Stereotaxis, Inc. ($STXS)

Good morning. Thank you for joining us for Stereotaxis' Investor Conference Call. Certain statements during the conference call and question-and-answer period to follow may relate to future events, expectations and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company in the future to be materially different from the statements that the company's executives may make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. Additional information related to the acquisition of Robocath can be found in Form 8-K filed with the SEC. [Operator Instructions] As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis.

Thank you, operator. Good morning, everyone. We appreciate you joining today's investor call to discuss the acquisition of Robocath. We assume you've all had the chance to read the press release that came out this morning announcing the acquisition. The press release is available on our Investor Relations website. I'll keep our prepared remarks relatively brief such that most of the time can be spent on Q&A. I'm taking this call from Robocath's headquarter, and we have here with me their Founder and CEO, Philippe Bencteux, who will also be available for Q&A. I'd like [indiscernible] to start with some background on Robocath and its technology. I would complement our strategic road map and expand our opportunity and our intentions and expectations in the coming quarters. We are very excited to be making this announcement. Robocath represents a highly strategic addition to Stereotaxis, amplifying and accelerating our strategy as the leading robotic platform for the broad spectrum of endovascular procedures. The combination of our technologies will more quickly allow us to deliver next-generation fully integrated and highly capable robotic solutions for electrophysiology and even more so for interventional cardiology and neuro interventions. Let's start with some basic background. Robocath is a venture-backed private company based in Roan France, just north of Paris. It was founded in 2009 by Philippe an interventional radiologist. The company has about 40 employees, the majority of whom are in engineering. It has raised approximately EUR 70 million to date, with the vast majority of this spent on R&D to advance its core robotic technology. It resleased the first-generation robotic system, the R-One system in 2019 after receiving CE Mark receipt in Europe and has 15 of these systems installed predominantly in Europe and China. It has spent the last several years incorporating learnings from initial clinical use to build upon the original R-One system and develop a far more capable next-generation system. Robocath approached the topic of robotics and endovascular procedures from a very different vantage point in Stereotaxis, both in terms technology, mechanism of action and clinical focus. Its system is a sophisticated mechanical grasper that replicates the human hand holding and manipulating up to 5 interventional guidewires and catheters simultaneously. [indiscernible] can be installed quickly in existing cath labs without construction and used with typical nonmodified interventional devices that would otherwise be held by the physician's hand. This differs from Stereotaxis approach of using magnetic [indiscernible] to allow for otherwise unprecedented navigation of one interventional device at a time directly for [indiscernible]. Robocath's mechanism is particularly important for interventional cardiology and neurointervention with multiple devices, wires, catheters, stents, balloons, must be navigated in tandem. The closest comparison to Robocath's technology was [ Corindus ], which was acquired for $1.1 billion by Siemens in 2019. Corindus similarly had developed a robot with a mechanical grasper mechanism of action for use in interventional cardiology. The system ultimately suffered from limited clinical value due to its immature technology, leading Siemens to pull back from the market. We believe that Robocath's technology as it is being implemented in its next-generation system, hope to be architecturally more capable and elegant than Corindus. With the use of Bionic fingers that provide better traction with [indiscernible] devices and more precise manipulation and a system design that supports smoother and more efficient workflow with a better cost profile. Stereotaxis' go-alone approach to robotics in interventional cardiology and neuro intervention has been predicated on developing magnetically steered guidewires and guide catheters what we have called previously the Imagine family of guidewires and guide catheters to navigate tortuous vasculature. We're still advancing that strategy and expect regulatory approvals for both Imagine devices later this year. The devices will address specific unmet medical needs where our unique mechanism of action steering directly from the distal tip can provide significant value. But we always knew that to make these procedures fully robotic where all aspects of the procedure can be done robotically and ultimately remotely, we needed a sophisticated mechanical grasper to complement our magnetic mechanism. We have plans for how such technology could be developed internally, but simultaneously maintain an openness to an acquisition. [Technical Difficulty]

Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference. Please hold and the call in resume momentarily. Thank you for your patience. Mr. David Fischel, you may resume the conference.

