May 14, 2020
Operator
Good afternoon. Welcome to the Viveve First Quarter 2020 Financial Results Conference Call.
All participants will be in listen-only mode. [Operator Instructions] Speaking today for Viveve are Viveve’s Chief Executive Officer, Scott Durbin; and Jeannie Swindle, Senior Director of Corporate Communications.
Please note that this event is being recorded. I will now turn the call over to Jeannie Swindle.
Jeannie Swindle
Thank you, operator, and welcome, everyone. Before we begin, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company.
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 the company’s annual report on Form 10-K and other filings made with the SEC, which are also available on the company’s website.
Also, any forward-looking statements represent management’s view only as of the date of this conference call and should not be relied upon as representing management’s views as of any subsequent date. I would now like to turn the conference call over to Scott Durbin, our Chief Executive Officer.
Scott Durbin
Thank you, Jeannie. Good afternoon, everyone.
Thank you for joining us today. I’d like to begin the call this afternoon with summary of our first quarter results and milestones.
Next, I’d like to discuss the commercial impact of COVID-19 and outline the deliberate actions we’ve executed to significantly cut costs throughout the organization, in order to reduce cash burn and to strengthen our balance sheet. Finally, I’d like to outline the trajectory of our SUI clinical development program, and highlight the important upcoming milestones as well as provide our perspective for our business going forward.
To begin, 2020 started with a quarter that demonstrated strength from a commercial, clinical, regulatory and financial perspective. The effectiveness of our new U.S.
recurring revenue model designed to increase physician adoption rates by reducing upfront costs and barriers to adoption, was continuing to show traction, and momentum was building well into the quarter. Armed with confirmation of the commercial model’s growing success and increasing physician enthusiasm, we began the initial steps early in the quarter to scale the program within our U.S.
sales, customer support and marketing departments. As previously stated, this model was designed for rapid scalability.
It was implemented in June of 2019 to provide the company with greater long-term revenue per customer, lower selling costs, improve revenue from consumable sales, provide more predictable quarterly and annual sales growth and improved profitability. At scale, we believe this model can quickly lead us to cash flow breakeven.
As a reminder, the change to the recurring revenue model from the former capital sales model in the U.S. was a massive transformation for the company.
And its results were continuing to be realized through the end of February of this year. However, in March, we began to directly experience the disruptive commercial effects of the coronavirus pandemic.
Despite the commercial impact in Q1, we are reporting total revenue of $1.3 million. And as of March 31, 2020, the company had an installed base of 849 Viveve Systems worldwide, 479 of them in the U.S., of which 91 had been placed under the recurring revenue model.
On the regulatory front during the first quarter, clearances for our next generation 2.0 system and treatment tips in Taiwan, a global key market and in Canada were reported. These clearances are a testament to the company’s continuing achievement of regulatory milestones.
Manufactured at a significantly lower cost than our first generation system, the Viveve 2.0 platform and consumable treatment tips are now commercially available throughout North America, Asia and in over 30 European countries. In Q1, we also achieve significant clinical milestones in our stress urinary incontinence or SUI clinical development program that advanced our 3-arm short-term feasibility study, and with timely efficiency.
This progress, however, preceded the top-line readout of our U.S. sexual function trial.
And unfortunately, as reported in early April, the VIVEVE II study did not meet its primary endpoint of demonstrating a statistically significant improvement in the mean change from baseline in the total Female Sexual Function Index at 12 months. Although there was substantial improvement demonstrated in the active study hour, there was not sufficient statistically significant separation from the sham treatment group.
As I’ll discuss in detail in a few minutes, continuing evidence, both commercially and through multiple studies of the benefits associated with our CMRF treatment, and the company’s enduring potential to realize a multi-billion dollar consumable market opportunity has resulted in our strategic business decision to focus all of our near-term efforts and resources on advancing our SUI clinical development program. Next, I’d like to discuss the commercial impact of COVID-19 and discuss the deliberate actions we’ve executed to significantly cut costs throughout the organization in order to reduce cash burn, and strengthen our balance sheet.
