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| EX-99.1 - PRESS RELEASE - SANUWAVE Health, Inc. | snwv_ex991.htm |
| 8-K - CURRENT REPORT - SANUWAVE Health, Inc. | snwv_8k.htm |
Exhibit 99.2
SANUWAVE HEALTH, INC.
CONFERENCE CALL TO DISCUSS FIRST QUARTER 2018
FINANCIAL RESULTS AND PROVIDE A BUSINESS UPDATE
Wednesday, May 16, 2018
9:00 a.m. Eastern Time
Operator
Greetings, and
welcome to the SANUWAVE Health, Incorporated First Quarter
Financial Results and Business Update Conference Call. At this
time, all participants are in a listen-only mode. A
question-and-answer session will follow the formal presentation
[Operator instructions]. As a reminder, this conference is being
recorded.
It is
now my pleasure to introduce your host, Lisa Sundstrom, Chief
Financial Officer. Thank you, you may begin
Lisa Sundstrom – Chief Financial Officer
Thank
you. 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 first quarter 2018 financial
results. Our quarterly report on form 10-Q was filed with the SEC
yesterday, May 15, 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 &
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, May 16,
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 would like to turn the call over to our Chairman of
the Board, Kevin Richardson.
Kevin Richardson – Chairman and Chief Executive
Officer
Thanks,
Lisa. Thank you everyone for joining the call today. We last
updated you at the end of March on our 2017 progress. Today, we
will provide an update on the first quarter of 2018 and a number of
initiatives we are undertaking to ensure our success as we roll out
dermaPACE in the U.S. and international markets.
Our
goal, as we have stated, is to have a device anywhere in the U.S.,
a DFU, that’s a diabetic foot ulcer, is treated, then to
drive device usage with growth in a number of treatable indications
and an ability to combine with other treatment modalities. This
won’t happen overnight. To accomplish these goals, the team
has established an execution plan that is well underway for
2018.
To
accomplish these goals the team has established an execution plan
that is well underway for 2018. As we progress through the
remainder of the year you will be hearing about the following
progress:
–
various partners
working with us on a successful roll out,
–
KOL’s working
with us on clinical and case study work globally
–
new senior level
employees and leadership
–
additional science
advisors and board members
–
progress on our US
reimbursement efforts
–
expansion globally
including new joint venture partners, and
–
building our brand
through our blogs, conference attendance, peer reviewed articles,
and visiting with the many leads and contacts who we know are
extremely interested in SANUWAVE.
All of
these steps will allow us to show revenue growth that will
accelerate throughout the year.
Today,
Lisa will discuss Q1 financials and then I will summarize the
initiatives we are undertaking. We will update you on the success
we had at the various conferences, and then turn it over to Q&A
earlier than normal to provide more time to answer
questions.
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1
Lisa.
Lisa Sundstrom – Chief Financial Officer
Thank
you, Kevin.
Revenues for the three months ended March 31, 2018
were $344,000, an increase of $195,000, or 130%, from the same
period in 2017. Our revenues resulted primarily from sales in the
United States and Europe our dermaPACE and orthoPACE devices and
related applicators. The increase in revenue for 2018 was
due to our first sale of dermaPACE devices and applicators in the
United States after obtaining FDA approval as well as a slight
increase in refurbishment applicator sales.
Research and development expenses for the three
months ended March 31, 2018 were $349,000, an increase of $89,000,
or 34%, from the prior period. Research and development
expenses increased as a result of hiring of a full-time software
engineer, accrual of bonus for 2018 and a grant given to a
university for clinical work to be performed.
General and administrative expenses for the three
months ended March 31, 2018 were $946,000, an increase of $497,000,
or 111% from the prior period. General and administrative
expenses increased due to hiring of a human resources director,
higher travel costs, accrual of bonus for 2018, recruiting fees for
open positions, higher legal and accounting fees related to SEC
filings and higher consultant fees related to the commercialization
of dermaPACE.
Net
loss for the three months ended March 31, 2018 was $5.9 million, or
($0.04) per share, compared with a net loss of $494,000, or ($0.00)
per share for the same period in 2017, an increase in the net loss
of $5.4 million. The increase in the net loss for 2018 was a result
of higher interest expense related to convertible promissory notes,
an increased loss on warrant valuation due to the higher stock
price and increase in operating expenses discussed
above.