Sorry, everyone. I very much apologize somehow the phone lost connection here. So sorry for the delay. I think where we have left off and I kind of was mentioning that we had plans to develop kind of a mechanical grasper internally in-house, but simultaneously maintain an openness to doing an acquisition if the right technology presented itself in an opportunistic fashion that accelerated and augmented what we would otherwise have done internally. And so we kept a close watch on the field of companies developing surgical robots. And several years ago, noted Robocath's technology as something that could be of interest. Over the last year, we had the opportunity to start more detailed dialogue and deeper due diligence, we were impressed with what the Robo gas team had accomplished and views the next-generation system as the most thoughtful approach to the challenges in designing a scalable and fully capable mechanical grasper. The approach has been sharpened their clinical experience with R-One system, and they have an IP portfolio that will be a strong barrier of entry for any competitor. Acquiring Robocath, became an actionable opportunity more recently, and we were pleased to be able to come to terms that we believe are fair and allowing both companies and their shareholders for long-term success. Our plan with Robocath in the near term is primarily to leverage Stereotaxis' technology and expertise or quickly advanced the next-generation robotic system towards regulatory submissions for percutaneous coronary intervention and the treatment of stroke. Robocath system will be enhanced with existing proprietary hardware and software embedded within GenesisX, Synchrony and Sync supporting advanced functionality, including operating room integration, automation and remote procedures. In tandem with bringing Robocath's next-generation system to market, we will work to fully integrate our magnetic robot GenesisX with their system. The combination of these synergistic mechanisms promises the most powerful approach to improving procedural precision, efficiency and outcomes. We see the most benefit here, obviously, in interventional cardiology and neuro interventions, but also in our existing EP market. When we launched Robocath's next-generation system, this will be fully synergistic from a commercial perspective. Our global commercial team is very well suited to sell Robocath and being able to commercialize both technologies independently and in combination is additive in every way. While we expect approximately $2 million in annual revenue during the first year post acquisition, we will hold off on a full launch until the next generation system is approved. Stereotaxis' commercial team remains fully focused in the near term on executing on our existing strategy with GenesisX, Magic and Magic Sweep in electrophysiology. As we demonstrate our success in EP, we are already laying the foundations for future robust commercial success in over $20 billion interventional cardiology and neuro interventional markets. A few key financial terms of the transaction, and then we'll start Q&A. The transaction consideration includes an upfront payment of $20 million and additional contingent payment of up to $25 million tied to regulatory and commercial milestones. The regulatory milestone is FDA clearance of the next-generation Robocath system and the commercial milestones reflect significant adoption of that technology. All considerations, upfront and milestones are payable in cash or steroid taxes common stock at Stereotaxis at discretion. The upfront portion will be paid in stock at [indiscernible] tock price of $2 per share. The acquisition will be cash flow negative initially, but is expected to become breakeven by the third year post acquisition, supported by launch of the next-generation system and commercial and operational synergies. We're also working on potential nondilutive financings to fund the development of Roppat's technology for neurointervention. The acquisition is subject to customary closing conditions and is expected to close in mid-2026. Upon closing, Robocath will operate as a wholly owned subsidiary of Stereotaxis. With that, Philippe and I look forward to answering any of your questions. Operator, can you please open the call to Q&A?

[Operator Instructions] And our first question comes from the line of Daniel Stauder with Citizens.

I guess, first, I appreciate all the color that you provided, but you talked about these being complementary technologies. And I just wanted to get more of a sense of how Genesis and GenesisX and R-One would interact broadly, it sounds like these would be using the same procedures, but does R-One have the same mobile capabilities. Is there any interruption of workflow? Can they be set up at the same time? Just any more info on how these 2 systems will work together in the lab would be great.

Sure. Dan, thanks for the question. So First of all, both technologies will continue to be advanced and commercialized as independent separate technologies, but there's definitely a significant opportunity predominantly in interventional cardiology, Neuro intervention, and ultimately also an EP to combine the technologies together. If you do [indiscernible] Genesis and GenesisX, we do have a small mechanical grasper the QuickCast device, our disposable, which sits near the access side of the patient the magnetic catheter flips into it, and that allows for advancing and retracting of that One catheter. And so that's kind of already the most simplified version of a mechanical grasper to some extent that you can have in a robotic system. As we look towards interventional cardiology and neuro interventions, we have -- had designs on a similar type of device that could be used with [indiscernible] catheter or Guidewire. But to allow for a fully robotic procedure and not just power steering of the tip of a magnetic device you would want to have a more sophisticated mechanical mechanism that can move both the magnetic devices and the standard sheet, standard wire, standard angioplasty catheters. And so this is really kind of the combination of Robocath's mechanical grasper, and we won't do integration with the R-One system of Robocath. It will really be all within next-generation system of Robocath. But the integration of that next-generation Robocath system with GenesisX and Genesis will allow for pairing [indiscernible] benefits of magnetic steering full distal tip control steering through tortuous anatomy and the benefits of Robocath, which is really kind of a multi-device manipulation, being able to do everything in an interventional case fully robotically.

