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| EX-99.1 - PRESS RELEASE - SANUWAVE Health, Inc. | sanu_ex991.htm |
| 8-K - CURRENT REPORT - SANUWAVE Health, Inc. | sanu_8k.htm |
Exhibit 99.2
SANUWAVE HEALTH, INC.
CONFERENCE CALL TO DISCUSS 2017 FINANCIAL
RESULTS AND PROVIDE A BUSINESS UPDATE
Thursday, March 29, 2018
9:00 a.m. Eastern Time
Operator
Good
day, ladies and gentlemen. Welcome to the SANUWAVE 2017 Annual
Earnings call. All lines have been placed on a listen-only mode.
[Operator instructions.]
At this
time, it is my pleasure to turn the floor over to Lisa Sundstrom.
Ma’am, the floor is yours.
Lisa Sundstrom – Chief Financial Officer
Thank
you, and good morning. We appreciate your interest in SANUWAVE and
in today’s call. SANUWAVE will now provide an update of our
most recent activities as well as our 2017 annual financial
results. Our annual report on Form 10-K will be filed with the SEC
later today, March 29, 2018. If you would like to be added to the
Company’s distribution list, please call SANUWAVE at
770-419-7525 or go to the Investor Relations section of our website
at www.sanuwave.com.
Before
we begin, I would like to caution that comments made during this
conference call by management will contain forward-looking
statements that involve risks and uncertainties regarding the
operations and future results of SANUWAVE. We encourage you to
review the Company’s filings with the Securities and Exchange
Commission, including without limitation our Forms 10-K and 10-Q
which identify specific factors that may cause actual results or
events to differ materially from those described in the
forward-looking statements. Furthermore, the content of this
conference call contains time-sensitive information that is
accurate only as of the date of the live broadcast, March 29, 2018.
SANUWAVE undertakes no obligation to revise or update any
statements to reflect events or circumstances after the date of
this conference call.
With
that said, I’d like to turn the call over to our Chairman of
the Board, Kevin Richardson. Kevin.
Kevin Richardson – Chairman and Chief Executive
Officer
Thanks,
Lisa. Thank you, everyone, for joining our call today. We last
updated in early January after receiving notification from the FDA
about our de novo approval
for the dermaPACE system in treating diabetic foot ulcers. This
update is to review the Q4 2017 results and 2017 as a whole and
will provide some direction on our plans for 2018 specifically
around our expected rollout of the dermaPACE system. As normal, we
do not plan to provide any financial guidance.
Let me
start with our stated goal which is to ultimately place a dermaPACE
device anywhere and everywhere a DFU is treated and eventually any
advanced wound. I’m going to pause for a second and let that
sink in. The market is vast and unfortunately growing, both
domestically and internationally. The number of locations in the US
where DFUs are treated is greater than 10,000. To implement this
goal, we will need to follow a playbook that other successful wound
companies have implemented.
We have
to make the patient happy with the outcomes, the payer happy with
the cost of the treatment, the doctors happy with how they’re
compensated, but more importantly with the results. The approval is
the first step needed to implement the plan. We will discuss in
detail today and over the next conference calls how we will execute
and how we are progressing against that plan.
We are
excited with the opportunity ahead of us and believe this
technology will make a dramatic impact on the lives of millions of
people worldwide. Let’s quickly review the highlights of 2017
before I turn the call over to the team where Lisa will review our
financials; Pete will review the FDA and operations and touch on
clinical work about to commence; Iulian will discuss R&D,
patents, and spend a moment discussing our successful symposium in
December; and Andre will discuss the results for 2017 on the
international front, and importantly what we look for in
2018.
We
obviously received de novo
clearance from the FDA December 28, 2017 for use of dermaPACE
system in treating DFUs. This was our big event, but we also signed
a Brazilian joint venture with MundiMed worth north of $25 million
in net present value during the fourth quarter of
2017.
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We
expanded our international footprint from 9 countries to 14
countries in 2017. We added an experienced international healthcare
expert to the Board of Directors in Britt Kaltoft. We added senior
military doctor, Col. Pat Sesto, to the Science Advisory Board. We
hosted our annual symposium in December with over 20
representatives from 5 countries. We were also awarded three
additional patents.
We
launched numerous international clinical studies to support growth.
These studies have been and are beginning to be published, and
you’ll see more in 2018. They’ll be featured at various
conferences we attend.
We also
presented at MEDICA and other medical conferences. We launched the
“Shock This” blog, which garnered tremendous industry
response. In 2017 its focus was education of the shockwave. I will
come back at the end to discuss some of the plans for
2018.
With
that, let me turn it back to Lisa to review the
financials.
Lisa Sundstrom – Chief Financial Officer
Thank
you, Kevin. Revenues for 2017 were $739,000, a decrease of $638,000
or 46% from the prior year. Our revenues resulted primarily from
sales in Europe, Asia, and Asia-Pacific of our orthoPACE devices
and related applicators and the upfront distribution fee from our
Brazilian distribution agreement with MundiMed. The decrease in
revenue for 2017 was primarily due to a decrease in sales of
orthoPACE devices in Asia-Pacific and the European community as
compared to the prior year as well as lower sales of new and
refurbished applicators.
