Minerva Surgical(US:UTRS)2023-03-22 20:17PART I Business Minerva Surgical is a medical technology company providing minimally invasive solutions for abnormal uterine bleeding (AUB) through a direct sales force, targeting a $900 million annual market - The company targets a large and under-penetrated market, with an estimated 18 million women aged 25-50 in the U.S. seeking treatment for AUB, representing a potential annual recurring market opportunity of over $900 million142325 - Minerva's product portfolio was significantly expanded in May 2020 through the acquisition of the Genesys HTA, Symphion, and Resectr product lines from Boston Scientific Corporation (BSC)17430 - The company utilizes a direct sales force in the United States, which consisted of approximately 89 field-based personnel as of December 31, 2022, targeting OB/GYNs in hospitals, ASCs, and physician offices20105432 Product Portfolio Overview | Product | AUB Cause | Description | | :--- | :--- | :--- | | Minerva ES | Non-structural | PMA-approved endometrial ablation device using proprietary PlasmaSense technology for uniform ablation | | Genesys HTA | Non-structural | PMA-approved endometrial ablation device using heated saline, suitable for irregular uterine cavities | | Symphion | Structural | Minimally invasive tissue removal system combining bladeless resection, coagulation, and integrated fluid management | | Resectr | Structural | Handheld surgical instrument for hysteroscopic removal of endometrial polyps | Our Clinical Results and Studies This section details the clinical efficacy and safety results of Minerva ES and Genesys HTA systems, which formed the basis for their FDA approvals - The Minerva ES system's safety and effectiveness were evaluated in two key studies, the Single-Arm Study and a Randomized Controlled Trial (RCT), which collectively enrolled 263 patients and formed the basis for its FDA PMA approval in July 20151963 Minerva ES Single-Arm Study Efficacy Results (12-Month Follow-up) | Metric | Minerva ES | FDA-Established OPC | Statistical Significance | | :--- | :--- | :--- | :--- | | Success Rate | 91.8% | 65.6% (lower bound) | p < .0001 | | Amenorrhea Rate | 66.4% | N/A | N/A | | Patient Satisfaction | 97.6% | N/A | N/A | Minerva ES vs. Competitors (from Clinical Studies) | Device | Manufacturer | Success Rate | Amenorrhea Rate | Hysterectomy Rate (36 mo) | | :--- | :--- | :--- | :--- | :--- | | Minerva ES | Minerva Surgical | 91.8% | 71.6% | 0.9% | | Novasure | Hologic, Inc. | 77.7% | 36.0% | 6.3% | | Her Option | CooperSurgical | 67.4% | 22.0% | 8.3% | | Genesys HTA | Minerva Surgical | 68.4% | 35.0% | 10.2% | - The Genesys HTA system's safety and effectiveness were established in a pivotal PMA clinical trial with 276 patients, leading to FDA approval in April 2001. Its performance has been further supported by over 76 subsequent peer-reviewed publications92101 Manufacturing and Supply This section outlines the company's hybrid manufacturing model, reliance on single-source suppliers, and the conclusion of its transition services agreement with Boston Scientific - The company uses a hybrid manufacturing model, combining in-house final assembly for the Minerva ES handpiece at its Santa Clara facility with reliance on third-party contract manufacturers in the U.S., China, Taiwan, Germany, and Costa Rica for controllers and other components111112 - Minerva Surgical depends on a limited number of single-source suppliers for critical components like plasma array balloons, custom molded parts, and hollow fiber filters, making it vulnerable to supply shortages and price fluctuations115 - As part of the acquisition from Boston Scientific (BSC), Minerva entered into a Transition Services Agreement (TSA) and a Supply Agreement, which concluded in the second quarter of 2022, marking the full transition of manufacturing and services124127 Competition This section describes the direct competition from medical device and pharmaceutical companies in the AUB treatment market, highlighting key competitive factors - The company faces direct competition in the AUB treatment market from major medical device companies including Hologic, Inc., Medtronic plc, and CooperSurgical, Inc., which market FDA-approved endometrial ablation or tissue resection devices128 - Competition also comes from pharmaceutical companies offering drug therapies for AUB, such as Johnson & Johnson, Bayer AG, and AbbVie, Inc., which have significant advantages in name recognition, established relationships, and financial resources129 - Key competitive factors in the market include product safety, strength of clinical evidence, ease of use, physician acceptance, patient outcomes, reimbursement availability, and patent