Okay. Great. I appreciate that. And then just 1 follow-up for me. Just more specifically, as we think about Synchrony and R-One, when could you start to see these working together as complementary systems I'd assume there's some compatibility process or a technological integration that is needed. So how complex would that be? And then will R-One still use its own command unit with this new system and just, I guess, anything there in terms of the actual system or Synchrony and the cockpit would be helpful as well.

Yes, definitely. We view Synchrony and things as we just discussed a week ago when we got FDA approval for Synchrony. We view Synchrony and [indiscernible] as kind of a very core part of providing a great cockpit experience for the physician during a robotic procedure, and it's not just that. It's not just the experience and kind of what you see visually, but the fact that Synchrony through its software allows for integrations and data kind of availability with many different systems in the cath lab environment, that's obviously very attractive. And so it would be a very reasonable guess to assume that we expect Synchrony to serve as part of that cockpit environment also with use with Robocath's next-generation system. And that's where, right, there's things I've talked often in the past that someone looking at Stereotaxis and looking at robotic surgery has to think about ecosystems of technologies. Robocath has done really an awesome job in terms of building the mechanical robot. We have had much more commercial experience over many more years that has allowed us to think more holistically about an ecosystem about software integrations, about how to take pre-op images and integrate them into the computer into the robot software about things like telerobotics. And so there are -- there is a range of those capabilities that we can relatively easily bring to Robocath. And I would expect, as the Robocath team continues to advance the next-generation system. We will do those integrations such that the next-generation system can be launched with those capabilities.

Awesome. That's great color. I'll try to squeeze one more in here just on the financials. I guess just as we think about the near term, how does this change your bottom line? You cash burn and cash needs as it relates to the new operating expenses of Robocath and the expectations for developing this new system and any gross margin considerations that we should think about?

Sure. So from a financial perspective, I would generally model around $5 million incremental annual operating expense from the Robocath team. And we have a couple of efforts ongoing or kind of that are available, we believe that for significant non-dilutive funding to advance the technology. And so hopefully, kind of over the coming months, we'll be able to discuss those as well. But that's kind of the basic way I would think about it. And as we launch the technology, we would expect both from a system perspective, and definitely from a system perspective to be gross margin accretive. And from a disposable perspective as we grow disposable revenue, it should be able to kind of match our typical thoughts on disposable margins.

Our next question comes from the line of Josh Jennings with TD Cowen.

Congratulations on the acquisition. I was sorry if I'm making you repeat yourself, but I wanted to maybe get you to review just where Robocath stands in the FDA approval process and maybe the pathway and what the hurdle was and it remains to be was there clinical data that was required? Is it a 510(k) pathway can start for making repeat yourself?

I'll try to start to answer that and then maybe if Philippe wants to add any additional color he'll do so. So Robocath received CE Mark in 2019. they didn't pursue FDA approval for the R-One system. And so in many ways, the R-One system was not viewed as something that would undergo a broad commercial launch and similar to some extent, the difficulties that Corindus -- Siemens with Corindus had in terms of launching that system broadly. It was just first-generation technologies in these spaces are not mature enough to really work in a broad fashion, kind of to be commercialized very broadly. And so the R-One system was really used as an initial system to gain clinical experience to work with KOLs in the field to learn to refine such technology and all of that kind of learning went into the development of the next-generation system, which is currently still in development but kind of in the later stages of development and we will obviously then join in that kind of process of refining the technology, getting it to the point of regulatory submissions and helping the regulatory submissions. Did that answer your question?

It does, thank you. And I was hoping to just tap in or hoping you would share your vision of robotics in coronary interventions. I think the clinical value proposition of robotics and neurovascular intervention has seen more straightforward. There have been attempts for robotic solutions, as you called out in your prepared remarks -- for the coronary space, what do you think robotics needs to deliver in order for -- or your development efforts? And we know what is share taxes now need to deliver to open up that space and gain traction for your robotic solution in PCI going forward.

Sure. So maybe I'll pass it to Philippe since you've thought about this for many years, and he can start to answer that.

