Viveve Medical, Inc.

Scott Durbin - Chief Financial Officer Patricia Scheller - Chief Executive Officer

Joshua Jennings - Cowen And Company Dennis Dae - Raymond James & Associates Jeffrey Cohen - Ladenburg Thalmann & Co Anthony Vendetti - Maxim Group Charles Haff - Craig-Hallum Capital Group

Thank you, operator, and good afternoon everyone. Thank you for joining us today to discuss our third quarter financial results.

Before we begin, let me remind you that on today's call we will be making forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes remarks about the Corporation's projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

These risks and uncertainties are described more fully in our annual report on Form 10-K and other filings we make with the SEC, which are also available on our website. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.

Joining me on the call today is Viveve's Chief Executive Officer, Patricia Scheller, and following our prepared remarks, we will open the call to your questions. I will begin today's call with a brief financial review of the third quarter.

Revenue for the third quarter of 2017 totaled approximately $4.1 million from the sale of 60 systems. 47 of which were sold in the North American market through our direct sales force.

Q3 was also a strong quarter for sales at or disposables with 2724 treatment kits sold globally. During Q3, sales in North America represented approximately 80% of total dollar sales with the balance coming from international sales and sales of InControl medical product that we distribute to the professional sector constituted less than 1% of total sales.

With respect to our sales expectations for the full-year 2017, we continue to anticipate a strong year especially in light of our continued momentum in North America our largest market globally. We are also encouraged by our strong performance in the third quarter which is traditionally the softest quarter of the year for medical technologies.

Internationally, we continue to see tremendous potential in markets around the globe though we have seen a shift in regional opportunities relative to our original expectations for the year. in particular, China has not grown as rapidly this year as our distribution had anticipated and this is due to several factors.

First, we believe based on input from our partners, that’s the regulatory environment in China maybe shifting relative to Radio Frequency or RF devices. Currently, radio frequency, vaginal rejuvenation is unregulated in the private market but physicians in China have heard reports that the Chinese FDA or CFDA may begin to regulate this area.

Ultimately, we do not know or when this may affect the vaginal rejuvenation market but it is created apprehension among some physicians who might have otherwise been rapid adaptors of our systems in the region. To address this concern, we anticipate now pursuing the CFDA clearance and have reached agreement to share this cost with our distribution partner.

Secondly, throughout 2016 our partner utilized a network of sub-distributors with great success. However, continued growth through this sub-distributor network slowed in the first half of 2017.

To supplement their efforts in China, our partner began to build a direct sales force mid-year which was full launched in September. That effort is going very well now and we expect to see this payoff through the rest of this year and into 2018.

Despite these challenges in the region, we continue to believe that China represents a very large market opportunity and that DMT remains the best partner for us in the region. More importantly year-to-date we are extremely pleased with two key leading indicators that we monitor closely to assess the success of our commercialization efforts.

First, direct console sales in North America which currently stands at a 103 systems. And secondly disposable sales utilization globally, which is now over 8,100 consumables sold year-to-date.

With respect to the rest of the financial statements, gross profit for the third quarter of 2017 was just over $2 million or 49% of revenue. This compares to gross profit of $691,000 or only 37% of revenue in the third quarter of 2016, a 10 percentage point increase year-over-year.

Total operating expenses for the third quarter of 2017 were $10.8 million. Spending on research and development during the third quarter of 2017 was $3.5 million, and was mainly associated with engineering and development work related to continued product design improvements.

Selling, general and administrative expenses for the third quarter of 2017 were $7.4 million, and was due to continued sales and marketing efforts to build brand and market awareness worldwide, as well as expenses associated with being a public Company. Net loss for the third quarter of 2017 was $9.6 million or a loss of $0.50 per share.

From a balance sheet perspective, we ended Q3 with $19.2 million in cash and equivalents. Further, pursuant to our 2017 term loan with CRG we have an additional $10 million we can draw upon the achievement of certain milestones.

As a result, we believe we have cash to support our operations well into the back half of 2018. Finally, we would like to discuss our guidance regarding full-year 2017 revenue expectations.

With tremendous momentum in North America and expectations around a robust fourth quarter which is traditionally the strongest quarter of the year, we expect our current installed base of 364 systems to increase significantly by year-end and expect full-year revenue for 2017 to be between $15 million and $16 million. With that, I would now like to turn the call over to Pat.

Thank you, Scott. As you just heard we are very pleased to have delivered another record quarter and to have achieved several key milestones since our last call.