On March 31, 2018, we had cash on hand of
$154,000, compared with $730,000 at December 31, 2017. Net cash
used by operating activities was $1.8 million for the three months
ended March 31, 2018, compared with $115,000 for the same period in
2017. The increase in the use of cash for operating
activities for the three months ended March 31, 2018, as compared
to the same period for 2017, of $1.7 million was primarily due to
the increased operating expenses and decreased
payables.
We
continue to project that our cash burn-rate from operations will be
approximately $175,000 to $250,000 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. We plan to use revenue growth to gauge and manage our
cash burn, including additional hires and infrastructure upgrades.
By syncing these inflows and outflows we should be able to maintain
our current burn rate.
Now,
let me turn the call back to Kevin.
Kevin Richardson – Chairman and Chief Executive
Officer
Thanks
Lisa. As you can see, Q1 was the best first quarter in the
Company's history, up 130%. And as I stated earlier, that growth
should only accelerate throughout the year. The growth in Q2 will
be driven mainly by our continued international expansion with
planned shipments to at least six countries, potentially up to
nine, which I will discuss later.
Since
the beginning of the year, we have begun to execute on the plan we
have laid out in the past. As I said before, this playbook we are
following has been successfully used by others in the wound space.
So we plan to follow that path with our own unique
twists.
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2
Our
near term focus includes:
–
Developing
more relations with the Key Opinion Leaders (KOL’s) as we
expand our clinical work
–
Having
the proper equipment financing in place
–
Selecting
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
–
Extending
the number of wound indications beyond DFU
–
Adding
more wound care experience at the Board of Directors and Science
Advisor level
–
Hiring
the driven people in several key leadership positions
–
Attending
the various industry conferences to build the brand and
presence.
–
Developing
a service driven culture that can meet the needs of the
practitioners, payors, and patients
–
Develop
more JV relations like the Brazil Mundi-Med
partnership
–
Collaborate
with our international partners.
During
the quarter we began shipping product to our partner Premier
Shockwave. They have been busy attending trade shows and visiting
military bases and remain on track to have a very successful roll
out in 2018 and beyond. There are many hundreds of locations that
Premier will service and they are off to a very powerful
start.
We will
be launching our first clinical work since the DFU study in the US
with the perfusion study being performed at Rutgers and UCLA by
Dr.’s Alvarez and Nuvong. The study will show how the
dermaPace product brings vascularization to wound areas that
otherwise can’t heal without blood flow. These doctors will
present their initial results in the Fall SAWC Conference in Las
Vegas.
We plan
other clinical efforts launching later this year both in the US and
internationally. As these various efforts are launched we will
share more of our clinical plan and developments with the public.
Having positive clinical work and getting those reports both
published and presented in poster format at conferences will lead
to wide spread recognition of the positive impacts of our device.
The clinical side of the equation is critical for
success.
Internationally, we
and our partners have presented at 7 different conferences since
the beginning of 2018. The response since the FDA clearance has
been overwhelmingly positive. We’ve collected over 400 leads
for potential customers. We are beginning to see this reaction in
the number of orders we are receiving and new partnerships opening
in countries all over the globe.
In Q2
we will see shipments to:
–
Romania which has
an initial award size north of $400k
–
2-3 new countries
in Southeast Asia will get their first shipments in the June or
July time frame
–
Australia is
beginning to show signs of life since the FDA and the publishing of
the VLU study
–
Italy and the
Benelux region continue to see growth
–
The big surprise
for 2018 looks to be Canada. We recently added Dr. Perry Mayer as a
science advisor and he attended two conferences with us. We
anticipate double digit deliveries of devices in Canada in 2018 and
they will be on a rental model delivering monthly recurring
revenue.
–
Brazil remains on
track for ANVISA approval later this year.
The
recent EWMA conference and travels to the Middle East and Mexico
should begin to yield strong revenue and partnership fees in the
back half of 2018 and into 2019. As we have stated before, we
anticipate two additional Brazil type partners in 2018. We are
currently speaking with four and anticipate the first one being
announced before we host our next conference call. As mentioned
previously some are smaller than the Brazil deal and some are
larger. Regardless, based on the traffic and follow up we are
seeing from the recent conferences we have extreme confidence our
international strategy is paying off.
