Viveve Medical, Inc (NASDAQ:VIVE) Q3 2019 Earnings Conference Call November 7, 2019 5:00 PM ET
Jeannie Swindle – Senior Director of Corporate Communications
Scott Durbin – Chief Executive Officer and Director
Conference Call Participants
Good afternoon, and welcome to the Viveve Third Quarter 2019 Financial Results Conference Call. [Operator Instructions] Speaking today are Viveve’s Chief Executive Officer and Director, Scott Durbin; and Jeannie Swindle, Senior Director of Corporate Communications. Please note, this event is being recorded. I’ll now turn the call over to Jeannie Swindle.
Thank you, operator, and welcome, everyone. Before we begin, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company. This includes remarks about the corporation’s projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
These risks and uncertainties are described more fully in the company’s annual report on Form 10-K and other filings made with the SEC, which are also available on the company’s website. Also, any forward-looking statements represent management’s views only as of the date of this conference call and should not be relied upon as representing management’s views as of any subsequent date. I would now like to turn the conference call over to Scott Durbin, our Chief Executive Officer.
Thank you, Jeannie. Good afternoon, everyone, and thank you for joining us. I’d like to begin the call today by reviewing the progress of our major commercial transformation in the United States that was initiated in June of this year from a capital sales model to a recurring revenue model and the positive results demonstrated in the first full quarter of its execution. I’ll then provide a brief update on our clinical development programs in pursuit of label expansions in sexual function and stress urinary incontinence, and I’ll conclude with an overview of Viveve’s current and continuing areas of focus. The third quarter 2019 marked the first full quarter of successful results of our new recurring revenue model in the U.S. The change from a capital sales model to a recurring revenue model was made in June of this year and represented a major transformation to our commercial strategy in the United States. The strategic intent of this transition was to increase system adoption rates by reducing the barrier to entry for physicians and lowering the sales cost to place each system. We are pleased that our third quarter U.S. commercial results are confirming our strategic decision to adopt the new sales model.
Throughout the third quarter, we successfully increased customer adoption rates on a per rep basis, and per system profitability is improving dramatically due to reduced selling time and sales expense per unit. In fact, the third quarter 2019 results demonstrate that sales rep productivity has increased by more than 50% and new customer acquisition costs have decreased significantly. Importantly, the response from potential new customers has been incredibly positive, and the long-term financial advantage of this model can’t be understated.
While revenue has been reduced in the near term as we build the installed base of recurring revenue model units in the U.S., we anticipate that the future will bring a scaling of recurring, more predictable revenue, dramatically reduced sales costs, accelerated consumables sales and improved financial profitability. The launch of the new recurring revenue model in the U.S. in June was supported by the introduction of an expanded suite of customer services designed to enhance the success of our physician customers.
We are extremely pleased with the effectiveness of these services and the positive physician response that we’ve received. Members of our new dedicated customer care team, who became the company’s point of contact for new physician and clinic customers, are actively engaged with accounts, enabling our sales reps to focus on new placements.
This team coordinates and assists with practice development, triages, medical or technical issues, promotes product offerings and executes programs to increase and drive higher utilization rates. Viveve University, our new on-site comprehensive training program for customers has been well attended with over 70% of new provider customers actively participating.
The educational interactive sessions provide clinical training, expert demonstrations, patient selection guidelines, robust marketing resources and communication tips for use in consultations with prospective patients. We strongly believe that the training on best practices offered at Viveve University will lead to enhanced provider success, expanded patient demand and growth in their clinical practices.