Research and
development expenses for 2017 were $1.3 million, an increase of
$164,000 or 15% from the prior year. Research and development
expenses include the costs associated with the dermaPACE submission
to the FDA, which incurred costs related to the responses to
questions from the FDA, including the hiring of an independent
consultant to perform software updates. In addition, medical device
and separate technical audits were performed related to our ISO
certification in 2017.
General
and administrative expenses for 2017 were $3 million, an increase
of $331,000 or 12% from the prior year. The increase in general and
administrative expenses in 2017 as compared to 2016 was due to an
increase in board of director’s fees related to adding a
member to the board, costs associated with the symposium hosted in
December 2017, increased costs associated with investor relations
consultants, and increased non-cash stock based compensation
related to stock options and stock warrants issued to employees in
2017.
Net
loss for 2017 was $5.5 million or ($0.04) per share, compared with
a net loss of $6.4 million or ($0.06) per share in 2016, a decrease
in the net loss of $901,000 or 14%. The decrease in the net loss
was primarily a result of the decreased loss in the warrant
valuation that is partially offset by an increase in the operating
expenses in 2017 which I just discussed.
Looking
at cash flows, as of December 31, 2017, we had cash on hand of
$730,000, compared with $134,000 at December 31, 2016. Net cash
used by operating activities was $1.5 million for 2017, compared
with $3.2 million for 2016. The decrease for 2017 in cash used for
operations was primarily due to an increase in accounts receivable,
accounts payable, and accrued expenses.
We
continue to project that our cash run rate from operations will be
approximately $150,000 to $225,000 per month in 2018 as we continue
to expand our international markets, prepare for the
commercialization of dermaPACE including hiring of new employees,
and continue research and development of non-medical uses of our
technology.
Now,
let me turn the call to Pete Stegagno for FDA and operations
updates.
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Pete Stegagno – Vice President, Operations
Thank
you, Lisa. Good morning, everyone. In July 2007, SANUWAVE enrolled
the first patients in the dermaPACE clinical trial for the
treatment of diabetic foot ulcers, or DFUs. Little did we envision
that it would take 336 subjects and enrolled across two trials, a
PMA submission, and finally a de
novo petition to the FDA that would spread across ten
years.
As
Kevin said, the FDA issued their affirmative decision on the
de novo allowing SANUWAVE
to market the dermaPACE system for the treatment of DFUs in the US
as a Class II device. When I recount the scientists’ journey
to friends and colleagues one of the most asked questions is,
“Why did you stay?” The answer’s simple, everyone
here at SANUWAVE believes in the product and its ability to manage
and heal difficult to treat wounds.
We all
feel this device is a game changer in the wound care market. It
took ten years to get here, so now our work is even more urgent to
bring this device to market and to begin influencing the quality of
life for millions of people afflicted with diabetic foot
ulcers.
Our
immediate goal is to bring the dermaPACE system to market in a
carefully planned and thought out manner covering all aspects
including targeted initial rollout, product positioning,
reimbursement, further clinical proof of effectiveness in treating
DFUs, expanding indications and claims, and listening to the
customer for product improvement.
We’re excited
about our clinical pipeline which is being designed to support
growth of the DFU claim and expanded indications. We expect to
begin enrolling patients in Q2 into a case study series designed to
bolster our claims for dermaPACE and its mechanism of action. We
are working with key opinion leaders, or KOLs, here in the US and
abroad to develop initial investigations in pairing dermaPACE with
other products to validate our expectations about the use of
dermaPACE in conjunction with other modalities can further improve
the ability to manage and heal wounds. We’re also looking at
performance studies to compare effectiveness of dermaPACE with
other modalities already in the wound care arena.
Late
last year a group of Australian researchers published a paper
describing their work and results in using dermaPACE to treat
venous leg ulcers, or VLUs. This case study series described
promising results in using dermaPACE with these wounds, and the
group was excited to further the work they’ve
started.
We
expect to kick off a significant clinical trial in treating VLUs by
early 2019. In the meantime, we’ll continue our preliminary
work towards this end.
Using
the published paper from Australia as impetus, we have challenged
our international distributors to become more involved in pushing
for further research and clinical work and publications. This is
beginning to manifest into productive work, whereby, there will be
four presentations by our KOLs at the upcoming European Wound
Management Association show in Krakow in May, which Iulian will get
more into detail later.
We have
at least two sets of investigations planned for Canada to begin in
the next few months, and we’re expecting two papers out of
South Korea very shortly describing work in the DFU area in that
country.
Operationally,
we’re in very good shape in being able to meet short and
long-term production capabilities. The personnel and infrastructure
needs are continually being identified and addressed. We feel we
are in great shape to meet the challenges coming our way in this
year and into the future.
With
that, I’ll turn it over to Iulian Cioanta to discuss research
and development. Iulian.