protection130 Government Regulation This section details the extensive FDA regulations governing Minerva's medical devices, including classification, approval processes, and ongoing compliance requirements - Minerva's products are subject to extensive regulation by the FDA, classified as Class I, II, or III medical devices depending on risk. The company's products fall into all three categories, requiring compliance with processes like 510(k) clearance, Premarket Approval (PMA), or de novo classification132134 - The Minerva ES and Genesys HTA systems are Class III devices that required the more rigorous and lengthy PMA approval process, while the Resectr and components of the Symphion system were cleared through the 510(k) or de novo pathways135140349 - The company is also subject to ongoing FDA regulations, including the Quality System Regulation (QSR), Medical Device Reporting (MDR) for adverse events, and rules governing labeling and promotion, with non-compliance potentially leading to significant enforcement actions146147 Intellectual Property This section provides an overview of the company's patent portfolio and ongoing intellectual property litigation with a major competitor U.S. Patent Portfolio as of December 31, 2022 | Product | Issued U.S. Patents | | :--- | :--- | | Minerva ES | 27 | | Genesys HTA | 17 | | Symphion | 24 | | Resectr | 5 | - The company owns a total of 88 issued U.S. patents and 54 issued foreign patents, with 19 pending U.S. and 8 pending foreign applications as of year-end 202224 - Minerva is engaged in ongoing patent litigation with Hologic, Inc., a major competitor, which could be costly and divert management attention166 Risk Factors The company faces significant risks including going concern doubts, limited commercial history, intense competition, supply chain reliance, intellectual property litigation, and regulatory challenges, compounded by its "controlled company" status - The company's financial condition raises substantial doubt about its ability to continue as a going concern, stemming from a history of net losses ($34.1 million in 2022) and an accumulated deficit of $283.7 million as of December 31, 2022182184370 - Minerva is a "controlled company" as Accelmed Partners II LP and New Enterprise Associates 13, L.P. hold a majority of the voting power, allowing the company to be exempt from certain Nasdaq corporate governance requirements, such as having a majority of independent directors182365 - The company is heavily reliant on third-party and single-source suppliers for manufacturing components, making it vulnerable to supply chain disruptions, price fluctuations, and quality control issues201207 - The company is currently a party to intellectual property litigation with Hologic, Inc., which is costly, time-consuming, and could interfere with its ability to market its products182267269 - A material weakness in internal control over financial reporting related to the financial statement close process was identified in prior years and has been remediated as of the end of fiscal year 2022182402403 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None410 Properties The company's corporate headquarters, R&D, manufacturing, and distribution facilities are located in a leased space of approximately 33,000 square feet at 4255 Burton Drive, Santa Clara, CA - The company leases approximately 33,000 square feet for its corporate headquarters, R&D, and manufacturing operations in Santa Clara, California411 Legal Proceedings Minerva Surgical is engaged in ongoing patent infringement litigation with Hologic, Inc., involving multiple actions with varying statuses and outcomes - First Hologic Action: Concluded on December 30, 2022, with Minerva paying Hologic $7.4 million in damages and interest413 - Second Hologic Action: Hologic sued Minerva in July 2020 for alleged willful infringement of the '348 patent. The trial is scheduled for August 21, 2023414 - First Minerva Action: Minerva sued Hologic in April 2017 for patent infringement. The case was dismissed on summary judgment, and after an unsuccessful appeal, Minerva has decided not to pursue the claim further415417 Mine Safety Disclosures This item is not applicable to the company - Not applicable418 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "UTRS" since October 2021, with no history or future plans for cash dividends, and no equity repurchases or unregistered sales - The company's common stock began trading on The Nasdaq Global Market under the symbol "UTRS" on October 22, 2021421 - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, with its loan agreement also limiting its ability to pay dividends423 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, Minerva Surgical