for questions. Operator?

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Rick Wise of Stifel. Your line is open.

Unidentified Participant -- -- Analyst

Hey, it's Drew on for Rick. Congratulations on the quarter, and I just wanted to start with Mark, you highlighted a lot of critical milestones in remote and neuro, especially being able to cover potentially all the interventions by year end. And you talked about momentum and accelerating the sales cycle. So I guess my question is, with all the positive pieces at Corindus, how will that kind of translate into commercial sales in 2019? And you previously talked about leads being kind of in that 150 range, maybe how has that changed over the past three months? And I'll just lump this last one in here too, but I mean, would you be disappointed if you were to end 2019 with less than 100 systems on the install base?

Mark J. Toland -- President and CEO

Yeah. Hey, Drew, thanks for the questions. Very good questions and we are thrilled with the milestones that we have achieved and the shortened sales cycle, which speaks to what I call the burning platform of why you need to get into robotics today, and I think that physicians are starting to see the critical need of that across multiple fronts. Obviously, we've had most of our cases performed in PCI. We've got four programs up and running for peripheral and we've got a neurovascular ahead of us here in 2019. We really see the growth of this Company driven off of the backs of of exactly that concept around telerobotics and the future of telerobotics is no longer a 10-year Star Wars discussion. It's much more near term. We've demonstrated in our pre-clinical studies. We've demonstrated in humans, and we're anticipating it driving a lot of behavior of physicians wanting to become robotic experts in their own lab, in their own hospital before they start to do remote procedures in 2020 and beyond.

So we're starting to see that transfer into sales. Obviously, we saw that in Q4 post TCT with our success of demonstrating a live case at TCT that has spurt on a lot of the clinical interest. And so, when we think about the upcoming year, we get very bullish about the growth trajectory for us, driven off of the excitement around where our robotics is going from telerobotics standpoint as well as global expansion is another key category for us that we continue to put a lot of emphasis on. We placed another system at India. We placed another -- we stood up Singapore. We just got our first order in Europe and in a key center in France. We got -- we just got approval recently in Australia. We're starting to launch in the Nordics. We are starting to launch in the UK. So we we feel like the international expansion is a big opportunity for us.

And then, we think about the indication expansion sometime this summer in the neurovascular space. We look at that as a force multiplier for growth. So we would be excited about the number of leads we have because we have previously publicly said we have 150 or so leads that we were working on. I would say that continues to grow. We've got the neurovascular leads that continue to come in. As I mentioned in the call, we do approximately one to two VIP visits per week on neurovascular to get them up to speed on our technology. And I would anticipate that continuing to grow.

As we think about the number of installations to close out 2019, I would anticipate us being close to 100 range, maybe a bit -- a little bit less than that in terms of future projections, but yeah, we closed out 2018 with 52 installations globally, but I think indication expansion, telerobotics and a greater international penetration will only help accelerate that.

Drew Ranieri -- Stifel -- Analyst

Thanks so much. And just you touched a little bit on this -- on international, but one thing that really caught our eye was the first European order. So can you just maybe go into a little bit more detail of how you see the European opportunity specifically for PCI, peripheral and neurovascular in days to come.

Mark J. Toland -- President and CEO

Yeah, as I've mentioned previously, we haven't spent a lot of time in Europe, mostly because it's just a high cost burden on organizations to go into Europe because it's multiple different laws and regulations and how you get access into capital funding, but what we've seen is, we've seen an increased interest in robotics in Europe and funding sources are coming from foundational elements where -- or you have philanthropy donating the capital and then the institution acquires the capital, start to build out the robotic programs.

And we have recently launched in -- or are launching in France right now, all right. We think that the interest level in Europe is continuing to grow for vascular robotics driven off of a lot of the work we're doing in automation, remote, as well as neurovascular. There's a significant interest in remote stroke treatment in Europe since they're a socialized medicine model, the disability cost of stroke management is a significant cost burden on their government. So they really see this as an increasing value proposition that's going to continue to grow.

Drew Ranieri -- Stifel -- Analyst

Great, thanks for the color, Mark.

Mark J. Toland -- President and CEO

Thanks, Drew.