Iulian Cioanta – Vice President, Research and
Development
Thank
you, Pete. Good morning, everyone. In the year 2017 we continued to
reinforce our patent portfolio and trademarks. The number of
patents and patent applications extended from 64 to 68 with three
new US patents being issued in 2017 as follows:
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US
patent 9,522,011 titled “Shock Wave Applicator with Movable
Electrode.”
US
patent 9,566,209 titled “Shock Wave Electrodes with Fluid
Holes.”
US
patent 9,840,313 titled “Cleaning and Grooming Water
Submerged Structures Using Acoustic Pressure Shock
Waves.”
The
newly issued patents and patent applications are reinforcing the
protection of our new designs for the medical field and new
indications for the shockwave technology. In 2017 we also renewed
our SANUWAVE PACE, which means pulsed acoustic cellular expression,
and dermaPACE trademarks in the US and numerous countries all over
the world.
Many
misconceptions still exist in the medical community about what a
shockwave is and is not. This is why education of the patients,
healthcare professionals, and clinicians on focused shockwave
technology was one of the key activities for us in 2017. For that,
we launched the blog, “Shock This”, that reached a
broad audience and has gotten a tremendous industry
response.
In six
separate blogs, we explained what focused shockwaves are, how they
operate, and how they significantly differentiate from ultrasound,
radial pressure waves, and unfocused pressure waves. In 2018, we
already posted a new blog which is part of a series of blogs with
interviews with pioneers and influential personalities who have had
significant contributions in advancing shockwave technology in the
medical field. Also, we will continue to put differences in between
focused shockwaves and other technologies that use energy in
medical treatments.
As
Kevin said, in December 2017 we culminated our educational
activities by organizing a clinical and science symposium on
advanced wound care with over 20 representatives from the US and 5
countries from 4 different continents. Our distinguished guest
speakers were Dr. Maria Siemionow and Dr. Ching-Jen
Wang.
Dr.
Maria Siemionow is a Polish transplant surgeon and scientist who
performed the world’s first near total facial transplant
successfully at Cleveland Clinic. She presented at the symposium
for research regarding the use of dermaPACE system for improving
microcirculation which can be a key factor in chronic wound
healing. Among numerous awards, Dr. Siemionow is the recipient of
the Commander’s Cross Polonia Restituta award given by the
President of Poland in 2009. In 2014, she received the Great
Immigrants award from the Carnegie Foundation of New York. Dr.
Siemionow is now affiliated with the University of Illinois of
Chicago College of Medicine as a Professor of Orthopedic Surgery
and Director of Microsurgery Research.
Dr.
Ching-Jen Wang is the worldwide distinguished researcher in medical
applications for extracorporeal shockwaves. From 1997 to present,
Dr. Wang is Professor of Orthopedic Surgery at Chang Gung
University College of Medicine and Chang Gung Memorial Hospital in
Taiwan. He was the former president of the International Society of
Musculoskeletal Shockwave Therapy, or ISMST, which is one of the
conferences where the shockwave research is presented. He is
practically one of the gurus in the shockwave medical field. Dr.
Wang presented at the symposium. His research resulted in
shockwaves which are considered the foundation for numerous
applications of shockwaves in the medical field and wound care,
cartilage, regeneration, and a combination of shockwave with stem
cells to name a few.
Overall, the
symposium offered the opportunity to have constructive discussions
about the research and the future of shockwave technology and also
in laying the foundation for the national and international
collaboration and expansion of shockwave technology in new
countries all over the world.
Globally speaking
from the science and technology point of view, in 2018 we are
dedicated to continuing our educational effort and to improve our
product platforms and implement these changes over time in a
methodical basis. The promotion and exposure of our product and
technology will be done by participating as distributors at the
Symposium on Advanced Wound Care, SAWC, in the spring and fall; at
European Wound Management Association, EWMA Conference in Krakow,
Poland; at the American Professional Wound Care Association
Conference in Baltimore; and the Canadian Association of Wound Care
Conference, just to name a few of them.
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I will
now turn the discussion to Andre Mouton for the update on the
international markets. Andre.
Andre Mouton – Vice President, International Sales and
Relations
Thanks,
Iulian. Good morning, everyone. So, 2017 was a very positive year
with interest in our products but also very frustrating with
governance and changed legislation in different countries. We have
seen an increase of five more countries during the year. This will
be surpassed this year given the interest we see from Southeast
Asia as well as the focused wound care rollout.
We
expect placement of units in at least four countries by the end of
second quarter. We increased the focus in Europe towards wounds
where we traditionally had an orthopedic focus by our distributors.
We’re all prepared to reeducate our distributors within the
wound arena to ensure we spread the correct unified message on
dermaPACE.
Internationally,
the big event in 2017 was signing Brazil. The MundiMed team is
fantastic. They have been interacting with our team constantly and
all plans remain on track for a successful rollout during 2018.
This also helped us with designing and getting comfortable with our
joint venture structure which includes upfront payments as we
approach the bigger identified markets.