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3
Domestically
we are beginning the hiring process and bringing on employees to
assist in the ramp of the business. Although we cannot discuss any
of the individuals today, we are assembling an extremely talented
team to allow us to reach our goals in 2018 and beyond. We have
engaged certain outside consultants to help with the ramp in
understanding the opportunities and also managing the reimbursement
landscape. As we make progress on those initiatives we will keep
you updated on our quarterly calls.
In
short, we have a plan. It involves continued clinical efforts,
cultivating additional international expansion, research and refine
reimbursement strategies, additional new employee hiring, and
focused and effective marketing. We are effectively a 10-year-old
start up and the marketing efforts are needed to educate the
practitioners, the payors and the public. This will take a
coordinated effort on all fronts, which we are executing on
currently.
Before
I go to Q&A.
Lastly,
I want to again thank the shareholders who have helped us get to
where we are today. Many of you have stopped by and visited the
facility, we probably hosted 5 or 6 investors since the beginning
of the year. We encourage those in the area to stop by and see what
we are working on and where the company is headed.
With
that said, let's move to Q&A. I’ll turn it back to Donna.
Thank you.
Operator
Thank
you. [Operator instructions]. Our first question is coming from
Brian Marckx of Zacks Investment Research. Please go
ahead.
Q: Kevin, can you tell me how many units were shipped in the
U.S. in Q1?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
We’re
not going to go in the details on units shipped, but it was related
to the Premier Shockwave partnership. There were no units shipped
outside of that in the U.S. in the first quarter. They have certain
milestones and minimums that they’ll meeting over the next
two years, and everything remains on track there. That's where
you’ll see the U.S. shipments primarily in the first
three-fourths of the year.
Q: Any insight from Premier in terms of—I guess, you
mentioned that they're seeing some interest. Have they started
treating do you know?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
I now
they’ve been out. I don't know specifically where
they’re treating. I know they’ve done a lot of on-site
training and on-site demonstrations, and the devices are in the
process of being deployed. I know that they’re rolling it
out. One of the important aspects of whatever we do, whether
it’s with Premier or whether it’s internationally or
even domestically, making sure that we have the practitioners not
just the doctors but the nurses and those who are actually going to
use the device trained appropriately, is going to be something
that's really important for us.
It's
also important that we educate them on some of the questions that
are going to come from the patients. Okay, what is a Shockwave?
What is it not, what is it, and explaining a lot of that?
There’s an educational curve whenever we roll out a new
device. Premier, luckily has been in the Shockwave treatment in the
VA market for 10-plus years and has experience with that and has a
good team around that. We’re doing the same thing
internationally as we roll out into the different countries,
training is an important part of that.
I think
we’ll probably provide more of an update on the next call
with Premier and give a little more insight. I know a lot of that
agreement still has confidentiality around it. But as we move
through the year, I think it’ll be important for people to
understand the opportunity, and that's really what I'm focused on,
the hundreds of different VA military bases and immune health
opportunities that they have, so that investors can appreciate the
size of that market opportunity for our partner.
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4
Q: Kevin, when you go to the wound conferences and
you’ve certainly been pretty active in doing that, when you
talk to the wound experts, the KOLs, and you talk to them about
whether they would consider using dermaPACE in their practice. Can
you talk about what their response is in terms of maybe positive
responses that they might consider using it and responses that
relate to concerns, why they may not use it?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
There
have been seven conferences that we’ve attended over the last
three months, domestically and internationally, Canada, Korea,
Italy. So it's been a pretty robust quarter for us as far as
presenting the product with its FDA go ahead. The first question is
what is it, right? And you’ll get strange looks. People are
used to at these wound conferences looking at dressings and gels,
and little things that you wrap and put on it or gels, or honeys,
and this was a mechanism. And so a lot of people think, is it a new
debridement device. A debridement in wound care is how you clean
the wound. Many people use a scalpel. Some people use an ultrasound
device to shear away the necrotic skin.
