Motus GI Holdings Inc (MOTS) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Motus GI Holdings, Inc. First Quarter 2020 Financial and Operational Update. (Operator Instructions) I must advise you all that today's conference is being recorded.

I'd like to turn the call over to Bob Yedid of LifeSci Advisors. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us for the Motus GI First Quarter 2020 Update Call today. Representing the company are Tim Moran, Chief Executive Officer; Andrew Taylor, Chief Financial Officer; and Mark Pomeranz, President and Chief Operating Officer of Motus GI.

Before turning the call over to management for their opening remarks, I'd like to take a minute to remind you that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake an obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that can cause -- that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on forms 10-Q and 8-K filed with the SEC.

With those prepared remarks, I'd like to now turn the call over to Tim Moran, CEO of Motus GI. Tim?

Thank you, Bob, and good afternoon, everyone. Thank you for joining us today for our Q1 2020 earnings call. I would like to start by providing a business update before turning the call over to Andrew to review our financial results for the first quarter. At the end of our prepared remarks, we will open the call for a Q&A session.

I'd like to cover 3 key topics today: provide an update on our launch progress through the first quarter; share our view of the impact of COVID-19 and how we are preparing to be successful in the new normal; and then discuss the progress we have made with execution of the cost reduction program announced on March 30. We entered the first quarter of 2020 with positive momentum as we built a foundational group of large influential hospitals and health systems who've begun utilizing the Pure-Vu System. The feedback from these early adopter hospitals has continued to be very positive, further confirming what we believe is the value that our system offers GIs in providing improved patient care while also reducing hospital costs, and increasing efficiencies as it relates to inpatient colonoscopies.

Our launch of the Pure-Vu System into the U.S. market is focused on accomplishing 4 key objectives: generating demand at target institutions in leading hospital networks; developing value and assessment committee approval for the Pure-Vu System at these targeted institutions; driving utilization at top national health systems that can influence the market; and building brand awareness of the value that Pure-Vu technology provides as a solution in busy hospital GI labs. I'm pleased to report we are executing against each of these 4 objectives, though at a pace that reflects the current market conditions.

As we discussed on our last call at the end of March, our progress was hindered in the back half of the first quarter as the COVID-19 pandemic gained momentum and severely constrained our customers' ability to perform colonoscopies using Pure-Vu, pursue new product evaluations or commit to new equipment investment. As the threat of COVID-19 became clear and more pronounced and in order to ensure the health and safety of our employees and customers, we complied with CDC guidelines and enacted social distancing, thereby requiring our sales team to work from home.

Despite these challenges, we have gained approval and placement of the Pure-Vu System in 19 major hospitals since our Q4 2019 launch. These prestigious hospitals include several of the top-ranked GI centers in the United States, including the Cleveland Clinic, UCLA, the University of Texas, Geisinger Medical Center and Memorial Hermann Health System. Each of these hospitals continue to move through the sales process from evaluation to approval to building utilization, which typically ranges from 4 to 6 months.

Despite losing part of the first quarter due to the COVID-19 lockdown, I am pleased to report that we've now trained more than 75 physician champions on the Pure-Vu System. We believe that hospitals will begin to reactivate broader elective and nonelective procedures towards the end of Q2 and that the COVID-19 crisis has the potential to amplify the important role that Pure-Vu can have on assisting sites as their GI labs begin to ramp back up.

As it relates to the significance of the unmet need in the market for our technology, we are encouraged by our ability to gain evaluation approvals as we approach accounts on our target list. We are batting 1,000 in VAC approval so far and have been pleased by the economic, clinical and overall utility acceptance of the Pure-Vu System. Although we have implemented a targeted downsizing as part of our previously announced cost reduction program, we continue to build a strong pipeline of pending evaluations. Of particular note are a number of significant upcoming evaluations, including the Mayo Clinic, UC Irvine, the University of Pittsburgh Medical Center and Northwestern University Medical Center. We currently anticipate these evaluations to begin during June and July.

During the last few months, we've maintained a high level of communication with our GI champions despite the impact that COVID-19 has had on their departments. Most of their hospitals have been fully dedicated to addressing COVID-19 patients, limiting other activities in order to keep non-COVID-19 patients safely out of the hospital.

