Good morning. Welcome to the 2023 Piper Sandler Healthcare Conference. My name is Adam Maeder, and I'm one of the med tech analysts here at Piper. I'm very pleased to introduce the management team from Vicarious Surgical. With us on stage, we have Adam Sachs, co-founder and CEO. Adam, thanks for joining us.
Thanks for having me.
Of course. Maybe a good place to start, you know, you guys are a newer company still, and at least in my view, so I think it'd be helpful just to kind of do a one or two-minute introduction to Vicarious, how the company was founded, your technology, and kind of where you are in the development process.
Yeah, of course. So, we started this company a number of years back, formally in actually 2014, and spent the first many years of the company just working on our own robotic actuator technology. And this is the decoupled actuators that really enable everything that we're doing. And somewhere around, you know, 2019, 2020, we, I'd say, really got it to work and developed it into the first beta system of our surgical robot. So our system is two arms and a camera. It's about yay big, and it's inserted into the abdomen of a patient all through a single 18-millimeter incision. That's much smaller than anything that exists today for a single incision system.
Then once it's inside, it expands and is able to operate naturally and easily under the control of a surgeon with nine degrees of freedom per arm, plus motion about the trocar, about the incision site, four degrees of freedom there, plus a really incredible visualization system that leverages cell phone technology. So the result is a system that's much easier to set up, much easier to use. And since then, we've, you know, had the privilege of taking our company public, getting investment and partnerships from hospitals like, like HCA Healthcare, University Hospitals, Intermountain Healthcare, and UPMC. And we are, you know, just in the integration phase of the first version of our product, working through, you know, all of the kind of kinks and bugs as we pull it all together.
We'll be going through the V&V testing and into the clinic in 2025.
That's perfect. Great place to start and, a lot to unpack there. So, you know, I'll start with one more kind of bigger picture question before we dive into the technology and, and some of the recent developments. You know, Intuitive Surgical has obviously done a great job of pioneering the, you know, robotic-assisted surgery market. You know, that being said, penetration of robotics is still pretty low today. You know, what are the major limitations in, in your view, and what are you trying to solve for with your system?
So the biggest limitations of not just robotic surgery, but I'd say surgery as a whole today, comes down to the fact that any minimally invasive technique requires multiple small incisions, where you triangulate from those incisions down to a single point inside the abdomen. So if you think about the way laparoscopic or robotic surgery works, it essentially, all of the motion is defined based on the pivot point that's created by the surgeon at that incision site. And that produces a lot of training challenges. So the result with, you know, Intuitive da Vinci or any other multi-incision solution, is that they end up adding a ton of training burden, a ton of complexity, especially because they have these large, cumbersome arms.
So not only now does the surgeon need to make sure that their setup avoids collisions inside the abdomen and gets good triangulation, but they now need to think a lot about everything outside the abdomen, and making sure that those robotic arms have the operating space to move easily without colliding. So the result of all of this is a system that takes, you know, many tens, or actually, on average, typically over 100 procedures to really master how to use, and the result is just a couple % total penetration. So that's part of why we really believe in this single incision solution.
If you can have enough capability, enough strength, enough motion, all through a single small incision, and keep that incision small enough so that it doesn't cause additional complications, then you can create a system that is easy to set up, one incision, and the surgeon is free once they've inserted the robot and can operate.
That's great color. So let's dive into some of the takeaways from the Q3 call. And, you know, I think Q3 was a quarter that had some positives, but also some challenges for the company. And, you know, certainly if I've learned anything over the past couple of years, it's that building robots is really hard. So maybe just talk about some of the hiccups with the integration process for your Version 1.0 System that you, you know, you saw on the hardware and software side. Just kind of talk a little bit about those and, you know, what's being done to kind of remedy the problem.
Yeah. So, overall, the way to think about our system is that it's, it's basically somewhere around 8, depending on how you slice it up, independent devices. It's, you know, surgeon console, a patient cart, the robotic arm, the camera system. Each of these has its own software, its own electronics, its own hardware. And over the last 18 months, since our Beta 2 system, and we've rearchitected and built up this V 1.0 system, and each of these has, you know, has come up as a subsystem within its own subsystem.
So at the same time, we had, you know, some major endeavors to do things like simulated testing of the integration, to try to debug everything that we can in order to make sure that the system, you know, comes together and integrates easily with as few hiccups and challenges as possible. And, you know, what I'll say is that it was less successful than we thought it would be, and the result is that we're working through those bugs now and those challenges now, and the system is, you know, up, it's connected, it's actually, you know, moving the arms and all of that. But there are still bugs throughout it that we are just testing and testing and testing and burning down. And overall, it's... I would say it's nothing that we're worried about.
