Vicarious Surgical Inc (RBOT) 2021 Q3 法說會逐字稿

Good afternoon, and welcome to Vicarious Surgical's Third Quarter 2021 Earnings Conference Call. My name is Sarah, and I'll be your operator for today's call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych with the Gilmartin Group for a few introductory comments. You may proceed.

Thank you, and thank you all for participating in today's call. Earlier today, Vicarious Surgical released financial results for the 3 months ended September 30, 2021. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements.

All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, market opportunity and commercialization are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our quarterly report on Form 10-Q filed with the Securities and Exchange Commission today.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 8, 2021. Vicarious Surgical disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

And with that, I will turn the call over to Adam Sachs, Chief Executive Officer.

Thank you, Marissa. And good afternoon, and thank you, everyone, for joining our first earnings call as a public company. Joining me on today's call is Bill Kelly, Vicarious Surgical's Chief Financial Officer.

Before we begin, I want to congratulate our team and thank our investors, advisers and partners for contributing to our company's growth and driving our ability to become a public company. We would not be trading on the New York Stock Exchange today if it were not for my co-founders, our incredible leadership team and our employees who have driven this company from an idea to a reality.

We have a tremendous opportunity and an exciting journey ahead of us. Of course, I'd also like to welcome newer investors to our story.

Let me take a step back to highlight our company's overarching mission. At Vicarious Surgical, we are committed to leveraging next-generation robotics technology to improve the standard of care for patients across a variety of surgical procedures, while minimizing associated costs to the health care system. Despite advancements to minimally invasive surgery over the last 40 years, it is estimated that more than 50% of the 39 million annual procedures addressable by legacy surgical robots are currently performed with no minimally invasive technology at all. They are still being performed using open surgical technique.

The large incisions required for open surgery creates significant trauma to the patient, resulting in long hospitalization and recovery time, high long-term cost of care and significant pain and suffering. Due to the patient trauma associated with open surgery, 15% to 20% of such surgeries results in an incisional hernia, requiring additional complex surgery to correct.

While current minimally invasive techniques seek to address the substantial unmet need, these techniques fall short. Laparoscopic instruments are difficult to manipulate, have limited degrees of freedom, limited reach and reduced depth perception and visibility, requiring significant coordination among the surgical team to perform a procedure. Multi-port robotic systems have overcome some of the challenges of rigid instrumentation associated with laparoscopy, but they have a large footprint and limited portability, require extensive setup and procedural time and use multiple incisions and multiple systems.

Fundamentally, these systems still require surgeons to choose the incision site location based on the robotic motion that they're looking for and to design the kinematic profile of their robotic tool for every procedure. Economically, these systems are expensive, and surgeons encounter cumbersome and costly learning curves.

The more recent development of single-port robots does not comprehensively address these fundamental issues still relying on legacy robotic architecture. These require a much larger trocar incision than multiport systems and are associated with complication rates akin to legacy techniques. Additional challenges include limited motion, strength and visualization and can only operate in a small area. For these reasons, nonrobotic techniques continue to be used in the vast majority of cases.

At Vicarious Surgical, we intend to deliver the next generation in robotic-assisted surgery to deliver the shortcomings of open surgery as well as current laparoscopic and robotic minimally invasive surgery. The Vicarious System combines advanced miniature robotics, computer science and 3D visualization to build an intelligent single-incision surgical robot that virtually transports surgeons inside of the patient to perform minimally invasive surgical procedures. Our proprietary decoupled actuators enable human equivalent motion with 9 degrees of freedom per robotic arm, providing an experience that's more natural and more akin to the surgeon's own upper body movement.

In surgical procedures conducted on cadavers, our system allows surgeons to enter the abdomen from nearly any angle and work in nearly any direction without multiple incisions. A stereoscopic camera that rotates in 3 degrees of freedom provides the surgeon with imaging of nearly every surface in the abdomen. The Vicarious System also contains 28 sensors per instrument arm and is designed to enable real-time feedback to the surgeon on force, motion and other key data intended to enhance surgical procedures and patient outcomes.