Yes. So if I may, you know that for [indiscernible] it was not a success, because of the technology was so difficult and so complex. And on our side, with our third generation, first -- which is the first product we learn much from the market and even our first generation is not the success in the market. And we learned much and what is expecting the market is to be able to deal with complex lesion which is where there is a pricing which is where the cardiologists need for a robotic solution. They have a need for a robotic solution for this complex lesion because they stay aside the patient dealing with many devices. It's very long. It's very difficult. It's cumbersome. And so this is where a robot can deal with many devices, and where the [indiscernible] may sit down with a console, working from a console. And so it's for them a huge progress here. So this is what we feel that -- and not we feel what we experienced this [indiscernible] we are expecting a robotic solution. So for complex lesions and complex [indiscernible] half of the activity of cathlab -- cardio cath labs. Regarding euro, in euro, only 2.8% of the world population have access [indiscernible] an emergency when having a stroke. And so there is a gap and a huge potential to improve the care of the second cause of depth and also first cause acquired chronic disabilities, such as hemiplegia and so on. So there is a huge opportunity here, and this is the vision of David, who understand that market is huge and the big opportunity here.

And maybe I'll add to that I'll add to that a little bit in the interventional cardiology field. I think you're very right at kind of noting the differences between interventional cardiology coronary percutaneous intervention and neuro interventions for stroke. They are very different markets, needs there are different in some ways. I'd say that in the coronary world, there is kind of -- you can almost think about it as a barbell approach. On the one hand, and this is really where we plan to kind of to first push in the closer term with the next-generation system is enabling complex procedures, that otherwise couldn't be done or couldn't be done well or couldn't be done at most sites. And that has always been, right, Stereotaxis' core value proposition has been enabling complex cardiac ablation procedures in the EP space. Similarly, there is room to do that with a good robot in the IC space. I think there is also a broader benefit in the bread and butter IC cases, and that will really be prestated on automation. And so we've talked in the past about Synchrony about some of the AI features that we've been developing with Synchrony. I mentioned the ability to look at an X-ray feed irrespective of which x-ray system it comes from and to see things like catheters and wires in that feed and to create close feedback loops then with automation software. And so there are a range of kind of fun stuff happening under the hood to make that vision a reality. And with better automation, I think you definitely can also see the barbell where the value proposition is not just enabling complex things, but it's taking away the mundane aspect of day-to-day, the 10, 15 angioplasty procedures that are done in a [indiscernible] every day, making those kind of much less mundane and much more efficient.

Next question comes from the line of Frank Takkinen with Lake Street Capital Markets.

Congratulations. I was hoping I could follow up on that last string of questions. Can you just call out maybe some examples of complex procedures in the coronary that you think make the most sense? And then any color on kind of starting to think about the size of those markets would be interesting in the complex area.

Sure. So can you give a first try and Philippe can add. I mean chronic total occlusions are one very, very clear one, then you have a range of times where you have to do angioplasty in more distal, more tortuous vessels and that's kind of a second room. Sometimes you have to do it at a bifurcation of vessels. That's probably a third group. And so I'd say those are 3 categories that are clear complex ones in the PCI space. Philippe, anything you would add kind of beyond those 3?

No, no. You told the main essential indications. And so what is amazing is our new generation of robot is we are able to deal with 5 devices with this new generation, which is unique in the world and this is -- as you mentioned, there is a technological barrier to the adoption. And so again, so [indiscernible] as with our third generation, we are not able to reach this technological barrier. And so now with this next generation, able to take care of 5 -- at the minimum 5 devices we are able to have a comprehensive approach [indiscernible] intervention and the comprehensive approach of the world activity of cath lab, and so it's a big step that we are crossing here, and we are quite confident on the adoption of this next generation of robot.

And you can look at the TAM for interventional cardiology and neuro interventions in various ways. I mean it's easily [indiscernible] plus medical device market, just the catheters used in those procedures. And so it's -- we're talking about very, very big fields. And when -- even if you look at just procedures that are 10% of those -- and it's obviously a very, very large market. So I think given our current vantage plan, we're looking to build the best technology possible start to use it in these complex cases. And we don't have right now any concern about market size.

Helpful. And then I don't know if it was mentioned, apologies if I missed it, but could you just lay out a timeline of when we could see the next gen on the market?

We've talked about within the next couple of years, we expect to do regulatory submissions.

We had a first in human. We had the first cases achieved with our next generation with success. And so now we are in a regulatory process.

But we've -- yes. Let me add to that. Robocath team has done first in human testing with that system, and we're -- when Philippe says they're in the regulatory process, a submission has not been made. Testing is being done that would be related to the regulatory process, but a submission has not yet been made.

