Second Sight Reports First Quarter 2019 Financial Results
May 15, 2019
— Company to Accelerate Development of Orion® Visual
Cortical Prosthesis System —
LOS ANGELES–(BUSINESS WIRE)–Second Sight Medical Products, Inc. (NASDAQ:EYES) (“Second Sight” or the
“Company”), a developer, manufacturer and marketer of implantable visual
prosthetics that are intended to create an artificial form of useful
vision for blind individuals, today reported financial results for the
three months ended March 31, 2019.
Recent Financial and Corporate Highlights:
-
Announced a plan to accelerate development of the Orion Visual
Cortical Prosthesis System (“Orion”) by aligning organizational
capabilities and focusing resources primarily on advancing Orion;-
Expand research and development efforts supporting Orion and
related technologies, including adding 25 new positions this year; -
Support Argus® II Retinal Prosthesis Systems (“Argus
II”) users worldwide; - Continue to perform new Argus II implants with available inventory;
-
Suspend new production of Argus II systems in the near future and
reduce commercial spending;
-
Expand research and development efforts supporting Orion and
-
Presented positive interim results on its Early Feasibility Study of
the Orion Visual Cortical Prosthesis System at the Fifth Annual BRAIN
Initiative® Investigators Meeting; -
Sixth subject has been cleared for home use as part of the Orion Early
Feasibility Study; - Reported net sales of $1.1 million in the first quarter of 2019;
- Implanted 10 Argus II systems worldwide; and
-
Raised aggregate gross proceeds of approximately $34.6 million through
a rights offering in February 2019.
“Our decision to accelerate development of Orion is based on both the
positive interim results of our Early Feasibility Study and on the
significant market opportunity we see for this potentially
transformative product. We believe it is the right time to reallocate
resources toward this more attractive platform, which holds the
potential to treat virtually all forms of blindness and extend our
leadership position in artificial vision,” stated Will McGuire,
President and Chief Executive Officer of Second Sight.
“We are also encouraged by our ongoing discussions with the U.S. Food
and Drug Administration (“FDA”) and the Center for Medicare and Medicaid
Services’ (CMS) proposed new rule regarding reimbursement for
Breakthrough Devices, such as Orion. We believe that Orion provides an
opportunity to address a much larger patient population and a
significant unmet need in the United States and globally,” continued
McGuire.
“Importantly, although we are suspending production of new Argus II
systems, we will continue to support our existing users and plan to
pursue regulatory approvals for our next-generation externals, Argus
2s,” concluded McGuire.
First Quarter 2019 Financial Results
Net sales on a GAAP basis were $1.1 million for the first quarter of
2019 compared to $1.0 million in the first quarter of 2018. Revenue was
recognized for nine units in both periods. On a GAAP basis, revenue
recognized per implant was approximately $125,000 in the first quarter
of 2019 and $108,000 in the same period of 2018.
Gross profit for the first quarter of 2019 was $0.4 million compared to
a gross profit of $0.3 million in the first quarter of 2018. Cost of
sales was $0.7 million in both periods. In the first quarter of 2019,
cost of sales consisted primarily of the cost of products implanted and
unabsorbed production costs in the quarter of $0.7 million. In the first
quarter of 2018, the cost of sales included approximately $0.8 million
for the cost of products implanted and unabsorbed production costs less
an adjustment of $0.1 million for a reduction in the reserve for excess
inventory.
Research and development expense, net of funding received from grants,
decreased to $2.2 million during the first quarter of 2019 compared to
$2.5 million in the first quarter of 2018. In the first quarter of 2019
the Company utilized $0.6 million of grant funds to offset costs as
compared to zero in 2018. The costs before the grant revenue offset
increased from the prior year primarily due to verification and
validation activities related to Argus 2s, and consists of increased
headcount and costs for internally produced prototypes.
Clinical and regulatory expense was $1.0 million during the first
quarter of 2019 compared to $1.3 million in the first quarter of 2018.
The decrease of $0.3 million is primarily attributable to decreased
costs associated with the Orion feasibility study. The Company expects
clinical and regulatory costs to increase in the future as it conducts
additional clinical trials to assess new products such as Orion and
related enhancements to the user experience.
Selling and marketing expense was $2.1 million during the first quarter
of 2019 compared to $3.0 million in the first quarter of 2018. The
decrease of $0.9 million is primarily the result of decreased use of
outside services, reduced headcount and related compensation expenses.
General and administrative expense was $2.4 million in the first quarter
of 2019 compared to $3.2 million in the first quarter of 2018. The
decrease of $0.8 million is primarily attributable to $0.5 million in
lower compensation costs, primarily due to cancelled stock option grants
and reduced outside service costs of $0.2 million.
The Company also recorded a $2.4 million non-cash impairment charge to
its reserve for excess inventory and obsolescence in the first quarter
of 2019 related to the Company’s plans to suspend Argus II production.