Beyond its technical advantages, the system's value proposition to hospitals and ambulatory surgical centers is clear. With the technology designed to enable so much capability within the abdominal cavity, we intend our product to be much more efficient to learn, set up and use during a procedure. Unlike legacy robotic systems, our system is smaller, easily moving from an operating room throughout a medical facility. Its size and engineering will allow cost-effective price points in comparison to existing robotic systems.

Hospitals and ambulatory surgical centers would not be required to dedicate permanent space, reducing expenses relating to sterilization and operating room turnover. The Vicarious System is designed to provide excellent surgical dexterity with flexible setup to enable many procedures to be performed faster and more effectively with less injury and risk to the patient, significantly reducing overall health care costs.

Our thoughtful design was created and adapted specifically to address current barriers to physician training and adoption. Surgeon feedback toward our prototype validates the system's ease of setup and use natural human motion and the value of system mobility from location to location. Our robotics is the first of its kind to receive a breakthrough designation from the FDA, specifically for the ventral hernia indication, which we are targeting as our first clinical application. Beyond ventral hernia, we are excited by the potential to target an array of soft tissue, abdominal and pelvic procedures, including other types of hernia, hysterectomy, cholecystectomy and other certain gastrointestinal procedures.

We have developed multiple prototypes, including beta units, which we are pleased to announce that we have -- and we are pleased to announce that we have just filed a detailed regulatory plan in the form of a pre-submission to the FDA. Our regulatory plan is focused to minimize risk and minimize time to market by focusing initially on a single indication. We intend to file a 510(k) application for the Vicarious System for ventral hernia procedures by late 2023 and other indications thereafter.

Today, we are also proud to announce that we are well on our way to successful beta testing of our first Beta system with surgeons and hospitals. The first of 5 Beta 1 units was integrated over the summer. Since then, we have continued to collect critical surgeon and hospital feedback on our system across attributes such as clinical value and workflow to transport and ergonomics. We plan to utilize complete feedback to ensure that our device is exactly what surgeons and hospitals need. Our plan includes formative testing that will ultimately support our FDA submission in later 2023. Thus far, the results of our testing have further confirmed our value proposition to patients, surgeons and hospitals, and we look forward to continued testing of the Beta 1 system as we begin work toward Beta 2.

This quarterly call marks the first of many, and we are proud and honored by the broad base of support from the members of our SPAC sponsor, formerly known as D8 Holdings, as well as innovative technology luminaries supporting our story and development history.

I will now turn the call over to Bill Kelly, our Chief Financial Officer, for a discussion of our financial results in the third quarter.

Thank you, Adam, and thank you all for joining us today. To begin, I'd like to make a few comments about our recently completed merger with D8 Holdings Corporation, which closed on September 17, and our successful listing on the New York Stock Exchange under our new ticker symbol, RBOT.

Despite the redemptions that have become increasingly prevalent across all SPAC transactions, we are very pleased that we successfully closed our transaction with total proceeds of approximately $220 million, which after transaction costs, resulted in over $190 million in net proceeds to the company. Through this financing, we were able to demonstrate both technical and market validation with the addition of several key strategic investors, including Becton Dickinson and multiple hospital chains in the U.S. and Asia, which should serve us very well going forward.

With this financing secured, we are pleased that we can continue to execute on our development and regulatory time line as planned, and we look forward to continuing to update you on that progress in the coming months.

Turning to the results of the quarter. Total operating expenses for the third quarter of 2021 were $8.6 million, a 156% increase from $3.3 million in the third quarter of 2020. R&D expenses for the third quarter of 2021 were $5.2 million compared to $2.5 million in the third quarter of 2020. The increase was primarily driven by a 70% increase in R&D headcount, costs associated with our new and expanded headquarters and increased materials and services expended in the continued development of the Vicarious system.

