Vicarious Surgical Inc

NYSE:RBOT

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, and welcome to Vicarious Surgical's First Quarter 2023 Earnings Conference Call.

My name is Alisa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. We'll be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Kaitlyn Brosco with Vicarious Surgical for a few introductory comments.

[Kaitlyn Brosco, IR]

Thank you, Alisa, and thank you all for participating in today's call. Earlier today, Vicarious Surgical released financial results for the three months ended March 31, 2022. 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 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 the live broadcast today, May 08, 2023. 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.

With that, I'll now turn the call over to Adam Sachs, Chief Executive Officer.

[Adam Sachs, Co-Founder, CEO, President & Director]

Good afternoon and thank you, all for joining us. At Vicarious Surgical, we envision a future for exceptional surgical outcomes are achieved for every patient and by every surgeon. Driven by our vision, we reengineered surgical robotics from the actuator up [ph], enabling superior capabilities, streamline training and OR workflow and compelling economics.

More than that, our unique system architecture is the key that unlocks best-in-class visualization, sensing and data collection, all designed to collect key information that will enable incorporation of automated safeguards in robotically performed procedures.

It is our unique combination of practical and efficient architecture with sensing for safety automation that will enable us to unlock the true potential of digital surgery.

In the last month, we took an important step toward realizing our vision with the design lock of our version 1.0 system. Our team spent the first quarter of 2023, collecting extensive feedback on our Beta 2 system across our surgeon Luminary Group, Center of Excellence partners and a handful of other leading surgeons to inform and shape the design of our V1.0 system.

In total, we had almost two dozen surgeons test drive our latest robotic system in Q1 alone with numerous hospital system administrators and operating room assistants also providing invaluable insights as we continue to refine our robotic platform.

As a reminder, we are not just iterating on our system for ventral hernia. By garnering feedback from a number of specialties, we better understand the potential of our system across a broad spectrum of indications. In addition to ventral hernia, we have used our Beta 2 system in cadaveric models for hysterectomy, inguinal hernia, cholecystectomy and GI procedures such as bowel resection.

For instance, we recently hosted a high-volume gynaecologist from one of our Center of Excellence partners for a full day at our headquarters. This surgeon spent the morning training with our system for the first time and performed core steps of a cadaveric hysterectomy in the afternoon.

Not only was it encouraging to watch him progress through the cadaveric procedure with just hours of familiarity using the current Vicarious System, but the team walked away from the procedure excited and with the renewed confidence in our systems of versatility and potential to work around the year and leverage our greater range of motion and dexterity to provide additional value across a diverse set of procedures.

Informed by the insights gathered in the first quarter, our V1.0 design incorporates a number of enhancements, which we believe will improve our system's long-term value proposition. These include reducing the life of the system arms for greater dexterity in confined spaces, refinement to the motor and joint controls into our video processing pipeline, along with a restructured software and electronic architecture. We believe these changes will enable further refined motion profile and higher image quality with increased system safety.

With V1.0 design locked, we are now focused on assembly of units and the development of manufacturing processes ahead of formal verification testing. We believe that through extensive testing, we will ensure our system achieves the technical specifications and functional capabilities required to deliver a best-in-class safety profile.

While our team remains hard at work, a challenging market environment for emerging growth companies persists. In response, we are maintaining a more streamlined organizational structure to extend our cash runway. Part of our efforts to reduce expenses requires we no longer parallel path multiple contingencies to mitigate time line risk. As we expressed in our prior call, this naturally introduces risk of delays to current time lines.

Our team remains flexible and adaptable as we work toward defining our formal FDA submission and we're excited to continue collaborating with the agency on the path to bringing our technology to market. All in all, the Vicarious Surgical team is heads down, hard at work, executing on the task at hand and ensuring the rest of 2023 is a continued success.

With that, I'll turn the call over to Bill Kelly, our Chief Financial Officer. Bill?