Net loss for the first quarter of 2019 was $9.7 million, or a loss of
$0.10 per share, compared to a net loss of $9.8 million, or a net loss
of $0.17 per share, in the first quarter of 2018.
The non-GAAP net loss for the first quarter of 2019, excluding certain
non-cash items, was $6.4 million, or $0.07 per share, compared to a
non-GAAP net loss of $8.5 million, or $0.14 per share in the first
quarter of 2018.
As of March 31, 2019, Second Sight had $31.7 million in cash and cash
equivalents. In February 2019, the Company completed a rights offering
that provided approximately $34.6 million of gross proceeds. The Company
expects its cash to fund operations into the second quarter of 2020.
In connection with the revised strategy, the Company expects to record a
restructuring charge of $0.7 million in the second quarter of 2019
related to severance and related benefits.
For a full reconciliation of non-GAAP financial measures to the most
comparable GAAP financial measures, please refer to the tables included
with this press release.
2019 Key Objectives
-
Complete analysis of 12 month data from the first five Orion early
feasibility study subjects; -
Enroll additional subjects in the Orion U.S. Early Feasibility Study
to gather incremental safety and performance data; -
Reach agreement with the FDA regarding the clinical and regulatory
pathway to commercialization for Orion; and -
Advance future refinements, such as the delivery of prototype eyewear
suitable for patient testing with eye tracking technology, distance
filtering/decluttering or thermal imaging.
Conference Call
As previously announced, Second Sight management will host its first
quarter 2019 conference call as follows:
| Date | Wednesday, May 15, 2019 | ||||
| Time | 4:30 PM EDT | ||||
| Telephone |
U.S.: |
(800) 682-9959 | |||
| International: | (303) 223-2689 | ||||
| Webcast (live and archive) |
www.secondsight.com |
||||
A replay of the conference call will be available for two weeks after
the call’s completion by dialing (800) 633-8284 (U.S.) or (402) 977-9140
(International). The conference ID for the replay is 21923693. The
archived webcast will be available for 30 days via the aforementioned
URL.
About Second Sight
Second Sight Medical Products, Inc. (NASDAQ: EYES) develops,
manufactures and markets implantable visual prosthetics that are
intended to deliver useful artificial vision to blind individuals. A
recognized global leader in neuromodulation devices for blindness, the
Company is committed to developing new technologies to treat the
broadest population of sight-impaired individuals. The Company’s U.S.
headquarters are in Los Angeles, California, and European headquarters
are in Lausanne, Switzerland. More information is available at www.secondsight.com.
About the Orion Visual Cortical Prosthesis System
Leveraging Second Sight’s 20 years of experience in neuromodulation for
vision, the Orion® Visual Cortical Prosthesis System (Orion)
is an implanted cortical stimulation device intended to provide useful
artificial vision to individuals who are blind due to a wide range of
causes, including glaucoma, diabetic retinopathy, optic nerve injury or
disease, and eye injury. Orion is intended to convert images captured by
a miniature video camera mounted on glasses into a series of small
electrical pulses. The device is designed to bypass diseased or injured
eye anatomy and to transmit these electrical pulses wirelessly to an
array of electrodes implanted on the surface of the brain’s visual
cortex, where it is intended to provide the perception of patterns of
light. A six-subject early feasibility study of the Orion is currently
underway at the Ronald Reagan UCLA Medical Center in Los Angeles and the
Baylor College of Medicine in Houston. No peer-reviewed data is
available yet for the Orion system. The Company anticipates enrolling
additional feasibility subjects in 2019 while simultaneously negotiating
the clinical and regulatory pathway to commercialization with the FDA as
part of the Breakthrough Devices Program.
Safe Harbor
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the “safe harbor” created by those
sections. All statements in this release that are not based on
historical fact are “forward looking statements.” These statements may
be identified by words such as “estimates,” “anticipates,” “projects,”
“plans,” “strategy,” “goal,” or “planned,” “seeks,” “may,” “will,”
“expects,” “intends,” “believes,” “should,” and similar expressions, or
the negative versions thereof, and which also may be identified by their
context. All statements that address operating performance or events or
developments that Second Sight expects or anticipates will occur in the
future, such as stated objectives or goals, our refinement of strategy,
or that are not otherwise historical facts, are forward-looking
statements. While management has based any forward-looking statements
included in this release on its current expectations, the information on
which such expectations were based may change. Forward-looking
statements involve inherent risks and uncertainties which could cause
actual results to differ materially from those in the forward-looking
statements as a result of various factors, including those risks and
uncertainties described in or implied by the Risk Factors and in
Management’s Discussion and Analysis of Financial Condition and Results
of Operations sections of our Annual Report on Form 10-K, filed on March
19, 2019, our Form 10-Q to be filed on May 15, 2019, and our other
reports filed from time to time with the Securities and Exchange
Commission. We urge you to consider those risks and uncertainties in
evaluating our forward-looking statements. We caution readers not to
place undue reliance upon any such forward-looking statements, which
speak only as of the date made. Except as otherwise required by the
federal securities laws, we disclaim any obligation or undertaking to
publicly release any updates or revisions to any forward-looking
statement contained herein (or elsewhere) to reflect any change in our
expectations with regard thereto, or any change in events, conditions,
or circumstances on which any such statement is based.