Viveve like the majority of companies in all industries had to respond swiftly to the unprecedented health, market and economic challenges resulting from COVID-19 crisis. Let me summarize our organizational response first and then provide some detail.
First, we implemented a range of operational changes, designed to support and protect the health and safety of our employees, customers, distribution partners and other contacts as necessary. The majority of our organization continues to work remotely, despite restrictions that are beginning to lift in some cities and states.
The company’s financial health and commercial business likewise required an urgent response. As reported in April, a series of significant cost cutting actions were implemented to drastically reduce expenses and reposition resources to support our current customers and our pivotal clinical development program in the treatment of stress urinary incontinence.
Although the expense cutting and realignment actions involve extensive sales team and staff reductions, we have retained our ability to resume full operations and rescale commercial growth quickly as conditions improve. Additionally, the successful warrant exercise transaction that was recently announced, combined with existing cash, has strengthened Viveve’s balance sheet and have provided the resources necessary to maintain our business strategy and advance the SUI clinical development program in the coming months as the COVID-19 crisis continues to evolve.
The ultimate goal of the important actions that we have taken is to preserve and create long-term value for the company. In April, reductions made to our commercial organization were significant.
And a result of approximately 70% to 80% of our existing U.S. customers either temporarily closing or dramatically reducing services and staff and their medical practices.
This was the same with targeted or prospective physician practices and customers. As you know, this was a result of the COVID-19 stay-at-home orders and directives to hold non-essential medical treatments and elective procedures in an effort to combat the spread of coronavirus and protect public health and safety.
As a result of the commercial organization, we’re significantly but temporarily reduced and refocused to support existing customers. The reductions were done as full and partial furloughs to help ensure our ability to rapidly rescale the commercial team and operations when conditions improve.
We anticipate that until the COVID-19 pandemic abates, practices begin to reopen, and elective patient safety concerns are reduced, that we will continue to experience reduced revenue from existing subscription customers as well as a greatly reduced number of new and prospective customers. However, in the meantime, our talented commercial customer care and marketing teams are focused on support of our existing customers and engaging with new practitioners through a variety of digital means.
Our Viveve University, practice development and marketing programs are now available in virtual formats and participation is in fact at a record-high level with existing customers and targeted physician prospects. Many practitioners are using the forced downtime to take advantage of our educational resources that will help build and support treatment volumes in their practices as elective procedures restart.
Overall, we are confident that the recent changes made to our U.S. commercial activities will support customers, reduce costs and preserve cash.
Sale of our products outside the United States continues to be supported by the company’s current distribution partners without significant change to the international business model. Our predominant focus since the second half of 2019 has been on growing the business in key countries and regions in Asia.
As we know, this region was initially the epicenter of the coronavirus. But thankfully, countries within Asia have been showing signs of commercial recovery.
Currently, we anticipate a return to near-normal physician utilization and distributor sales activity in the coming quarter, and through the remainder of the year. However, as in the U.S.
elective patients’ continuing health and safety concerns may somewhat throttle the speed of return to pre-COVID procedure rates. And we continue to support existing distributors and customers in Europe and other global markets as COVID-19 recovery efforts are less advanced.
Finally, I’d now like to address the advancement of our stress urinary incontinence clinical development program. It is the achievement of near-term key milestones in this program that we believe will set the course for our CMRF technology and the company going forward.
SUI is a condition that affects an estimated 25 million to 30 million women worldwide, and represents a $10 billion to $12 billion total available consumable market opportunity. We have demonstrated in 3 previous clinical studies that the Viveve treatment safely improves SUI symptoms and reduces leakage for women.
Our resolute focus, to which the entire organization has been repositioned, is to: one, complete the readout of the 3-arm SUI feasibility study now targeted for late summer of this year; and two, to achieve FDA IDE clearance for our U.S. PURSUIT trial, which was resubmitted in April, and begin the trial as soon as practicable if the SUI feasibility study is positive.
The current 3-arm SUI feasibility study compares our CMRF treatment and a cryogen-only sham treatment to a totally inert sham treatment for improvement of SUI in women. The prospective randomized single-blind study is being conducted at 3 clinical sites in Canada with a planned enrollment of approximately 36 subjects randomized on a one-to-one-to-one ratio to each of the 3 study arms.