As Scott mentioned, while the medical device industry typically experiences a seasonality effect on sales during the third quarter, our third quarter system placements demonstrated continued robust demand for the Viveve system and Geneveve treatment to markets around the world and in particular in North America, our largest commercial market. I will start by reviewing some highlights from the quarter’s achievement, and then provide an update on the regulatory status of our pending Investigational Device Exemption or IDE to achieve an expanded indication in the U.S.

In North America, demand for the Geneveve procedures continues to grow as demonstrated by the 47 Viveve systems sold this quarter. We achieved this incredible growth of 33% unit increase over the second quarter of this year in spite of the seasonal slowdown in medical technology sales typically seen in the third quarter and the disruption cost by the major Hurricanes that impacted many of our customers, patients and employees.

Due to the increasingly positive reception of the Viveve systems since our launch in the U.S. earlier this year and the clear potential for continued growth in this market, we have significantly expanded our sales and customer support organizations.

Our U.S. salesforce has nearly tripled in size since its formation in January of this year with 23 sales representatives at the end of the third quarter.

This level of commercial sales coverage is essential to position us to address the increasing demand of interested physicians across all of our targeted physicians’ specialties including aesthetic medicine, gynecology, urogynecology and dermatology. We anticipate further expansion of our U.S.

sales team will occur before year-end to further capitalize on the growing interest in the Viveve system and to position us for continued growth and success in 2018 and beyond. We also recently announced the expansion of our direct sales coverage into the Canadian market with the hiring of experienced sales representatives and practice development managers.

This represents the first time we have established the direct sales organization outside of the United States and we look forward to building a robust Geneveve business in Canada, especially since we had the only technology cleared by the Canadian Health Authority for the treatment of vaginal laxity to improve sexual function. Additionally, recent regulatory approval in Taiwan and Mexico has increased our commercial footprint and opportunities in Asia Pacific and Latin America both of which are major global markets for the Viveve.

In Taiwan, our distribution partner Dynamic Medical Technologies has begun its marketing activity and is forecasting a strong launch. We are working closely with them to ensure a smooth rollout into this important market.

Our Mexican regulatory approval for the improvement of sexual function came within weeks of the country suffering to devastating earthquakes. We would like to extend our condolences to our partners and friends in Mexico.

So are significantly impacted by the earthquakes and wish them well as they rebuild. Year-to-date, Viveve has received nine international regulatory approvals.

The Company now has global regulatory approvals and clearance to market visibility system in 60 countries. And in 56 of those markets, we are cleared for the treatment of vaginal laxity and or sexual function indications.

We are gratified that regulatory authorities around the world have acknowledged and accepted our solid clinical evidence that the Geneveve treatment can provide significant benefits to women suffering from vaginal laxity and sexual dysfunction. We have also been monitoring the regulatory environment in countries where we already are selling the Viveve system.

In China, as Scott mentioned previously there are evolving concerns that products sold into the private market for the treatment of vaginal laxity may require CFDA approval. We are working with our distribution partner and regulatory consultants in the region to ensure that we are prepared for any new requirements that might be introduced and we have appropriate plans in place to secure any necessary additional approvals or clearances.

Turning to the regulatory situation in the U.S., as discussed in previous calls, Viveve’s current FDA clearance in the United States is for general surgical procedures for electro coagulation and homeostasis. To obtain a new US indication for the improvement of sexual function that is consistent with our approvals in most countries around the world, Viveve submitted an IDE to the FDA on there at De Novo 510K pathway for a multi-centre U.S.

pivotal trial which we call Viveve-2. Earlier this year, the agency requested that the complete some additional pre-clinical work to further demonstrate the safety of RF energy on tissue damaged during vaginal birth.

Data from an ex-vivo preclinical study was submitted in mid-August. In late-September, Viveve received a letter from FDA requesting that we conduct additional safety testing to access the tissue temperature time history in relation of histopathology and the potential effects on vaginal and surrounding tissues of RF energy administration.

After direct consultation with the FDA, we have proposed a short in-vivo sheep study that was included in the resubmission of our IDE that we believe will address any concerns that the FDA has with the safety of or device in vaginal tissue. The submissions were accepted for review by the agency on October 18 and we expect to hear back from the FDA in the coming weeks regarding this proposed protocol.