While inpatient colonoscopies typically are not an elective procedure, we have seen a meaningful reduction in cases at most sites. It is our understanding that patients not exhibiting severe active bleeding at the hospital have had their procedures postponed as the hospitals wait for the COVID-19 cases to plateau.

With the unusual and extended lull in GI procedures, resulting in many physicians working from home, it has afforded us the opportunity to spend more time with them discussing the advantages that the Pure-Vu System can provide when they return to some degree of normalcy in the coming months. GIs have informed us that they expect, at least initially, to be treating a larger-than-usual number of sick patients as they begin to reactivate their departments.

The largest concern we've heard has been the importance of avoiding any extended hospitalizations, canceled or aborted procedures due to insufficient bowel prep. We share their concern and have amplified our messaging to remind them of our belief that the single largest benefit of the Pure-Vu System is to allow for a successful procedure the first time through.

This is just one example of how we are approaching hospitals as a value-added partner, offering a solution with the potential for high impact as they adapt to a new normal. I have made it a directive for our commercial team to not wait for the GIs and hospitals to lead the way, but instead, I expect the Motus GI team to be proactive and find solutions for our hospital customers as their activities begin to ramp back up.

Let me share a few new initiatives we've enacted and are beginning now to roll out. As a result of access to on-site visits being limited or not available, we have initiated a virtual support program for inpatient procedures. This program can become a valuable tool for us and GIs have expressed their appreciation for this level of flexibility.

As part of our virtual support, we just launched a new mobile app that is now available on both iOS and Android devices. This app provides chaptered and narrated video support that covers the setup and use of the Pure-Vu System. As in-person meetings for discussions about the Pure-Vu System with new target hospitals are currently not possible, we have established a virtual Pure-Vu training room that is manned 5 days a week, 8 hours a day based in our Florida facility, where live system demonstrations and in-services are available, utilizing real-time video technology.

We are also evaluating the idea of providing off-site training to GIs and their staff on the Pure-Vu System with the goal to conduct this training in either an ambulatory center or a nearby hospital where it may be a safer and more convenient environment. We believe we have an opportunity to position Pure-Vu as an even more valuable tool in the GI suite as hospitals proactively consider how to improve patient flow and eliminate the costly burden of extended hospitalizations.

Looking outside the U.S., we recently announced receiving CE Mark approval in Europe as well as Israeli approval for the second-generation Pure-Vu System. We are also actively evaluating potential strategic partnership opportunities with established medical device companies and distributors that have a global commercial footprint and scale. While Europe and Asia are both interesting markets for partnership, we also continue to evaluate potential opportunities to accelerate our launch in the U.S. market, should the right opportunity present itself.

In terms of the cost reduction program we announced on March 30, I am pleased to tell you that the team has rallied together to execute this plan in rapid fashion. We are confident that we will achieve our objective of reducing our quarterly cash burn by approximately 50% or approximately $3 million per quarter beginning on July 1, 2020. This program was designed to allow us to successfully navigate the uncertainties of the market during this unprecedented time while continuing to advance our commercial and strategic objectives.

Before I turn the call over to Andrew, let me summarize our recent accomplishments. We continue to make steady progress against our commercial objective of generating demand, most importantly, by building a solid foundation of key reference centers and KOL support across the U.S. We have decisively adjusted to the new environment created by the COVID-19 pandemic and are prepared to continue to access the market with an innovative approach. And finally, we have taken the necessary steps to ensure financial stability for the company during these times.

I will now turn the call over to Andrew to discuss our first quarter financials. Andrew?

Thank you, Tim, and thank you, everyone, for joining us today. We reported revenue for the first quarter of approximately $28,000 from sales of the Pure-Vu single-use suites. As Tim discussed, we continue to gain new system placements and increase our training of GIs early in the quarter prior to the impact of COVID-19. The majority of these centers were operating under an evaluation period, during which several were paying for disposables but not the Pure-Vu workstation. We continue to work through capital equipment purchases, leases or rentals with many of these accounts.

