Minerva Surgical, Inc. (UTRS) Q4 2022 Earnings Call Transcript

Minerva Surgical, Inc. (NASDAQ:UTRS) Q4 2022 Earnings Conference Call March 21, 2023 4:30 PM ET

Company Participants

Caroline Corner - IR

Todd Usen - President and CEO

Joel Jung - CFO

Conference Call Participants

Operator

Thank you for standing by, and welcome to Minerva's Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. After this speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the call over to Caroline Corner, Investor Relations. Please go ahead.

Caroline Corner

Thank you, operator. Welcome to Minerva's fourth quarter and full year 2022 earnings call. Joining me on today's call are Todd Usen, President and Chief Executive Officer; and Joel Jung, Chief Financial Officer.

This call will provide forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Minerva Surgical operates, trends and expectations for Minerva's products and technology, trends and demands for Minerva's products, Minerva's expected financial performance, expenses and position in the market and outlook for fiscal year 2023, and the impact of COVID-19 and its variants on Minerva's operations and Minerva's customers' operations.

These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievement to differ materially from any results, performance or achievements expressed or implied by the forward-looking statements.

Please review Minerva's most recent filings with the SEC for additional information, particularly the risk factors described in Minerva's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, which was filed on November 14, 2022 and which be updated on the company's 2022 Annual Report on Form 10-K which is expected to be filed with the SEC on March 22, 2023.

Any forward looking statements provided during this call, including projections for future performance are based on management's expectations as of today. Minerva undertakes no obligation to update these statements to reflect events that occur or circumstances that exist after today except as required by applicable law. Minerva's press release with fourth quarter and full year 2022 results is available on Minerva's website, www.minervasurgical.com under the Investors section and includes additional details about Minerva's financial results. Minerva's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on Minerva's website by 5:00 p.m. Pacific Time today.

With that, I will hand the call over to Todd.

Todd Usen

Thank you, Caroline, and thanks to all of you for joining us on our fourth quarter earnings call.

Before I jump into the fourth quarter and full year 2022 results, I thought it would take a moment to share a little about myself and why I chose to join Minerva Surgical. I've been in the medical device space for over 30 years with increasing leadership roles with Boston Scientific, Smith & Nephew, Olympus and Activ Surgical.

I have always had a strong belief in women's health, from the time I had responsibility for the GYN organization at Smith & Nephew to helping to build and establish a standalone GYN business at Olympus. I always focus on people, technology and patient outcomes. And Minerva has the people who were part of the original design, development and testing of today's top technologies in this space.

And with the goal of women experiencing heavy periods or abnormal uterine bleeding to avoid the need for a hysterectomy and to eliminate their heavy bleeding, Minerva is the only company with less than a 1% hysterectomy rate at a three year follow-up which is 7x better than our nearest competitor, while delivering twice the amenorrhea rate, which is elimination of bleeding of our closest competitor in FDA approved clinical data.

To go along with our people and clinical outcomes, we have a new majority investor with our recent financing led by Accelmed Partners with participation by New Enterprise Associates. Our shared vision of how we build and grow our organization has made extremely confident about our short and long term outlook for the organization. In my early days, we are addressing and building our key improvement initiatives and strategic plans that I look forward to sharing in the coming quarters.

This quarter, we reported revenues of $13.8 million up from $13.6 million in the same period of 2021 and $12.6 million in the third quarter of 2022. For the full year of 2022, we reported revenue of $50.3 million, a decrease of 3% compared to 2021 revenue of $52.1 million.

While we were disappointed with the decrease in revenue year-over-year, we are very encouraged by recent positive trends with sales momentum building throughout the fourth quarter of 2022 and continuing through the early stages of 2023. While we saw overall revenue decrease year-over-year, our Symphion system saw 13% growth over 2021 revenues. We continue to make progress with new account evaluations and trials and believe that as the macroenvironment improves, we are well positioned for growth.

Given how we ended the fourth quarter and the momentum that has been built, through the early stages of 2023, we believe we are in a strong position to drive growth this coming year. Sales for our Symphion tissue resection products were a bright spot this past quarter and for the full year 2022 having increased 5% over the fourth quarter of 2021 and 13% over the full year 2021.

This rate exceeds overall market growth for tissue resection products, indicating we are successfully increasing our market share in this important segment. The exclusive product efficiency and safety features unique to our Symphion product and our ability to compete with the full suite of products for AUB are beginning to show results. We are currently undertaking a strategic review of the entire organization. This includes both an internal review of operational efficiency across the organization and external opportunities to increase commercial success. We remain committed to our OB/GYN physician customers and focused on our mission of delivering the best-in-class health care solutions to women.

As I near the end of my first quarter as CEO of Minerva, I'm extremely proud to be a part of such a value-driven organization. And as a final note, I'm excited to welcome our new Chief Commercial Officer, Kaile Zagger. Kaile is a 20-plus year industry veteran. After completing the GE Global leadership development program, she has had a successful career with leadership roles with Boston Scientific, Intuitive Surgical, GE Healthcare, Phillips and Change Healthcare. She is the co-founder of the MAT Foundation, a nonprofit organization whose mission is to eradicate late-stage diagnosis of gynecological cancers. She had multiple C-level positions for both private and publicly traded organizations.

With that, I'll hand things over to Joel for our financial results. Joel?

Joel Jung

Thanks, Todd, and good afternoon, everyone.

Total revenue for the fourth quarter of 2022 was $13.8 million, a 1% increase from the fourth quarter of 2021 and a 10% increase over the third quarter of 2022. At the product level for the quarter, Minerva ES was $6.6 million or 48% of total revenue, up slightly from $6.4 million in the fourth quarter of 2021. Genesys HTA was $4 million or 29% of total revenue in the fourth quarter of 2022, down slightly from $4.1 million in the fourth quarter of 2021, and Symphion was $3.1 million or 22% of total revenue in the fourth quarter of 2022, up slightly from $3 million in the fourth quarter of 2021.

