Good afternoon, welcome to the Vicarious Surgical's fourth quarter 2022 earnings conference call. My name is Tia, I will be your operator for today's call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Kaitlyn Brosco with Vicarious Surgical for a few introductory comments. Please proceed.
Thank you, Tia, and thank you all for participating in today's call. Earlier today, Vicarious Surgical released financial results for the 3 months and full year ended December 31st, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, expense management, market opportunity, and commercialization, are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors set forth in our Securities and Exchange Commission filings, including our most recent Form 10-K and Form 10-Q. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February thirteenth, 2023. Vicarious Surgical disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I'll turn the call over to Adam Sachs, Chief Executive Officer.
Thanks, Kate. Good afternoon, everyone, and thank you for joining our full year 2022 earnings call. In 2022, our first full year as a public company, I'm pleased to share that we made significant progress toward our objectives of finalizing the Vicarious Surgical System, preparing for regulatory review, and expanding our surgeon and health system relationships as part of early commercial readiness. I'll start by reviewing our key accomplishments before discussing our early progress and outlook for 2023. First and foremost, we met our development timelines and made substantial progress toward a commercial-ready system. Following the completion of Beta 1 in 2021, we collected considerable hospital and surgeon feedback from our partners and performed extensive cadaveric testing to inform the finalization of Beta 2. Our development work culminated in the use of Beta 2 to successfully perform cadaveric ventral hernia procedures at Tufts Medical Center.
The procedures were performed by Dr. Igor Belyansky, a world-renowned expert in robotic abdominal wall reconstruction and leader of our Surgeon Luminary Group, which I'll touch upon in a moment. We were pleased to showcase the video of these procedures during our December system demonstration day, at which we hosted representatives from University Hospitals to highlight the potential future application of the Vicarious system in a hospital setting. Next, we established partnerships with innovative providers to meet the needs of surgeons and hospitals and ultimately build the foundation for accelerated adoption. Early in the year, we announced the formation of our Surgeon Luminary Group, 20 of the most talented, experienced, and innovative surgeons tasked with providing critical expertise to guide all clinical aspects of our technology. Later in the year, we announced agreements with three of the top healthcare networks in the country, HCA Healthcare, University Hospitals, and Pittsburgh CREATES.
Through these multi-year agreements, we were able to leverage the resources and expertise of our partners to support system development, regulatory clearance, and commercial launch. In addition, we added critical expertise to our leadership team with the appointment of John Mazzola as Vice President of Operations and Beverly Huss and Victoria Carr-Brendel as members of the board of directors. We are thrilled to have these industry veterans on board to guide our company through the next phase of development to launch. In sum, 2022 was a transformational year for Vicarious Surgical, and although it's early in the year, I'm pleased to report that our progress continues into 2023. With the Beta 2 system complete, we are diligently working toward our next system, V1.0.
As part of these efforts, we've hosted conversations and Beta 2 System experiences with our Surgeon Luminary Group and each of our Center of Excellence partners at our headquarters to capture further feedback on which we can iterate. Feedback remains positive. We are now in the phase of utilizing constructive takeaways to execute modest adjustments to the system arms, improvements to the patient cart docking, and our approach to patient access. Today, we are excited to share that we remain on track for V1.0 finalization in the first half of 2023. While our team remains hard at work advancing the system, I'd like to provide an update on the steps we are taking as a company to optimize our cash runway in adaptation to today's macro environment.
As everyone here knows, we are operating in a very different economy than two years ago when we took our company public. The cost of capital has dramatically increased, particularly for pre-revenue and emerging growth companies, and thus, the meaning of efficient use of capital has dramatically changed as well. While previously it made sense for the company to deploy greater resources and parallel path multiple contingencies in order to absolutely minimize timeline risk wherever possible, in the current market environment, fiscal discipline requires a much more lean approach focused on growing equity value and minimizing dilution. With that in mind, we have taken thoughtful steps to optimize our burn and extend our cash runway. We have streamlined our internal teams via a measurable reduction in total headcount, predominantly across SG&A, and we have reduced external spending as well.