For the 3 months ended March 31, 2020, we reported a net loss of approximately $6.5 million or a net loss per diluted share of $0.23, compared to $6.3 million or a net loss per diluted share of $0.29 for the same period last year. The first quarter of 2020 included noncash expenses of approximately $600,000, principally related to stock-based compensation compared to $1 million of noncash expenses for the same period of 2019. As was the case in the first quarter of 2019, the company's cash flows from operating activities in this period included certain onetime annual expenditures related to personnel, insurance and other compliance fees. The amount of these specific cash outflows totaled approximately $1.6 million.

With respect to our cost-cutting measures, as Tim mentioned, these are tracking to plan and are expected to largely be implemented by the end of the second quarter, resulting in a significantly reduced cash burn run rate on a go-forward basis. We continue to estimate that total onetime charges associated with this program will be in the $1 million to $1.5 million range. At the end of the first quarter, we expensed approximately $600,000 as a portion of these charges.

We held approximately $21.5 million in cash and cash equivalents as of March 31, 2020. Additionally, we recently entered into a deferral agreement with Silicon Valley Bank, whereby our term loan was extended by 6 months to June 2024 with the interest-only period now in place through June 2022, providing additional financial flexibility to the company.

And with that, I'll now turn the call back over to Tim.

Thank you, Andrew. In closing, we are pleased with how our sales team continues to find innovative ways to effectively stay engaged with our target GIs and hospitals during the COVID-19 pandemic. We see an opportunity to engage additional GIs and train them on the Pure-Vu System while they work through this unique slowdown in their hospitals. And we are working with hospitals and GIs to plan for ramping up inpatient colonoscopies with an influx of at-risk patients who have had their procedures delayed and would benefit from the Pure-Vu System.

We've created a compelling technology that addresses a large procedural market. We've established first-mover advantage and are pleased with the positive impact we believe we can have as it relates to improving patient care and health economics, particularly in the wake of the COVID-19 pandemic.

I will now ask the operator to open the call for questions.

(Operator Instructions) Our first question comes from the line of Steven Lichtman with Oppenheimer.

Tim, you mentioned the emergent active bleeding patients not getting deferred certainly as much as others. What percent of the inpatient colonoscopies would you estimate fall in into sort of that category?

So Steve, thanks for the question. Let me start by just saying, in general, what we've seen in talking to our physicians is, in many cases, their overall colonoscopy volume has been down by upwards of anywhere between 75% and 85% during this period of time. That said, as you know, we focus on critical colonoscopies, which if you look at the total colonoscopy procedure for inpatients, roughly about 60% of those are a bleed. What we've seen though -- so you kind of scratch your head and say, okay, well, these patients still exist. But in talking to our physicians, what they've told us is due to the redeployment of many of their units to treat COVID patients, they basically assess these patients. And if their bleed was not significant, they've actually postponed them either to an outpatient center or postpone the procedure to take place at a later date. So they've changed their protocols as it relates to managing even these critical colonoscopies that they typically wouldn't have discharged.

Okay. Got it. And then you -- in just the last few weeks, you've continued to build out the pipeline. Can you remind us how you define a pipeline opportunity as you put a new hospital in that bucket?

Sure. Yes. So in my mind, the general pipeline are accounts that we've targeted and we've had some degree of interaction with. And if you look at that universe, Steve, it's about 150 hospitals. But then from there, we prioritize based on the profile that we think best meets our strategic objective as well as where those hospitals are in terms of their ability to prioritize the evaluation of the Motus product. So I would say that we probably have about 60 accounts that are in our backlog. And we continue now to just add those as we move forward. So as I mentioned in my earlier remarks, we've been cultivating these opportunities at places like Mayo Clinic and Northwestern. We added a couple of new ones that I don't think we've talked about before, but UPMC, which, as you know, is a very large system that we've been in dialogue with, and now we have approval to move forward with an evaluation as well as the Methodist System in Houston. So we continue to take them from initial contact, discussion with GIs to approval actually through their VAC to do an evaluation. And those are the ones that we really focus on as it relates to pipeline accounts.

Got it. Okay. And then just last one, I'll jump back in queue. How many of the 19 hospitals where you placed Pure-Vu, how many of those have gone through a full VAC at this point?

