Vicarious Surgical - Q1 2024

Transcript

Operator (participant)

Hello, and welcome to Vicarious Surgical's 2024 first quarter earnings call. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. I'd now like to hand over to Kaitlyn Brosco, Head of Investor Relations. The floor is yours. Please go ahead.

Kaitlyn Brosco (Head of Investor Relations)

Thanks, Elliot, and thank you all for joining. With me today for prepared remarks are Adam Sachs, Co-founder and Chief Executive Officer, and Bill Kelly, Chief Financial Officer. Later, Randy Clark, our new Company President, will join for the Q&A portion of this call. Today, after market close, Vicarious Surgical released financial results for the three months ended March 31, 2024. A copy of this press release is available on the company 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 provision 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 obtaining approval for the Vicarious Surgical System and timing for any such approval, 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 would cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place any undue reliance on these statements. For a list and description of the risks and uncertainties associated with the business, please refer to the risk factors set forth in our Securities and Exchange Commission filings, including our most recent Form 10-K and Form 10-Q. This conference call contains time-sensitive information and is accurate only as of this live broadcast today, April 29, 2024.

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. Now, I'll hand the call over to Adam for prepared remarks.

Adam Sachs (CEO)

Thanks, Kate, and thank you everyone for joining us. I'm proud to report a strong start to the year as we advance our mission to improve lives by transforming surgical robotics. In the first quarter, we made meaningful progress toward the finalization of our V1.0 system. The collective efforts of our development team culminated in the completion of our spring cadaver lab at the end of March. This lab marks the first use of our integrated V1.0 system in a cadaveric procedural setting, with the primary goal of validating the capabilities and potential of the new system's feature set. I'm pleased to share that the lab proceeded as we had anticipated, verifying several advancements in development and yielding valuable insights across the system. During the lab, our V1.0 system showcased the tremendous potential inherent in our novel platform.

Underpinned by the new fortified software, electronic, and mechanical architecture, and supported by enhanced instrumentation and visualization technology, the V1.0 system exhibited the dynamic motion capabilities of our patient cart, facilitated maneuverability within the abdominal cavity, and enabled 360-degree visualization and access to targeted surgical sites. We highlighted many of these specific V1.0 development goals in our remarks last year, and I'm happy to report the success of our team's diligent efforts since. As anticipated, in addition to our development success, the lab offered insight into the additional refinements required for our final system. Over the next few quarters, our team will focus on leveraging these insights to fine-tune the V1.0 system in preparation for formal verification and validation testing.

Taking a step back, I'd like to contextualize the detailed development work we are performing against the broader landscape for surgical robotics, to remind our stakeholders why we believe our offering is poised to take a disproportionate share of this market over time. Even with considerable progress over the past few decades, the field of surgical robotics is still in its infancy. Despite substantial growth and varying new market entrants, around 96% of the estimated $150 billion market opportunity remains white space. Recent strategic activity in the space continues to strongly support this notion that robotics is the future of surgery. While existing robotic technology has notably augmented surgeon capabilities, these multi-port systems have amplified costs to the hospital system without addressing the technology's fundamental limitations.

For example, lack of instrument dexterity and range of motion constrain surgeons to utilizing wrist-on-a-stick instruments that necessitate multiple incisions to the patient and require cumbersome instrument triangulation by the surgeon. This approach introduces complexity, both during the procedure and in preoperative steps, contributing to the steep learning curve for new users and the low 4% adoption rate for surgical robotics today. Vicarious Surgical was founded on the recognition of these limitations of multi-port surgical robots. Instead of building off legacy robotic technology, we reimagined surgical robotics from the ground up. Core to our reimagined architecture is our proprietary decoupled actuator technology... which prevents the force buildup in the joints of each instrument arm, significantly enhancing the dexterity and range of motion of our system, and thereby eliminating the need for multiple incisions required for instrument triangulation.

Through a single 18-millimeter incision, our system is designed to achieve full intra-abdominal access with high force exertion for our targeted surgical indication. We believe this streamlined approach will enhance procedural efficiency and remove the training demands on new surgeons for every procedure. With today's offerings predominantly limited to multi-port wrist-on-a-stick technology, we, along with our hospital system partners, see this as a distinct clinical and commercial advantage. We're confident that our technology's unique capabilities will establish a lasting competitive edge for us in the robotic-assisted surgery market. With the completion of our spring cadaver lab, we are excited to have taken another step towards finalizing our differentiated system. With that, I will turn it over to Bill to review our financial performance.

Bill Kelly (CFO)

Thank you, Adam. As expected, our 2023 initiatives to streamline resources, optimize spending, and restructure the company for maximum efficiency are yielding a benefit to our 2024 expense profile. As a result, total operating expenses for the first quarter of 2024 were $16.1 million, a 28% decrease compared to $22.3 million in the first quarter of last year. R&D expenses for the first quarter of 2024 were $10 million, compared to $13.4 million in the first quarter of 2023. General and administrative expenses for the first quarter of 2024 were $5 million, down from $7 million in the first quarter of 2023. In first quarter, 2024, sales and marketing expenses were $1.1 million, versus $2 million in the first quarter of 2023.