If FDA agrees, we believe we will have the required data to support our filing early in the first quarter. Further, and if the outcome of this study is positive, we anticipate we could initiate the Viveve-2 study in the first quarter of 2018, if the FDA approved our IDE submission.

In addition to pursuing an expanded sexual function indication in the U.S. we have been focused on exploring addition indications for use.

Several of our key opinion leaders are currently conducting investigator-sponsored studies for a wide variety of conditions. In Canada, Dr.

Bruce Allan noticed that several of the patients he enrolled in the Viveve-1 study experienced release from the symptoms of their stress incontinence after a single Geneveve treatment. Based upon these results Dr.

Allan initiated a small pilot study to optimize the treatment protocol for treatment of stress incontinence. We are encouraged by his preliminary results we are seeing with this and other investigator-sponsored studies in SUI.

We will be prepared to talk more about these results, the implications of these studies and our path forward when we report our results at year-end. We are extremely excited about the potential opportunity to treat stress incontinence, which represents a very large and underserved market.

At this time, I would like to turn it over to the operator for a question-and-answer session.

This is Josh Jennings at Cowen. How are you guys doing?

Thanks for taking the questions. Sorry for the technology snafu.

I just wanted to ask first - congratulations on the strength in the U.S., clearly you had some build out in the sales force that contributed to that. But I also wanted to hopefully may be you could add some color just on was there anything in the competitive landscape that changed in the quarter and also how impactful has the Viveve-1 been?

I know you can’t market that directly but being able to have that paper in hand and also have your clinical team in the back office supporting some of the new customers, I just wanted to take here about how differentiated that data is and your marketing efforts?

Yes thanks Josh this is Pat. Yes we are able to handout the Viveve-1 data because it is published in the peer reviewed journal.

So our sales representative do bring that in. They are not allowed to comment on it but they are allowed to provide that information as part of the call.

As you are well aware, our back office staff on the medical sales side of Company has been very active in answering questions that physicians in the U.S. have with regard to off label indications.

And there is of course a great deal of interest in what is happening around the world with Viveve System and the Geneveve treatment.

Great. And I was looking also just to ask about ASPs sequentially where they relatively stable for both systems and disposables in the U.S.

and internationally?

Yes. Thanks for the question, Josh.

This is Scott. As we reported on our second quarter call, we have been very pleased with the overall ASPs year-to-date.

I believe in the first quarter ASPs of the U.S. were in the $65,000 to $66,000 range that increased in Q2.

It came in right around there in the $66,000 range for Q3 and we are very pleased with the stability of the ASPs in the U.S. market for the system.

Great. And just internationally thanks to the explanation around China and the changes there.

I was hoping to just ask about some of the other territories and where you seen the placements go internationally? And then also just follow-up on the DMT partnership and there I guess a system purchase minimum set that have been detailed historic - are those still in play or is that an evolving contract as you see this changes in China?

Yes, I will take the last part of that with respect to DMT. We can’t comment on any pending sales for the fourth quarter as it relates to the DMT distribution agreement.

We will say however and hopefully it was inferred by our comments that the magnitude of their expectations on minimums two years ago when we put this relationship in place while they performed well in 2016 the growth slowed in 2017 for the reasons we described in our prepared remarks. And given the magnitude of their minimum requirement associated with 2017, we don’t know what they are going to hit it it’s unlikely, but we continue to remain dedicated to our partnership with them, particularly given that they have agreed to cost share, the process is going through the FDA approval.

They have spent a lot of time in energy building a direct salesforce through the summer and which was launched in the fall and that effort is going very well. So we are sort of on a wait and see approach with respect to China, but DMT will remain our partner in that area.

Great. I will jump back in queue and thanks for all the answers.

Thanks Josh.

Hi, this is Dennis for Jayson Bedford. Can you guys hear me?

Yes, hi Dennis.

Yes, hi Dennis.

Thanks for taking the questions. I just have the question on InControl your salesforce you mentioned earlier that selling was planned to start in September now that you are going to have a month of experience under your belt.

Can you comment on how things are playing now?

Absolutely, so the InControl products were launched in September and have met with a great reception both on the part of our sales team as well as our customers. We have been very excited to be able to offer these products which are currently cleared by the FDA for the treatment of stress, urge and mixed incontinence.

And what we found is that being able to lead in the sales process with this product has given us a great deal of flexibility in working with our accounts and we have had very positive reception all around from the market on the product.

Okay, great. That’s helpful.

And I noticed that in terms of sales reps that number has been stable since last quarter. Does that number include like attrition or have you not seen any attrition just that number has been stable?