Yes, sure. Great question. So what we found in most of the processes are, there is an initial VAC approval required to do an evaluation and bring the equipment on site. And everyone, obviously, of those accounts, have gone through that. I would say, generally speaking, about half of those accounts have gone through the full VAC approval. And as I alluded to earlier, so far, we've received that approval in each of those. What I will note is, in most of those cases, now they're starting to purchase the disposable sleeves, we are still working through the capital process. As you know, the capital funding is not always available at the time of VAC approval. But hopefully, that gives you a little bit more color, Steve, on the conversions.

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.

This is actually Destiny on for Jeff. I just real quick wanted to confirm that we would see approximately $0.5 million to $1 million in onetime charges in Q2 related to the COVID expense reduction. Am I understanding that correctly?

So yes. So we had outlined that we expected the total charge to be anywhere between $1 million to $1.5 million. I would say right now, Destiny, that we will come in on the low end of that range.

Okay. Perfect. Thank you for clarifying. And...

Just to clarify that one point. Sorry, just to close the loop. There was about $600,000 associated with the onetime charges that was booked in Q1 of that range. So it's not incremental.

Okay. Okay. Got it. And then I also just wanted to touch on inventory levels. I'm wondering what they may look like for the remainder of the year. I know you mentioned briefly in your press release, so I'm wondering if it will be similar to Q1 or slightly above.

Sure. Let me just make a kind of a color commentary on that first, Destiny. As we looked at what was happening with the impact of COVID and the expected slowdown in these facilities and as part of our cost reduction program, we made sure that we were running the business as efficiently as possible and -- but also balancing to ensure that we have enough inventory to meet our needs. I will tell you that we're very comfortable that we have the appropriate number of both workstations as well as disposables, both slim and adult to meet both the existing needs, but upcoming in terms of what we expect in terms of conversions at new facilities. Mark, if you want to just chime in with a little bit more detail as it relates to that, please feel free.

Thanks, Tim. I think you said it well. I think we're in a very good position from an inventory perspective. And we have extending -- good shelf-life on our product, so that with any ups and downs that happened, we should be in a very good position, and we have no -- really no concerns at all from a supply chain perspective.

Okay. Got it. And then I'm just curious for your virtual program, what kind of mix are you seeing as far as attendees? Are you seeing physicians that have been using it and are looking to get a better like understanding and additional training? Or are you seeing more pipeline accounts? And then are you also considering maintaining these virtual options for physicians? I know we've talked to a number of companies that have been doing that.

Yes. Yes, Destiny, that's actually -- it's really exciting, the way I look at this. We've really digitized, if you will, our go-to-market model. And some of this was in the works prior to COVID. One of the things that we've always looked at with this business is, over time, getting hospitals self-sufficient on doing the Pure-Vu procedure. Once we've come in and done all the training and are no longer at the site on a daily basis, you want to be able to provide the appropriate tools to allow them to do cases without us there. So what I would say is the silver lining here with COVID is it accelerated our time and effort in these areas. So as I mentioned earlier, we have been, as you'd imagine, utilizing some of the standard tools like Zoom and webinars. We also created this virtual training room, which I think is going to be very interesting, where you can call in and see a live demonstration without having to have a sales rep there.

I talked about the app, which we've gotten tremendous early feedback on what we've put into that app in terms of content and the fact that you can go through an in-service on the device, but we've chaptered it with commentary. So if there's just one part of the system setup or disposable removal at the end that you want to remind yourself or get a refresher on, you can go right to that section and just watch a, call it, 30-minute clip.

There's a few other things that we hadn't mentioned, but we have a new whiteboard animation tool that's going to be launched here in the next 2 weeks. And this really outlines the importance of the system, how it's utilized and some specific case studies that we think is going to get good attention, both at the hospital level, but also in social media. So there's a lot of these things that they're now ready and they're starting to be utilized in the market. We will absolutely continue to support this, and I would say, even add to it over time.

