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Note 8 - Controlled Launch
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Controlled Launch [Text Block]

8. Controlled Launch

 

In February 2021, the Company received 510(k) clearance from the FDA for its proprietary CellFX System for dermatologic procedures requiring ablation and resurfacing of the skin. In January 2021, the Company received CE marking approval for the CellFX System, which allows for marketing of the system in the EU for treatment of general dermatologic conditions, including SH, SK, and cutaneous non-genital warts. Additionally, in June 2021 the Company received Health Canada approval for the CellFX System, which allows for marketing of the system in Canada for use in dermatological procedures requiring ablation and resurfacing of the skin for the reduction, removal, and/or clearance of cellular-based benign lesions. In February 2021, the Company commenced a controlled launch of the CellFX System in the United States and European Union via its CellFX Expectations Excelled Program (the “Controlled Launch”). Subsequent to receiving Health Canada approval in June 2021, the Company also commenced its Controlled Launch in Canada.

 

As part of the Controlled Launch, the Company selected 70 physicians and their practices to be the first physician consultants to launch the CellFX System and the associated CellFX commercial procedures into their respective markets and geographies. In the Controlled Launch program, the Company provided and set up a CellFX System at each physician site and provided the physician with the necessary related products and components, free of charge, to complete the requirements of the Controlled Launch program. Each CellFX System and any unused component products remained the property of the Company throughout the Controlled Launch program. Under the Controlled Launch program, each physician was to identify and recruit up to 40 or 50 patients, depending on the contract, for participation in the Controlled Launch, performing a CellFX procedure on each of the appropriately selected patients. The physician and their patients complete evaluation surveys about their experiences with the CellFX System and provided other information helpful to the Company. Upon completion of the procedures and the survey feedback, the physician earned credits to be used towards the future purchase of the CellFX System or, in some jurisdictions, fair payment for their time and effort completing the paperwork required under the Controlled Launch program. Credits earned and, if applicable, any other payments earned were limited to a maximum amount dependent on the number of surveys received by the Company. Upon completion of the Controlled Launch program requirements, each physician could choose to enter into a purchase agreement with the Company, under which the physician could use the credits earned (or other payments earned, as applicable) towards the purchase of the already-delivered CellFX System, or the physician could return the CellFX System to the Company.

 

As patient procedures and surveys were completed under the Controlled Launch program, the Company accrued the value of the credits earned, which were recorded in accrued expenses, with a corresponding charge to sales and marketing expense. During the years ended  December 31, 2022 and 2021 the Company recorded $0.1 million and $1.8 million, respectively, of net sales and marketing expense in relation to the Controlled Launch.

 

During the year ended December 31, 2022, certain consultants completed the Controlled Launch and entered into purchase agreements with the Company, whereby they used their credits or other earned payments towards the purchase of a CellFX System. Accordingly, approximately $0.4 million of the accrued liability related to the Controlled Launch was relieved and recognized as revenue on a non-cash basis as a result of the purchase. See Note 9 for additional detail of revenue transactions.

 

In September 2022, the Company concluded the Controlled Launch program and notified all remaining program participants. In accordance with the Controlled Launch program, physicians having completed the program requirements could elect to purchase their already delivered CellFX System, applying credits earned, or return the CellFX System to the Company. The Company concluded these efforts in the fourth quarter of 2022 and has discontinued sales of the CellFX System, although the Company continues to offer its disposable treatment tips to dermatologists who have chosen to retain their existing CellFX consoles.