General and administrative expenses for the third quarter of 2021 were $2.5 million compared to $0.5 million in the third quarter of 2020. The increase in G&A expenses can be primarily attributed to increased headcount and personnel expenses, increased professional fees, particularly related to the merger and the transition to being a public company as well as increased facilities expenses associated with our new headquarters.

Sales and marketing expenses for the third quarter of 2021 were $0.8 million compared to $0.4 million in the third quarter of 2020. The increase in sales and marketing expenses can be primarily attributed to increased headcount and related activity.

Adjusted net loss for the third quarter was $8.6 million, according to an adjusted net loss of $0.09 per share as compared to an adjusted net loss of $3.3 million or an adjusted net loss of $0.04 per share for the same period of the prior year. Net loss for the third quarter was $65.5 million, equating to a net loss per share of $0.71 per share.as compared to a net loss of $3.3 million or a net loss of $0.04 per share for the same period of the prior year.

For a reconciliation of these non-GAAP measures to GAAP, please review our earnings release. We ended the quarter with $185 million of cash and cash equivalents. Our cash burn rate for the third quarter of 2021, excluding the impact of the recently closed merger, was $13.1 million, bolstered by our recent business combination concurrent PIPE transaction, which provided $220 million in gross proceeds.

We expect cash burn of $11 million to $14 million in the fourth quarter as our balance sheet normalizes in the continued development of the Vicarious System. As we advance our development, clinical and regulatory processes, we expect cash burn of approximately $60 million to $70 million in fiscal year 2022.

Overall, we are very proud of our recent transactions and strengthened balance sheet, and we look forward to providing updates as we execute on our development initiatives in the quarters ahead. We believe the future of Vicarious Surgical is bright. And with that, I'll turn the call back to Adam.

Adam?

Thanks, Bill. I'd like to close by commenting on the expansion of our leadership team and our footprint, 2 critical aspects of our company's growth and positioning into the years ahead.

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In addition to Bill's appointment as Chief Financial Officer, we have expanded our executive team with the addition of June Morris as General Counsel; and Michael Pratt as Vice President of Commercial Strategy. We've recently signed a new lease facility to expand by 30,000 square feet in Waltham, Massachusetts. This is another vital step toward building out our development, manufacturing for the future of Vicarious Surgical toward our goal of improving patient lives. Thank you all again for joining today's call. Operator, would you please open up for Q&A?

(Operator Instructions)

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(technical difficulty) First quarter out the gate here. So wanted to just talk about a few components. Adam, you talked about the submission to the FDA, the pre-submission, I should say, to the FDA. And I'm wondering if you could provide any more color or a road map around kind of when do you expect to hear from them, what their feedback may or may not be thus far, and any other color you can give around that component. And then I have a follow-up question.

Absolutely. Well, thanks for much for that question, Ryan. So we filed a submission and we've been incredibly pleased with the engagement that we've had with the FDA, especially under the breakthrough designation, where we're able to have a close relationship overall. At the end of the day, it's ultimately going to be the FDA's decision what the feedback they provided, so I'd prefer to not speculate on what they may or may not say. We do expect some amount of back and forth over a number of months. They are fairly backlogged, after all, and expect to come to a conclusion, and we'll be sharing the results as soon as we come to an agreement at the end of that.

Okay. Helpful. And then, Bill, I really appreciate your commentary around cash burn, not just for the fourth quarter but also for next year. And any color in terms of -- I would imagine that's more R&D loaded than sales and marketing -- cash burn as we think about modeling for next year.

Yes. Thanks, and thanks for joining us on our first call, really appreciate it. Yes, I think, Ryan, we're obviously not -- we're not providing guidance on what the actual overall cash burn is, obviously. The predominant spending we've had as you've seen in the quarter is R&D, which includes both development of the system as well as the regulatory process as well. So but that being said, towards the end of this year, and towards the middle of this year, we did hire Michael Pratt as Head of Commercial Strategy. And so I think you're going to see the lion's share of our spending being R&D related, but I think we'll see more and more sales and marketing, that line item start to develop over time.