In terms of where we've targeted this, as I look at our business right now, and I've said this before, the pipeline, because of this unmet need and because of the fact that we are the only technology in the market that can meet this need, we have not had a difficult time getting interest and having facilities want to do an evaluation. So we're focused now on going a bit deeper before we go wider, if you will. So the focus of a lot of this remote work has been on existing customers, trying to get them through the remainder of the sales process as well as the immediate kind of on-the-cusp customer. So these are facilities that either have our device on-site and were about to start a trial or had received approval for a trial and will be starting now in June and July. We spent most of our time with those folks over the course of the last 60 days.

Our next question comes from the line of Ben Haynor with Alliance Global.

I just had one. You've done a good job providing quite a bit of color so far. But you mentioned the some of these procedures being pushed to outpatient centers at the same time that you're seeing the length of stay improvements of Pure-Vu really resonate with these hospitals. I mean do you worry at all that some of these that are getting pushed out to the outpatient centers, not just in time, ultimately do not come back to the hospital and maybe you need to shift the commercialization strategy more towards outpatient centers? Or any color you could provide there would be helpful.

Yes. Thank you, Ben. I would say that -- and we've talked to a large number of our docs, one of the benefits in this period of time has been a lot of the GIs have been working from home. So our ability to interact with them on a much more routine basis has been remarkably high. I would say that the majority of these cases have been postponed as opposed to have been picked up in the outpatient center. I think if it was significant, and they were able to do it, they did. But what we're hearing from our docs is they're expecting a significant influx of these sicker patients as they start to ramp back up. And what they've basically told us, and we've now shared that we put some of our existing guys in touch with docs that haven't had exposure to the technology yet to share, which is the #1 thing that they want to do with these patients is ensure that if they're bringing them into a hospital environment, as you think about the COVID testing that has to be done, the PPE that's going to be consumed by both the health care professionals as well as the patient and the fact that there's a risk, there's always going to be a risk there that, that patient can catch the virus while they're there, the last thing that they want to do is have that procedure be prolonged or canceled. So the feedback we've received is the value prop will likely be even more important now post-COVID and with the awareness on the importance of length of stay reduction. So we really think that this works well in terms of what we've been talking to the market about even before COVID hit.

Okay. That's definitely helpful. And then actually, just one more quick one from me. You mentioned the strategic partnership opportunities and the potential to maybe sign an agreement here for the U.S. market. Any color you can provide on how those discussions have been going, whether you think that, that is a likely route? Any help there would be great.

Sure. Yes. Listen, there's only so much, as you know, Ben, that I can comment on now. But what I will say, just generally speaking, is I'm very pleased with the interest and attention that we've gotten in the market with our product. I think it's being recognized by other folks that either play directly in this space or nearby part of the hospital and look to try to get into the GI space. I think they see that we've got a technology that's taken us 8 or 9 years to really perfect that allows a physician to control a procedure that is today very much not controlled well and is costly to hospitals. We also have first-mover advantage. So as I mentioned earlier, we've protected this asset. We think it's going to be quite some time before someone is in the market competing with us. I think that's gotten the attention of some of these larger companies. So we continue to be in active dialogue. When there's an update, of course, I will provide that, but right now, we're really focused on continuing to bring these large centers on board, which I think just gives us more leverage as we move forward and continue to have these discussions.

Keep up that batting average for the VAC approvals.

Our next question comes from the line of Matthew O'Brien with Piper Sandler.

Of those 75 docs you trained, are they all at those 19 facilities where you have a system? Or are there some that are outside of those 19?

So Matt, I would say the majority are at the sites that we have a system. There's a few that we have spent a little bit of time with that they were -- we have -- because we have loaner units that we give to our reps that they can go out and do some training. So when they're creating interest in the market, they may have -- go have a meeting and they'll train a physician on how to utilize the device. But if they're not ready to trial, then obviously, we're not going to leave it on-site. But I would say the large majority are at the facilities that we're working with today.

Okay. And then, Tim, as we think about things as they progress throughout the course of the year, I mean, capital is definitely constrained at a lot of these hospitals. They have a lot of other things to worry about at the moment. They're hemorrhaging money currently. So how do you think about the recovery here for you guys during the back half of the year? Or is it going to be really difficult until we probably get to '21 and things have moderated more so? Or can you be more flexible with your business model?