[William Kelly, CFO & Treasurer]

Thank you, Adam, and thank you all for joining us today. I'll start with our first quarter 2023 results. Total operating expenses for the first quarter of 2023 were $22.3 million, a 23% increase from $18.2 million in the first quarter of 2022. R&D expenses for the first quarter of 2023 were $13.4 million compared to $9.8 million in the first quarter of 2022. General and administrative expenses were $7 million in the first quarter of 2023 compared to $6.9 million in the first quarter of 2022. And sales and marketing expenses for the first quarter of 2023 were $2 million compared to $1.4 million in the first quarter of 2022.

The increase in operating expense year-over-year was primarily driven by higher overall headcount, partially offset by a $1.5 million increase in interest income due predominantly to increased interest rates.

Adjusted net loss for the first quarter of 2023 was $20.8 million, equating to an adjusted net loss of $0.17 per share as compared to an adjusted net loss of $18.2 million or an adjusted net loss of $0.15 per share for the same period in the prior year. GAAP net loss for the first quarter of 2023 was $26.9 million, equating to a net loss of $0.21 per share, and this compares to a net income of $42.5 million or a basic and diluted net income of $0.35 and $0.33 per share, respectively, for the same period in the prior year. The prior year benefited from a $60.7 million reduction in the fair value of our warrant liability. For a reconciliation of all non-GAAP measures to GAAP, please review our earnings press release.

At the end of the first quarter, cash, cash equivalents and short-term investments were approximately $97 million, representing an overall cash burn of $18.7 million. While cash expenditures were slightly elevated for the quarter and can vary due to timing of payments, we continue to expect our full year 2023 cash burn to be between $55 million to $65 million. As you heard Adam state earlier, we continue to be committed to disciplined spending, particularly in this market environment and investing in only high value-generating initiatives that advance our development and regulatory processes.

The first quarter required a number of difficult decisions regarding personnel and expense investments, but I'm proud of our Vicarious Surgical team has rallied together and remain focused on delivering a differentiated robotic system with the potential to meaningfully expand the robotic market and allow patients to benefit worldwide.

And now I'll turn the call back over to Adam for closing remarks.

[Adam Sachs, Co-Founder, CEO, President & Director]

Thank you, Bill. In closing, our organization is focused on executing on the bills at hand as well as the regulatory pathway ahead. The fundamental DNA of our company is innovation and while innovation requires grit and perseverance, especially in today's market, we believe it is essential to achieving our pursuit of revolutionizing surgery and enabling greater access to exceptional surgical outcomes. We remain confident that our thoughtful approach to our developing -- development process, regulatory approach and market strategy will set the foundation for a bright future.

With that, I'll turn the call over to our operator for Q&A. Operator?

[Operator]

[Operator Instructions]. Our first question comes from the line of Ryan Zimmerman with BTIG. Your line is now open.

[UnidentifiedAnalyst]

This is Sam on for Ryan and congrats on all the progress this quarter. I was wondering if you could provide us with any updates on the ventral hernia clinical trial based on discussions you're having with the FDA and then I have one follow-up. Thank you.

[Adam Sachs, Co-Founder, CEO, President & Director]

Yes. Thanks so much for the question. We are still in discussions with the agency about the details of this trial and the details of our submission. Candidly, I do realize that we -- it's been a while since we provided an update on this and the conversations continue to progress with the agency, we're meeting on a regular basis and have been really pleased with the relationship and the progress so far. And we're looking forward to providing a more detailed update on that in the near future.

[UnidentifiedAnalyst]

Thank you. Have you received any reimbursement-related feedback from the University of Pittsburgh Medical Center partnership given their large insurance umbrella? Thanks again for taking our questions.

[Adam Sachs, Co-Founder, CEO, President & Director]

It's a really good question. We've been involved in the conversations and understanding the details of the procedural economics with them as well as our other partners. I don't have a detailed answer for that right now, but I can definitely get back to you with an answer.

[Operator]

Our next question comes from the line of Kyle Rose with Canaccord. Your line is now open.

[Kyle Rose, Canaccord]

Great. Thank you very much for taking the questions. I guess just a few for me. One is just to the prior question on the FDA conversations, could you just confirm regulatory and trial time lines just as far as where we are now, the conversations with the FDA and when you'll expect to complete the trial and get the market. And then secondarily, obviously, you made some decisions from a streamlining perspective. Can you just remind us time line of cash runway and thoughts about future cash needs?