Again, the year-over-year reduction in operating expenses reflects the diligent efforts made throughout last year to optimize our burn and prioritize capital efficiency. Continuing on, adjusted net loss for the first quarter of 2024 was $15.1 million, equating to a net loss of $0.09 per share, as compared to an adjusted net loss of $20.8 million, or $0.17 per share, in the first quarter of 2023. GAAP net loss for the first quarter of 2024 was $17 million, equating to a net loss of $0.10 per share. This compares to a net loss of $26.9 million, or $0.21 per share, in the first quarter of 2023. For a reconciliation of all non-GAAP measures to GAAP, please review our earnings press release.

We ended the first quarter this year with approximately $84 million of cash, cash equivalents, and short-term investments on our balance sheet. This represents a first-quarter cash burn rate of approximately $14 million. Note that while first-quarter cash burn was slightly elevated as a result of a few seasonally timed payments, we continue to expect full-year 2024 cash burn to be approximately $50 million and remain committed to disciplined capital allocation. 2024 is off to a strong start, and our team is executing with the urgency and discipline needed to achieve our development timelines, including the completion of the V1.0 system build and integration this fall. We look forward to updating you as we progress with our business initiatives in the coming quarters. And with that, I'll turn the call back to Adam for closing remarks. Adam?

Adam Sachs (CEO)

Thank you, Bill. I'd like to close by re-emphasizing the way in which we as a company have differentiated ourselves within the broader robotics market. While many surgical robotics companies continue to iterate on legacy platforms, we are taking a new path forward. While this approach takes careful time and consideration, we remain steadfast in the value of our unique technology. I'd like to thank all of our stakeholders, particularly our employees, for their continued support of our mission and vision. Elliot, we're now happy to take any questions.

Operator (participant)

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally. First question comes from Ryan Zimmerman with BTIG. Your line is open. Please go ahead.

Ryan Zimmerman (Managing Director)

Thanks, thanks for taking my questions. Good afternoon. Just maybe a few for me. You know, your R&D expenses came in a little higher. SG&A was certainly lower than I think we expected. But overall, you know, really good expense management this quarter. Just kinda help us understand kinda how you're balancing the needs on kind of both sides of that P&L, as you think about your progress and, and kind of what you have planned for the, for the balance of this year.

Bill Kelly (CFO)

Yeah, no, great question. You know, obviously, as we've made a number of cost reductions year-over-year, the focus has really been on building a quality robot and getting it to market as fast as possible. And so that's really where we, you know, try and draw the line there and focus and prioritize spending there. As noted in the call, our burn rate was probably a little bit higher than otherwise the run rate would be, but that was really due to the seasonality of certain spending. As you can imagine, certain material expenses and things like that, they happen in one period versus another. That's why you're seeing that. But we still remain committed to, you know, $50 million cash burn for the-

Ryan Zimmerman (Managing Director)

... Mm-hmm. Okay. And then if, correct me if I'm wrong here, Adam, but so the V1.0 wraps up in the fall of this year. Talk to us about kind of next steps from there, you know, how that dovetails into, you know, potentially the, the establishment of a clinical trial. I think, you know, slated for maybe mid- to late-2025, if I'm not mistaken, and, you know, kind of what you need to do once we get all the design and, testing done for V1.0.

Adam Sachs (CEO)

Yeah, I think that's a really important question. So as we finalize our V1.0 system and go into more sort of preliminary verification and validation testing, we're going to then roll that into all of the formal testing that's required. As I'm sure you'll recall, we're focused primarily on outside the U.S. data collection in our clinical trial, and one of the advantages of that is in the verification and validation process, we need to do primarily all of the essential performance and safety testing rather than all verification and validation testing. So once essential performance and safety testing is complete, for our system, we'll then be able to start up our clinical trial in 2025.

Ryan Zimmerman (Managing Director)

Thank you.

Operator (participant)

We now turn to Adam Maeder with Piper Sandler. Your line is open. Please go ahead.

Adam Maeder (Managing Director)

Hi, Adam, Bill, Randy. Thank you for taking the questions, and congrats on the progress. I wanted to start with the spring cadaver lab experience and just ask a little bit more color there. So, you know, I guess the first question would be multipart here. How many cadavers were performed? You know, who was doing the procedure? Was it surgeons that you know, you guys partner with? Talk about kind of setting a care and then just, you know, bigger picture, maybe just what were the learnings from the spring cadaver lab? What, you know, what went better than planned, and, you know, what were some of the challenges, if any, that may have arisen? And then I had a follow-up. Thanks.

