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Second Sight Medical Products (EYES)

Participants
Lisa Wilson Investor Relations
Jonathan McGuire CEO, President
John Blake CFO & Corporate Secretary
Sameer Joshi H.C. Wainwright
Kyle Bauser Dougherty & Company
Call transcript
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Operator

Greetings, and welcome to the Q1 2019 Results Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session.[Operator Instructions] As a reminder, this call is being recorded, Wednesday, May 15, 2019. I would now like to turn the call over to Lisa Wilson, Investor Relations with Second Sight. Please, go ahead.

Lisa Wilson

Ash. you, Thank welcome Call. and Sight's Quarter First Good to Results XXXX afternoon, Second This Second Relations Investor is Wilson, Lisa for Sight. of Blake, With me Chief Financial John and McGuire, Will Officer Chief on today's Executive call Officer; are Second Sight. President and the press detailing a months March financial company X release XX, the of XXXX. the for After close ended issued market, results press can be section Sight Second the secondsight.com. release accessed Relations The website of through the at Investor

access also webcast of from call the this there. You can

the everyone anticipation based on started, that -- Second conference and get those to risks release uncertainties, Before Actual Reform regarding may I including today projected forward-looking management afternoon's as of materially future These performance Second noted forward-looking on a to remind be statements of and in future results future and statements are Sight's would Such today's Litigation statements and performance. may from any Act. forward-looking we defined statements. as call belief, press like made information available expectation, or differ events express this with forward-looking the that in by company's Securities statements SEC. are those considered projection, the not forecast, SEC guarantees the and intent involve Sight Private filings

call Second statements will call be Sight to except the obligation A specifically forward-looking X replay disclaims completion next of the available this any update as of law. these for intent weeks. or after telephone required by shortly

X You'll secondsight.com. on website, find webcast the The archived will be dial-in in month available for release. information today's press company's

please this have I'll the Will the recent the to Second call XXXX. the to McGuire. CEO, made and be on Since may webcast, then, that, over SEC of announcements topics most was so archived filings. call May turn the to those related recorded Sight's with And Second benefit For company's discussed, press releases reference may or XX, listening who held Sight and replay

Jonathan McGuire

call call, On our going and we for Sight and share development platform. rationale to you, forward. that Second like Lisa, accelerate all this would this announced afternoon, I'd afternoon. plans Orion Thank joining thank our our This the of

should sooner is best Orion deliver on path are virtually Orion, to And fastest There value organizational to vision creating several so. to individuals. the the believe, shareholders. offers now forward we which strategy Orion. more reasons do is path believe we lead time Our a useful ultimately right treating to and people now for the all focus increases ultimate accelerate while goal our for artificial blind The to substantial

short early our Xth the We XX, potential impact subjects were data X April continue as evaluate the have and the terms that home X by since mild and increasingly without observed and Orion light visually by becoming the Investigators visually Annual or ability daily system. in feasibility have Observations on subjects dark was parked objects rehabilitation orientation use in to use. as to lives their walking we Initiative BRAIN positive to were subject and by, nicely mobility previously implanted the First, cleared our Orion not well-being Washington, subjects is are benefit post-implant. January individuals blind Recently, encouraged direction the rated could and in motion first D.C. a the having include view from Meeting of encouraged and subject Xth the presented Orion in positive they Orion without have testament one which size. these a as functional the the results X vision out to demonstrate The certified made. received very alone Baylor for progress cars, at of what Orion of for anyone's of this from time progressing laundry results detect small study, identify specialists reported blind. by they to who order from around in of block walking perform assistance from person was on we we able We're can neighborhood of task months sessions just as at

of study We XX Stereotactic the scientific Society be expect on June such Functional additional year Orion forms feasibility for in presented York data later City. as and this to at Neurosurgery various World meeting New the

directly potential diabetic cortex to to we nerve help including glaucoma, of retinopathy, optic believe us forms useful injury, disease blind for calls, blind individual's the eye or optic allowing as those almost Orion and outlined Second, Orion provide blindness. nerve RP. bypasses injury visual the and all the from to in most vision and stimulate eye past holds the artificial causes