And the
initial question is what is it, and we’ve got it down pretty
well. And again, this is part of what we did last year with our
blog strategy, was to really educate consumers so we would have
something that we could just hand them or talk to them about what
is a Shockwave, what is ESWT, what’s PACE technology and what
isn’t it. And we’ve done a good job with that first
question. The second question is, when would I use it? And that, we
talk about that it’s going to be the doctor or nurse using
it, it takes three to five minutes at most and you’d use it
after you debride before you put your dressing and send them on
their way.
The
when to use it and specifically what we’re targeting is
we’re letting people know, this is something that can really
help the perfusion. And you can focus on wounds that have stalled
out, I mean you can you can start right away. But we’re
really trying to lead the practitioners and using it when they see
a wound that’s not making progress, and we can, jumper
cables, jumpstart the wound on the healing process. And they
appreciate that and they understand it. And they’re all very
surprised it's only three minutes. And so for them, that leads to
next question, which is okay, well, do you have reimbursement? In
the U.S. that's been kind of the number three question that gets
asked, it’s what is it, when do I use it, and how do I use
it, which I described, and then how do I get paid.
And
internationally, we have a good plan in place with different rental
models, with different procedure models. In some markets we will
sell the device. But in the U.S., our reimbursement strategy still
working with the outside consulting group, ADVI and our game plan
is to have our CPT tracking code in effect January 1, 2019 and have
devices placed in the back half of this year, so that they can
begin billing. And that’s the game plan and that’s what
we explain to people. And then most people are saying, in general,
I mean the majority people are saying it’s something
they’re interested in and something they want to see and use
and touch.
I think
there’s going to be a big educational curve we have to go
through with different practitioners on just how easy it is to use,
how easy it is to get them trained and get that adoption curve
going by just placing some devices and driving some usage. And
that's really where we’re headed right now. We have a big
push starting in the fall. We’re really taking the summer off
as far as conferences go, there just aren’t that
many.
In the
fall, there’s some big ones, I know in Europe, they have some
and in Italy there’s some and in Las Vegas, Canada, and then
some more of what I call expert driven ones in December.
We’ll be participating in those in the back half of this year
to get the usage driven up. And by then we’ll have a team
that can support it on a roll-out where we’re going from zero
to 100, or 200 devices pretty quickly.
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5
Q: You mentioned Canada. I mean, you expected that to be
relatively robust this year. Is that -- are all the units that you
expect to ship to Canada, or the majority I guess, to Dr.
Mayer’s practice. And what other involvement will Dr. Mayer
will have on the clinical evidence side? So will he be
expected—they’ll be some conducting some studies at his
practice as well?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
So
specifically with Dr. Mayer, I mean he runs the Mayer Institute,
and they treat close to somewhere between 80 and 90 wounds a day.
He has eight unbelievably great nurses that are working with him.
He is probably more in tune with what’s going on in wound
care than a lot of people up in Canada. it was great to have him
involved. He’ll be working on some clinical work for us as
well.
And
like we do whenever we launch into a new country and Canada is in a
little bit of restart even though I think we’ll probably
exceed what I’m expecting for this year. But you always start
with getting some KOLs to do some case work, to do some clinical
work, because you need those professionals, like a Perry Mayer, who
can come out and say, yes, I’ve used device and I’m
credible, I am doing 80 patients a day, and here is where I am
using it and I’m finding it effective. It’s that type
of messaging, whether it’s in a poster format or paper
format, that really helps drive the brand within a
country.
We have
a rental model up in Canada that’s really appealing and
it’s really geared to how much usage a practitioner in
location is going to use. We’ll probably have, like I said,
double-digits by the end of this year. It could be higher, and
that’s a nice, really nice recurring monthly revenue for us
where we’re rolling it out, both on the east side of the
Canada and the west side of the Canada, and we have a good plan in
place for both.
Q: And so in terms of the payment model in Canada, I know
it’s the national health system. But how does that work in
terms of the reimbursement side?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
So
they’re going to work on how they get—on the rental
model, it’s really about monetization of the device over a
certain number of patient used. So they’re going to rent it
for call it and I’m going to make up a number here, $2,500,
$3,000 a month for the device, and what they’re doing is if
they can use it for again, I am going use a number here, 100
patients over that month that means you're dividing 100 into
$2,000, that’s your cost of operations for the
device.