The next question comes from the line of Kyle Rose with Canaccord Genuity.

Great. I'll echo Ryan's sentiments to you, congrats on the first quarter here as a public company. So the one thing I just really wanted to ask was just around some of the comments about some of SPAC or the PIPE investors. If you can help us just understand, I mean, we don't typically see health systems, both U.S. and international, invest in companies. So help us just understand, from a broader perspective, what does adding that type of investor to your shareholder base do for you from a beta site perspective? And maybe just help us understand what rights, if any, do they have from a commercialization, and how we should be thinking about just layering that type of relationship into the model when you do flip commercial?

Yes. So first of all, thank you so much for the question. This is a bit of a tricky one to answer because any of these hospital chains that have invested in us, we're incredibly proud of their investment. But we also want to be aware of the fact that they are potential huge customers in the future for our company, right? These are, today, our partners and our investors, and we hope tomorrow will become our customers. We've had engagement from multiple hospital chains inside and outside the United States, including major ones with over 200 total hospitals between them. And there's a lot of potential opportunities with hundreds of hospitals, thousands of operating rooms, thousands of surgeons engaged, working with us to ensure that our technology is exactly what they want, and our product is exactly what they want when we bring it to the FDA and bring it to market.

To answer specifically the question about special rights, there are no specific special rights. There are no special rights provided in any of the investments. Bill, do you have any color you'd like to add to that?

Yes. No, I think you hit it right on the head, for sure. We're extremely pleased with our PIPE. We actually oversubscribed it twice, bringing in multiple hospital systems. None of the strategic investors and hospital systems or any of the investors received any special rights. But I think what we feel pleased about is just we stated back when we started this process that we wanted to reach out to hospitals and start to engage them. And just this level of involvement has us excited because it shows that they all got engaged and are supportive of our system, and we're very appreciative about that.

The next question comes from the line of Adam Maeder with Piper Sandler.

This is Simran on for Adam. So I wanted to touch on how your current engagement with hospital systems and physicians on the development of Vicarious, the Vicarious robot is going? How many of those kinds of physicians have come through headquarters? And are these clinicians associated with large academic centers or ASCs? Any feedback, commentary that you'd like to share?

So we've had a large number of hospitals across many different chains, as well as academic centers. There are a whole bunch of facilities in addition to those hospital chains that have invested in us that we're working with. It does include smaller community hospitals, academic centers, ASCs, as you mentioned, as well as larger for-profit hospital chains inside and outside the United States. They've been engaged with us both at the hospital C-suite level all the way through, including surgeons and other operating room staff. And we've been going through our beta testing to thoroughly examine and understand every feature of our system to make sure it's exactly what they want. Did I answer your question?

Yes. No, that was perfect. And then could I maybe ask a little bit more on how things are looking from an OpEx standpoint? Could you maybe help us understand the pace of spend in subsequent quarters, both on the R&D and SG&A side of things, quantitatively or qualitatively?

Yes, it's a good question. I think, obviously, we can probably reiterate back to the guidance that we have if we look for this quarter coming up or really -- we're now coming out of the transaction at the end of Q3 here as you will see on November 17. So the guidance we provided for Q4 is about $11 million to $14 million of cash spend. And the vast majority of -- the very significant majority of that is pure OpEx. And then if you continue that trajectory into next year, our total cash burn guidance is $60 million to $70 million for 2022, again, significantly with OpEx, and definitely some CapEx involved in there for sure as well. But you can see us going from the Q4 run rate of this year to a point where we get to the full $60 million to $70 million lineup for the year.

The next question will come from the line of Josh Jennings with Cowen.

