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(CVRS) Q2 2019 Earnings Call Transcript

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 (NYSEMKT: CVRS)
Q2 2019 Earnings Call
Aug 08, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, ladies and gentlemen. My name is Casey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corindus Vascular Q2 2019 earnings conference call. [Operator instructions] Thank you.

Judy DiClemente, you may begin your conference.

Judy DiClemente -- Investor Relations

Thank you, Casey. Welcome to Corindus Vascular Robotics second-quarter 2019 earnings call. This is Judy DiClemente, investor relations for Corindus. With me on today's call are Corindus' chief executive officer, Mark Toland and Chief Financial Officer David Long.

This morning, the company issued two press releases: the first, announcing that Corindus has entered into a definitive agreement to be acquired by Siemens Healthineers AG; and the second, announcing our financial results for the second quarter of 2019. Both press releases may be accessed through the Investor Relations section of the Corindus website at www.corindus.com. Before we get started, I would like to remind everyone that during this morning's call, we will be making forward-looking statements on a number of matters, including the proposed acquisition of Corindus by Siemens Healthineers, as well as Corindus' second-quarter financial results. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by these forward-looking statements.


Please refer to the press releases we issued this morning for a fuller explanation of these risks, uncertainties and other factors, as well as the limits applicable to the forward-looking statements. The archived webcast of this call will be available for one year on our website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 8, 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 Mark.

Mark Toland -- Chief Executive Officer

Thank you, Judy. Good morning, everyone, and thank you for joining us. This is an exciting day for Corindus and our shareholders. As Judy mentioned, as I'm sure you have seen, this morning, we announced that we have entered into a definitive merger agreement to be acquired by Siemens Healthineers AG.

Under the terms of that agreement, Siemens Medical Solutions, a wholly owned subsidiary of Siemens Healthineers, will acquire all issued and outstanding shares of common stock of Corindus for $4.28 per share in cash, representing an aggregate purchase price of approximately $1.1 billion. The transaction, which we believe provides immediate, compelling and certain value to our shareholders, is the culmination of our previously announced process to identify a strategic partner to optimize the development and commercial potential of our robotic platforms. The transaction is expected to close in the fourth quarter, subject to Corindus shareholder approval and other customary closing conditions. Together with Siemens Healthineers, Corindus will be positioned to take our business to the next level and continue our success story.

Combining high-quality imaging, digital and artificial intelligence tools and precision robotics into a complete solution is at the core of improving clinical outcomes today and tomorrow. With this transaction, our vision of dramatically improving access to care for time-to-treat patients, such as stroke and heart attack victims, has taken a giant leap forward with Siemens Healthineers. An integrated robotics solution with advanced capabilities, such as remote, automation and AI, could lead toward a paradigm shift in how patients are treated. On the heels of this great news, I would like to turn our second quarter -- I would like to turn to our second-quarter performance.

Our numbers reflect the continuation of the positive momentum seen earlier this year. The clinical community, both in the United States and internationally, continues to embrace the potential of robotics to improve patient outcomes and extend access to care for underserved areas. Let me start with some highlights for the quarter. Revenue was $4.6 million, 175% increase from the $1.7 million in revenue in the second quarter of last year.

We received revenue for nine CorPath GRX Systems, including six new systems, one upgrade and two systems sold to distributors, one each in Italy and Japan. This brought our total installed base up to 68 systems at the end of the quarter. CorPath GRX Systems ASP was $480,000 in Q2. We sold a record 700 single-use cassettes in the second quarter, generating sales of more than $300,000.

And our presence in markets outside the United States is expanding, as well as interest from the international clinical community continues to grow. To date, we have sold systems into 10 countries, including our first commercial installation in Brazil. And importantly, we expect to conduct our first neuro cases in Europe later this year. Now let me turn to our CorPath GRX System and share some thoughts on the positive trajectory and adoption and usage that continued to build in the second quarter.

Our revenue and improved margin during the quarter reflects solid demand for our systems and the strength for our ASP during the quarter. For the second consecutive quarter, we sold a record number of single-use cassettes, a 16% increase to 700 in Q2, further evidence that robotic utilization is rising. One trend of note this quarter has been the increased independence among our customers. What I mean by this is that, last year, only about 7% of the cases done using CorPath GRX were performed without a Corindus representative on site.

Today, that number is over 20%. This positive progression reflects both our rigorous training curriculum for doctors, nurses and staff and efforts by our clinical sales force to work with customers to establish greater self-sufficiency. Switching now to our international markets. As I mentioned earlier, interest in Corpath GRX outside the United States is growing.

We have indications for PCI, PVI and now neurovascular in Europe. In addition, we also received CE mark approval for our next wave of smart automations called technIQ. These represent six new automations that could enhance the speed and the tactical success of complex cases, all add up to drivers of robotic interest across Europe and other CE mark countries. At the EuroPCR conference in May, Dr.