Adam Sachs (CEO)

Yeah, super fair question. So, overall, it was the very first cadaver that we performed. This was a single cadaver and will be the first of, you know, a number that we do over the course of this year. Overall, the procedure, you know, was designed to really test out the core functionality of our system and, you know, burn down and evaluate any potential issues and risks with it as early as possible, which is one of the reasons that we did it, frankly, on the earlier side of the spring. It was done, you know, by internal surgeons and surgeon partners, and with a collaboration between two physicians.

and overall, there were a number of things across, frankly, each subsystem that came up that we needed to focus on revising over the next 2-3 quarters. And that is why we've scheduled in this time over the next couple of quarters to make those revisions before we actually lock our V1.0 system.

Adam Maeder (Managing Director)

Yeah, that's, that's good color, Adam. And sorry to press here a little bit, but just, you know, to the extent that you're willing to share, you know, I think you called it additional refinements in the prepared remarks to the final system. You know, what are some of those things that, you know, you guys need to kind of smooth out before you go into, you know, final system integration in the fall?

Adam Sachs (CEO)

Yeah. I'll give you a few examples of a few different things. So, you know, within the software, there were a handful of bugs that we encountered, including, you know, one on firmware within the arms and the sensing of the arms that caused some challenges along the way. That one has actually already been resolved. A few small things between interaction between the lubrication of the trocar seal and the arm itself and the sensing of the arm. Just to name, I'd say, two out of—but frankly, a decent handful of similar things. So, you know, either one of the two of those are fairly easy to resolve.

It's just that, you know, there are a number that we need to tackle, and that's why we want to give ourselves a couple of quarters to do that and to really heavily test out the implementation of each solution.

Adam Maeder (Managing Director)

Yeah, that, that makes sense to me. Thank you for that. And then just one last one, if I may, maybe for Randy, and congratulations on the new role, by the way. I wanted to ask, you've been in the seat now for a few months, you know, maybe just talk about some of the early, you know, impressions from your vantage point of the company and, and the technology and, you know, how will you look to put your fingerprints on the, broader organization going forward. Thanks again for taking the questions.

Randy Clark (President)

Yeah, no, I appreciate the new person question, Adam. So, as you mentioned, you know, since joining at the end of January, I've really just been fully immersing myself into the intricacies of our business and really trying to familiarize myself with each team and taking deep dives into all aspects of our operations, as you can imagine. And I can tell you, it's been an incredibly exciting journey so far, especially where you're going with Adam. You know, I had the privilege of observing the team's unwavering dedication and hard work and commitment that led up to our spring cadaver lab. And that's one of my first takeaways that I want to double down on, is just the talent that we have here at Vicarious Surgical is absolutely incredible.

Let alone the work ethic and commitments from the teams to really drive towards our mission. I'm just focusing right now and being very committed to just disciplined execution of our current objectives and consistently achieving our milestones. That's going to be key to ensuring our success in the long run.

Adam Sachs (CEO)

Thank you.

Operator (participant)

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Josh Jennings with TD Cowen. Your line is open. Please go ahead.

Josh Jennings (Managing Director)

Hi, good afternoon. Thanks a lot for taking the questions. Wanted to just get an update on the plans for the OUS clinical trial to support the de novo submission. Any—I know it's only been two months since the last call and the last update, and less than that since our healthcare conference, but any further communications with the FDA on that trial design? And just, I guess, the second part of the question is, thinking about international sites, and how do you go about... I know we're not till next year, but how do you go about establishing those relationships? Or maybe they're already in hand in terms of finding investigator sites and finding the right ones and developing those surgeon relationships or center relationships with Vicarious.

Adam Sachs (CEO)

Yeah, thanks, thanks, Josh. And two great questions there. So you know, I'll start with the FDA side. So, nothing that we have to share on that front directly, but what I will say is, as we're seeing the broader robotics space continue to develop, we are seeing other filings and frankly, other approvals come through. Many of which are occurring with data entirely outside the U.S., as well as with about 30 patients each in each trial. So this is further confirming that, unsurprisingly, the guidance and support that the FDA is giving to us is being given in exactly the same way to the other new entrants in the space, and they are following through on their commitments there. So that is very reassuring for us to see.

As far as specific site selection and country selection, we are in conversations with a number of different locations. We do have time, but, you know, we are well on the way to working through this already. And one of the goals here is to maintain optionality for as long as we can. We actually view that as a distinct advantage, especially when, frankly, regulatory environments in specific countries do change. And we'd like to maintain that optionality to choose the specific sites and even the specific countries out of a few that we're working with, at the latest point that wouldn't impact our schedule.

Josh Jennings (Managing Director)

Great. And then just to follow up on the cadaveric testing results and some of the re-refinements that you're going to put in play. Are there more cadaveric lab sessions that are required before you kind of get to that fully integrate, fully integrated, I guess, era and move forward with the pre-B and B testing? Thanks. Taking all the questions.

Adam Sachs (CEO)

Yeah. So the answer to that is, certainly yes. We're, you know, well on the way to implementing a lot of these refinements already, and they're being primarily implemented into this next build, which will then be tested through robust cadaveric testing, as well as a number of other tests.

Josh Jennings (Managing Director)

Great. Thank you.

Operator (participant)

Ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.