In this way, we are reducing our burn while focusing investment on our critical business initiatives. While we have intentionally structured these changes to preserve our development and regulatory timeline, understand that the reduction in resources, specifically the reduction of future planned spending, does naturally introduce additional timeline risk. That being said, we are confident in the team we have in place and their ability to execute, innovate, and adapt when required, as they demonstrated throughout all of 2022. Closing with our regulatory progress, our conversations with the FDA have remained enthusiastic, and we are pleased with the level of collaboration in support of bringing our differentiated technology to market. Our process has involved significant open dialogue with the agency, and we are pleased to share that we are nearing the completion of our latest pre-submission.
We look forward to providing further updates once our clinical protocol is finalized and we are able. With that, I'll hand it over to Bill for a discussion of our fourth quarter and full year financial results.
Thank you, Adam, and thank you all for joining us today. I'll start with the full year 2022 results before touching upon cash burn and those cost-saving efforts Adam alluded to earlier. Total operating expenses for the full year 2022 were $80.1 million, a 110% increase from the $38.2 million in 2021. R&D expenses for the full year were $43.9 million compared to $22.1 million in 2021. General and administrative expenses for the full year were $29.7 million compared to $13.2 million in 2021. Sales and marketing expenses for the full year were $6.5 million compared to $3.0 million in 2021.
The increase in operating expenses for the full year can be primarily attributed to headcount growth and professional services expenses related to becoming a public company. Adjusted net loss for the full year was $78.8 million, equating to an adjusted net loss of $0.65 per share, as compared to an adjusted net loss of $38.3 million or an adjusted loss of $0.40 per share for the prior year. GAAP net income for the full year was $5.2 million due to an $84 million gain in the fair value of our warrant liability for the period, equating to net income of $0.04 per share. This compares to a net loss of $35.2 million or a loss of $0.36 per share for the prior year.
For a reconciliation of all non-GAAP measures to GAAP, please review our earnings press release. At the start of 2022, we set full year cash burn guidance of $65 million-$75 million and later tightened this range down to $65 million-$70 million. I'm happy to report we delivered on our guidance as our full year 2022 cash burn was $67 million. In the fourth quarter, we filed a shelf registration with the SEC that included an ATM facility. Utilizing this facility, we were able to opportunistically convert $10 million of inbound investor demand that reduced our net burn down to $57 million for the year.
Based upon the cost reduction initiatives that Adam touched upon, including a 14% reduction in force, our full year 2023 cash burn is now expected to be between $55 million and $65 million. As we ended 2022 with $116 million on the balance sheet, we now have roughly 2 years of cash runway. With these changes and our progress to date, we are confident that the future of Vicarious Surgical is bright. We look forward to continuing to provide updates as we execute on our business initiatives in the quarters ahead. With that, I will turn the call back to Adam. Adam?
Thanks, Bill. To our employees, partners, and investors that were with us throughout 2022, including those employees that were part of our reduction in force, I'm incredibly appreciative for your support and hard work. 2022 is a transformative and successful year for our company, driven by our team's ability to deliver on a number of value add initiatives and execute and adapt throughout the iterative development process. We are excited to continue this work in 2023 and take the next steps towards regulatory submission. Thank you again for joining today's call. Operator, would you please open the line for questions?
Of course. We will now begin the QA session. If you would like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question comes from the line of Ryan Zimmerman with BTIG. Please proceed.
Hello. Thanks for taking the questions. Good afternoon. Adam, I wanted to start maybe on, you know, your comments around the parallel path changes that you did and just the impact to timelines as you see it. I understand the timelines are stable today as they are, but where do you see risk? I mean, specifically, what's prompting that comment as you made those changes?
Yeah. Thanks for the question, Ryan. If we look back at the last year specifically, especially around the supply chain efforts, for example, there were a ton of incredibly effective risk mitigation efforts that we made around supply chain. Frankly, even before the situation became, you know, obvious to everybody, we were just doing these as a method to absolutely minimize the risk in our timeline. You know, a lot of these initiatives involve parallel pathing different systems around verification and validation going forward in order to, you know, absolutely ensure success on the first try.
In the current market environment with the current cost of capital, it makes a lot more sense for us to take some modest amount of additional timeline risk and bet on success, around our initial design and bet on our own team to be able to quickly fix any issues that may come up throughout the path.
Okay. Specifically, given those changes, and I think you're still waiting on clarity from the FDA, it sounds like, for the clinical trials. Is that the case? Or at least
That is correct.