market in research number far a greater indicates these U.S. outside over Our XXX,XXX individuals U.S. blind the are the from legally that causes same people with causes the alone from blind of

better RP the that to including quickly addressed convinced Orion treat more that now now to blindness, all population is is Argus to the II platform. by faster way are and transition We

is will position for vision. artificial in we our technological continued extend the more and attractive leadership believe platform Orion investment Finally, improvement that

us greater much the key result, millions view count to increasing help such a a cortical bilateral percentage as to while This outcome includes also array enable talent top than around in capabilities field programs more the to acuity cortical an of XX to next-generation process are of As of include designs higher useful our could that and with the forward, well move advances, the these programs, advances of support world. We implants. of ability Orion and higher expansion as the filling the of and development individuals legally current will stimulation strategy blind new supporting believe vision, more as we that positions electrode adding devices, organization. vision a technologies,

this exciting portfolio our technology. in consists investment U.S. cortical XX protect applicable addition, an our Orion estimated or In patent of continued patents that simulation to

and meetings with the regarding additional have in expect agency months. we discussions by the the regulatory encouraged our On front, coming the to remain with FDA Orion

chain manufacturing Orion to regulatory opportunities Orion, clinical requirements. of improvements. wrap of intend we data II. the future. clinical production we for investors. CMS by FDA our than the capabilities I'm with to on proposed released quality key share coordinate evaluating to requirement volumes on second As regarding recently Upgrades developments will a waive pleased to devices reimbursement clinical rule more with we medical future our explore with agreement reach areas processes transition support suspend half meet substantial II could Orion the details reimbursement that path with to XXXX breakthrough concerning Argus gathering such for will regulatory believe are of assurance would identify that evidence that reimbursement the automatically also get formal and and strategy, CMS will the for approval aspects and tech Orion. upon X as CMS continue breakthrough we work add-on certainly FDA-designated recent devices and up additional for I greater payments Accordingly, support to payments. be manufacturing of supply that we the initiate To approval. devices means add-on for a improvement expect we magnitude technology be we regulatory devices discussions near breakthrough of to Argus required for new in new as years sales them would orders during automatically and This qualify the

depending treating plan clinical patients if continue enrollment, due future. It the new considerations a factors, new RP is the for speed note, devices RP approval, upon sizable in We inventory some II there even that have choose of with that other gap potential decide patients anticipate Orion. We to available. performing newer Please regulatory inventory at also implants still possible point, may and approval may some for is platform. wait Argus to be suspend to reimbursement a we the II that foreseeable implants of business to and Argus could Orion

to further outside overtime be On the front, commercial U.S. to dedicated want both the one I our thing. about implants, and spend well in Argus as U.S. we commercial as very driving eliminate new the II to reduce clear intend

Argus users, throughout field as as Second parts. world. to users organization or II our maintain Argus our to This inventories including in troubleshoot the means issues warranty Sight committed capabilities well to support we replacement that of II is existing will personnel supporting

they their system. from We keep our vision team as artificial intact, most role rehab of key a training the also play most intend to get to subjects Orion's

on As IIs of Argus implanting and Argus factors will our we Argus a for regulatory basis demonstration potentially available allow. these new users existing limited next-generation submit to some to approval, regulatory a continue commitment other users, constraints inventory then as with at made centers to be plans Upon externals would and approval. our

vision artificial of continued our vision integration research thermal Our enhance further multiple eye technologies. facial before. object commitment the and artificial to recognition, tracking about by include, experience. field to They is these projects the and of filtering in We've talked designed investment demonstrated user imaging, distance the

Our artificial extend thermal such efforts multiple leadership closing, excited human in imaging. plan with and object count vision. It's acceleration and In that devices with cortical is later The II recognition to paving prototype calculated a been way invaluable Orion move position the to systems ready integrated high as get capabilities the have this about includes testing electrode easy quite year. future into for system a Argus success has facial our experience Orion. is to for the our of or

the high-channel count human that last is neuromodulation unmatched. design years to miniature, Our body ability for in and devices build

will will continues offers in market with commit short, vision discussions The huge. now John to success the We opportunity fully outreach, be success. exciting for rehabilitation. John? also and our to patient that, learning Orion's technology platform right individualized an and data With FDA patient customized And XXXX programming in the review results. advances. financial ensure now to promising. is is artificial of our areas are future encouraging, extensive our leverage resources critical our The quarter time the first In the