They
get paid currently at different levels depending on what type of
work they’re doing on the wound, but it’s more on a per
patient per treatment basis. Ee’re making sure that we can
make it affordable for up in Canada. But at the same time, if
they’re only using it once a month, they probably
shouldn’t have a device. I mean, this is a device that up in
Canada is going to be probably aggressively used. We’re going
to probably see pretty high usage rates. Again, when I look at like
a Dr. Mayer where he is doing call it 80 patients a day multiply it
times 20 days in a month, it doesn’t take a lot of
penetration for him to get good usage out of the product. So
that’s really what we’re playing with.
And
then we’ll have to do some formal economic stuff up there as
well. I mean we have to do that in the U.S., Europe, each market
individually needs to show that this is beneficial to not just the
patient from a healing practice, but from the payor and in Canada
it’s the government, so you have to make sure that they are
seeing that we’re helping close wounds faster, because
they’re faster there's less infections, because it’s
faster the patients happier, quality of life goes up. And those are
the things that we’re going to start to quantify, so that we
can then present them and help with driving reimbursement and
payor, not just in Canada but everywhere.
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6
Q: So the leasing model in Canada, do you charge for per
treatment too or you just charge for the lease?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
Yes,
they can opt either way. I mean, if they’re a lower volume,
then they’re going to pay a lower price on the rental, but
they’re going to be charged per procedure. If they’re
higher volume, then it’s all covered in the cost with the
higher price. We’re really trying to gear it so that not all
wound centers are paid the same, and so we’re trying to make
it so that we have an offering that we can go to someone who is
treating 80 patients a day and someone who is treating
five.
Q: And then last one I have is, on the potential
partnerships, the ones that you think might come on line. Are those
in areas of the world where dermaPACE already has regulatory
approval, or not?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
No,
yes, yes, and mixed. Of the four that we’re talking to, one
of the regulatory procedures would probably take six months. The
other one that would probably take, I’d guess, probably a
year. And then the other one, it’s mixed where we have
approval to ship in certain areas, but they follow the CE Mark
approvals, so we’re fine in that one. So really the one
that’s probably going to happen first, we’d still have
to wait probably six months to nine months before we begin shipping
revenue generating units, but again they’re going to pay us a
fee upfront to get that exclusivity.
Operator
Thank
you. Our next question is coming from Terry Thompson, a Private
Investor. Please go ahead.
Q: Is there a stockholders meeting scheduled and if so,
when?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
We are
in the process of pulling that together. We don’t have a date
set. We’ll probably pick that at our next Board meeting,
which is going to be in June. We’ll probably have a
shareholder meeting, I’d guess August or September, would be
my guess. But we have to look at everyone’s calendars, make
sure we’ll have all our board members there. And make sure we
give enough notice so that people can attend, if they want
to.
Q: Well, I definitely want to so that was why I asked.
Clarify for me, the dermaPACE device, are those strictly placed
like on a lease basis, or do you sell them outright? And if so,
what revenue do either one or both of those bring to the
Company?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
Terry,
on international, we have both where we sell the device, and then
our distributor will resell it and we’ll make a certain gross
margin on the sale of the device on the initial sale and then
we’ll get refurbishment revenue from refurbishing the
applicator heads. And then we’ll sell wound kits and make a
little profit there too. Our preferred preference is really to join
with these international partners on a joint venture basis where we
either rent the device, and again, I mentioned to Brian earlier,
the rental rate’s somewhere few thousand dollars a month
depending on volumes, or on a per procedure basis. Down in Brazil
it’ll be per procedure. In those joint venture cases, we
usually split the profit 50-50. We will supply a device at cost to
the joint venture, the joint venture will then either rent it out
or get a per procedure fee. And that's our preferred model
internationally.
Domestically
with our partner Premier, there is a sale of the device where they
are then charging a per procedure fee. They cannot sell the device
contractually. We're the only ones that could buy that back, the
device, so it's somewhat controlled, and there's also a per
procedure fee. As we roll out in the U.S., we'll be trying to move
towards a per procedure fee model, so per treatment, so per
patient. And that's where our tracking codes have us aimed right
now. So we'll be collecting more of a per procedure
fee.