We have
identified and finalized relationships with more distributors in
Europe. This company’s all have a track record in wound care
and already have access to the key opinion leaders and established
relationships within the wound management market. Germany, Austria,
UK, and the Nordic countries will be added to our country
distribution list. The relationship these distributors have with
KOLs will also enable us to explore further studies and poster
participation from them.
These
companies are also working closely with our team to ensure we
overcome the barriers of entry and not to get involved with price
wars with established players over there. The issuance of free
trade certificates per country is going slower than normal due to
some backlogs in the Europe administrative process. This has a
knock-on effect with our Asia and Southeast Asia markets. Once
completed, we shall have both indications registered in Taiwan,
Indonesia, and Thailand. Wound registration only now will be for
Singapore, Hong Kong, Malaysia, Cambodia, and Vietnam.
We have
engaged in this clinical relationship which will lead to further
opportunities from Mexico, South America excluding Brazil, Costa
Rica, and the Middle East. We are finalizing relationships with
potential introducers for India, Pakistan, and China. These big
markets will be similar to Brazil where shall have a joint venture
with an upfront payment to our company.
Our
exposure in Canada is growing by the day. It’s also enhanced
our medical approach and communication with direct caregivers. We
registered orthopedic indication as well and two different groups
will handle the dermaPACE and orthoPACE device distribution.
We’ll also engage more directly with identified key opinion
leaders and work with them for market access and faster potential
placement of our units.
Our
strongest markets are still Italy and Korea. The success is mostly
due to the drive from professionals to distributors and to
personnel. We are keen to foster this same vision with our new
distributors to ensure more success for this year. The foundations
have been laid in 2017 and there definitely will bear fruit in
2018.
That
being said, I will turn the discussion back to Kevin for his
concluding remarks.
Kevin Richardson– Chairman and Chief Executive
Officer
Thank
you, Andre. As we’ve said in the past, this has been a long
journey, but we have stayed true to the technology that can and
will impact millions of lives. The team and the investors are all
owed a debt of gratitude for sticking with this company during the
darkest hours, but now we are prepared to reap the benefits of this
long struggle.
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When I
was a senior partner at Blum Capital, we were involved in a similar
wound company, Kinetic Concepts, KCI. KCI felt that they had an
innovative wound product called the V.A.C, basically a vacuum on
the wound, but were heavily levered and had to fight their lenders
tooth and nail to continue down the path to get their product to
market. Ultimately, the product went from minimal revenue to $500
million in just five years.
I share
this story, because SANUWAVE today shares many similarities with
that path KCI took to success. dermaPACE is an innovative product.
The V.AC. was innovative. dermaPACE started with one indication.
The V.A.C. started with one indication. dermaPACE started with a
510(k). The V.A.C. started with a 510(k). What we plan to do is
follow that playbook that KCI did so that we can have similar
success as we move forward in the wound care market.
Our
stated goal is to deliver a dermaPACE system to every location that
is treating a DFU. If we can achieve this goal by delivering value
to the practitioners, payers, and patients, then we too can see the
rapid adoption that occurred for Kinetic Concepts. To do so,
we’ll need to execute implementation of the following
plan:
Develop
relationships with key opinion leaders as we expand our clinical
work;
Have
the proper equipment financing in place;
Select
the right partners to manage the various channels;
Continuing
extensive clinical work to support the gold standard study that was
part of the FDA approval process;
Extend
the number of wound indications beyond DFU;
Add
more wound experience to the board and science advisor
level;
Hire
the right driven people in several key positions;
Attend
the various conferences to build the brand;
Develop
a service-driven culture that can meet the need of the
practitioners, payers, and patients; Develop more JV relations like
the Brazil MundiMed deal; and
Collaborate with
all the partners internationally.
The
task ahead is daunting yet exciting. The key mantra around the
office has been and will continue to be FOCUS. It is easy to get
distracted with other opportunities in various indications, but
right now the goal we have set for 2018 is to establish the
infrastructure and business model to repeat what other successful
and sound companies have achieved before us.
As we
progress through 2018, you should expect to see revenue growth
accelerate throughout the year with the first quarter being up at
least 100%. I am sure they’ll be lots of questions, and in
full transparency, we’ll try to answer everything we can. So
why don’t we just turn it over to Q&A.
Operator
Thank
you. We will now be conducting a question and answer session. In
the interest of time, we ask that you please limit yourself to one
question, one follow-up, and re-queue for any additional questions.
[Operate instructions.] Our first question comes from the line of
Brian Marks with Zacks Investment Research. Please proceed with
your question.
Q: Good morning, guys. Kevin, you walked
through a sizable list of milestones that you hope to hit to
eventually be successful, and I understand it’s really early
on in the process. So you may not have much in the way of specifics
or details in terms of what you’re going to do to hit those
milestones, but just kind of wondering where you are today with
implementing the US strategy. Then, what are the first sort of
specific steps that you’ll do to implement that I
guess?
Kevin Richardson – Chairman and CEO
Sure.