Financial Tables Follow
| SECOND SIGHT MEDICAL PRODUCTS, INC. | ||||||
| AND SUBSIDIARY | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| (in thousands) | ||||||
| March 31, | December 31, | |||||
| 2019 | 2018 | |||||
| (unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 31,682 | $ | 4,471 | ||
| Accounts receivable, net | 597 | 504 | ||||
| Inventories, net | 1,602 | 3,250 | ||||
| Prepaid expenses and other current assets | 1,155 | 1,395 | ||||
| Total current assets | 35,036 | 9,620 | ||||
| Property and equipment, net | 963 | 1,025 | ||||
|
Right-of-use assets |
2,508 | – | ||||
| Deposits and other assets | 41 | 37 | ||||
| Total assets | $ | 38,548 | $ | 10,682 | ||
| LIABILITIES AND EQUITY | ||||||
|
Current liabilities: |
||||||
| Accounts payable | $ | 1,600 | $ | 1,305 | ||
| Accrued expenses | 2,309 | 2,503 | ||||
| Accrued compensation expenses | 2,080 | 2,690 | ||||
| Accrued clinical trial expenses | 1,016 | 933 | ||||
|
Current operating lease liabilities |
210 | – | ||||
|
Contract liabilities |
218 | 167 | ||||
| Total current liabilities | 7,433 | 7,598 | ||||
|
Long term operating lease liabilities |
2,586 | – | ||||
| Total liabilities | 10,019 | 7,598 | ||||
| Commitments and contingencies | ||||||
| Stockholders’ equity | 28,529 | 3,084 | ||||
| Total liabilities and stockholders’ equity | $ | 38,548 | $ | 10,682 | ||
| SECOND SIGHT MEDICAL PRODUCTS, INC. | ||||||||
| AND SUBSIDIARY | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| Net sales | $ | 1,128 | $ | 976 | ||||
| Cost of sales | 731 | 668 | ||||||
| Gross profit | 397 | 308 | ||||||
| Operating expenses: | ||||||||
| Research and development, net of grants | $ | 2,183 | $ | 2,474 | ||||
| Clinical and regulatory | 1,006 | 1,348 | ||||||
| Selling and marketing | 2,103 | 3,011 | ||||||
| General and administrative | 2,449 | 3,244 | ||||||
| Impairment charge | 2,424 | – | ||||||
| Total operating expenses | 10,165 | 10,077 | ||||||
| Loss from operations | (9,768 | ) | (9,769 | ) | ||||
| Interest and other income, net | 68 | 16 | ||||||
| Net loss | $ | (9,700 | ) | $ | (9,753 | ) | ||
| Net loss per common share – basic and diluted | $ | (0.10 | ) | $ | (0.17 | ) | ||
| Weighted average shares outstanding – basic and diluted | 96,567 | 59,052 | ||||||
| SECOND SIGHT MEDICAL PRODUCTS, INC. | ||||||||
| AND SUBSIDIARY | ||||||||
|
Reconciliation of Non-GAAP Information to Most Comparable GAAP Measures |
||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| Net loss | $ | (9,700 | ) | $ | (9,753 | ) | ||
| Add back non-cash charges: | ||||||||
| Stock-based compensation | 898 | 1,350 | ||||||
|
Excess inventory reserve |
2,424 | (109 | ) | |||||
| Non GAAP net loss | $ | (6,378 | ) | $ | (8,512 | ) | ||
| Net loss per share | $ | (0.10 | ) | $ | (0.17 | ) | ||
| Add back non-cash charges: | ||||||||
| Stock-based compensation | 0.01 | 0.03 | ||||||
|
Excess inventory reserve |
0.02 | (0.00 | ) | |||||
| Non GAAP net loss per share | $ | (0.07 | ) | $ | (0.14 | ) | ||
Contacts
Investor Relations:
Institutional
Investors
In-Site Communications, Inc.
Lisa Wilson,
President
T: 212-452-2793
E: [email protected]
or
Individual
Investors
MZ North America
Greg Falesnik, Managing
Director
T: 949-385-6449
E: [email protected]
Media:
Nobles Global Communications
Laura
Nobles or Helen Shik
T: 617-510-4373
E: [email protected]
E:
[email protected]