The primary efficacy endpoint is the mean change from baseline in the standard 1-hour pad weight test at 5 months post-treatment. The primary goal of this trial is to demonstrate directional separation between the treatment arms, and the inert sham or true placebo arm of the study.
A positive data readout from the short feasibility study would strongly support initiation of our pivotal PURSUIT trial in the United States. Fortunately, from a timing perspective, the feasibility study, Investigational Testing Application was approved by Health Canada, the trial initiated and enrollment completed in March before COVID-19 shut down medical centers from performing non-essential medical procedures.
We have also initiated a change to the final follow-up visit from 3 to 5 months. We anticipate that this 2-month extension will provide more time for the investigational sites to resume medical services with COVID-19 patient safety measures enacted and reduce patient health concerns.
This will also better support subjects’ compliance with the final follow-up visits and minimize any potential protocol deviations. As previously stated, the final readout for the SUI feasibility study is targeted in the late summer of this year, and represents a major clinical milestone for Viveve.
Moving to the PURSUIT U.S. trial, the importance of this study, its design and implications for our future are represented in the meaning of the word PURSUIT.
In keeping with our commitment to scientific rigor, initiation of this pivotal U.S. trial, pending IDE approval by the FDA and a positive readout of the SUI feasibility study, will enable the company to continue its strategic PURSUIT for U.S.
label expansion of our CMRF technology for an SUI indication. Again, resubmitted to the FDA in April, the IDE for the proposed PURSUIT trial is a multicenter, randomized, double-blind sham-controlled trial.
The primary efficacy endpoint is intended to be the 1-hour pad weight test at 12 months post-treatment. Enrollment is intended to be approximately 240 patients set up to 25 study sites in the United States.
Randomized in a 2-to-1 ratio, subjects in the active treatment arm will receive this CMRF treatment of 90 joules per centimeter squared of RF and cryogen cooling. Subjects in the control arm will now receive a clinically inert sham treatment of less than 1 joule per centimeter squared of radiofrequency and less than 2 degrees tissue cooling for cryogen.
It’s important for me to emphasize the comparative treatments in the active control group in this PURSUIT trial. Unlike previous Viveve clinical trials, with the exception of the currently underway SUI feasibility study, the sham treatment that will be administered in the control group will be a clinically inert or true sham treatment.
The minimal RF energy and the cryogen cooling delivered by the sham treatment tip will be at subclinical and therapeutic levels, and thereby should not induce a treatment response in subjects in the control group. By design, the highly powered PURSUIT SUI trial will compare Viveve’s CMRF treatment in the active group to an inert sham treatment in the control group, using the standardized objective 1-hour pad weight test.
And the anticipated target for initiation, pending FDA approval of the IDE is in the fall of this year. In spite of the unprecedented challenges and uncertain duration of the COVID-19 caused health and economic crisis, the importance of our upcoming milestones in the SUI clinical program remains paramount.
A positive readout from the SUI feasibility study showing directional separation between the 2 energy arms and the inner sham or true placebo arm will provide confidence in the ability of the U.S. PURSUIT trial to achieve positive results and positions Viveve for a potential SUI indication.
Although severe, the actions taken to cut costs, reduce cash burn, reposition resources and refocus the organization were imperative for the company to survive the magnitude and breadth of the COVID-19 crisis. As a result of these actions, and with continued diligence to cost containment measures, I believe the company and our talented team will successfully address and adapt to the challenges we are and continue to face from this pandemic.
We are united in our focus to support our existing customers. And to successfully achieve the upcoming clinical milestones that will advance our commercial efforts in SUI.
I’m so proud of the dedication and continued perseverance that is the hallmark of Viveve. Our vision has always been and remains to be the global leader and innovator in women’s intimate health and wellness.
Operator, this is the end of our prepared remarks. I’d like to thank everyone for participating in our first quarter conference call today.
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Operator
The conference is now concluded. Thank you for attending today’s presentation.
You may now disconnect.