Yes. Yes. So as you know, Matt, and we've talked about this, I mean, capital has kind of always been tight. And I think it just got a bit tighter, at least in areas that have been hit the hardest, and we've heard that feedback, in particular, even with some of our existing accounts that were on the cusp of releasing funds to purchase the workstation, and now that's been put on hold, at least temporarily. But what I will say is I think we have the flexibility to really partner with these sites and be creative in terms of how we structure our programs. And we've already had some of those discussions, and there's things -- and we'll talk in more detail as they are actually enacted, but volume-based agreements where some sites have said, "Hey, we can make a commitment on the number of procedures we'll do, but there may -- we may not be able to pay for the capital now." And in our mind, and I've said this before, the capital has value, of course. However, getting these sites to the point where they are doing repeat procedures, we're getting repeat disposable orders, and our product has become just a standard tool in their toolbox within the GI lab is really where we need to be and what we're focused on. So we will not let capital slow down these conversions, but we think we can get creative as it relates to the way we go about the partnership and including the disposables.

Okay. And then one for Andrew. Just the level of cut is definitely necessary given what's going on. Can you talk about where the majority of those cuts are really focused on and then how that could impact you as you head into '21 as far as trying to grow the business?

I'll comment generally, and I'll hand it over to Tim to talk about general impact on strategy and our commercial objectives. But the short answer, Matt, it's really across the board. As we talked about last quarter, we had some cuts in the commercial department a little bit more than 50% in that regard. And then in other areas, it was anywhere between 30% to 50% really across the board. And Tim, if you want to comment on sort of how that sets us up for the remainder of the year and into '21?

Yes. What I'll say is one of the most important things when we made that decision was we wanted to be decisive. We want to ensure that it was meaningful enough to allow us to weather the storm to get through this period of time and the unknowns in terms of when hospitals would start to get back online. And we also -- one of the kind of tenets of the process was what we didn't want this to be ongoing. So doing the best of our ability to ensure that there wouldn't be additional cuts. And right now, I feel comfortable with at least the view that we have that's getting a little clear that there wouldn't be additional cuts.

What we did do, though, Matt, is we looked at the overall organization and we trimmed in areas where we may be placing a bet that's much longer term. And we said, okay, does this meet our immediate objectives? And the #1 immediate objective for Motus GI is demand generation in the market commercially with our product, building out that foundational group of hospitals that then really become the proxy for what this market can be, either as we add back more salespeople and grow that business ourself or we look at a strategic partnership. I think that's the critical priority. The other key objective that we thought about when we made the cuts were the technical expertise of the company, ensuring that we can drive some of the opportunities that we see that are in the nearer term. So next-generation ideas around our disposable sleeve, which have been in the works as well as the upper GI opportunity that we talked about on last call. So made sure that we didn't impact those key priorities. But we did have to make some hard decisions on things that we can add back as we see things getting a little bit more positive in the market. But I feel very comfortable that we're able to achieve the most important objectives. So hopefully, that makes sense.

And if you look around the market, and I've heard from colleagues and others that had to make much worse decisions and some that are questioning whether they can weather the storm, and I'm really pleased that we took quick action in terms of what we did.

Okay. And just a quick follow-up on that. Tim, how many sales reps do you have at the moment? And how are you thinking about the end of the year?

Yes. So we -- as I -- I think I mentioned this on the last call. We made about a 50% reduction in terms of our headcount. So roughly, Matt, we have 5 customer-facing field people. And we've really focused them on central, west and east with our key relationships in many of those sites. We also have support in Texas, where we've got some good installations of product and, of course, our Head of Sales. So that's the way the commercial team is structured now. And then in terms of marketing and the other key support areas, we've peeled off a few folks, but we've kept our key employees there.

Our next question comes from the line of Kyle Bauser with Dougherty & Company.

I know, as you mentioned, it's more important now than ever to get the colonoscopy done in the inpatient setting on the first try. And I understand that even these nonelective inpatient colonoscopies are being pushed out. So it's hard to get into the new hospitals. But given the size of the early adopting hospitals, it seemed like the sales reps could stay quite busy, making sure all the GI docs and support staff have been in-serviced and trained in. So as you look at these 19 hospitals with GEN2, just kind of curious, roughly what percentage of the targeted clinicians at these hospitals have been trained in?