You know we’re less than 90 days in, so we have the approval,
well I guess 91, 90 days ago. We’re still new in the game
here, but I think relative to implementation, I laid out a few of
the things that we needed to do. First was getting the right
financing in place. So with NFS, we got the right equipment
financing in place so that we can expand to 100 devices up to
1,000.
The
next piece was finding the right partners from a channel management
standpoint, and we recently announced the Premier Shockwave
agreement and shipped our first order. So, I’d actually say
that we’re kind of implementing the plan, and we’re
executing already on a lot of this. I think we’ll see that in
the first quarter where we said we’ll have revenue up over
100%. So we’re starting on that.
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What I
think the things that are going to be challenges are bringing on
people as fast as we can, but they have to be the right people. So
we’ve been interviewing at different senior levels because
the team of eight, we were all stretched as it was, and to
implement something if your goal is to be in 10,000 locations, I
think it’s important that we think about this to get in one
machine at a time, one step at a time. Because each time you place
a device, you need to train, you have to execute against that, you
have to install, and you have to educate, so there’s work
behind it that we’re going to need to do.
So
you’ll see us announce hirings probably in the second quarter
that are pretty extensive, additional science advisors. Pete
alluded to some of the KOL work that we’re doing on the
clinical side. That’s all to support it, because when
you’re in front of a wound care doctor, he’s going to
look at the science. He’s going to look at what clinical
trials, what KOLs do you have on board, because it’s an
innovative product. This isn’t, I hate to say it, it’s
not the 16th negative pressure
wound therapy product, it’s not the 61st extracellular
matrix company, it’s not the 85th band aid company on
the market. We’re leading with innovation, and so
there’s an educational curve that we have to
follow.
So I
think those are the things I’d be looking for from us. Are we
hiring the right people, are we bringing them on, where are we
placing the devices in the studies, where are we placing the
devices in the different channels. I think you’ll see us
probably over the next quarter or so start to place the US outside
of the VA market with different locations.
The big
push for us as we head into the summer and the back half of next
year where we’ll hopefully have those people in place so that
when we hit a lot of the opportunities with the late summer, fall
conferences we’re something to be reckoned with. It’s
really kicking off at UWMA in May for Europe. We have four podium
presentations. I mean that’s about, it’s four more than
we’ve ever had, but it’s about two more than most
companies get. And we have a really big backlog of clinicians who
want to meet with us, so I feel very positive about things going on
in Europe. We just have to parlay that into the US. I don’t
think they’ll be any drought of clinical work coming our way
over the next year to 18 months, which will help support the
growth.
I
don’t know if that answers everything, Brian. I mean
that’s kind of what we’re trying to lay out, but I
would start to see, we’ve laid the ground work. We’re
kind of following our plan and kind of picking it off one by one,
but we needed the equipment financing in first. So that was a very
important milestone for us.
Q: Yes. It does help, Kevin. I very much
appreciate it. So in terms of, you alluded to a potential US sales
force. I assume that you may have, just with your background and
the location that SANUWAVE is in, that you may have some
opportunity to pick up resumes from KCI.
Kevin Richardson – Chairman and CEO
Yes, we
have, I mean so as far as, we’ve been, the biggest search
we’re underway right now is for someone to lead the wound
care team. In that, we’re very fortunate in that within 20
miles of our headquarters there’s MiMedx. They’ve been
an unbelievably great success story in the wound care space over
the last five years.
There’s
Molnlycke [ph] US headquarters, they’re probably the number
three global wound care company, and they’re down the street
from us. Halyard [ph] another big company, and so we’ve been,
since December 28th we have been
inundated with resumes coming in wanting to join the sales force,
wanting to join in the medical side, the R&D side. So we just
have to sort through a lot of it. We brought on a new employee two
weeks ago to be our HR Director just because we’re dealing
with rapid growth and have an influx of people trying to join on to
this.
They
see the opportunity. I mean that’s the one thing, the team
went around and met with a bunch of KOLs a week ago across the US,
two weeks ago. The response we got was you know fantastic.
They’ve been waiting for this product for a long time. They
know where and how it can be used to help heal wounds, and
they’re excited to get it in their clinics so they can start
using it. So it’s just been a very exciting time down in
Georgia.
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Q: Okay. Thanks. I’ll jump in the
queue.
Kevin Richardson – Chairman and CEO
Great.
Thank you.
Operator
Thank
you. Our next question comes from Deepak Khanna with Vulcan
Capital. Please proceed with your question.
Q: Good morning. Kevin and team, thanks
for the update. As you look at launch in the US I was trying to get
some more color on the reimbursement scenario that could play out
over the next two to three quarters in the US specifically. Then
secondly, can you just give us an update on the VA launch as to
where it is and the timeline on it. Thank you.
Kevin Richardson – Chairman and CEO
Sure.
Thanks, Deepak. I’ll start with the VA launch. We’ve
sent our initial shipments off to Premier Shockwave. They received
those shipments. They’re beginning to place the devices. I
was fortunate to be with them in Nashville recently at the Foot and
Ankle Surgeon Conference and there was a lot of interest. We had
two fascinating dinners with, and the focus of the dinners were
with military base doctors. Just again, a lot of positive
response.