... update investors publicly?
Yeah. It's. You know, we've been back and forth a number of times. You know, there's been a. I mean, I keep using the word collaborative, but I think on the last call, the FDA really reiterated the fact that, A, they're actually really excited about what we're doing, and our team e-emphasized that. B, you know, they reiterated their commitment to bringing medical devices to market via the least burdensome path that proves it's safe and effective. We're going back and forth with them still to make sure we come up with that.
Mm-hmm
least burdensome path.
Okay. I'll just sneak in one more, and then I'll hop back in queue. The difference between Beta 2 and the V1.0, it sounds like it was around the system arm, patient cart docking, et cetera. Is there any impact from those changes to the agency and your submissions to the agency that you think impact timelines, or are these not material to the timeline changes or the timelines that you have in place? Excuse me.
Yeah. I. Your question, I think, is obviously mostly focused on timeline, and there's no, you know, significant impacts of any of the changes from Beta 2 to V1.0. You know, I will share, though, that in each of these changes, both Beta 1 to Beta 2 and Beta 2 to V1.0, we are really thoughtful about not just the surgeon and hospital feedback, but also ensuring that any impact that it might have on regulatory submission is, frankly, is positive. The entire process...
Yeah
... of collecting all of this surgeon feedback is part of the formative process that minimizes risk during the clearance as well.
Thanks, Adam. Appreciate the questions and the answers.
Yeah. Thanks for asking.
Thank you. The next question comes from the line of Josh Jennings with Cowen. Please proceed.
Hi. This is Eric calling for Josh. Thanks for taking the question. With the Beta 2 system finalized, the design finalized, excuse me, and you're focused now on completing V1.0 of the system, could you help us understand what the remaining steps are for you to finalize V1.0 and just keep that within the timelines that you've set here?
Absolutely. We are pretty far along in the process of actually finalizing V1.0. We've already taken a ton of feedback over the second half of 2022 and all kind of culminating in that Tufts Medical Center cadaver lab series and the demo day that we did around that. We've taken that feedback, made a ton of relatively small design changes and, you know, our aim is to keep them as subtle as possible to minimize the differences focused on those areas around patient card and patient access and the kind of subtle changes around the tools and end effectors. We'll then be taking...
We'll be hitting design lock in the next month or so around V1.0, building it out and bringing it through the verification/validation process or, you know, at least starting that around the summer.
Okay, great. Thank you. Maybe thinking about the demonstration day from December, what sort of feedback have you received from that event? Any inbound interests from folks who weren't previously involved or in communication with the company? Thank you for the questions.
Yeah, absolutely. We've received a pretty good amount of inbound interest from the demonstration day across, you know, frankly, everything from an inbound investor interest, through, you know, hospitals and surgeons that have seen the videos and seen the progress of Beta 2 as well. The feedback overall from the demonstration day has been, you know, entirely positive. The demo day was fantastic. The feedback around Beta 2 itself, I'd say was pretty much entirely positive as well with, you know, subtle changes that people were looking for, again, around those areas I mentioned previously.
Great. Thanks again.
Thank you. The next question comes from the line of Adam Maeder with Piper Sandler. Please proceed.
Hi, good afternoon. Thank you for taking the questions. A couple from me. Maybe we could just start with the cost reduction initiatives and the OpEx guide for 23. You know, the OpEx guidance well below what we were modeling for spend this year. Heard some of the commentary around the cost reduction initiatives, but maybe just specifically frame up what changed, you know, where those cost savings are, and kinda how do you know, kinda push your system forward without sacrificing quality of product or speed to market? Then I had a follow-up or two. Thanks.
Yeah. Yeah. No, I think, first of all, it was cash burn guidance, not OpEx guidance. I'm sorry. Our cash burn is lower than our OpEx due significantly to non-cash items like stock compensation, depreciation...
Got it.
That sort of thing.
Yep. Thank you.
55.59 is the cap. I would say that in terms of the re-reduction in force, specifically, the source of the headcount reductions was largely focused on G&A and sales and marketing. Actually we'll see, you know, increased spending in R&D. Really the thesis behind the whole thing was to really focus spending on those things that get a quality product out the door fast, and divert resources in this economic environment, to ensure that we deliver on those things.
