Vicarious Surgical Inc

NYSE:RBOT

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon. Thank you for attending the Vicarious Surgical's 2024 Second Quarter Earnings Call. My name is Cameron and I will be your moderator for today. [Operator Instructions]

I would now like to pass the conference over to your host, Kaitlyn Brosco, Director of Investor Relations. You may proceed.

[Kaitlyn Brosco, executive]

Thanks, Cameron, and thank you all for joining. With me today for prepared remarks are Adam Sacks, our Co-Founder and Chief Executive Officer; Bill Kelly, Chief Financial Officer; and Randy Clark, our company President, will join for the Q&A portion of the call.

Today, after market closed by Vicarious Surgical released financial results for the 3 months ended June 30, 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 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 obtaining approval for Vicarious Surgical System and timely for any such approval for 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 any 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, August 12, 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 our prepared remarks.

[Adam Sachs, executive]

Thanks, [ Kait ]. Good afternoon, everyone, and thank you for joining.

In the second quarter, Vicarious Surgical team continued to build upon the momentum generated in the first months of this year, remaining steadfast in our mission to improve lives by transforming robotic surgery. Upon the completion of our spring cadaver lab at the end of March, our team began the process of aggregating and deciphering the numerous insights gained in the initial use of our Version 1.0.

From there, the necessary design optimizations were outlined at both the system and subsystem levels and the team promptly began the implementation of these system refinements. As it stands today, both pieces of capital equipment, the surgeon console and the patient cart are in the latter stages of planned refinements. Given the promising status of our patient cart, we conducted our first Version 1.0 4-minute assessment evaluating the surgeon and care team of bedside user experiences.

Assessing human factors such as maneuverability, docking, draping and instrument insertion throughout the development cycle ensures our design put the end user at heart and will deliver a top-tier customer experience. Overall, we are pleased with the results of our recent formative assessment and plan to continue with our surgeon console formative mix.

Regarding the system instruments, while we finalized the latest camera build last month, our team continues to work through the enhancements of our most differentiated subsystem, the instrument arms, ensuring we are achieving the refined fidelity range of motion and dexterity to capture the attention of our hospital system partners. I'm happy to say that with the pace of progress achieved in the second quarter, we remain on track for our V1.0 system integration this call.

Following the integration milestone, our plan includes informal verification and validation activities across the individual subsystems and full system, incorporating both cadaveric procedures and animal labs. We will then transition into the formal verification and validation process, where we will undergo a range of comprehensive benchmark testing, including system-specific evaluations that assess procedural capability and safety known as essential performance and safety testing.

This includes, for example, biocompatibility and electromagnetic compatibility testing to assess interference risks, environmental testing to gauge performance under various conditions and durability testing to assess long-term reliability. All of this testing is done to ensure our device meets regulatory standards and is safe and effective for clinical use. Once our system satisfies the essential performance and safety standards, we can confidently proceed with our first clinical patients and subsequent clinical trials while simultaneously addressing the remaining verification and validation requirements related to human factors and manufacturing processes.

With our first clinical patient anticipated around this time next year, our clinical and regulatory teams are diligently working with CROs to evaluate potential OUS clinical sites and their respective regulatory procedures and landscaping. In an effort to avoid any unexpected regulatory changes and maintain our optionality, we have not yet announced a formal decision on clinical site selection, but intend to do so once appropriate.

As we continue to make strides in our development cycle, we are also thrilled to announce an exciting new partnership with LSU Health New Orleans, Louisiana's premier academic health institution. Renowned for high-quality academic and training programs LSU Health New Orland educates the majority of Louisiana's health care professionals. Their network includes the University Medical Center, a distinguished research and academic hospital known for its robust medical training facilities and comprehensive patient care services.

As a leading regional provider LSU Health New Orleans offers unique insights into administrative and clinical protocols typical of regional care centers, yields in valuable perspective to enhance our market strategy. Additionally, their commitment to clinician training involving learners at all levels, presents a significant opportunity for our team to validate training protocols and the clinical and economic benefits of our single port system would be next generation of surgeon.

Our partnership with LSU Health New Orleans marks our fifth hospital system alliance to date, further reinforcing our confidence in our innovative single-port approach to surgical robotics and our potential to take share of this market over time.

I'll now turn the call over to Bill for a review our financial performance.

[William Kelly, executive]

Thank you Adam.

In the second quarter of 2024, operating expenses totaled $17.7 million, representing a year-over-year increase of 17%. The and reflecting the success of last year's efforts to enhance capital efficiency and manage cash burn. R&D expenses for the second quarter of 2024 were $10.9 million compared to $12.7 million in the second quarter of 2023. General and administrative expenses for the second quarter of 2024 were $5.6 million, down from $7.1 million in the second quarter of 2023. And second quarter 2024 sales and marketing expenses were $1.2 million versus $1.7 million in the second quarter of 2023.

