Good afternoon, everyone, and welcome to the Asensus Surgical company presentation. My name is Ethan Taylor. I'm an associate in J.P. Morgan's Healthcare Investment Banking group. It is my pleasure to introduce Anthony Fernando, President and CEO. A quick note, there'll be some time at the end of the presentation for some audience Q&A, so please have some questions ready. And with that, Anthony, please take it away. Thank you, Ethan. My name is Anthony Fernando. I'm the President and CEO of Asensus Surgical. Before I begin, just wanna thank the J.P. Morgan team for inviting us to present today. These are forward-looking statements, which also can be found on our investor relations section on our website. So who is Asensus? We are an early-stage, early commercial stage medical device company, really focusing on pioneering the future of soft tissue abdominal surgery by leveraging the power of Augmented Intelligence and machine learning to help surgeons perform better, more predictable, and ultimately provide better outcomes for patients. As many of you are aware, the soft tissue abdominal surgery market has a massive growth opportunity, and then currently, you know, it's probably around 5% penetration of the market compared to the potential opportunity. With the LUNA Surgical System, which is on this picture here, our second-generation system, we continue to enable a single platform to perform procedures across a variety of specialties, not just one focus area. Additionally, I think in order to bring all of these technologies to market, we've assembled a really talented team cross-functionally, not just technology, but also regulatory and all other functions that's required to bring such a complex system to market. So at our core, our goal is to digitize the interface between the surgeon and the patient to bring true innovation to surgeons. And we call this Performance-Guided Surgery. And Performance-Guided Surgery will have the ability to unlock previously unavailable clinical intelligence to the operating room, which we believe will enable surgeons to perform better surgery and drive predictable and safer outcomes. You know, despite the advances in robotics over the last 20+ years, the overall adoption remains limited, as I mentioned earlier, around 5%. You know, first, the outcomes are not improving, outcomes, even though the technology has been introduced, and still, there's almost 2 million complications on an annual basis that are associated with surgeries performed. Second, the cost of robotic use continues to remain pretty high, to a point of not being viable. When you consider alternate approaches, similar like laparoscopy, it's almost twice in terms of cost. And another challenge is an impending shortage of surgeons, driven by burnout and fatigue. One of the key elements, as I noted before, is really variability. That's pretty significant in surgery today and also facing surgeons. This variability, you know, leads to inconsistent patient outcomes, and often, you know, measured through surgical complications, as well as OR inefficiencies, which contribute to a high financial burden for the hospital. You know, studies have shown that up to 1 in 20 procedures result in a major complication. The next thing is also a link to the level of experience and the volume of surgeries. Studies have also shown that the more surgeries performed at a certain institution by a specific surgeons, the variability, ability tends to reduce. I think for us, we recognize that despite the introduction of robotics, still the outcome is still dependent on the experience and the volume of the surgeon, and technology is not really bringing a whole lot of value, which we intend to change. So just taking a step back, if you think about the evolution of surgery, you know, everything began with open surgery and really made a huge difference. Then, with the introduction of laparoscopy, I think there was a very big shift in terms of outcomes, given the level of invasiveness reduction, length of stay, benefit, blood loss, less pain; it really changed how surgery is performed, and today continues to be a very widely used technique, which is called laparoscopy. Then with the introduction of robotics, 20+ years ago, it's really not made a huge difference in terms of outcomes. You know, laparoscopy still remains the gold standard in surgery. And that's really becoming a problem now, primarily given the increasing cost, why technology is not improving outcomes compared to a manual laparoscopic approach. The opportunity that we are embarking on is really the introduction of real-time digital tools that couples with the benefits of robotics, and to bring the two together to reduce variability and ultimately deliver better outcomes. As I stated before, it's a pretty large under-penetrated market currently around 5% in terms of robotic penetration, you know, projected to grow significantly over the next 7-10 years. Another tailwind to growth is the ambulatory and the surgical centers that are outside the hospitals, because they are primarily driven by cost. And when you think about cost, there are multiple elements that come in, you know, cost of performing the procedure, cost of dealing with any complications that occur, and also the efficiency that these centers have to deliver because their reimbursement levels are lower than of the main hospitals. So trying to take all of these together, we believe that there's really an opportunity for a platform that can really deliver value, not just to the main academic centers, but also to the ambulatory centers and surgical centers that are looking to