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7
Q: And do you anticipate needing more funds to continue
expanding and developing, or are you in good enough shape with the
money you have on hand now for your—
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
One of
the benefits we have is that we have super shareholders that helped
us when we were down on our—down at the lows. And one of the
things we had strategized about way back when we raised money was
to set up the warrant so that they expire on a rather short term
basis. So that those shareholders would be the ones who'd fund us
moving forward by exercising the warrants. And that's really our
main focus right now is having shareholders who have been with us
for a long time and supportive of us be the ones who'll be funding
as we grow.
And
that right now, there is $7.5 million to $8 million of warrants, of
cash that would come into the company from exercising of warrants
that are due in March of 2019, so they're coming due in the next 10
months. And we're beginning to see shareholders begin to exercise
their warrants and that's really one of our primary focuses. The
other primary focus is these international deals that I alluded to,
and I'm hoping to have at least one announced before we have our
next conference call and we have four that we're talking to. I've
said we'll get two this year, those provide capital for
us.
There's
some other avenues we're exploring, but it's too early to talk
about right now. But based on our cash burn, based on the warrants,
based on some international deals, that's really what our plan is.
That doesn't mean we're not listening and talking to professionals
who want to help us and other potential corporate partners that
might be out there that could help us as well.
Q: No plans then it doesn’t sound like. I understand
there's no definitive answer on this, but no plans for any
dilutions at this point?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
Well, I
mean, the warrants are already accounted for in our fully diluted
shares, so that would be our primary hope would be that the
execution of the warrants goes well. We have to figure out exactly
how to do that in the best interest of shareholders. Right now, I
don't think there is -- doing an offering, if we have the
shareholders willing to do the warrants then raising money through
an offering isn’t in the best interest of
shareholders.
I think
as we get towards the back half of this year, some of the things
that we have longer term, we want to be able to up list to NASDAQ.
We want to make sure we can fund the company to profitability. But
I also want to make sure that it’s reflective of the growth
we’re having as we accelerate our top line throughout the
year, as we look at kind of 2019, when we’ll be placing
devices in the U.S. and have tracking code for
reimbursement.
There
is no definitive answer but the board is well aware that there are
certain capital needs we’ll have to go after at some point if
we want up list. And I’d say that right now, we’re
focused on the warrants. We’re focused on these international
deals. As we get throughout the year, I think you'll see us explore
some other opportunities. And it could be finding a good partner
and letting them work with us on some things. We’re really
trying to find the best way for all shareholders.
Q: Great, that sounds good. And the up listing to NASDAQ
sounds superb, that’ll be something to look forward
to.
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
Yes.
Q: Again, congratulations on everything. And I
couldn’t be more excited, I’ve increased my holdings by
a factor 20 in the last five, six months. So I am all excited and I
am fired up, and I will see you when you schedule your stockholders
meeting.
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
Thanks,
Terry, appreciate it.
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Q: Thank you.
Operator
[Operator
instructions]. Our next question is coming from James Terwilliger
of Paulson Investment. Please go ahead.
Q: You had regulatory approval for less than six months, so
I know there’s—you’re drinking from a fire hose,
so to speak. There’s a lot of things going on. In the press
release, you talk about, or you have a bullet point, where you talk
about the Premier Shockwave agreement, 100 units over three years.
Can you give me an update on how I should think of this agreement
in terms of timing? I know you're at the beginning of year one. But
how should I think about where you are with Premier?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
They
have certain commitments and milestones they have to hit throughout
that period. They’re on track with everything. I think
what’s going to happen with Premier, similar to us I mean
they’re just, quite frankly, they’re nine months ahead
of us. It’s about getting those initial placements. It's
about getting the clinical work. It’s having the
conversations, which they’re doing at the conferences.
It’s getting in there and training. It’s getting the
devices at the right facilities.
And
then we’ve seen this in other countries. We’ve seen
this with other treatment modalities. It begins to, I don’t
want to say go viral, but in a way, it goes viral where the doctors
start talking and they're like, oh yes, I am using this dermaPACE
thing, it's fantastic, I’ve increased the perfusion, my
wounds are healing at twice as fast as they use to. And they talk
to other doctors at other places or other VA's, other health
institutions, and then they’re going to say I want one too.
And the important part is making sure those initial devices have
the right training and education behind them.