Adjusted net loss for the second quarter of 2024 was $16.8 million, equating to an adjusted net loss of $2.86 per share as compared to an adjusted net loss of $20.4 million or $4.82 per share in the second quarter of 2023. The GAAP net loss for the second quarter of 2024 was $15.2 million, equating to a net loss of $2.59 per share, this compares to a net loss of $15.3 million or $3.62 per share in the second quarter of 2023. For a reconciliation of all non-GAAP measures to GAAP, please review our earnings press release.

We ended the second quarter of this year with $73 million of cash, cash equivalents and short-term investments on our balance sheet. This represents a second quarter cash burn rate of approximately $11 million, which is slightly below the seasonally impacted first quarter burn of $14 million. We continue to expect the full year 2024 cash burn to be approximately $50 million. While we are focused on meeting our development schedule and executing upon our upcoming milestones, we are equally dedicated to upholding strong financial discipline in ensuring efficient resource allocation.

And with that, I'll turn the call back to Adam for closing remarks. Adam?

[Adam Sachs, executive]

Thanks, Bill. 2024 remains a pivotal development year for Vicarious Surgical as we march forward in our mission to improve lives by delivering a new innovative approach to surgical robotics. The strong execution by our team in the first half of this year has positioned us well to achieve our fall integration milestone, paving the way for our transition into the clinic next year and allowing us to showcase the immense value of our differentiated single-port system.

I want to express my gratitude to our dedicated employees whose hard work and valuable contribution to lay the foundation for our future success. Thank you to everyone who joined the call today. We look forward to updating you on our continued good progress in the quarters to come.

Operator, we're now ready to take questions.

[Operator]

[Operator Instructions] The first question is from the line of Josh Jennings with TD Cowen.

[Eric Anderson, analyst]

This is Eric on for Josh. I wanted to start just on the balance sheet. With the cash you guys have on hand, I appreciate the guidance you gave there. How do you think about funding your clinical trial now that that's set to kick off sometime in 2025.

[William Kelly, executive]

Yes. No, thanks for the question. As we said on the call, we ended the year -- ended the period with $73 million and reiterated our burden guidance for about approximately $50 million for this year. So that leaves us with the better part of another 1.5 years worth of cash. Obviously, a strong balance sheet has been a hallmark of this company since we've gone public and we'll continue to be good stewards of capital to make sure that we take advantage of opportunities to augment that in the future.

But really, right now, our focus is executing on the milestones in front of us, the Version 1.0 integration this fall, first clinical patient next year and so on from there. But it's a good question, but obviously, we'll look to update at the right time.

[Adam Sachs, executive]

And if I can also come on top for a second there. I did want to emphasize that what we're formally guiding to is that for clinical patient. It's not at all first standard first-in-human or feasibility study, but it's also not going to be formally part of our clinical trial. We're going to use it to evaluate the site to evaluate the clinical trial protocols and then enroll as quickly as we can into the clinical trial after that and still keeping us on track for other milestones that we are guiding to.

[Eric Anderson, analyst]

Understood. And maybe on the U.S. hospital partners, congrats on adding another one with LSU Health. I was just wondering if you could share some details and insights that those partners have been providing to you through the development process of your system? And what role do you see them playing in the trial activity that you guys have coming out?

[Adam Sachs, executive]

Yes. So one of the wonderful things about having all these hospital system partner as it gets with the tone insight into all of the different stages, including informative assessments that we're conducting and we'll continue to [indiscernible] on our system going through verification and validation, understanding the full care team experience. Both on the financial side, the purchasing, supply chain components and then rolling out into training of clinicians, something that we're already, of course, looking at and working with them today. And we'll continue to do so all the way through our clinical trial and commercial launch.

[Operator]

The next question is from the line of Ryan Zimmerman with BTIG.

[Ryan Zimmerman, analyst]

It looks like your R&D and SG&A came in just a here higher than what we were expecting. But overall, your management of expenses has been pretty good so far. So as we move into the back half of the year, I was just wondering how you're thinking about the OpEx spend with that $50 million of cash burn in mind.

[William Kelly, executive]

Yes. No. I think I sure we missed the beginning of that question, [indiscernible] but I do think I understand. Obviously, we do see a little bit of seasonal fluctuations, if you will, or just from time to time fluctuations. We're really focused on the Version 1.0 integration. And so in this past quarter, what we ended up slightly higher than average external expenditures as we're purchasing materials and whatnot. That's anticipated as we set out the guidance for the year on the $50 million. So we had a higher cash burn month in cash burn quarter in Q1, lower cash burn in Q2, just a little bit of fluctuations there. So factor that into our guidance when we said it, and we still remain comfortable that approximately $50 million cash burn for the year.

[Ryan Zimmerman, analyst]

Got it. That's helpful. And then just on the integration process, given that we're only a couple of months out from that launch in the fall, what do you guys have left to do in preparation for that?