In general, we're seeing positive trends in Minerva ES and Symphion, offset by the much more mature Genesys HTA product, which we believe is holding flat market share as a niche product for treatments in atypical uterine anatomies. Total revenue for the full year 2022 was $50.3 million, a 3% decrease from full year 2021 revenue. At the product level for the year, Minerva ES was $23.1 million or 46% of total revenue in 2022, down from $24.4 million in 2021. Genesys HTA was $14.7 million or 29% of total revenue in 2022, down from $16.4 million in 2021. And Symphion was $12.1 million, or 24% of total revenue in 2022, up from $10.7 million in 2021.

While we were disappointed with the overall year-over-year revenue decline, we're very encouraged with the sales momentum we experienced as it relates to Minerva ES and especially Symphion towards the end of 2022, and we're working hard to build the sales growth momentum in 2023. Our gross margin for the fourth quarter of 2022 was 53.4%, a decrease from the gross margin of 57.3% reported in the fourth quarter of 2021 and 54.1% reported last quarter.

Gross margin for the full year 2022 was 54.2%, a decrease from the gross margin of 58.6% for the full year 2021. Our gross margin in the fourth quarter and full year 2022 was negatively impacted by increased costs in the current inflationary macroeconomic environment, fixed overhead costs being spread over a smaller revenue base as well as the changing product mix away from our Genesys HTA ablation product to Symphion, which today has an overall lower gross margin profile.

Also impacting our gross margin is an expanding base of installed controllers placed at customer sites where we recognize depreciation expense on those controllers over a fixed time period, which is offset by the future sales of single-use handsets over the life of the instrument.

Total operating expenses in the fourth quarter of 2022 were $12.6 million compared to $14.5 million in the same period of 2021. The decrease in operating expenses was driven by a $5 million reversal of the liability associated with the final acquisition-related milestone payment due to Boston Scientific. This $5 million reduction was partially offset by a $2 million reserve for litigation matters, increased sales and marketing expense due to the expansion of the sales force and an increase in spending on physician and patient outreach, as well as additional research and development-related spend.

Noncash depreciation and amortization expense included in operating expenses was approximately $2.1 million in the fourth quarter of 2022, unchanged from the fourth quarter of 2021. Noncash stock-based compensation expense included in total operating expenses was $1.7 million in the fourth quarter of 2022 versus $1.1 million in the fourth quarter of 2021.

Total operating expenses for the full year of 2022 were $58.1 million compared to $59.7 million for the full year 2021. The decrease in operating expenses was driven by the $9.1 million reversal of the liability throughout 2022 associated with the final acquisition-related milestone payment due to Boston Scientific. This $9.1 million reduction was partially offset by a $2 million reserve for litigation matters, increased sales and marketing expense due to the expansion of the sales force and an increase in spending on physician and patient outreach, as well as an increase in general and administrative expenses associated with operating as a public company for the full year of 2022.

Noncash depreciation and amortization expense included in operating expenses was approximately $8.3 million for the full year 2022, unchanged from 2021. Noncash stock-based compensation expense included in total operating expenses was $6.7 million for the full year 2022 versus $6.5 million in 2021.

Our reported net loss for the fourth quarter of 2022 was $6.2 million compared to net income of $10.8 million in the fourth quarter of 2021. The reported net income in the fourth quarter of 2021 was primarily the result of the onetime extinguishment of derivative liabilities in the fourth quarter of 2021 with the conversion of debt to equity as a result of our IPO and the reversal of embedded derivative liabilities following the refinancing of our previous third-party debt.

For the full year 2022, our reported net loss was $34.1 million compared to a net loss of $21.5 million for the full year 2021. On a non-GAAP basis, we've reported negative $5.7 million in adjusted EBITDA for the fourth quarter of 2022 compared to negative $3.2 million in adjusted EBITDA for the fourth quarter of 2021. Adjusted EBITDA for the full year 2022 was negative $22.3 million compared to adjusted EBITDA of negative $11.3 million for 2021.

As a reminder, we have significant noncash expenses related to the amortization of intangibles from the May 2020 acquisition of the Genesys HTA, Symphion and Resectr assets, as well as significant noncash stock-based compensation expense. From a balance sheet perspective, we finished the quarter with $6.9 million in unrestricted cash. In total, our cash outflow in the fourth quarter 2022, excluding changes in restricted cash, was $8.2 million. Our long-term liabilities were substantially unchanged from the fourth quarter of 2021 following our IPO and the refinancing of our previous long-term debt facility.

And as a reminder, our $40 million long-term debt facility is interest-only through the third quarter of this year after which it rolls into a three year amortization schedule. I also wanted to highlight our recent equity financing. On February 9, 2023, we closed a $30 million private placement of common stock led by Accelmed Partners, and which included support from our existing investor New Enterprise Associates. We're very excited to have Accelmed as an investor in furthering our mission. And with this financing, we have extended our cash runway, allowing the company to enter a new chapter of growth. We intend to use the net proceeds from the financing together with our existing cash to support operations and working capital investments, further advance our research and development activities and for general corporate purposes.

We plan to discuss 2023 annual guidance on our first quarter earnings call in May, following completion of our strategic business review with our Board and new CEO. With our recent financing, a fully staffed sales organization, increased emphasis on signing contracts for our full line of products and a growing installed base of controllers at customer sites, we believe that we are well positioned to drive future revenue growth. We look forward to updating you of our continued progress on future calls.

With that, I'll say thank you and turn the call back to the operator.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Question-and-Answer Session

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