The
benefit we’ve had with Premier is that they’ve already
laid a lot of the ground work in educating the military bases and
the VA in using shockwave. They use an old device of ours called
the OssaTron to treat plantar fasciitis and have kind of the, I
don’t want to say the landscape laid out, but they understand
who the players are, who the right connections are. They’re
well connected in that community, so we expect to have fairly rapid
growth over this year. Then, we’ll begin receiving revenue on
a per treatment basis as treatments begin to ramp.
Once we
can see how many times it’s being used a day, we’ll
share that information with people. There’s some expectation,
and I’m going to be really broad here, it could be as little
as twice a day, it could be five times a day. We really just
aren’t sure. I think that’s part of the educational
curve that Premier and then ultimately SANUWAVE will have to do
with the practitioners so that they can understand where and how to
use it, how often to use it, where to place it. So we’re
actually feeling pretty good about that.
I’d expect
that under their agreement they have a minimum order size over the,
I think it’s a two or three-year period, but I’m
anticipating that the initial Q2 rollout is making sure
everything’s working, make sure they get all their bugs out
meaning on the educational and training side. Then I’d expect
that you’re going to see a much more rapid increase as they
bring on some new sales people and service technicians to follow.
So that’s with regard to Premier and the VA
side.
With
regard to reimbursement, our strategy is really to work with some
of the regional coverage areas where there is a need for our
product, so it’s kind of a regional map strategy. We’ve
engaged a consulting group to work with us on bringing that to
market. We feel that our product is comparable to other products
that are being reimbursed in the $6,000, $8,000, $12,000 per wound
category. So we’re really trying to build a case where we can
show the payers that what we do will help affect their change in
the wound management, and it will be quite frankly less expensive
than necessarily going to a hyperbaric chamber.
So we
have a lot of work to do over the next, I’d call it few
months with the goal of having everything pinned together
mid-summer, late summer so that we can begin a heavy push after
that. Again, we’re taking the same approach that KCI took.
You pick one area, focus on that region, as you get that region
figured out, then you roll it out nationally and can really hit the
accelerator button.
For us,
a lot of it is around the economics of what we do and what we bring
to the wound. I would expect us to focus on wounds that are what
I’d call more advanced or harder to heal as a place to start,
because that’s where the payers are going to be a little more
open minded to trying something like us, an FDA approved device
that’s new. So we’ll try to use that four to six week
marker where if a wound hasn’t shown any improvement on
standard of care that’s when they’re going to make a
decision, okay do we go to the V.A.C. negative pressure wound
therapy. Do we go to hyperbaric, do we go to skin grafts
surgically? So that’s a big decision point within wound
centers is around that four to six week marker. We’re going
to try to wedge ourselves right in there as an alternative to the
very expensive strategies that are out there today.
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Q: Great. Thank you.
Kevin Richardson – Chairman and CEO
Thanks,
Deepak.
Operator
Thank
you. Our next question comes from James Terwilliger with Paulson
Investment Company. Please proceed with your question.
Q: Hi, guys. Can you hear
me?
Kevin Richardson – Chairman and CEO
Yes.
Q: Congratulations on your recent
success. It’s only been 90 days since approval and a lot has
happened in terms of, I don’t want to say the launch, because
I don’t even know if we’ve launched officially, but a
lot has happened in 90 days. Usually in my experience when a
company gets regulatory approval like you did, there’s kind
of a three to six months lull before we actually have the type of
announcements that you’ve been putting out. So
congratulations to you and your team for being well-prepared.
You’re at the top of the first inning. I think baseball
season is starting pretty soon, and the way I view your company,
you’re at the top of the first inning.
If
there’s a surprise for me in the press release, and a lot of
my questions have been answered, it’s really the comment here
about adding the international clients or distributors with two
being similar to Brazil. I thought the Brazil announcement was a
significant announcement a couple months ago concerning the size of
the announcement, and I think that’s from the press release
what has caught my eye is the opportunity to have two more deals
similar to Brazil. So my question is can you give me an update on
Brazil in terms of the implementation and how that’s going,
any color there.
Then,
secondly, any additional information concerning that couple
sentences in the press release about two other opportunities that
could have the size that Brazil did. Thank you.
Kevin Richardson – Chairman and CEO
Sure.
Thanks, James. I appreciate it. On Brazil, the update is the
processes that we’re waiting for and Visa approval, so
similar to an FDA, but it should go a lot faster and smoother.
We’re anticipating that later this year. We’ve trained
their initial KOLs, so we’ll begin a shipment probably June,
July timeframe of two devices that they’ll start to use for
case study work ahead of the launch.
Again,
when we try to enter a new country, we try to identify some key
opinion leaders in those countries who can begin case work. That
way when the launch comes, call it three, six months later, you can
get the superstar up on stage or at a dinner and talk about their
experience working with the device. We’ve just found
that’s the model that works really well for us. So
that’s kind of where we’re at with Brazil.