Yes, Kyle, that's a good question. And we -- as I mentioned earlier, we kind of had the luxury of many of these physicians working at home. So we've been able to be in contact and I would say, with almost every one of those facilities, the key GI champions that either -- or docs from the earlier accounts, places like UCLA that are doing procedures on a regular basis, University of Texas, they're doing and purchasing sleeves on a regular basis, we've been able to be back in touch with them just to check in. But on the facilities that we're in the midst of an evaluation or the ones that had not yet started their evaluations, we've been in touch with, I can say confidently, all of those docs to ensure that we're walking through questions on the system, talking to their staff about setup. And also we've been working through the anticipation of the value analysis committee, ensuring that we've got the data necessary to have that be an efficient process once we get back on track. So overall, this has been, in my mind, a pretty effective period of time in terms of -- we've got a reduced size team, but you can get a lot done when people are available, and we're doing things over the phone, if you think about it kind of from that perspective and we even had procedures that were taking place in one of our evaluation sites, Sinai Hospital in Baltimore, that did 7, 8 procedures this past month without us there, and we're able to support them remotely, and they're an early evaluation account. So that was very, very positive.

Interesting. That's helpful. And can you talk about the rental process timeline? It sounds like there's flexibility here with accounts willing to do sort of minimum disposable volumes. But how long are you offering the rental option to accounts once they sign up typically?

So the priority is trying to get these facilities onto some type of capital program, whether it be an outright purchase or rental or a lease, or a different creative volume-based program, really right following the VAC approval. Now at times, that is not able to be done depending on the dynamics of the hospital. So we've had instances where we've committed to say, okay, based on the volume that you're going to give us on a monthly and quarterly basis, we will leave the workstation here for the next 3 months. But at that point, we now need to try to get you under some type of an agreement. So we've shown that kind of flexibility. And keep in mind, it's early, right? We're, call it -- we're 2 quarters into our launch, of which a month was impacted. So these -- most of these facilities that we talked about are really getting through the final portion of their process. So a lot of dialogue in terms of the timing of when they will move to a rental is really happening real time, if you will.

Got it. And then just lastly, I know the clinical trials across the board have largely been put on hold. But can you just walk through in a little bit more detail the plans for each of your upcoming and ongoing studies that we should keep an eye on?

Yes, sure. Let me make a general comment. So yes, they've all been impacted just as everyone else in the market has seen in terms of clinical study activity. You know that we're running the EXPEDITE study in Boston. And of course, Boston has had a large number of cases, and we've been in very close contact with Dr. Jacobson, and they are not really back yet up and running as it relates to the clinical study, but we continue to stay in close contact. As you know, we are also focused on -- as you think about 2020, and we've said this, the investments that we want to make around clinical studies are all to advance our commercialization effort. So we haven't yet revealed the details and we will when the time is -- when these are approved, but we are working with a couple of the largest centers in the U.S. to construct studies that will give us additional data that we don't have today around GI bleeding and the economics associated with using Pure-Vu for the GI bleeds. So we've talked about getting into a GI bleed with a reduced time line and some physicians have already done that with very minimal prep. So we'd like to formalize that, and we're working with some of the largest centers to do that. I can ask Mark, if you'd like to provide a little bit more color as it relates to clinicals, please add.

I think you covered it well, Tim. To Tim's point, Kyle, we're really looking at those critical patients and developing more data around that. So everyone is already fairly aware that we don't want to delay patients and the COVID issues have only accentuated that. So really driving to that whole point of, especially for those critical bleeds, not even waiting overnight to try to prep those patients, but really to try to move that to a much more rapid colonoscopy experience, to really not only for the economic benefits, but it will also have the large potential to show some significant clinical benefits as well.

Our next question comes from the line of Yi Chen with H.C. Wainwright.

This is [Gopalan] dialing in for Yi Chen. I have a couple of questions. So I just wanted to make sure the RESCUE study, you have not initiated, correct? I mean do you have any plans when you plan to initiate that? And are you planning to use the study data for any future indication expansion or some sort of special 510k clearance?