We know
from an economic standpoint, we are better for the system, because
we’re much cheaper than the other advanced wound treatment
modalities. Hyperbaric is extremely expensive, negative pressure is
extremely expensive. We’re coming and we’re helping the
system, and we’re helping the wound heal, so we’re
helping the patient, we’re helping the quality of
life.There’s so many benefits that we have to begin to make
sure we get out to the practitioners. But the first ones right now,
I mean, I know that the Premier guys, I don't think they’ve
been home for the last six weeks. They’ve been at conferences
and meeting with the VAs and military bases for, I mean, literally,
I think they’ve been on the road the whole time just doing
training.
So I
think we’re going to see that really kick in
probably—they’re on track with all their minimums right
now. But I think it's really going to be toward the end of this
year where you're really going to see the placement start to take
off for them.
Q: Secondly, I am just going through some of the large
announcements. Any update that you can provide on the large
opportunity down in Brazil? I believe you made that press release
in September of last year?
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
They’re
moving along great. I mean we had a few other doctors and people up
for our symposium in December where they got some training, they
got to meet the other KOLs from Europe, Taiwan, around the world,
and they’ve been communicating with them. Pete has been in
contact with their regulatory people on getting through the ANVISA
process. We’ll probably get a plant inspection sometime later
this summer. The game plan is to have two devices shipped later
this year to begin the KOL work, six month in advance of their
approval. And we’d only assume two devices this year in the
modeling and then the big ramp starting next year.
Everything
remains on track. The folks at MundiMed, our partners are doing
fantastic. They're seeing their growth rate in the wound business
without us yet up close to 60%. So they're having a
fantastic—I'm glad we picked them as a partner. They’re
adding new product. They’re adding more employees,
salespeople. So they were definitely the right partner. And
we’ll hit our stride next year with them once we get through
the regulatory process. And they’re making all their payments
on time, so I guess that’s the other good news.
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Q: Lastly very quickly, I know this is a tough one. But when
you're looking at pricing strategies and the different way you
structure these deals, I mean you can sell a unit, you can run a
unit, you can do a per procedure fee for a unit. Do you get a lot
of pushback from your customers in terms of your pricing
strategies, or does your customer more or less fall to one of those
three strategies with very little pushback in terms of pricing? And
I know that’s a tough question.
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
No,
it’s a tough question, but it's a great question. Because
three years ago, our international strategy was kind of a, this is
the way we do it and this is the only way we do it. And what we
realized is we did this world tour of all our distributors and
partners, every market is different. In some markets, like in
Italy, they are selling certain devices. They’re renting them
on a daily basis. They’re renting them on a weekly basis,
monthly basis. They got them on a Vespa so they’re driving
around treatment at home. And so there they have every different
model you could imagine, and it really depends on who the customer
is.
And I
think that's what we’re trying to do is offer the flexibility
on an international basis where we can make it work within whatever
system they have. And that's really important part from our
standpoint is having that flexibility. And for us, as long as
we’re getting the right return on capital, and again return
on capital for us is payback on the device within a year and then
with recurring revenue generating of hundreds of percent ROI over a
multiyear period, the devices last for a while.
In the
U.S., when we talk to people about device sale, rental per
procedure. All they want is something consistent. They
actually—we haven’t gotten much pushback on, oh I only
buy capital equipment, or I only rent it or I only do this, I only
do that. It’s really about, as long as we have a consistent
reimbursement strategy for them so that they can know how to do
their billing, that’s really what they’ve been focused
on, and so we’re going remain focused on that within the U.S.
is making sure that we have a consistent strategy with
that.
We want
to maintain control of the devices so that when we’re doing
upgrades. We can do that ourselves and implant new software or new
hardware new imaging, so that they can have a device and it’s
under our warranty where it’s get upgraded over time, and
that way we maintain control over it too.
Operator
[Operator
instructions]. Mr. Richardson at this time, I’d like to turn
the floor back over to you for any additional or closing
comments.
Kevin Richardson - Chairman of the Board, Chief Executive
Officer
I
appreciate everyone making the call. Again, we’ll have a
shareholder meeting later this year. But if you’re in the
area and want to stop by, please stop on by. We’ll have some
announcements on new employees throughout the next month or so.
Hopefully before our next conference call, we’ll be talking
about another international deal. We’re excited about where
we’re headed. We appreciate everyone’s patience with
our process. And we’re looking forward to updating you again
in 90 days. Thank you.
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