[Adam Sachs, Co-Founder, CEO, President & Director]

Yes. So I'll definitely start with the first question there. The conversations have been really good, but the details of exactly when the sort of interim submissions happen are highly dependent on a variety of things, including the specific system build-outs as well as the balance of what's being tested through verification and specifically actually through validation in testing like summited testing versus what's being tested in a clinical trial. That being said, we are still tracking to an FDA submission for authorization of the use of our device around year end of next year, year end of 2024.

I'll pass off the specific details to Bill for the reduction, but kind of as a reminder, we really focused that production around G&A specifically and non-R&D in order to minimize the risk of an impact to a time line that it might have.

[William Kelly, CFO & Treasurer]

Yes, exactly. So you may recall that we closed last year with $116 million of cash, and we've guided to $55 million to $65 million of cash burn. As Adam alluded to, we made some very difficult decisions, obviously, to streamline our operations. But I think in retrospect, it's given us a much longer runway since we stay that this year's burn rate, we have effectively two years' worth of cash.

So that gives us a lot of optionality. Obviously, in a difficult market, we announced those changes, and obviously, you saw the banking upheaval almost immediately thereafter. So we're comfortable with that. I would say virtually every financing option remains available to us and at the right time and conditions, obviously, we'll look to be opportunistic.

[Kyle Rose, Canaccord]

Great. And then just one last one for me is the feedback you're gathering from other specialties, any expectations for that to change the robot that we're seeing and how it functions in its utility? Or anything that I guess would impact the regulatory time lines for the ventral hernia? Thank you.

[Adam Sachs, Co-Founder, CEO, President & Director]

Yes. So to start, we are gathering this feedback. We've actually been gathering it and have on Beta 2 and have already incorporated a lot of it into the version 1.0 system. Ventral hernia is an incredibly exciting indication, but it is the first step of many indications, and we remain committed to and frankly really excited about a rapid follow of additional indications after our initial launch. So what it really has done is confirmed that our system has a lot of the capability in order to do these additional indications and that it really does provide meaningful value around them.

So it's started by confirming that and then actually moved in a little bit into really making sure we map out the refined workflow and all of the details around these additional indications, so that when we're ready to bring them to market, we have an incredible offering.

[Operator]

Our next question comes from the line of Josh Jennings with TD Cowen. You may proceed.

[UnidentifiedAnalyst]

This is Eric on for Josh. Thanks for taking the question. I was just curious with the designs made to -- design changes made to version 1.0. Does that impact your pricing strategy with the Vicarious robotic system? Just curious to get your thoughts there.

[Adam Sachs, Co-Founder, CEO, President & Director]

Yes, we take the start of this one. We are really fortunate from a cost of goods position to have cost of goods that's sufficiently low that it gives us fairly flexible pricing and that remains true with the changes to -- from Beta 2 to version 1.0. So we remain incredibly flexible in the pricing that we can have. And remain encouraged by the feedback that we've had about pricing capability and tolerance for pricing of our initial system after launch.

[UnidentifiedAnalyst]

Okay. That's great to hear. And then as you're approaching validation and verification testing, how many systems do you think you'll need to accomplish that? And are there any supply component issues that we should keep in mind as you're approaching those testing milestones?

[Adam Sachs, Co-Founder, CEO, President & Director]

Yes. So the number of systems that we'll need is a small handful in order to do VNB [ph] testing and clinical data collection. Overall, the quantity is low enough that it is not directly constrained by supply chain issues because of quantity. It is more just around ability to source components of a complex system, and frankly, needing every single component to be in before we're ready to integrate and test our system. Everything is on order, and we're already seeing parts coming in for our version 1.0 system. And we're really excited about it and haven't seen any reason to expect supply chain delays to date.

[UnidentifiedAnalyst]

Okay. That's great. Thanks for taking the questions.

[Operator]

Thank you Mr. Jennings [ph]. That concludes today's call. Thank you all for your participation. You may now disconnect your lines.