John Blake

in the and recognized X Thank in were XXXX $XXX,XXX per same in implant $X.X compared for Revenue million sales Net the was quarter Will. million as quarter the the of was XXXX of in period both recognized first Revenue was approximately first periods. $X of XXXX. period XXXX. in units in same to $XXX,XXX you,

sales of our net North North in implants sales of of $X.X profit in Cost Argus XXXX. in sell first of XX of in X million of units EMEA sales decline was II. the during we in primarily million quarter of first profit America of quarter America, were XXXX XX XXXX, the the compared products of first implanted XXXX, unabsorbed in first reserve implants of gross through to quarter quarter Cost the quarter. the of by consisted XXXX a of XX Of X first for was of sales both million first were of in a implants Argus in II costs the cost total In and the were Gross unabsorbed million in inventory $X.X in cost quarter the of excess XXXX. and to implanted $X.X these, the to the first the million $X.X offset as existing expect XXXX while and the production $X.X of We We of for production quarter our in XXXX. partially quarter were first reduction compared the X of $X.X periods. of included approximately products inventory. costs, adjustment quarter for EMEA million for implanted an cost in

the IIs. to quarter to XXXX. cost In before quarter of NIH offset in the revenue in be expenses quarter as $X.X to to grant and from for increased $X.X and in and received development production net periods. that inventory of II we validation as year, Argus prior compared any first Research primarily by million to fixed and in we from from the the majority record first XXXX, due of decreased from million to $X.X offset XXXX first of development verification to sell million expect million of $X.X grant of cost related remaining sales grants research expense and the funding overhead funds the costs none of expense utilized The future XXXX. our Argus reported We activities

$X.X million feasibility research attributable Orion our decreased as is This in decreased quarter aforementioned periods first development expect XXXX we from the to related previously $X transition $X.X with primarily to cost of including We XXXX. goods associated expense costs million in first the of of to million quarter Clinical future to sold. and and to expenses increase study. Orion, decrease the costs regulatory in

from the million expense million million marketing of $X.X activities approximately in approximately clinical 'XX and and as cost and by million. first decreased cost decline as million reduce product to $X million $X.X conduct expect we we primarily administrative further of marketing regulatory use General Orion to as related selling lower This existing million primarily the by Argus $X.X $X.X and headcount We in attributable period compensation million our result user expense in in experience. will from trials XXXX the of $X.X XXXX. quarter decline to the of reduced $X.X the XXXX our $X.X $X.X II was XXXX. of outside quarter of additional decreased our in enhancements clinical compensation sell-through We assess and related first service expense inventory. to such costs commercial million in decrease expenses. and same The reduced outside XXXX is and and to to increase Selling in new the $X.X quarter first services, decreased of decrease annual in million and anticipate cost

a of loss first or per million XXXX, $X.X per in The $X.XX excess of inventory loss certain II compared plans reserve to compared of the XXXX. per loss million to first the was share net the loss of a quarter $X.XX to items production. the of also a net quarter $X.X noncash per to quarter in share million or million of XXXX share or million Net XXXX the impairment We noncash a first quarter or to $X.XX related excluding for loss loss recorded of net our $X.X non-GAAP $X.XX first was $X.X sustain of a share for quarter in of $X.X charge our non-GAAP Argus XXXX. first net for

press For a the non-GAAP the to to comparable full release. most measures of reconciliation please this financial included measures, financial refer GAAP with tables

$XX.X we completed $XX.X March XXXX, equivalents. in cash approximately rights had proceeds. gross we million that cash provided offering a of of XXXX, As In million XX, and February

restructuring into second million to expect call Operator, benefits. related for $X.X second In record of quarter expect in the ahead. related to this with quarter I'll charge continue fund that, operations We to cash XXXX. the up and connection go With a the please we the strategy, to open revised XXXX questions. of of severance