It's kind of become really clear in the last two months that it's a matter of time more than anything, and that there's not all that much we can do about it. Because it's like, all right, you'll—you know, the first time it all comes together and is working, it literally worked for about two minutes before something caused it to crash. Okay, so you work through that, and you fix that bug, and then it works for three minutes, and then it works for five minutes, and then it works for 10 minutes.
You know, then once it's working for, you know, five hours, you actually need to start doing huge amounts of testing to prove that, that you're in, you know, when you look at the standard deviation, that the probability of those critical errors is extremely low. So it's a ton of testing, a ton of just kind of brute force work. Frankly, a lot of the efforts that we had, we had some multiperson teams and endeavors to try to minimize the amount of work and, you know, especially frankly, when our market cap was much higher, it was totally worth it to spend, you know, $1 million or $2 million on programs to try to save us from a lot of this debugging. Honestly, those were a lot less effective than I thought they would be.
The result is that we're working through those challenges now.
Really helpful color. So if I was to kind of, you know, put a bow on that, it sounds like there's no, you know, one, two kind of major items that are kind of giving you concern or pause. It's just, you're kind of working out some of the kinks, you're getting your arms around it. It's a process that's gonna kind of just take time to work through. Is that-
Yeah, that's exactly it. And to belabor the point a little bit more, it's just like you fix one thing, and then you see, you know, a little issue with some hardware system, and, you know, you fix that. And it's just a little bit of a game of Whac-A-Mole, and that's what happens when you have a system with thousands of parts and 100 independent processors and, you know, tens or probably hundreds of thousands of lines of code all coming up at the same time.
Yep. Okay, helpful. And we have, we have Bill in the audience, but I'm gonna ask you to fill in for Bill for a second here.
See how I do.
You know, let's talk about the balance sheet and cash burn. So you did an equity financing this past August. I think you raised close to $50 million in gross proceeds. Maybe just talk, Adam, about cash runway. How far does this take you? Yeah, let's start there, and then I'll follow on.
Yeah. So, you know what, I'll say, and I'm looking at Bill for the glares on this one, is we closed last quarter with $110 million on our balance sheet in cash, and our guidance for next year is $40 million-$55 million. So, you know, if you kind of project that out, I think you can get a pretty good idea of what our total cash runway is. The $40 million-$55 million is, I'd say, a moderately wide range and really depends on how we do. I'd say actually in some pretty inverse to common sense ways, because, you know, if we're really doing, I'd say, very well on our schedule, some of those V&V builds and all of that get pulled into 2024, and we incur those expenses.
Whereas if we're, you know, at the, you know, longer end of our schedule and just meeting expectations rather than exceeding them, we're probably having those builds out into 2025. So, you know, we wanted to give ourselves the opportunity to really kind of overdeliver, hence the range.
Yep. No, that's, that's great context on the range of $40 million-$55 million cash burn for 2024. Okay, and, you know, I guess one other thing on that that came out of the Q3 call, I believe, was some cost-cutting initiatives. You guys, you know, trying to be as judicious as you can with spend and burn. Obviously, challenging macro environment. Just remind us kind of the cost initiatives that you're putting into place and, you know, kind of how to think about those.
Yeah. So, you know, again, it is, you know, both the... It's the macro environment, financing, everything else, and the impact that that's had on our market cap overall. And, you know, it changes the equation for, frankly, the value of capital, right? Especially as one of the larger shareholders, myself, you know, who does not want to be diluted. Making sure that we, you know, use capital efficiently is one of the most important things to us. So, it, it's a- there's a compromise and a trade-off to how fast we go, to how much risk we take in the program, and how much capital we spend.
So the total cost-cutting initiatives over the course of the year, which has been in a few different phases, but, you know, we've gone from about 230 to about 130 people total. So it's a very significant reduction. And most of that reflects a variety of things, a decent chunk outside of R&D, and then most that's within R&D is a lot of those things, like that virtualization program that I mentioned, that was actually about eight people for simulated testing, for integration, and a few other programs like that, that we've removed, that remove the ability for us to go much faster than the timeline that we're currently on.
But I'd say provide, without it, it gives us a lot more certainty in the timeline, because we're just following that baseline path that reflects, you know, one at a time, kind of whack-a-mole of the problem.
Yeah. And if we put together, you know, some of the headcount reductions plus the bugs with the Version 1.0 System, just let's walk through timelines. I think you've talked about de novo FDA submission in early to mid-2026. But also I'd like to flesh out the other milestones that we should be looking for, things like V&V, First in Human. Let's just kinda talk through those, Adam.