Finally, our unbranded consumer marketing campaign, successfully launched in July, is supporting and helping to drive patients to our current and future providers. Geographically targeted around Viveve accounts and more recently expanded to cover new customer locations, our campaign is building a broader awareness of prevalent women’s intimate health conditions. To date, the campaign has drawn close to 53,000 visitors, over 11,000 of whom have navigated to our provider page. We are very pleased with the results and are working to improve our campaign’s reach, potential patient engagement and connectivity to local physicians who offer Viveve treatments. While the change to recurring revenue model in the U.S. was a massive transition from an organizational and financial perspective, we’re pleased with the progress made to date. Total revenue for the quarter ending September 30, 2019, was $1.1 million from the global placement of 31 systems and the sale of more than 1,300 disposable treatment tips and consumables. Of the total 31 Viveve Systems placed worldwide in the third quarter, 27 were in North America, and 25 of those systems were placed in the U.S. under the new recurring revenue model. Our goal is to continue to demonstrate the growing success of this model in the quarters ahead as we look to scale our sales team and this model in the near future to drive greater sales growth and better profitability.
Moving to our international business. Viveve’s products have been and will continue to be supported by the company’s current distribution partners without significant change to the international business model. In addition to third quarter international sales volumes being affected by the seasonality, typical experience during this Q3 period, the previously reported decision allowing distribution partners to refill sales pipelines in order to move closer to real-time ordering resulted in light international system placements during the third quarter. However, we believe over time, this effort will improve ordering predictability and will also help us to drive higher international ASPs in the future.
Also during Q3 of this year, two new distribution partnership agreements were announced for important international markets: Paragon Meditech, distinguished for their highly successful introduction of CoolSculpting, has exclusive distribution of Viveve’s CMRF technology in Hong Kong, China and Macau; and Salient Medical Solutions has become the Viveve’s new exclusive distributor in Canada. On the clinical development side.
Viveve continues its commitment to provide evidence-based, safe and effective clinical solutions to improve women’s intimate health conditions using our proprietary CMRF technology platform. VIVEVE II, our ongoing sexual function study, is a randomized, double-blind, sham-controlled trial that has completed enrollment of 250 patients at 2019 clinical sites in the United States.
The top line 12-month data readout of this trial is expected in April of next year, and we anticipate positive results from this important trial that may support a marketing application for a new U.S. commercial indication, representing an estimated consumable market opportunity of $6 billion to $7 billion worldwide. It is important for me to again note that VIVEVE II trial was preceded by VIVEVE I, our robust, published, blinded and sham-controlled trial conducted internationally on 174 patients, which showed a clinically meaningful and statistically significant improvement in vaginal laxity and sexual function.
With respect to our SUI program, in September, following the positive but inconclusive results from our LIBERATE-International trial, the company submitted an investigational testing application to the Canadian Ministry of Health to conduct a three-arm, three-month feasibility study comparing Viveve’s CMRF treatment to a cryogen-only treatment to an inert sham treatment for the improvement of SUI in women. Following regulatory clearance from Health Canada, Viveve intends to rapidly initiate the short- term trial. Results of the planned three-month feasibility study are targeted for readout in the second quarter of next year. And if positive, we intend to resubmit our Investigational Device Exemption to the U.S. FDA for approval to conduct LIBERATE-U.S. for – our U.S. trial, for improvement in SUI in women. SUI is a condition that affects an estimated 25 million to 30 million women worldwide and represents an estimated $12 billion to $20 billion global consumable market opportunity.
In closing, as Viveve moves forward through the remainder of 2019 and into 2020, our focus will remain on ensuring the continued success and growth of the recurring revenue model and the integral support programs in the U.S.; preparing for the upcoming VIVEVE II data readout in April, which could lead to the first FDA clearance for a new sexual function indication in the U.S.; and completing our planned SUI feasibility study to advance our SUI clinical development program in the United States.
Finally, I’d like to thank the incredible and very talented team at Viveve for embracing what has been a massive commercial and organizational change and for remaining committed to our vision of being the leading provider of treatments for women’s intimate health conditions. As we pioneer our way towards the first U.S. indications for sexual function and mild to moderate stress urinary incontinence, it will be our collective commitment to this mission that ultimately helps millions of women worldwide. Again, thank you for joining today’s call. Operator, this concludes our prepared remarks.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.