I mean
we talk constantly, and the relationship is great. They’ve
been doing a super job with us, so we expect everything for 2018 to
be on track. They’ve been making their milestone payments
every month, so everything there has been good.
I’d say the
two new potential ones, one’s smaller and one’s bigger.
We have a pipeline after that that we have not begun discussions
with. Andre and I can only fly so many places. So these are usually
in person, full due diligence sessions for multiple days. They tend
to come to visit and look at, in the case of Brazil, they went to
visit Italy, Switzerland, and Georgia. These are pretty extensive.
When people are coming out pocket millions of dollars, they tend to
want to make sure they know what they’re buying so it’s
a process.
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I would
expect later this, it could be Q2, it might Q3, but it’s in
that timeframe for both of the ones that we have our eyes on right
now. There’s a pipeline beyond that that’s probably
deeper, but I don’t feel as confident that we’ll have
certain closure on those this year. I think some might slide to
next year. We’re hopeful we can get them all this
year.
I mean
it would be great to get them all on board, but when we enter a
joint venture, we do it in a way where we get an upfront payment,
and then we split profits 50/50. The partner gets their payment to
us back first. So that’s kind of like a preferred return that
they get, but because they’re putting up a lot of money,
they’re incented to get the profitability as fast as they can
with machine and device placements.
So we
have a model that works and now it’s just a matter of rolling
it out country by country. And I’d expect some more, other
countries as we enter too, so it’s not just the big joint
ventures. Some of them are really sizeable, but we’ve been
really reluctant to start down that path yet until we have one or
two more of these under our belt. When I say big, think everything
by population, and then you can multiply by 10% to 15% diabetic and
then 10% to 15% diabetic foot, so that’s a rough way of
getting at how many diabetic foot ulcers there are on a country by
country basis.
Q: No, thank you. It’s hard to
have that type of international visibility, so I understand why you
don’t want to get too bogged down in terms of guidance, but
at the same time Q2 and Q3 is right around the corner. I look
forward to those, hopefully those announcements. Thanks, guys. Ill
jump back in queue. Thank you.
Kevin Richardson – Chairman and CEO
Great.
Thank you.
Operator
Thank
you. [Operator instructions.] Our next question comes from the line
of Terry Thompson, who’s a private investor. Please proceed
with your question.
Q: Kevin, congratulations. You answered
my first question. I wanted some more in-depth color on your
Premier Shockwave, but as a follow-up to that, I’m wondering
being in the VA, the Indian Health Services, and the military base
market, does that help you in acceptance and other clinical
environments?
Kevin Richardson – Chairman and CEO
Absolutely. I think
that’s part of the strategy is that they’re going to do
a lot of it. We have to do good clinical work on the VA side which
we’ll share, so one of the things the profusion study that
Pete alluded to, we’ll make sure we have two leads on that,
one’s a VA, one isn’t. We’ll bring in a third VA
to help build up the numbers in the phase two of that. So yes, it
helps, everywhere helps. It’s getting the right KOLs, doing
the right clinical work, and then the clinical work has to support
what we’re claiming we can do we can do, but more importantly
how do we position ourselves within healing of a
wound.
The FDA
is very hung up on wound closure, but if you go to a wound clinic,
it’s more about wound management. If you’re talking to
the payers, it’s about how are they managing the quality of
life. So those are different equations, and luckily, we play well
for all of that. I think we’re going to have a lot of success
in the VA, and as we do we’ll share that with
others.
I think
it’s a great first step for us.
Q: Fantastic, and congratulations.
I’m really excited.
Kevin Richardson – Chairman and CEO
Thank
you.
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Q: I’m increasing my holdings, so
I plan to continue, and I’ll jump back in queue. Thank you,
Kevin.
Kevin Richardson – Chairman and CEO
Great.
Thanks, Terry.
Operator
Thank
you. Our next question is a follow-up from Brian Marks with Zacks
Investment Research. Please proceed with your
question.
Q: Hi. Thanks, Kevin. You referenced Q1
sales, and I think you mentioned that you expected something like
100% growth. Is any of that expected to be in the US?
Kevin Richardson – Chairman and CEO
Yes.
Having those, the answer is yes. We have some in Italy. Our normal
kind of refurbishment work we’re doing, the payments from
Brazil, but also we launched the Premier contract and started
shipping devices. So we’ll be seeing some of that in Q1, and
Q2 we’ll follow that on with hopefully more shipments to
Premier and hopefully more international stuff that Andre alluded
to and other US activity picking up as well in North America. Andre
alluded to Canada, but Canada is I think going to be a very nice
surprise for us this year.
Q: Then, Kevin, on the US strategy
relative to the use of KOLs, if you can remind how many sites
participated in your two US dermaPACE studies, and will any of
those sites also be leveraged with the initial KOL focused
commercial rollout?
Kevin Richardson – Chairman and CEO
So the
sites that we had in our studies were fantastic. I mean
they’re kind of the who’s who. The team did, and this
is prior to my involvement at the management level, but they did a
great job recruiting some it’s kind of like an all-star team.