Can you just repeat the first part of the question? Which study are you referring to?

RESCUE study. RESCUE.

I'm sorry, it was cutting out, the RESCUE study. Mark, do you want to provide a little bit of color as it relates to the RESCUE?

Sure. So yes, the RESCUE study, we have currently put on hold, which is more of an outpatient-focused study. And that's a study we're going to determine probably as we get later into the year, depending on how things begin to open up, whether that's an area that we want to focus on. That was not a study to help with any indication expansion or any claims or any regulatory process, that was more just for market development reasons into the -- eventually into that outpatient setting. So not a critical study for us in the shorter term, more for a longer term focus. So we'll pick that up at the appropriate time and may even redesign it based on what we're seeing happening in the COVID world.

Okay. So how do the sales of the Pure-Vu overseas look like in 2020 before and after the peak impact? Maybe you can give some numbers. And also, do you have any expectations or guidance for the rest of the year with respect to the Pure-Vu, please?

Sure. Yes. So at this point, we have not given guidance as it relates to revenues, nor have we obviously then broke out the sales mix. But what I can tell you, just to provide a little bit of color, and we've said this publicly before, what we expect initially when an account makes a conversion to Pure-Vu, we typically have 2 to 3 physicians that are GI champions in that site that would have been part of the evaluation process and part of supporting the VAC approval with their clinical feedback. We expect those early accounts to ramp up to somewhere between 5 and 10 procedures per month initially. And then over time, as we continue to expand at that site, what we do is we focus on bringing additional physicians in, have them trained, and then obviously, that drives increased sleeve volume.

But in terms of modeling, when we put out detail, I think 2 calls ago, we had talked about 5 to 10 procedures per month initially is what we would expect that these sites can get to. And then if you think just kind of longer term, at a macro level, there's about 1.5 million procedures done each year in U.S. hospitals. These are the critical inpatient procedures. So about 1.5 million procedures, and the literature has shown, and we've seen in the real-world, that upwards of 50% to 55% of these procedures are indeed delayed for a night or 2, which is the perfect target opportunity for us here as we are launching the product to go after. So call that 750,000 to 800,000 procedures in the U.S. that immediately are a target market for us. And then, of course, as you model things, over the course of the next couple of years, you can look at various penetration rates. But we think it's premature to provide specific revenue guidance until we get a couple more quarters under our belt.

Great. Just one final question. Assuming the pandemic continue for the rest of the year, what are some of the steps you might have to take to protect your business?

Yes. So I think largely, the big step that we've taken already, as you are aware, on March 30, we announced the cost reduction program, we just talked about that. I think taking half of our burnout of the quarter on a go-forward basis gives us more runway to hopefully allow things to get a little bit more concrete in the market. I am pleased that we're starting to see, if you look at the concentration of our accounts, we've got a large number of facilities that we have been working with in California. We've got a nice group of installations in Texas and also parts of the Midwest. And in speaking to those accounts over the last couple of weeks, it looks like the majority of those will start to get back up and running here in the first half of June.

I think some of our facilities in the Northeast, New York, Boston, some of the larger cities like Chicago may be a little bit later in the year. But we're anticipating that these facilities are going to start to get back up to their normal volume over time. We've even had a few of the larger centers telling us that they're expecting by July to potentially be at 120% of their volume as they bring back this influx of patients.

So we're expecting that things are going to get better as we get into the summer. But I think we've stabilized things from a financial perspective. We do, of course, continue to have dialogue, as we discussed, with strategic partners, both on the commercialization side, but also on the financial side in terms of folks that understand our story and could be financial partners in the future for us. So right now, I think it's all about execution. And we're hopeful that the signs that we're seeing in some parts of the states are going to continue, and we can get back on the trajectory that we were on before COVID hit.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Moran for any final comments.

Great. Thank you. I just want to thank everyone for their time today for the continued interest in Motus. We've got an incredible technology that we are really in the early phases of developing into the market. But when you look at this procedural market, our first-mover advantage and it's that in just 2 quarters we're able to get our product into, we remain very bullish about the overall future opportunity of the company, and we'll look forward to providing updates next quarter. So thanks, everyone, for participating today.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.