Okay. That's helpful, Bill. Thank you for clarifying my question there. You know, I guess I also just wanted to ask about kind of the message around timelines because, you know, on one hand I kinda heard no change to previous timelines, but then I also heard, and hopefully I'm recalling this correctly, but reduction of resources may be introducing some additional timeline risk. Exactly what is the message from a timeline standpoint? Do you still expect to make FDA submission for ventral hernia in late calendar 2024? Then I had one more follow-up. Thanks.
Yeah.
Yeah.
I would say. Go ahead, Adam.
I'm sorry, Bill. I definitely wanna emphasize that we, you know, we are still on track for FDA submission in late calendar year 2024. The, you know, the difference here is around some additional timeline risk. To look forward at a few particular, you know, activities, we are, you know, as Bill mentioned, we've significantly reduced SG&A spending, and that doesn't really have any impact to timeline risk going forward. I think a lot of those activities, frankly, have been successful so far, and some of the head count was not necessary or not prudent in the current market environment.
Going forward, though, some of the reduced external spending budget, that we have, does have some additional timeline risk around our ability to rapidly and quickly respond to anything that comes up during the V&V process. It is, you know, the timeline that we have today is absolutely, you know, it is still the same for, filing around the end of 2024, but with some added risk that is in our ability to rapidly and quickly respond to issues as they come up through that process.
Okay. That's, that's helpful, Adam. Appreciate the extra color there. Just one last one if I can sneak it in. You know, good progress on the Beta 2 system, productive demo day this past December. It sounds like you're targeting design lock for the V1.0 system in the next, I think you said month or so. Maybe just talk about kind of the manufacturing process and you know, building out the systems. You know, what are the goals there? How many systems do you have to build for the clinical trial? Just level of confidence that, you know, you can do so in a timely manner. Thanks again for taking the questions.
Yeah, absolutely. The trial's likely to be, again, I'm saying likely because it does depend on the agency, likely to be just a small handful of systems. We're confident in our ability to build those out. We build a handful of each of our builds today in-house. The more challenging effort actually is around the consumables, the arms, the camera, the tools, rather than the capital systems production. We started building out the supply chain and the production lines for that.
Around a year ago, at this point. We're well on our way to building that out. We've actually had, you know, at this point, full cameras with no support and assistance from our company, produced by our main contract manufacturer, who is, frankly, one of the big CMs in the space. We're confident that within the timeline we'll be able to ramp these CMs up. It's frankly the reason we're using them. Helpful. Thank you. Yeah, thanks for the questions.
Thank you. The next question comes from the line of Kyle Rose with Canaccord. Please proceed.
Great. Thank you for taking the questions. You know, a lot's been asked, so I just wanted to ask two quick ones on the burn expectations. You know, 14% RIF here. Just, can you help us understand how that'll affect the P&L, at least in the first quarter? I assume there will be some one-time charges in the Q1 related to that, and then just how we should think about that moving forward. I'll have one follow-up.
Yeah. No, it's a good question. I would say in terms of, you know, severance costs, exit costs, that sort of thing, should not be material. I'd say less than $1 million, you know, in the quarter.
Okay, great. Then I just wanted to make sure I understood the timing here. You know, you've made the RIF here to bring down burn. Understand the guidance, $55 million to $65 million this year. I think you ended the year about $116 million, $120 million in cash. You're talking about two years of cash. Just trying to understand what we should think about burn expectations in 2024, given it sounds like that's gonna be the real year of, you know, the clinical trials and ramping up for FDA clearance and launch thereafter. How should we think about the transition or the acceleration in burn as you move through 2024?
Yeah. At this point, we're not providing guidance on 2024. I think we just. You know, when we speak about two years of cash, that would be at 2023's burn rate. Obviously, we've got a strong balance sheet right now. The changes that we've made, I think we feel strengthen our balance sheet and give great flexibility in terms of investigating future financing in whatever form that might be. It gives us optionality. At the moment, we're not, you know, necessarily telegraphing that 2024 burn the same as 2023, but at least to frame up our current balance sheet, it's two years worth of spend.
Great. Thank you for taking the question.
Thank you. There are no additional questions left at this time. That concludes today's conference call. You may now disconnect your line.