experienced a revenue decrease to $50.3 million and a net loss of $34.1 million, leading to going concern doubts, partially addressed by a subsequent $30 million private placement Financial Performance Summary (2022 vs. 2021) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $50.3M | $52.1M | ($1.8M) | (3.5%) | | Gross Profit | $27.2M | $30.5M | ($3.3M) | (10.7%) | | Gross Margin | 54.2% | 58.6% | (4.4 p.p.) | N/A | | Loss from Operations | ($30.9M) | ($29.1M) | ($1.8M) | (6.0%) | | Net Loss | ($34.1M) | ($21.5M) | ($12.6M) | (58.9%) | - The decrease in 2022 revenue was attributed to lower sales volumes of Minerva ES and Genesys HTA products, partially offset by increased Symphion revenue. This trend was impacted by hospital staffing shortages and constraints on elective surgeries454456 - As of December 31, 2022, the company had $6.9 million in cash and cash equivalents and an accumulated deficit of $283.7 million, raising substantial doubt about its ability to continue as a going concern433470 - Subsequent to year-end, on February 9, 2023, the company closed a private placement, raising gross proceeds of $30.0 million to fund operations471 Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Not applicable for smaller reporting companies503 Financial Statements and Supplementary Data This section presents the company's audited financial statements for 2021 and 2022, including the auditor's report which highlights going concern uncertainty - The Report of Independent Registered Public Accounting Firm includes a "Going Concern Uncertainty" paragraph, noting that the company's recurring losses from operations raise substantial doubt about its ability to continue as a going concern508 Balance Sheet Summary (As of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $36,119 | $75,004 | | Total Assets | $68,900 | $115,092 | | Total Current Liabilities | $14,278 | $22,809 | | Total Liabilities | $51,719 | $70,988 | | Total Stockholders' Equity | $17,181 | $44,104 | Statement of Operations Summary (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Revenues | $50,294 | $52,103 | | Gross Profit | $27,242 | $30,523 | | Loss from Operations | ($30,899) | ($29,145) | | Net Loss | ($34,112) | ($21,464) | | Net Loss Per Share | ($1.18) | ($3.06) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section is not applicable to the company - Not applicable698 Controls and Procedures Management concluded that disclosure controls were effective as of December 31, 2022, with a previously identified material weakness in internal control over financial reporting fully remediated - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level700 - A material weakness in internal control over financial reporting identified in 2020 and 2021 has been remediated as of December 31, 2022. Remediation efforts included hiring additional personnel and implementing improved accounting procedures704706 - The company's management concluded that its internal control over financial reporting was effective as of December 31, 2022703 Other Information This section is not applicable to the company - Not applicable711 Disclosure regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable712 PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2023 Annual Meeting of Stockholders715 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's forthcoming definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement716 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Accelmed Partners II LP became a majority stockholder, owning approximately 69.2% of common stock as of March 10, 2023, with further details in the proxy statement - Accelmed Partners II LP became a majority stockholder, owning approximately 69.2% of the company's common stock as of March 10, 2023, following the closing of a Share Purchase Agreement717 - The remaining information required by this item is incorporated by reference from the registrant's definitive proxy statement718 Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the company's forthcoming definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement719 Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's forthcoming definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement720 PART IV Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the annual report, including corporate governance documents and material contracts - This section lists all financial statements, schedules, and exhibits filed with the annual report, including key agreements such as the Amended and Restated Certificate of Incorporation, the Loan and Security Agreement with CIBC, and the Share Purchase Agreement with Accelmed723726 Form 10-K Summary This section is not applicable - Not applicable724