Operator

our with of question H.C. [Operator Joshi the comes you. Thank And Instructions] from Sameer Wainwright. line first

ahead. line Your is open. go Please

Sameer Joshi

John. Will, my for questions. afternoon, Good taking Thank

First is next thing, what plans do few quarters? of that the over the available inventory you Argus level for the plan to

John Blake

John. Sameer, Yes, this is

the inventory the $X.X disclosed we million of So value after impairment charge.

units, write-down, amount us took that is announcement. of our all customers just light we This you start a contacting that number although can the today's the in disclosed position. the we pretty haven't Well, see of doesn't We to the the judging through conservative by ability of after accounting did certainly preclude inventory. of from selling

Sameer Joshi

has under work change as any a that of And strategy better-sighted the in just Or Argus? being clarification is on done Okay. on there RP patients -- been the well? suspended

Jonathan McGuire

would better any do with take for we were we to RP the vision Anything that. work future and are some in do perspective or Hi, from Sameer, Argus. further these that pigmentosa will going a doing Orion going that a I'll the think injury, better with be good be retinitis RP vision done retinopathy as Orion treating applicable be platform. for and glaucoma, nerve platform diabetic well. very patients it's we also to We optic only to disease not and but from considering this is Will. would No, the either a development not clinical we eye patients with think

And patient be these of I vision would at population. overall think much, much not patients So would blindness, but any RP vision would the patients looking be path, which work done other a larger there. interested only be causes we better from would down looking better

Sameer Joshi

the eligible patients -- for does other would us, can forward? past. remind Understood. Orion But going the with implanted have been or are and Orion question Argus how may addressed patients existing you with if And work? that in next this be Or or

Jonathan McGuire

Any optimally a We getting an in a wait assuming decision are not would who the that database clinical Was anyone would on meet be Argus and patients I platform eligible commercial be for some who go that may the proceed certainly, level considering Orion maybe and question, get more would Argus for has Argus information would now with if are would screening the they there think currently instead. be be implant, for our pass eligible. not product. an -- vision But patients patients -- are though trial out have So certain in they Orion. make to and data eligible? Argus ultimately more criteria already that would and think there they the that forward

Sameer Joshi

Okay.

may there -- of I under -- reimbursement I approval have terms upon the in you and mentioned regulatory is your misheard, rule? for strategy reimbursement think but new automatic So

Jonathan McGuire

Yes.

me address I'd things. of that. let couple So say a

First, put was that payment. put device under what technology -- they their final. rule devices CMS not designation that have But did they breakthrough so get approved add-on it's their yet proposed a automatic new payment in rule, add-on in proposed FDA's are would the

payment And addresses dropped evidence is level It portion of clinical reimbursement. for so of that as a does certain the they what it also -- a well. requirement

and doing approval. being would it to straightforward a lobbied done device still a they're they're hasn't that is get easier yet and part coverage approved making second for, well. be as been parter, is what a and breakthrough what another So more is the device upon What payment get to that's for required as

period something of breakthrough in not that which is they only payment require get for automatic will and that's think also but a past similar year, coverage later in the the house time. introduced not would introduced in legislation has get so be There proposed automatic devices been rule. some And we the this

more and of decision go which a we to we our basis be, CMS. then, prepared probably would X advance waiting strategy look in get stated Now discussions we'd couple in kind patients as close We're with FDA the much on One the reimbursement we'll formal or things. how a final would our then to CMS not on engage CMS is parallel will how final. same And strategy, with at both really #X, a there's as path And our a there's trial time. clinical far a X potential down remarks. what of FDA and like, and have data. outcomes many review as our

used well that as So potentially think gathering regulatory for both it be reimbursement as for of would data decision. as

So path. one that's

called national in that case, the then we is evidence second that that a The which with get reach upon regulatory by reimbursement data would certain would CMS coverage enroll in for that a decision. and we And development program to for an agreement those use patients, phase number gather CMS approval the And in development. ultimately certain agreement process. all on a implants path CMS. would paid second additional of data we a certain approval go And we data in with regulatory approval, is then the that's for -- of or an everything regulatory program, with amount would and evidence a -- subjects then have coverage with in of to