Yes the number has been stable, we anticipate we will be adding some additional sales representative before the end of this year. So starting in January of 2018 and we anticipate will have approximately 30 reps on payroll at that point.

And by the end next year 2018, our projections are for approximately 45 sales people to be on staff in the U.S. and another five sales people in Canada.

Okay, great. That’s really helpful.

And I have one last question and then I will turn back into queue. In terms of margins, you guys mentioned that you were making a transition to a new manufacturer to put down the cost of goods and we are starting to see a little bit of that this quarter.

Is this kind of what I guess is this level, your target moving into fourth quarter in 2018 or do you expect to see some more improvements in margins.

We have not yet switched over to our new manufacturing partner, so that switch is not reflected in Q3. Q3 gross margins were really driven by the mix of direct versus distributor sales.

You know, we are still in the process and we will hopefully soon be launching our new system which we have talked previously about you know will effect gross margins in the future. And when we talk about 2018 guidance later this year you know we will comment more on our expectations for gross margin.

Okay, great. Thank you so much.

Sure.

Hi Pat and Scott, how are you?

Good Jeff.

Fine Jeff, how about you?

So Scott can you give us a little dive in to the systems disposables inside the composition percentage where as number are on tips.

By geography Jeff?

Yes, you can go about geography or worldwide.

So what we have said is 60 systems for the quarter, 47 were sold in the U.S. ,the rest were sold internationally and 2724 treatment tips sold globally.

Okay, got it. Can you talk a little bit about, looking at your OpEx and looking at your revenues, does it seem to you like the - it probably would come off in the next four or six quarters, I mean does it feel like you are at the mid-point now as far as revenues go?

Well, if you are speaking about the guidance on the top-line, we have sort of…

Yes, just as far as the momentum in your net income, yes.

Yes, yes, so look we were extremely encouraged by Q3. It was a fabulous quarter for us.

The momentum in the U.S. as we stated in the prepared remarks is very strong.

We are expecting a robust fourth quarter, it’s why we sort of shifted the guidance to the high end of the range. From an OpEx perspective I think we are right in line with where we expected to be this quarter.

We don’t expect that OpEx to ramp significantly over the coming quarters.

Okay. And what do you think any impact you had from Q3 was as far as the storms?

And the new placements were in the territories affected?

Yes, we haven’t analyzed to the state level, but we did have several of our sales representatives who were out of commission due to the damage in their regions for quite some time. So there was likely an impact felt by the hurricane, but it’s hard to quantify since they were likely lost sales.

Got it. And one more if I may.

How many FDAs is DMT prepared to leverage up to as far as going direct versus their current networks with distributors?

The existing teams that they have put to support the Geneveve procedure and Viveve System in China, in five regions in China is 21 people, nine of which are on the ground.

Got it. Okay that’s it from me.

Thank you very much.

Thanks Jeff.

Thanks Jeff.

Thank you. Yes, so I just wanted to go on a couple of things, one is on the IDE submission.

Has the conversation with the FDA concluded and you are just waiting for a decision for them and does the time line for data readout mid 2019, do you believe that where you are now with the FDA that’s still on track as best you can tell?

Yes. So thanks Anthony, great question.

So in our last discussion with the FDA they requested the temperature time tissues history study, which essentially assesses how the tissue heats up with the application of radio frequency energy and how long that temperature takes to go back to normal. And we took that information and we continued to seek their guidance and we developed a protocol for an in-vivo sheep study that has been submitted to the agency that went in on October 18th and we expect to hear back from them hopefully soon on the acceptability of that protocol.

Since we have had multiple discussions with them, we do feel that the response should be positive and will allow us to start that study shortly. It should only take us a short period of time to generate the data and we would have to be able to submit that back to the FDA which in a perfect world would be the final request that we receive from them for data.

However, one can never be certain that the FDA will not make additional request for data therefore we have factored one more round of questions into our internal timeline any event that they do seek additional information.

Okay. So even with that extra round of questions you are still hoping that sometime in the first quarter of 2018 they will approve the submission?

That’s our hope and that could include another round of questions, which does put us into a data readout timeline of mid through second half of 2019.

Okay, that’s helpful. And then obviously there is competing products out there and we have hosted tan event where physicians talk about the advantages of Geneveve System over some of that competitors.

Can you from your standpoint maybe just further clarify what you think in addition to what could be the first product in U.S. with FDA approval for the improvement of sexual function.