Jean Fajadet, an interventional cardiologist, performed a live, complex, robotic-assisted PCI from Clinique Pasteur in Toulouse, France. It was broadcast to more than -- to 11,000 EuroPCR attendees and marked the first time that a robotic procedure using CorPath GRX was performed and shown live in Europe. Dr. Fajadet's enthusiasm for the system and for the precision and the control it offers is a strong endorsement for our technology.

Finally, as one of the largest markets for PCI globally, Japan is an important growth area for us with more than 1,200 hospitals performing nearly 250,000 PCI procedures annually. This past April, Dr. Ueno, director of interventional cardiology, Center of Cardiovascular Disease, Kurume University Hospital, completed the first clinical, robotic-assisted PCI procedures, marking initial enrollment in a post-market study for CorPath GRX in Japan. This is the first system placed by our Japanese distributor partner, Japan Medicalnext, a wholly owned affiliate of MC Healthcare, which is a subsidiary of Mitsubishi Corporation.

Japan Medicalnext has since placed two more systems with others planned. The growing interest in robotics is one of the main reasons we saw an order from JMC in Q2. We anticipate continued penetration in markets outside the U.S. over the balance of 2019 and are excited by these global opportunities.

The benefits of telerobotics are compelling. Remote capabilities have the potential to address physician shortages, eliminate geographical challenges, beat time to treat, reduce the need for patient travel and extend the physicians reach, all while having the potential to improve procedural accuracy. In 2018, our tactical success was highlighted in our preclinical and first-in-human studies. Following on from that success, we have completed our second beta test with Verizon on their 5G network.

The study was very successful and continued to demonstrate that telerobotics is the future. Furthermore, we are planning another human-remote case by the end of the year, this time in the United States. Now turning to neuro. Let me share some of the opportunities we are working on.

As you may have seen, we recently received neurovascular clearance in Australia and New Zealand, along with our CE mark indication. These approvals position us to embark on our first neurovascular cases in Europe and other CE mark countries by the end of the year. Simultaneously, in the U.S., we have received follow-up questions on our submission for 510(k) review for our neuro indication with the FDA and are in the process of preparing responses. This exchange is proceeding forward, and we continue to work interactively with the FDA to provide additional data and other information required.

Finally, as mentioned in the last quarter's call, we have completed the proof of principle of our next-generation remote stroke robotic system. The system was available for physician feedback and input at the recent SNIS conference in Miami. The neurovascular physician feedback was very positive, with over 40 physicians providing input as they operate the system through models. Our next step will be to complete preclinical trials by the end of this year.

With that, I'll 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 morning, everybody. Revenue in the second quarter of 2019 totaled $4.6 million, compared to $1.7 million in the same period of the prior year. During the quarter, Corindus recorded revenue of nine CorPath GRX Systems, including six new systems, one upgrade and two systems sold to distributors, one each in Italy and Japan. This brings our total installed base up to 68 systems.

Gross profit in the second quarter of 2019 totaled $1.8 million, compared to a gross loss of $486,000 in the second quarter of 2018. Gross profit improvement was driven by both increased system sales and an increase in the system ASP in the second quarter of this year. Selling, general and administrative expenses totaled $8.4 million in the second quarter of 2019, compared to $6.9 million in the second quarter of 2018. The increase primarily relates to increased compensation, including stock-based compensation as we continue to grow, as well as increased legal fees.

Research and development expenses totaled $3.7 million for the second quarter of 2019, compared to $2 million in the second quarter of 2018. The increase reflects our continued investment in neurovascular remote activities as we expand engineering headcount, clinical initiatives and prototype expenses to enable achievement of our targeted goal. Net loss totaled $10.7 million in the second quarter of 2019, compared to a net loss of $9.9 million in the second quarter of 2018. Cash and cash equivalents as of June 30, 2019, were $31.9 million.

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

Mark Toland -- Chief Executive Officer

Thanks, David. As we look to the remainder of 2019, our primary focus will be on completing the proposed acquisition of Corindus by Siemens Healthineers. At the same time, we will continue to pursue our operational goals, including completing the first-ever U.S. remote interventional procedure, conducting the first neurovascular robotic cases by year end, continuing to work toward FDA clearance of CorPath GRX for neurovascular applications and launching our next series of smart automation in Europe and other CE mark countries.

In light of today's announcement of our definitive agreement to be acquired by Siemens Healthineers, we will not hold a Q&A session following the call. In connection with the proposed transaction, Corindus will file a definitive proxy statement with the SEC. Proxy statement will provide additional important information regarding the proposed transaction, and we urge all of our shareholders to read the proxy statement in its entirety when it becomes available. Thank you for joining today's call.

Questions & Answers:


Operator

[Operator signoff]

Duration: 16 minutes

Call participants:

Judy DiClemente -- Investor Relations

Mark Toland -- Chief Executive Officer

David Long -- Chief Financial Officer

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