create drive value overall, their entire value chain. So let me dive in a little bit to Performance-Guided Surgery. You know, we call our solution Performance-Guided Surgery to really bring together the precision of robotics and also the novel benefits that real-time clinical decision support tools, which will ultimately allow the surgeon to drive consistently superior outcomes. Later on in my presentation, I'll show you some videos of how we are going to drive this value. In order to do this, we have three components: robotic manipulation, intraoperative clinical guidance, and then cloud integration, and I'll get into each of these elements. You know, as I've stated before, the complications, the issues facing surgery today, you know, lack of improved outcomes, high cost, and the impending surgeon shortage. But also, you know, looking at those, we believe that Performance-Guided Surgery has the ability to reduce complications and improve outcomes by reducing variability, and deliver the economics and the efficiency that the hospitals are looking for, and also really address the physical fatigue and the cognitive fatigue of surgeons by the introduction of these digital tools. So to kind of put it all together, what is PGS, or Performance-Guided Surgery? It's really trying to achieve a level of standardization combining robotic manipulation and the digital tools. I think we are all very familiar with the types of digital tools that we use in our everyday life whether it's you know driving your car, navigation, or any kind of tools or apps that we have on our phone has tried to kind of standardized how we do things. Unfortunately, these don't exist in surgery. So if you combine the robotic element and then bring in the digital element, we believe that we can drive a level of standardization and also improve outcomes by reducing variability. As I've said before, you know, currently there's a handful of companies who are on the market and we are one of them with our Gen-1 product, this is the Senhance product. We've learned a lot from the market through clinical use. We've performed over 12,000 procedures. We have global regulatory approvals, which is a huge challenge, and we've been able to navigate that very successfully. And also built a very strong clinical registry, primarily focused on Europe, where the majority of our install base currently is, and developed a really good know-how of what surgeons or our staff and administrators at hospitals actually want. So, with the current platform, we've been able to decipher that, and we have a unique set of insights that we have used and leveraged to develop our second-generation platform, which is LUNA. You know, as I mentioned, we have a very broad label currently with our Gen-1 product, and been able to navigate the whole landscape globally. And this gives us an advantage because we become our own predicate for our Gen-2 product, you know, significantly de-risking our regulatory pathway in, in all the different geographies, and bring to market in, in a relatively short timeframe, the LUNA platform, that, that will significantly, you know, outperform the other platforms currently on the market. So let me kind of dive in a little bit and talk to you about LUNA. And multiple components: there's a robotic component, and then there is the Intelligent Surgical Unit. You know, LUNA, which is a second-generation state-of-the-art robotic platform, you know, built with years of experience that we've gathered. Second is really the ISU, or the Intelligent Surgical Unit, which empowers the surgeons by really offering real-time tools that they can leverage during surgery, not before, not after, but during the surgery, a tool that will interact with you. And combining these two really will be the value driver that will deliver superior outcomes and a significant reduction of variability. So the LUNA system is, you know, it's a second-generation system, console, four manipulator arms, and a suite of instruments, and I'll kind of dive through each of these components and give you a deeper understanding of this. The arm, it's a you know 12 degrees of freedom arm, relatively small footprint, and really it optimizes the space around the patient, the sterile field, which tends to be the most important space in the OR for the team to have patient access, and we have accomplished that with this platform. The second is really to engage the OR team, because the surgeon is at the console, and it's the OR team that is next to the patient. So it instead of that disconnect, we have developed tools to engage the OR team so that they can exchange information with the surgeon and see what the surgeon's doing, what the next step is, and help them set up and turn over the room in very as fast as possible to be significantly efficient in how it's done. You know, moving to the console, this is really a first-of-its-kind digital surgeon console that we will soon be introducing to the market. It has unconstrained surgeon interface with a 3D 4K display that does not require glasses, 3D glasses for the surgeon in order to get the 3D view. And it's an open console, so the surgeon can sit back, sit straight, and have full line of sight to the entire OR throughout the procedure without any disruption, and have the tools, all the digital tools on the lower touchscreen so that they, the surgeon can deploy any tools with a single touch. The other most important piece in any surgery are the set of instruments. This is really something that the surgeons really appreciate. So we've been able to come up with true 5 mm instruments that are reusable. You