Summary
- Vicarious Surgical's Beta 2 system is complete, it's now working toward its next system, v1.0.
- In order to reduce cash burn, RBOT cut its workforce by 14 percent while cutting other costs.
- With the reduction in spending the company introduces more time line risk, which means it's heavily reliant on using its initial design to achieve success.
On its last earnings call, Vicarious Surgical Inc. ( RBOT ), a company that is in the process of developing single-incision surgical robot for the purpose of performing minimal invasive surgery, announced its Beta 2 system was complete, and was now working toward its next system, the v1.0.
In the current economic climate, including the high cost of capital, the company has decided to change its strategy in order to reduce its costs while extending its cash runway.
To that end, it has cut back on 14 percent of its workforce and lowered spending, which has introduced a timeline risk element, along with the additional risk associated with heavy reliance on its initial design, now that the reduction in spending won't allow it to go down parallel paths as it had in the past.
In this article, we'll look at some of its recent numbers, specifically in regard to cash burn, expenditures, and its changing strategy.
Some of the numbers
With 2022 being the first full year as a publicly traded company, management apparently decided to primarily give a full-year report, even though it was the fourth quarter 2022 earnings call.
Total operating expenses for all of 2022 were $80.1 million, up 110 percent from the $38.2 million in overall operating expenses in 2021. R&D expenses for total 2022 were $43.9 million, up from R&D expenses of $22.1 million in full year 2021.
G&A expenses climbed to $29.7 million for 2022, in comparison to $13.2 million in G&A expenses in all of 2021. Sales and marketing costs came in at $6.5 million for total 2022, compared to sales and marketing expenses of $3.0 million for full year 2021.
Adjusted net loss for full year 2022 was $(78.8) million, or -$(0.65) per share, compared to an adjusted net loss of $(38.3) million, or -$(0.40) per share for full year 2021.
Even though the company generated no revenue in the quarter or year, for all of 2022 it did produce GAAP net income of $5.2 million as a result of an $84.00 million gain in fair value from its warrant liability, resulting in earnings per share of $0.04.
Cash burn for full year 2022 was $67.00 million, meeting the guidance range of $65.00 million to $70.00 million. One thing the company did specifically report for the fourth quarter was it had filed a shelf registration with the SEC which also had an ATM facility with it. Using the facility, the company was able to reduce its net cash burn to $57.00 million by converting "$10 million of inbound investor demand."
After cutting 14 percent of its workforce and cutting other costs, cash burn for full year 2023 is projected to be in a range of $55.00 million to $65.00 million. At the end of calendar 2022 the company had $116.00 million in cash and cash equivalents on its balance sheet.
Where things stand at this time
RBOT completed its Beta 1 tests in 2021, and in 2022 has finalized its Beta 2 development, which included the performing of extensive cadaveric testing to finalize that stage of development. Beta 2 was finalized at the completion of "cadaveric ventral hernia procedures at Tufts Medical Center."
Management reported the procedures were performed by well-known expert in robotic abdominal wall reconstruction, Dr. Igor Bellinski. At its December System Demonstration Day, the company released the video showing the procedures to various representatives of university hospitals in order to show how its system could be used. Now that its Beta 2 system has been completed, it's taking steps toward its next system - v1.0. What's included in that process is first, getting feedback from its experiences with Beta 2 via its surgeon Luminary Group and its Center of Excellence partners.
Based upon the feedback, the company will be able to iterate by making the needed adaptations to its patient care cart docking, system arms, and its approach to patient access to it. The company sees it being able to finalize v1.0 in the first half of 2023.Where the risk lies in the process is its reliance on the existing design, in that it will have to be able to make the needed changes based upon that design, rather than using parallel designs as it had before making the decision it needed to cut costs.
In other words, the company is exposed to it being able to make adaptations based upon the main design it has in place, or a small handful of designs when clinical trials begin. If there are any significant obstructions in the process, it would be a heavy blow to the company in regard to its timeline risk and cash runway. On the positive side, getting a lot of feedback from surgeons could presumably mitigate much of that risk, and I'm assuming that the design it chose to build upon was based upon that feedback.
Partnerships to expedite the process
In preparation for potential release of its system, RBOT has entered into partnerships in order to accelerate adoption of its system once it's ready for prime time.
To that end it has formed the Luminary Group, which includes 20 experienced surgeons which have been given the task of provide the type of expertise that will help guide the company's technology in all clinical aspects associated with it.
It has also entered into agreements with health care networks like Pittsburgh Creates and HCA Healthcare for the purpose of leveraging their expertise and resources in order "to support system development, regulatory clearance and commercial launch."
RBOT also added three new members to its board of directors that have the needed expertise to help the company through its next stage of development.
Conclusion
RBOT is making good progress toward its goal of having an FDA submission for ventral hernia by the latter part of calendar 2024. Management said, at this time it's still on track to achieve that goal, but added there is now more timeline risk because of the cut back in spending.
Based upon cash and cash equivalents of $116.00 million, the company sees a runway of approximately two years, which of course would bring it close to the FDA submission time frame, depending on when the submission was made.
But how I see it, not only is there a timeline risk now in place, but there is also a risk connected to the iteration process, where there isn't a lot of room for error on any big scale. Any significant interruption in the process would change a lot of things for the company, especially pushing the timing of a market-ready system further out.
Under that scenario, RBOT would be forced to raise a significant amount of capital to maintain operations and boost sales and marketing, which would be critical at that stage of development.
With the type of system RBOT is developing, I think it has a good chance of being approved of, taking into consideration the company must execute on its strategy.
That said, cutting back on spending has introduced more risk for the company over the next couple of years, and it leaves less room for error than it had before. For that reason, it remains highly speculative, and isn't likely to any sustainable upward moves in its share price, especially after bouncing off its 52-week low of $1.69 per share on December 27, 2022, and trading at $3.16 per share as I write.
For investors interested in RBOT stock, it would probably be best to wait for a pullback because there was no visible catalyst to trigger the upward move, which suggests to me a correction is on the horizon.
For further details see:
Vicarious Surgical: Moving Toward A Completed System - But Risks Remain