Operator

(Operator Instructions) Your next question comes from the line of Jeffrey Cohen of Ladenburg Thalmann. Your line is open.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Mark and David. How are you?

Mark J. Toland -- President and CEO

Hey, Jeff.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hey, I wanted to (inaudible), firstly, could you talk a little bit about the changes or differences, modifications for the neuro indication and how that progressed as far as the application to the FDA?

Mark J. Toland -- President and CEO

Sure. Good question, Jeff. So what we did in 2018 is we looked at our current system CorPath GRX, and the FDA currently looks at our approval process of are we compatible with devices or not? As you know, Jeff, we don't make anything that goes in the body. So we use currently approved FDA -- FDA-approved devices that we insert into the body for treatment and access.

So, we needed to do some testing on the neuro devices, which we did that, completed that, and we made only slight modifications. It was great experience for us because we didn't have to completely reoutfit a robot for neurovascular. We're able to do minor changes to software and minor changes to our disposable, which is called a cassette. And those two things alone, provided us a high confidence that we have compatibility with all of the market leading neurovascular devices from all the companies that like the Medtronics, the Strykers, the Penumbras of the world. So that's what we used to submit into the FDA back on February 14.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And you spoke a little bit about the US path to telerobotics and some of the movements at the technIQ software house and how does that relate to the RoR that you had before? And what specific files or applications will you have to get through or do you perceive getting through the FDA to get this added on as far as some of the software changes and movements?

Mark J. Toland -- President and CEO

Yeah, great question. So automation, we really look at something that could speed procedures up considerably, particularly for the average operator that doesn't have the same skills as the expert. And as you know, with RoR or what we call Rotate on Retract, that was our first entree into automation, which showed a 53% reduction in wiring time for a physician. And with our submission back in late 2017 and approval subsequently after that in early 2018 for RoR. We established a -- I'll call it a pathway to regulatory approval for automation. We're essentially replicating that pathway with the additional four automated movements that we're submitting in to the FDA here soon, which we would anticipate being well received based upon what we learned in the early days of automation.

So sometime this summer, we're going to have -- we view a kind of a library of algorithms that physician can choose -- could choose to provide them with some automation or smart procedural control that would allow them to complete procedures more efficiently and effectively and faster so that they could speed up their day as well as potentially even add more cases to their day. So we're really excited about that and believe that's going to be a continued driver of utilization for us as well.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. What's the specific approval process as you submit each specific movement or software modification algorithms?

Mark J. Toland -- President and CEO

Yeah, it's a 510(k) submission and we we base it off of specs that we've already got defined within the FDA. And so it's -- should be a very smooth process for us as we're anticipating a well-received physician with the FDA on this.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it, and then lastly, could you talk a little more about HCA? Maybe give us a little color on the geography of the hospital or perhaps some color on the number of physicians thus far that have been involved in the process or conducted cases?

Mark J. Toland -- President and CEO

Yeah. So we mentioned HCA and the the account that we were able to install our first robotic system in that big IDN, obviously, the biggest one in the United States. I think it represents close to 5% of the US healthcare. Very exciting hospital. It was down in Texas. And as you know, HCA is predominantly in the southeast, but also nationally, but it represents a cornerstone of what we can build on with that healthcare system. As a matter of fact, they had a call with their corporate office earlier today as we are kind of plotting out the next steps we make within that healthcare organization.

So moving in a really, really good path with a lot of these big integrated delivery networks that have multiple hospitals, and as they start to think about telerobotics, it could be a big benefit for them in a hub and spoke model when they've got hundreds of hospitals that they're trying to treat patients in and they don't have enough physicians to do it. So it can be a really compelling value proposition for these big IDNs that exist in the United States.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, super. Thanks for taking the questions.

Mark J. Toland -- President and CEO

Thanks, Jeff.

Operator

There are no further questions at this time. I will turn the call back over to the presenters.

Mark J. Toland -- President and CEO

Great. Well, thanks for everybody who joined the call. We appreciate your interest in Corindus and we look forward to maintaining a continual update with you on future calls. Have a good evening.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 35 minutes

Call participants:

Unidentified Speaker --

Mark J. Toland -- President and CEO

David Long -- Chief Financial Officer

Unidentified Participant -- -- Analyst

Drew Ranieri -- Stifel -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

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