VANI — Vivani Medical, Inc.

Summary of Second Sight Medical Products Q4 2019 Earnings Call

1. Key Financial Results and Metrics:

• Net Sales: $0.5 million in Q4 2019, down from $1.8 million in Q4 2018.
• Implants: Revenue recognized for three implants at an average selling price of $166,000, compared to 16 implants at $110,000 in the prior year, reflecting a higher reimbursement rate.
• Expenses:
  • R&D Expenses: Increased to $4.1 million from $2.4 million in Q4 2018, driven by Orion prototype production costs.
  • Clinical and Regulatory Expenses: Slight decrease to $1 million from $1.2 million in Q4 2018.
  • Selling and Marketing Expenses: Decreased to $1 million from $2.4 million, due to reduced commercial activities for Argus 2.
  • General and Administrative Expenses: Slight decrease to $2.3 million from $2.5 million.
• Cash Position: $11.3 million as of December 31, 2019, with a cash burn of $7.1 million in Q4 2019, providing a runway into Q2 2020.

2. Strategic Updates and Business Highlights:

• Leadership Transition: CEO Will McGuire announced his departure for a new role but will remain on the Board. Greg Williams is acting as interim CEO.
• Orion Early Feasibility Study: Completed 12-month testing for the sixth subject, showing positive results in visual function measures. The company is preparing for a pivotal study in the U.S.
• Regulatory Approvals: Received CE Mark and conditional FDA approval for next-generation Argus 2s wearables, which will be introduced in a limited market.
• Reimbursement Efforts: Ongoing discussions with CMS to secure national coverage for Orion, with a focus on both public and private payers.

3. Forward Guidance and Outlook:

• Pivotal Study Timeline: Expecting to submit an Investigational Device Exemption (IDE) application in the first half of 2021, delayed from the end of 2020 due to ongoing FDA negotiations.
• Increased R&D Expenses: Anticipated rise in R&D costs as the company continues to develop Orion prototypes and prepare for clinical trials.

4. Bad News, Challenges, or Points of Concern:

• Sales Decline: Significant drop in net sales compared to the previous year raises concerns about revenue generation.
• Regulatory Delays: Ongoing discussions with the FDA regarding safety endpoints for the pivotal trial are taking longer than expected, which could impact timelines.
• COVID-19 Impact: Validation efforts for FLORA 20 have been suspended due to social distancing protocols, potentially affecting the timeline for the pivotal study.
• Cash Burn Rate: Operating cash burn is expected to increase in 2020, raising concerns about the need for additional financing.

5. Notable Q&A Insights:

• CEO Search: The Board is in the early stages of searching for a new CEO, with no specific timeline provided.
• Safety Endpoints: Discussions with the FDA focus on determining acceptable serious adverse event rates for the Orion device, with the company optimistic about reaching consensus.
• Cash Needs: Operating cash burn in 2019 was $27.6 million, with expectations to exceed this amount in 2020 due to increased R&D activities. Financing strategies are under discussion.

Overall, while Second Sight has made progress in R&D and regulatory approvals, it faces significant challenges in sales performance, regulatory delays, and cash management as it moves forward.