Yeah. So I'd say in the next 12 months, the biggest milestones are all gonna be about that first version of our system. So it is coming together now. It is starting to all work together. We're gonna be doing our first cadaveric procedures in the spring because we're now serializing everything, and we're not... You know, our previous plan was to do a bunch of EMC remediations and things like electromagnetic compatibility, sterilization, biocompatibility, all, all of those things that are required for ISO 60601 compliance. We were gonna do them in parallel with this testing, but now we're gonna test the system, do a bunch of cadaveric testing, do a bunch of other testing with some of our vendors, and then do the remediation.
So next fall will be that fully remediated system, have everything all together, you know, ready to roll into a lot of more formal testing. And then, you know, mid- to late the next year will be the initial human use of our system.
Very helpful color. I wanted to talk about the IDE trial. Certainly, you know, another takeaway that I've had just covering the robotic space is FDA has been, you know, increasingly stringent or challenging. Those are my words, not yours. But, you know, just level set us, Adam, on the trial design. You know, what does that look like? Number of patients, length of follow-up, you know, are you gonna just in the United States, internationally, a combination? Just kind of flesh that out.
Yeah. So, I mean, I would frankly be happy to say the same thing, the way you said it. The FDA has been, you know, ratcheting up their expectations on surgical robots, and that has certainly provided a challenge for new entrants into the space. That being said, they have offered a significant amount of flexibility on things like whether the data needs to be collected in the United States. So, they have actually given us direct guidance that it does not. We're likely to collect data, some in the United States, some outside the United States. The OUS trials have a huge advantage in frankly patient enrollment overall. You know, it's just due to a variety of cultural things.
Patients in U.S. clinical trials enroll much more slowly than they do in a lot of other countries, including Europe or Australia. So there are a lot of, you know, developed countries that have excellent clinical practices where it is still much easier to enroll patients in clinical trials than the United States. That being said, we are pretty confident, again, with HCA and UH, University Hospitals agreeing to work with us to run our clinical trials, and we're already in site discussions, surgeon discussions, and interviews with those hospital systems. It gives us, I'd say, a huge advantage to enrollment in the U.S., but we're still gonna be heavily leveraging OUS.
And the total number of patients we've received formal guidance in the agency, 30 patients-60 patients, on the 30-patient side with good data. And frankly, what we've seen for basically every other submission is right around almost exactly 30 patients.
In terms of follow-up, Adam, do you have a sense?
Yeah, 30- to 45-day follow-up. And it, you know, we'll of course require multiyear post-market surveillance of the clinical trial patients, but we don't need to wait in order to file for authorization. It's you know, we're looking for the ability to complete the procedure, as in truly one of my least favorite terms, a non-inferiority study.
Yeah. That's great color and, and a good segue into kind of the next topic that I wanted to touch on, the, the partnerships. You know, one of the really impressive things, frankly, is I think you have partnerships with four large, prestigious U.S. hospital chains. You know, you, you talked a little bit about it. It sounds like they're going to play a role in the, you know, the, the clinical piece, in, in getting you guys to market. But maybe talk a little bit more about the partnerships holistically, and the different roles that they cover.
Yeah. So, overall, we're... This is—Other than the robot and the technology itself, this is probably the thing I, I'm most proud of. And, you know, I'd say the partnerships reflect the huge potential value of what we're doing. You know, HCA Healthcare is a major investor in us as well as a major partner, and we have partnerships with the, you know, a total of four systems representing about 250 hospitals and 200 ASCs across the U.S. and a few worldwide. And overall, these are broken into four different stages. The entire initial stage, which is right about at completion at this point, is design and development and testing of our system.
And the way to think about this is they, you know, our partners, especially, you know, take HCA and UH, which were in very early, really did a ton of testing of our Beta 1 system, which then helped us design the Beta 2 system, and then did a ton of testing of the Beta 2 system, which helped us design the V1.0 system. It's been a total of about 100 surgeons that have, you know, used our system in lab and cadaveric and animal settings. And the result is that we can get a lot of confidence that these systems that, you know, our product that we're designing will integrate into the hospital setup systems. And by the way, it is not just surgeons.
On top of that, they've sent scrub techs, OR nurses, and even, you know, hospital CFOs, supply chain coordinators, all across the chain to make sure that, you know, when we launch, they will be able to easily integrate our product into their hospital system readily. You know, after that first stage, then we're going into V&V testing, clinical trials, and then, of course, you know, on-market support use of the system.
Very helpful. I did want to ask about the other indications beyond your first indication, which is ventral hernia. So, you know, I guess in light of some of the recent challenges, how should we think about other indications, you know, in terms of timelines? You know, are you still kind of pursuing these, or is it all hands on deck on ventral hernia? Just kinda help talk through the prioritization that you guys are doing.