know, today, majority of the robotic systems, I would say all the robotic systems except for our Gen- 1 product, use 8 mm instruments, and these are 5 mm instruments that are reusable and fits in a standard off-the-shelf 5 mm trocar, without needing any specialized trocars to perform surgery. I mean, this really is a huge leap in terms of surgeons' ability to perform complex procedures and have the dexterity and the range of motion to successfully perform these features. Not only the 5 mm, but we also offer 3 mm instruments, that are straight, which we also offer on our Gen- 1 product, and it has been a huge level of interest from pediatric surgeons and also gynecology surgeons for certain procedures, primarily focused on small anatomy, or where cosmesis is important, and most of the time, some procedures being done, you know, percutaneously, that does not even require a suture after the procedure. You know, moving on to the ISU, you know, this is really something that we are the first to bring out in clinical use. This is currently in clinical use. Really trying to bring augmented intelligence and machine learning to surgeons so that they can leverage consistency and also bring in a total different layer of intelligence, clinical intelligence to the procedures. It really, you know, optimizes and enhances the surgical experience for the surgeon, and it also has the ability to level the field of skill. You know, basically leveraging good practices, best practices from everywhere and enable the deployment of it anywhere on demand. Let me show you some examples and then, you know, hopefully better explain how this is done. So the first video on the left, it's automatic camera control. So typically, a surgeon has two instruments, left hand, right hand, and then the surgeon also has to control, in some fashion, the camera. Now, what we've done is we've kind of created, a tool tracking mechanism, more of an autopilot, where the surgeon does not have to think about the camera, wherever the surgeon moves the instruments, the camera will follow wherever the surgeon's going. So it's one less thing for the surgeon to focus on and think about, so that the surgeon has the mental capacity to focus on the most important task. The second video, in the top row in the middle, is the ability to measure. So in real time, the surgeon can now measure to ±1 mm accuracy, either point to point, contour, in any which way the surgeon wants to measure certain anatomy. You know, why this is important, is a couple of reasons. One, there is no more approximation required. You know, now you can kind of, it now becomes a science, where surgeons can predictably perform two, three procedures and even write a certain procedure guide and inform surgeons of what good looks like and continue to do that. And second, you know, when you think about hernia procedures, you need certain mesh to fix a hernia. You can get the size right the first time and not have to go back and forth without the introduction of any external tools, which is a benefit. The third, on the right side of the screen, is what we call a no-fly zone. It's a safety tool, where you can highlight a certain anatomy and set a boundary. So now, even if the surgeon intentionally moves the instrument, the instrument will not violate that boundary. So it becomes a safe zone where the surgeon will not make any accidental errors while performing surgery. So you can focus on the area that you're performing the surgery and make all the other areas the safe zone, and as a result, now the instrument will not violate that. Again, peace of mind for the surgeon, and the surgeon gets to focus on what they are working on. And the last image on the bottom is more of a training tool. So with the use of a very simple tablet, a trainee could be on the robot, performing the surgery, and the professor or the teaching surgeon could be with a tablet, either sitting next to the surgeon or at his or her office, and guiding the surgeon what to do, what not to do, all in real time. And all of these get enabled because of the digital interface. So really excited, and we've so far gotten, you know, several of these features are already on the market in clinical use, and we've gotten extremely positive feedback, and we are continuing to take that feedback and even develop further features. You know, how does this all come together? It's really the cloud architecture that we've created in partnership with Google Cloud. So this ISU collects data from the surgeon console, from the surgical videos, and also the manipulator arms, and pushes all this data to the cloud. It's a secure cloud where this data gets stored, and it's stored by account, so the customer has direct access to their own data at any point in time. They have dashboards, and they can parse out all this data. And what we do offline is we extract the insights from this data. We tag this data, and it runs through a deep learning model, and we learn from this, saying: What does good look like? And we can expand on that. And then once we extract these insights, we feed that back to the ISU. So every time we upgrade the software, the ISU gets smarter and smarter over time with a larger volume of data. So again, it's really exciting. We have several of these connected to the cloud on our Gen-1 product. You know, data is really our currency right now, collecting this and trying to build this knowledge base, and it'll continue on with the LUNA platform as well. So to give you a financial snapshot of where we are for the full year 2023, these are all unaudited numbers. We grew our procedure base by 14%. We completed over 