Shares of RBOT were down nearly 30% to 28¢ apiece in early-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — rose nearly 2%.
In April, Vicarious completed a design freeze for its Version 1.0 (V1.0) surgical robotic system. The company said in its second-quarter earnings results that it planned for integration and the build of system units for this fall. Having received some input from the FDA, Vicarious Surgical had expectations to begin first-in-human trials in mid-2024. The company then planned to file for de novo clearance in fiscal 2025.
However, in the company’s third-quarter earnings results, co-founder and CEO Adam Sachs outlined a new timeline for V1.0. The company now expects to complete the build and integration in fall 2024. It earmarked early- to mid-2026 for an FDA de novo submission.
“The third quarter brought several successes for our business, but also introduced new challenges as we focused on the build and integration of our Version 1.0 System,” Sachs said in a news release. “While we were pleased with our ability to extend our cash runway through an equity follow-on offering and make meaningful progress on our individual sub-system builds, the impact from recent market-driven cost-cutting initiatives combined with certain integration challenges have compelled us to revise our development schedule. … Although there is still work ahead, we remain confident that our differentiated technology will allow us to revolutionize surgical robotics and transform the standard of care.”
Vicarious has more layoffs
In February, Vicarious Surgical announced that it planned to reduce its workforce by about 14%. It cited reducing cash burn and boosting R&D spending as the drivers behind the decision.
On the third-quarter earnings call, transcribed by SeekingAlpha, Sachs explained the latest changes to the organization’s makeup. He said Vicarious made “pretty significant cuts” to both its team and external spending. Its first layoffs targeted non-R&D functions, he said, but the latest significantly impacted R&D functions and outsourced R&D spending.
“Most of the functions that we’ve cut are functions that are parallel effort functions where we’re working on remediating things that we expect to come up taking the top-10 issues or areas like that and coming up with remediations in anticipation of challenges,” Sachs said. “Instead, we’re going to do this in the much more serial, more capital-efficient, but slower method of waiting until the issues come up and then remediating them at that time.”
Sachs said he didn’t have the exact numbers in front of him but noted that Vicarious began 2023 with around 230 employees. That number now sits around 130.
CFO William Kelly added that there are “probably 70%, 75% of the business are people touching the product still in this reduced headcount,” meaning around three-quarters of the company are still involved in the development of the V1.0 system.
The analysts’ view
BTIG analysts Ryan Zimmerman and Iseult McMahon downgraded Vicarious from “Buy” to “Neutral” following the latest updates.
“We’re not fans of downgrading when shares are at a low (especially when they are trading below cash) but with timelines for development extended another 12 to 18 months in order to preserve cash, we think its best to move to the sidelines until [Vicarious] can retire all its development risk,” the analysts wrote. “Simply put, [Vicarious] is walking a very tight rope with limited resources (and limited room for error). Even with cash burn reduced, there is still risk that these development timelines could extend further and the macroenvironment may not allow the company to get the capital it needs to get to de novo clearance.
In the third quarter, Vicarious posted losses of $15.7 million, improving from losses of $24.7 million in the same period a year ago. Adjusted losses per share of 12¢ beat Wall Street expectations by 2¢.
The BTIG analysts noted a narrowing of cash burn guidance for 2023 and a reduced cash burn guidance for fiscal 2024 as well.
“Simply put, robots are hard to create (Medtronic can attest to this), and [Vicarious] is suffering from integration challenges from both software and hardware (which is extending timelines),” they wrote. “If timelines can remain unchanged through the duration of FY24, we think there will be opportunities to revisit a more constructive thesis in the future.”