Can you talk about from a clinical or technological standpoint what results you get from your product versus the competitors or vis-à-vis the competitors that are out there?

Great question, Anthony and my response would be the major difference is that we have results. Most of our competitors have not done the clinical testing that we have done.

We have over 185 patients in a randomized - controlled blinded study. To-date, none of our competitors have duplicated that kind of rigorous scientific study.

So first and foremost, we bring to the clinician clinical proof that the product has performed as it has in the clinic and that statistically significant results are in fact they are for their patients. I think after that the major differences that we have are clearly patients’ safety.

We have not had a serious adverse event in any of our clinical studies and in all of the commercial patients that we have treated. I don’t think the same can be said for our competition.

So I think we bring some very profound differences to the market and those are all related to the patients’ safety and efficacy of the procedure.

Okay, that’s very helpful. And then just last, any update on the Thermi, Viveve litigation or is that still in progress?

The litigation is still in progress and because it is ongoing, we are not able to comment at this time.

Okay, great. Alright, thanks very much.

Thanks Anthony.

Thanks Anthony.

Hi, thanks for taking my questions and congratulations on a good quarter. Scott, on the 27, 24 for the treatment tips worldwide, would you be willing to break that out for North America versus outside the North America?

It was roughly split equally. I will say that.

Okay. Sounds good.

And then on the competitive environment, I know you talked about this a little bit when Josh asked the question, but you had just three pretty large competitors that have had some volatility in their product offering here in the last six months. And I’m wondering that do you think that the disruptions from those competitors has benefitted you or not so much?

Yes, great question. I think that we have had some benefit from that disruption clearly, we do know that in a number of the accounts that have had some of the competitive products that either we have replaced those competitive products or we have been added to the practice in conjunction with those projects.

And prior to that I think it is going back to what I said in response to Anthony’s question, you know we do present data which physicians want to have before they treat their patient and the absence of our competition having that data the physicians are looking to us. But it also is because I think we have positioned ourselves synergistically to laser products which are treating a completely different indication.

Right now they are marketing their products for treatment of vaginal atrophy which is not something w have studied with our product and have not thought that indication.

Okay. Thanks for that color Pat and when you think about the 47 systems that were placed in North America this quarter and you said that some of those systems were from customers who had been using some of the competitor products that ran into the disruption.

Do you have a sense for how many of those 47 units were placed in two accounts that we are previously looking using some of those competitive products versus the de novo accounts that haven’t really been using any product previously?

Yes I don’t have the exact number for you Charles, but you know I would say it is double-digits.

Okay, great. And then switching gears to Taiwan, you know you have had a lot of success in other Asian countries and I would expect that you would probably see very good success in Taiwan.

Do you have any estimates or any thoughts around how large that market is. And you know in terms of patients over in terms of potential systems that could be placed there?

Any thoughts around the size of the opportunity?

Yes, we haven’t quantified it from a dollar perspective Charles, I will tell you that we believe Taiwan will be a strong market for us as we believe in China and believe in South Korea at least in that region of the world as countries that will be strong contributors to our sales. You know DMT is just beginning the roll out after the approval, but I think there is a tendency I think for people to underestimate how big of a market Taiwan can be.

We have talked internally. We think that ultimately Taiwan could be of hundred unit market in total.

That’s our estimate at that point based on discussions with DMT.

Okay, that’s helpful. And then one last one on DMT.

You gave some additional color in response to somebody’s question on China and I think you said 21 people are sales people or at DMT that nine on the ground. Are you saying that 21 people are at the sub-distributors or are those the direct sales people that DMT has committed?

I’m just trying to understand what on the ground means versus the 21?

Yes no, thanks for the clarifying question. So DMT will continue to market our product through the network of sub-distributors.

In addition they are adding the direct sales teams. So DMT has a team of people approximately 20, 21 dedicated towards selling the Viveve System in China, nine of whom are on the ground, meaning it would be analogous to a capital rep in the United States.

Great. That’s very helpful.

Thanks for the clarifications.

Sure.

Thank you operator. In summary, we are extremely pleased with our performance in the third quarter and would be ongoing signs of a strong market response to our technology.

Our growing team of dedicated and talented professionals has positioned us well for continued future growth. And we remain very excited about the tremendous opportunities that lie ahead and look forward to reporting that to you on our global success in building the business through the remainder of 2017 and into 2018.

Thank you again for joining us today.