3,500 procedures. And in addition, we placed eight—we started new, eight new programs globally, and generated, you know, between $8 million and $8.8 million in revenue. Thinking about the balance sheet, we have no debt on our balance sheet and $21 million in cash coming into 2024. So just to summarize, you know, strategically in 2024, we are really focused on delivering the promise of Performance-Guided Surgery, really by bringing together the LUNA platform and the ISU, and continuing to drive this innovation. And I think given our experience with the Gen-1 product, technology-wise, and also from a regulatory point of view, we are really, you know, focused on improving outcomes, and we're extremely confident about our ability to do that, given the clinical experience that we have. And we have a very clear pathway to accomplishing that vision. And with that, you know, thank you for joining, and appreciate you listening in. Thank you very much for the great presentation. To kick off the Q&A portion, could you please speak about how the Asensus Luna system plus ISU is differentiated from the other player on the market or the ones that might be entering? ... Sure, Ethan. So I think it's something that needs to be understood is when you think about robotic surgery, it's not just about the robot. There's so many other things that need to go into building that program. So that's the reason why we call it Performance-Guided Surgery. You need the robot, you need instruments, and then there's a whole suite of the digital tools that we have very uniquely positioned. Nobody else has the ability to offer these digital tools. So it's less about the technology, but I think it's increasingly moving more and more towards the outcome and the solution, which is reducing variability. So I think that's kind of what we've built, is a digitally native platform and a ecosystem, not just the robot: the robot, the intelligence unit, and then the cloud to be able to collectively harness the knowledge and deliver a higher performance to the patient and the surgeon alike with leveraging technology. Great, thank you. And then you recently completed an animal lab for the LUNA system. Could you please elaborate on the feedback and the significance of this lab? Yeah, sure. I think that was a very exciting event for us that took place week of December 11th. We brought in seven surgeons from between Europe and U.S., and they were with us for four days, and we performed 13 different types of procedures on four animals during those four days. That was primarily to confirm that our design meets surgeons' criteria, because they were doing it on live animal and trying to create that environment where they are performing surgery. It was a huge success. The surgeons were able to successfully complete the procedures, and we, from a company point of view, we received confirmation because it's one of our product development gates to get that surgeon confirmation. With that in hand now, we are, you know, moving forward to the next steps of the development process. Great. Could you please elaborate on what some of those next steps might be? Yeah, sure. So I think, you know, given that we have to freeze the design, which should happen in relatively short order, and then it's a battery of testing. So there's a whole slew of validation, verification testing on the hardware and software. Then we need to perform certain, you know, sterilization and cleaning studies, and then most importantly, we need to perform a usability study that is required. So we are hoping to get those started, probably in the next quarter or so, and then that will prepare us for our 510(k) submission to the FDA, and followed very closely by Europe and Japan. Great. Speaking of the FDA, you know, we hear that the FDA continues to be the kinda stringent on robotic clearances. So how are you working with the FDA to kind of overcome that, and then what does that process look like for you? Yeah, really, really good question. I think, you know, you know, I think back in 2017, we were very fortunate to get our Senhance product 510(k) approved. And as a result, we now have predicate status, where we are using that. We have our own predicate. So even though the bar has moved, things have tightened up, we kind of have the opportunity to follow the traditional 510(k) pathway and get the Luna product cleared. So I think it's... Some things have changed, and the expectations from the regulators have changed, you know, in Europe with MDR coming in and even with the FDA. So but it's not where we have to go through like a de novo or do IDE study. We can leverage our own predicate and follow a traditional pathway, which really is a huge advantage for us and speed things up significantly and a lot more economical as well, too. Thank you. Any audience questions? I have one question. Sure. Hi. I saw in your- Sorry, sorry to cut you off. There's a mic, just so we can pick it up. Sorry. Thank you. Yep. Wayne Bacon here. I saw, I think, in your literature that your tools are reusable, so how do you recommend sterilization? So our current tools and also the TrueWrist instruments go through a standard sterilization cycle. There are no special requirements for sterilization. It follows the same traditional laparoscopic instrument sterilization process. Different standard in Europe, different standard in U.S., but those standards, we comply with all of those standards, but it's a traditional cleaning and sterilization process. If no further questions, we can conclude the session. So thank you very much for the time and the great presentation. Thank you very much.