Yeah, it's... There's not an easy answer to this question. So it's kinda two sides to this coin. On the one hand, it is all hands on deck on ventral hernia. We don't want to risk anything. We don't wanna, you know, bite off more than we can chew. We want to make sure that we get to market with that first indication and then follow quickly with additional indications. But the other side of that is that, you know, we have a ton of surgeons in our pipeline who are really excited about what we're doing and want to, and have been trying our system out in additional indications.
And the amount of additional burden to create detailed, you know, not just experimental procedures, but, you know, detailed procedural roadmaps, have done all of the testing, and actually be able to, you know, write out IFU instructions for use and all of that for additional procedures. It's really just a. It's a team of three people at our company today. So they will have a lot of time and bandwidth over the coming two years to build out additional indications, and they've been using that to their advantage over the last six to nine months and going forward for the next two years. So ventral hernia is first, and it's incredibly exciting, but so are other hernia repairs, like inguinal hernias, hiatal hernias, and Nissen fundoplications. And then after that, cholecystectomy.
I would say one of the biggest chunks that I'm excited about is actually gynecological procedures, because our camera system has an incredible ability to visualize things beyond the visible wavelength that other systems just can't have, and that is due to its architectural design. Our camera system enables, instead of fitting everything on the tip of a laparoscope, on the tip of an 8-millimeter rod, we have a much larger robotic camera that goes in sideways and uses our decoupled motion to, as well as actually water cooling, to enable us to have much more physical space and many tens of times as much power inside the body, electrical power.
The result is that we have two, you know, huge cameras that are effectively these cameras with slightly different lens stacks, actually come from a cell phone manufacturer, and can do many different wavelengths of multispectral imaging, have Lidar integrated all in the background. And the clinical advantage of this is that it enables us to use multiple fluorescent dyes all at that same time in the background throughout the entire case. So if you think about this for gynecological procedures, you know, it would allow us to have the system track where blood vessels are, where the urinary anatomy is, and with some new dyes that are in clinical trials currently with another company, if they end up successful, even where the nerves are as well.
Which will allow us to really protect surgeons and patients against critical errors in a way that nobody's been able to do in the past, that's much more akin to, you know, a Tesla that can automatically brake for you or keep you in your lane, than anything else.
That's good color. Just want to be cognizant of time. We have about a minute left. You know, maybe for completeness, I'll ask one on the supply chain side of things. You know, some med tech companies in the not-too-distant past have encountered some supply changes, semiconductor, chip shortages, etc. You know, from a Vicarious standpoint, anything that's giving you pause, or are you mostly kind of navigating through it?
We are navigating through it, but it hasn't returned to normal at all for us. We've had to leverage our CMs much more than we ever had in the past. So, you know, whereas we used to, going into the pandemic, we actually maintained our own supply chain function entirely and did almost all of our own purchasing. There is some small cost differences that are associated with that, but it gives us much more control. You know, that is not viable at all anymore as a small company and basically was out the window somewhere around two years ago. So we've been really leveraging our CMs for purchasing.
It requires us to be much more on top of things, gives much less room for error, but it's a world that we're pretty used to at this point and have been managing. You know, just for context, our longest lead time part went from 26 weeks lead time to, it actually peaked in the 80s, which is, like, truly mind-boggling to me, and is now in the 40s or low 50s week lead time. So entirely manageable. We work around it, but, you know, boy, does that mean we need to lock things and order those parts a year earlier than we would otherwise.
And I know we're just about out of time here, but fair to say that the updated timelines, you've built in a little bit of cushion or wiggle room for, you know, potential snafus on the supply chain side. Is that-
Yeah,
A fair statement?
100%. I'd say more than a little bit of wiggle room in the new timelines. We have a fair amount of confidence in them, but you know, of course, there are still plenty of things that can come up in a complex system.
Last question for me, I think this is an important one, one I'm focused on. You know, we, we saw a sneak peek of the system, I think it was December 2022. Adam, when are we gonna kind of get the, the next, peek behind the curtain? You know, how do we think about disclosures or how to monitor the progress that you guys are, are making here? Anything planned for 2024?
Yeah, we're gonna be showing off the V1.0 system. It's... You know, the only question that we have about how to show it off is, in a lot of ways, it's not that different from the Beta 2 system, which is kind of the point, right? The Beta 2 system worked incredibly well. Surgeons and hospitals love it. It's how we were able to attract so much interest from surgeons and hospitals. So, you know, we're trying to play the balance of the system that we're incredibly excited about and want to show off to the world. But, you know, what it really is, is the product version of the Beta 2. So, more to follow, and it will certainly be next year.
Perfect. That's a great place to stop. Thank you.