So that legislation national CMS we're the of then would to you legislation which to of the you lines time. is of about that possibility and be And during permanent you you automatically could proposed we're breakthrough data permanent in in move along period you additional with decision. -- approval device reimbursement rule be further an with designation, of should question, this reimbursement And would then post-market time, Hopefully passed which for what is CMS would that final on as reimbursement that your the for period and -- support used in a that get upon order approval as trial a talking you CMS-sponsored in regulatory a answers collect a reimbursement. a a agreement what Sameer. with kind endpoints long be in get have ongoing or reach to you setting,

Sameer Joshi

is no, yes, than in expected -- that X or Okay. around time does. period This that? years it to case, the the of Yes, last be shorter

Jonathan McGuire

by CMS, right. Yes. years. was I X What proposed was exactly believe That's

in be So they would X years. the place -- for payment would

has years. think in that I been legislation past X was introduced the the

then So be hopefully, X-year the it hopefully timeframe additional you you to decision. will and permanent data to payment collect and in X- support somewhere the reimbursement coverage where have

Sameer Joshi

Understood.

Okay.

-- color be must personnel. on to Moving give that? on some -- there actual of people more in the some impact you Can effect us like on overall terms

Jonathan McGuire

Sure. Yes.

the decision there as far our here, will XX physicians impacted with total of As is that physicians eliminated. negatively a be eventually

now, are happens are them in Not of some over think the half them -- -- that And think arena. immediately. of that XX, over commercial time. about about of occur Some will everything

that in have individuals are producing really and new a than II as we the are little Argus. as less going many So We'll supporting are to production area half for implants, Argus a personnel. production not need then not be

other side and Sameer, look programs XX. clinical R&D programs adding Orion it, to On the what you if moving at support of over we're to that's forward,

it's half actually in of is think and or I that R&D. about individuals XX XX

half So or clinical et regulatory And directly development, between another timelines, people. supporting cetera. to half approximately is quality development process and R&D and split assurance et other reduce the trying cetera,

in adding the additional there also quality So as we remarks, need and and capabilities that the to manufacture pathway. -- R&D. people associated as we and clinical said development down higher then, process regulatory looking folks processes development doing quantities. our move adding so assurance we at we're work necessary. And the can We're in process things We think

Sameer Joshi

buckets to marketing. his commentary, R&D give various little Understood. and expected remainder us color sales runway the And during of alluded your John and cash more the increases -- you bit expenses the in and a Can on forward? going year during and

John Blake

point. Yes, Sure. an that's important

runway into XXXX. cash So for number our QX one, reaffirmed guidance we our

So full of year over we'd with $X.X and our prior what next expect additional And the that XXXX so expense P&L for the R&D through to thought do come our expenses to selling going we I million be $X.X to expenses in or mentioned going less quarters, in that's where year related as or XXXX. then an combination will additional million are be and manufacturing about we see the quarters. that's annual a will $X.X consistent marketing and more a figure. reported about future lot of be of is capabilities, million We as an increase in --

also a into So are positions runway. the mentioned this of factored lot new that Will

and of baked the we all guidance are the puts some for have. in takes So runway that

Sameer Joshi

Okay. severance And just one -- we expect is last that one. in what the or and In charges related XQ XQ should later?

John Blake

approximately that's Yes, $XXX,XXX.

Sameer Joshi

it. Okay, got Thanks.

John Blake

you. Thank

Jonathan McGuire

Thanks, Sameer.

Operator

question [Operator comes the Bauser line of from Instructions] Our Kyle next with Dougherty & Company.

Your go line ahead. is Please open.

Kyle Bauser

hear Hi, Can good afternoon. you me okay.

Jonathan McGuire

Yes. Very well.