[Adam Sachs, executive]

Yes, it's a great question. So we're just in the kind of final stages of testing designs, evaluating everything at the subsystem level. And then jump off on the process of bringing everything together. So there's still a lot to be done. But that being said, the testing that we've done over the last couple of months and especially the previous versions testing that we did throughout the system, including at the full system level, it gives us a lot of confidence in the integration process and our ability to bring everything together, right? I do want to emphasize, though, it's an incredibly complex system. That's why we built in time to address hiccups and remediate issues as they come.

[Operator]

[Operator Instructions] The next question is from the line of Ryan Zimmerman with BTIG.

[Ryan Zimmerman, analyst]

I was jumping between calls. I'm on [indiscernible] tonight actually. It's Ryan. So on a -- on the trial. So Adam, I heard you're not giving out specifics on the trial just yet. Anything -- any early thoughts about where you think it's appropriate, geographically speaking, where you think you can get good data out of preliminary the composition between potentially U.S. sites versus all U.S. sites. Any color at this point you can share with us would be appreciated.

[Adam Sachs, executive]

Yes, for sure. So what I'll say is that, in general, we'd like to blazing a new path for the [indiscernible] and we've watched a handful of other surgical robotics companies get successful de novo approval actually even without any U.S. clinical data in the past couple of -- really past year or 2. And that has given us a lot of confidence. So the direction we're currently heading is actually filing without any U.S. clinical data. It doesn't mean we're not going to kick off a U.S. clinical trial, but rather it's not sort of the critical path [indiscernible] plan of record here.

South America is currently top of mind. So as Australia. There are a few countries, including Colombia, Chile as well of course, Australia that we've seen other companies do clinical trials in and get successful approval. And because of exactly that, we're working with the CROs and the teams that have been able to pull that off in the past couple of years and are already working with them today and working with individual hospitals getting sites. Actually, our Chief Medical Officer, has had to see with them last week.

[Ryan Zimmerman, analyst]

That's helpful, Adam. And then just on the partnerships, I appreciate that it gives you early feedback and whatnot. But when you think about your ability to get these partnerships together, do you feel like you have enough? Do you -- should we expect potentially more of these between now and commercial approval? I mean, what's the strategy? And how much time do you dedicate to bringing in some of these new partnerships versus kind of focusing on the clinical trials at -- and over the next, call it, 18 to 24 months?

[Adam Sachs, executive]

Yes. It's hard to give a generalized answer to that, but I think that kind of is the answer. Each individual partnership really needs to offer significant value that's incremental and different from what the existing partnerships offer. And because of that, in the case of LSU Health, it offers a ton of insight in a different way, especially from a regional system perspective, where the other 4 health systems that we're working with really operate at -- either operate at a national scale or in one case, operator very much like a national system at a more regional scale. And it gives us a different set of insights that are important to us and, therefore, justify the time that's invested. So no one size fits all answer to that.

[Operator]

The next question is from the line of Drew Ranieri with Morgan Stanley.

[Andrew Ranieri, analyst]

I'll ask my 2 upfront. But maybe just to piggyback on Ryan's question just now on the clinical data side, just to make sure you're still thinking about the current clinical pathway of doing hernia first and then venturing to others? Or has there been any other kind of change in kind of your indication strategy for the U.S. And then just on the second -- I'll let you answer that one, and then I'll go into the second one.

[Adam Sachs, executive]

Yes, quick answer. Good question. No change at all, though. Same number of patients and indication.

[Andrew Ranieri, analyst]

Okay. And then just on the integration, you're comfortable, confident it's still on track for this fall. Just as you do think about bringing the subassemblies to the final assembly, I guess where do you see there could be potential risk? And I guess just how derisked are these time lines that you're so confident.

[Adam Sachs, executive]

Yes. Look, I mean, I think that's an incredibly important question. Overall, the areas that were most likely to have picked up along the way, it just come down to the overall complexity. There's no specific one area. I mean if there is one subsystem, it's probably the arms. It's where a lot of our secret sauce is. And frankly, that's the huge benefit of what we're doing is. The capital system is coming along incredibly well, and I don't want to call it simple, it's still quite complicated in it self, but much less on the cutting edge and we're a lot more confident in the risk there.

So as a long winding way to say that I'm pretty confident in the V1.0 milestone that we've added time for remediation of any issues that come up before [indiscernible] testing and even time to change the minor things that come -- that may come up. But that all being said, if I really learned anything over the last year, the level of complexity as you try to bring everything together, try to integrate everything, get it through the process, things do come up. So I'll say, I'm about as confident as I can be, but there are real risks.

[Operator]

There are no additional questions waiting at this time. I would like to pass the conference back over to the management team for closing remarks.

[Adam Sachs, executive]

Yes. If that's all the questions, then we're good to end the call. Thank you, everybody, for joining.

[Operator]

That will conclude the Vicarious Surgical's 2024 Second Quarter Earnings Call. Thank you for your participation, and enjoy the rest of your day.