It's great to be on your first public earnings call as well. I echo the sentiments of the other analysts. I wanted to just ask about pipeline. I know it's -- you're moving towards a Beta 2 system development, but also you have, I guess, in the early days, both commercialization, VRs, vessel sealing and clip, the pipeline projects. Can you just talk about the development work and timing of those features and additions to the portfolio?

And then the second question is a similar one, but just on manufacturing. What are your key manufacturing development goals over the next few years? I think the sterile portion of your system that's fully disposable, maybe one of them, but anything you can kind of give us a road map and how -- what we should be expecting in the next 12 to 24 months on the manufacturing front.

Yes. Good question on features. So between the ones that you mentioned, vessel sealing, clip, applying some of the VR functionality added to our system, those are in development currently. And in fact, many of them are very far along. But we expect them to require clinical data for clearance, and we don't want to add any additional regulatory risk that's unnecessary in our main filing that might delay our time to market. So -- that's the reason that those are -- will be following the exact timing. We expect them to be fairly shortly after our initial launch. But again, ultimately, each of these is at the discretion of the FDA and will be launched in sequence following our initial product launch.

To the manufacturing question, the -- there are a lot of manufacturing goals. It's certainly a complex system, there's instruments and accessories. There's our capital equipment manufacturing. There's also not direct-to-manufacturing, but a service and support function that we're in the process of building out as well. So each of these is a major initiative. We're building out both capability in-house as well as partnering with contract manufacturers in some cases for individual components and subassemblies and some cases, for significantly more than that. And it's one of the biggest reasons that we've built out our -- we're in the process of building out this new facility next door to our existing facility, with an additional 30,000 square feet. And we'll be converting part of that as well as a big chunk of our existing facility into clean room manufacturing space for the production of sterile disposables.

The next question will come from the line of Matt Miksic with Credit Suisse.

Congrats for getting out on your first call, you're -- echoing what everyone else has said here so far. I had one on what you described, I think, Adam, initially was the first of 5 Beta 1 units. I think that's what you said. If you could maybe just sort of map out the pathway and the plan for what the other 5 units look like or the time line for that or what the criteria are for sort of getting to that next and then the next cycle. And then I had one follow-up.

Yes. So the remaining units are currently -- they're actually currently in production, all 4 of them, and we expect them to be completed in the near future, 1 or 2 of them are going to be primarily for engineering purposes and testing. And then the remainder are going to be for continued testing in -- with surgeons and hospital staff. We can certainly share more info as that testing happens.

That's great. And then just -- I thought it would be helpful given that you've been at this for a number of years now, but are now sort of at a steep part of the growth and execution curve. And I thought it might be helpful just to talk about with the growth and bringing people on and expanding it to new facilities and moving through the regulatory pathway, what some of the -- everyone in this environment is facing challenges of one kind or another. It would be helpful maybe to hear where are your challenges? What are things that you -- what keeps you up at night in terms of getting through what you need to in the next 6, 12, 18 months, say?

Yes, it's a very good question. I think there are a lot of challenges associated with building any company, and what we're building is incredibly complex. We've been really successful and really proud to have grown our team effectively, grown our company effectively, and we're achieving our milestones, and in the early stages of our regulatory plan and engagements. At the end of the day, to really directly answer your question about what keeps you up -- what keeps me up at night, it really comes down to making sure that our product is exactly right.

We have a technology that we firmly believe provides so many advantages against legacy technology and it's just a night and day difference. And making sure that we've successfully turned that technology into the perfect product for surgeons who are rightly very demanding customers and -- is incredibly important. And that's why we're engaging with so many hospitals, everywhere from the C-suite level all the way through surgeons and operating room staff, including circulating nurses, scrub techs, we really want to make sure that everything is exactly right.

There are no additional questions waiting at this time. So I'll pass it back to Adam to give closing remarks.

Well, thank you, everybody, very much for joining our first earnings call as a public company. Have a wonderful evening. Thank you.

That concludes the conference call. Thank you for your participation, and enjoy the rest of your day.