If you had to pick out of your top 50 wound care docs in the
country, we got 33 of them in our trial. So it was really fantastic
having them. And then going back out to them a lot of them were
like “Yeah, I’ve been waiting for you guys, thank god
you’re back, when can I get a device, how can I help.”
So a lot of the KOLs are already embracing it.
In the
second quarter, we’ll probably have five or six devices out
to some of the KOLs working on different clinical work and case
work. Again, we’re leveraging the relationships we have. The
team has done a good job maintaining those relationships despite
not having the FDA approval on the product, so we’ve been
communicating. It’s been, again, in business a lot of
it’s block and tackle, but it’s been making sure we
stay in touch with them, update them, good or bad keep them updated
on what we’re doing. Even when we had any setback it’s
to let them know here’s what’s going on, and then when
you get in front of them like we did two weeks ago, they’re
excited as anything to get a product and start working on some
things.
Some of
the ideas that are coming out of our KOLs on work they want to do
and explore with, they’re I don’t want to say cutting
edge, but they’re really forward thinking. One of them is
with a doctor that’s looking at a post-closure protocol that
would, so when a wound closes with an amniotic or with a graft, a
lot of times the wound appears to be closed with the
epithelialization, but underneath it it’s still a wound. When
you look at it using some of the medical imaging technologies,
you’ll see that there’s an underlying wound even though
the skin is closed.
Recurrence in wound
care is a big, big issue, and his study he wants to pursue is how
do we do this as a post-closure treatment which is again a market
that we’ve never even really thought of. But he’s
thinking about it as if you’re a diabetic foot ulcer patient
and you have the propensity to have diabetic foot ulcers,
let’s treat your foot every six months. Kind of like a
booster shot, almost like going and getting your teeth cleaned that
type of thinking.
I mean
that again would increase usage for us dramatically, but we have to
do the right clinical work with the right facility with the right
KOL, and that’s what we’re putting in place today.
We’re hoping that the results show what we theorize they
will, and then you can bring it to the payer community and say by
doing the dental visit equation here, we can keep it from turning
into something really nasty and really expensive later. So a lot of
forward-thinking ideas coming from our KOL community. It’s
really exciting to hear their thoughts and ideas.
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Q: It’s really encouraging from
the outside perspective to hear already what sounds like some real
significant initial interest. So, great. Thanks, and I appreciate
the answers.
Kevin Richardson – Chairman and CEO
Thank,
Brian.
Operator
Thank
you. Our next question is a follow-up from Terry Thompson,
who’s a private investor. Please proceed with your
question.
Q: Yes, Kevin, my next question concerns
financing. The $1 million line that you have with NSF Leasing, do
you anticipate that being enough, or do you anticipate having to go
back to the well? If you do have to go back to the well, are we
going to be looking at debt or god forbid dilution?
Kevin Richardson – Chairman and CEO
Terry,
I mean great questions. NSF is a great partner. They’ve had
experience in medical equipment, and they understand as we grow,
they’ll grow with us. It’s a very good dialogue that we
have, and I think if we presented them, if we got through our
initial line, we’ve had conversations about expanding it so
that we can handle growth on that line to $5 million or $10 million
if we needed to over time, but right now it’s about focus,
it’s about one device at a time, it’s kind of taking
one step at a time. So I really don’t want to get ahead of
myself there.
As far
as financing goes, some of these international joint venture deals
come with an upfront payment, so we’re pushing very
aggressively to bring those in to help as far as our growth capital
that will be required. I will also, we have an asset on the balance
sheet that comes due within the next 12 months that could bring in
$7 million to $7.5 million. And we’re using that creatively
to figure out ways to maybe either bring in that money sooner, work
with someone and use that as a way to out finance the growth that
we’re seeing right now.
So I
think there a number of alternatives that we can look at, but
Terry, we’re always, as a small company in hypergrowth mode,
we have to be open to what’s ahead of us. Right now,
we’re focused on getting devices out every day, getting them
trained, and getting them used. So we’ll figure out the
capital thing as we move along, but right now we’re in fairly
good shape.
Q: Great. Well that sounds very
promising. Thank you again. I’ll be watching.
Kevin Richardson – Chairman and CEO
Operator
There
are no further questions at this time. I would like to turn the
call back over to Kevin Richardson for any closing
remarks.
Kevin Richardson – Chairman and CEO
Great.
Thank you, Michelle. I appreciate it. I appreciate everyone’s
time. If you have any follow ups or any questions, please contact
us. We’ll try to answer it as best we can.
We’ll be out
at a few industry conferences this year. We may attend a few
investor conferences, and if you want to get together, please let
us know. As always with shareholders, if you want to come down to
Suwanee and meet with the company, also feel free to contact us to
do that. We’ve have some investors over the last few months
come by, get to see the product, get to see the team, and
we’d encourage that if people want to do that.
With
that, I’ll finish. Thanks very much. Have a great
day.
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