Kyle Bauser

Thanks update had X I quick just Great. questions on that today. for Orion.

encouraging. there only is First, patients. feasibility study based the looked it very But on X

can to confidence focus Orion forward on So on of exclusively you speak the product? to your moving level

Jonathan McGuire

that's Yes, Will. is and probably well. one that as question, think I a fair for This while we Sure. internally discussed I think a

a So I'd couple. say

X to are of subjects that. First are will confident. that end May, that have X-year comments at of a we But out yes, all, say, keep the couple we in I'd the on of Number one, mind mark.

now. of X year. at getting it's The Xth or mark what about X- not we're So right data, short-term X-month probably out is the X subject

that with are a that data may regular we subjects XX-month the seeing performance So very our on you these pretty performance rehab -- or mark, we're One teams or X-month X-month their from is subjects good some evolved artificial where only understanding of with the other trials, get that. over other clinical a basis. as we're pleased we're get time be has opposed do to getting a vision a and and also comment somewhat how you have

see month. know often. them they're we month they're and improving So We performing how quite to how

of there's lot data So in basis. on taking of we're a that regular kind there

that you the was that good. presented I the think X-month -- couple example increased Meeting, feeling on But X picked off. versus be at there on we're better out were there on out has and data Investigators square news the pretty look the X releases with system that localization since would So of at the the to BRAIN We X of would at X of X. of data significantly up out had be, a improvement if points subjects the point, an And that of months. most

X do X. Same the to a identify use X how system the X-month where screen screen. a At at with X for results. significantly line of off. directional looking continuing this at moves how now the out we're So system to and motion on mark, the get -- learn better we're better to of they're across and But out versus trying were looking

we're are again, performance mild getting same, X, remained has is which good the we're who or then So X getting And benefit really system. benefit of there. with FLORA showing the the out

good. So we are results those think

rehab better they start were or literally compare said, even some their artificial different would practice. bit in point of we little thing at and are As the thereafter. Argus typical subjects The could getting a weeks with Argus. several it vision that more here you subject weeks, that's would one And other I say to if to activated get X maybe

us month, programming and all to a mapping because initial things and taking it's vision artificial doing rehab. special months they the quite within it's Orion that. us and So -- that new, months or the takes -- subjects X And X maybe sometimes do it's like for the different it

So their results the that today, same thing, one this evolved look much seeing and seeing final often we're we're months not system. much because the that's that's just at practice had why the X-month or training haven't at And mark, they Argus and XX with with X world the time. out or familiar looking we're how evaluating XXX data, in as users got not and at it they've we over in over a We've vacuum. performance and at we're months

that's... you for than bargained maybe but that So more

Kyle Bauser

can the respect I Great. stand an appreciate update And provide communications then to you FDA just helpful. that. on That's you Orion? to can on that share where secondly, extent you with

Jonathan McGuire

Sure.

coming we're over hoping have final to the up. somewhat getting of So regular times to the communications breakthrough devices are And them. looking questions. on meetings we looks -- in quickly think kind to or have path a responses that would regulatory I get X critical or in would X stage, get like. to negotiations really what we X is talked the past, week, frequent this the fairly next conference program I do able is calls in start we of can We've say able interactions we days meetings you to are us what or FDA. and/or a and have over these sometimes X with forward, X But hallmark the get have to the months, some X these with next months will, a about if to responses few a I expect

So up decision the linked of endpoints will trying endpoints, like to things and subjects get safety efficacy to many that. endpoints, how what follow to be, a

So had comments discussions discussions. go be like these some share if the other some end to as the and with and have could certainly of expected, you near and maybe that hoping forth. things had to would QX But by have we proposals end negotiations that something we We've we're and and we investors. potential back of

Kyle Bauser

Thanks the it it. Got Okay. from me. for taking That’s questions.

Jonathan McGuire

you. Thank Yes.

Operator

turn to I to over At Mr. like McGuire. go ahead would the back call this and time, Will

Jonathan McGuire

you the thank call you future progress Have all thank joining in to great of Sight Second on a on for all forward today. like the us I look of to I'd day. updating Yes, calls. also team our and

Operator

We that That thank does for your your the please for today. ask lines. call and all conclude you disconnect participation you