Helpful. And then if I could just squeeze one last one in. Can you talk about economics? How do you think about what the system might sell for? And then how much of the future potential do you really bake into kind of the disposable side of the equation? Obviously, that's been a big investment from Stereotaxis to build that disposable angle do is there investment required here that needs to catch up Robocath or is it going to come to market with a pretty good suite of disposables to go along with the system?

I think -- I mean, I don't -- I would rather not kind of comment right now about that first part of the question. we've obviously kind of looked at things like the DaVinci robot as a good yardstick for the Stereotaxis robot in that kind of $1.5 million to $2 million range. And there's other robots in the market in orthopedics that are sometimes lower than that. But I think kind of that we'll definitely be shooting for a 7-figure number and generally kind of want to do a little bit of exploration about what the best pricing will be. So give us kind of a little bit of time to plan for that. But I think we should be able to have a healthy price and a healthy margin on this. And in terms of the disposable part, there is definitely an opportunity in the interventional cardiology neuro interventional field to think more expansively about disposables like Stereotaxis had in electrophysiology. I would say that in the initial iteration of Robocath's technology, you should think about the revenue model much more similarly to what Stereotaxis has been historically. And with the one exception being obviously, when our 2 robotic mechanisms are paired together, there will be a magnetic guidewire magnetic guide catheter that would be used in the procedure. And so that would be kind of an added in disposable revenue.

Next question comes from the line of Adam Maeder with Piper Sandler.

This is Kyle on for Adam. Congrats on the acquisition. I guess first to follow up on the impacts to the model, see that you expect $2 million annual revenue contribution here from Robocath. So just trying to kind of map it out, should we assume about $1 million contribution for the second half of this year. I didn't see any mention of kind of the previous fiscal 2026 guidance of about $40 million total revenue. Are you still kind of standing by that figure and is it correct to maybe assume additional $1 million here from the acquisition?

Thanks for the question. So yes, we stick with our -- obviously prove we haven't updated our previous guidance. We stick with our previous guidance. I would say we plan to close the acquisition in the middle of this year. I would probably don't kind of flatline that $2 million. I would kind of put more of it into the beginning of next year versus the end of this year.

Okay. Got it. That makes sense. And then I guess kind of more broadly, just curious to get your thoughts why right now kind of made sense for doing this acquisition kind of given you just got full product portfolio together for the U.S., a lot of approvals. And just kind of how do you kind of plan to manage or prioritize resources going forward, making the commercial push with GenesisX and MAGIC versus now also balancing the development of this second-gen Robocath system.

Sure. Great question. And so what I'd say is that kind of from a commercial perspective, our commercial teams are fully focused on what's in front of them. As you mentioned, we've been blessed with many regulatory approvals over the last few months. It's been a multiyear effort to get to this stage where we have that, we know very clearly what is our key goal for this year. And as mentioned on the call a month ago or so, right, in our March year-end call, we talked about the key goals for this year. And those 4 key goals kind of are printed in everyone here. One of those key goals was to demonstrate a more robust strategy in kind of beyond electrophysiology in endovascular space. This was one of those activities that we were obviously thinking about and working on at the time. There's another one which is -- it's not an acquisition. The other one would provide for significant funding to Stereotaxis in the tens of millions of dollars to advance technology in this field. And so there are kind of -- we are -- this is part of that promise of our 2026 annual goals, is creating a pipeline which allows us to be much more robust in the broader endovascular space. I'd say that our R&D team regulatory team, obviously, there's still a lot of activity to do. We have a robust in-house development effort, but obviously coming on the heels of completing GenesisX and getting magic approved and all of those successes and getting Synchrony approved. There is an ability to start to think about where do we want to orient our engineering regulatory focus over the next couple of years, few years. And I think that kind of the expansion into a multispecialty robot is a very good strategic way to advance. And so this obviously sets us up. We're blessed the Robocath team has a good engineering team, kind of across also all the specialties of engineering. And so it's not like they're going to need Stereotaxis' team immediately to get things running, we'll be able to gradually ramp up participation with the Stereotaxis team with them over the next year or so. And then in terms of the -- in terms of the timing, just to -- sorry, to more specifically answer that also, right it's somewhat -- it's somewhat also just opportunistic, right, opportunities present themselves. And when you find great opportunities to advance the company, you take them and you move forward. And so the timing was right from Robocath side. And I think that given the success we had on all the regulatory approvals recently, the timing also felt on our side.

[Operator Instructions] There are no further questions at this time. I would like to turn the call back over to Mr. David Fischel for closing remarks.

Thank you very much for joining us. We're excited to be pushing forward aggressively on all fronts and look forward to speaking with you again soon. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.