Q4 2019 Earnings Call
Greetings and welcome to electric horse fourth quarter and full year 2019 earnings conference call. At this time all participants are in a listen only mode of question answer session will follow the formal presentation. If any what's your <unk> operator sisters during the conference he stressed stars or on your telephone keypad.
Please note. This conference is being recorded I would now let's turn the conference over to your host Mr. Han Mr. like say advisors. Please go ahead. Thank you operator, and thank you all for participating in today's call.
Joining me are Dan Goldberger, Chief Executive Officer, and Brian Posner, Chief Financial Officer.
Earlier today Electric car released results for the quarter ended December 31st 2019 a.
A copy of the press releases are available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call. It includes forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act at 1995.
Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements. All forward looking statements, including without limitation, how examination that operating trends and our future financial expectations based upon today's current estimates from various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for a list and description of risks and uncertainty.
He is associated with the company's business. Please see the company's filings with the Securities and Exchange Commission.
Electric quite disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive information that is accurate.
Only as a live broadcast today March 20, Threerd Twentytwenty.
And with that I'll turn the call over to Dan.
Thanks, Hans Hello, everyone and thank you for joining US today, we are all adjusting to the impact of the coupled with 19 pandemic and that has affected our ability to forecast our business. Thanks.
I'll begin with an operational update.
Before turning the call over to Brian to review our financial results.
You'll recall that electric core is in the early stages of commercialization of our proprietary gamma core therapy for headache patients.
Total revenue for the full year 2019 was $2.4 million, a 141% increase from $993000 in 2018.
Of course, we've made substantial changes to our go to market strategies over the last year.
We have dramatically reduced our efforts to reach patients through commercial channels in favor of two specific opportunities, where we are reliable is getting paid.
First the federal supply schedule eligible entities, which encompass the veterans administration Department of defense and the Indian Health services.
And second the United Kingdoms National Health service.
Parallel with our sales efforts.
We continue to take aggressive steps to reduce our operating expenses.
You're all aware that the cobot 19 pandemic is it that businesses everywhere.
In our case, our access to prescribing physicians has been impacted as VA hospitals limit entry and travel becomes more difficult for our field sales personnel.
In addition, patient access to prescribing physicians, it's increasingly challenged I expect our ability to grow the business will be uncertain until our health care system returns to a more normal flooding.
That said I'm pleased to report positive trends in total paid prescriptions and prescribing physicians.
I'd be ended the fourth quarter more than 2735 American physicians have written at least one prescription up from 2600 in the third quarter.
This demonstrates physicians growing awareness out and comfort with the efficacy and safety of game of course therapy.
During the fourth quarter, we had 24% sequential growth in paid much the therapy across all lines of business rising to 2158 in the fourth quarter from 1736 in the third quarter and 1023 and the second quarter.
Paid much of therapy shift should it be a indio D increased 50% sequentially to 829 in the fourth quarter 2019 from 553 in the third quarter 2019.
Revenue from the via Indio D increased 36% sequentially to $378000 into Q4 2019 from $279000 into Q3, if 2019.
The discrepancy in growth rate between paid months of therapy in revenue is driven by the launch of our 93 day offering at a lower price per month therapy that aren't 30 day offerings.
[noise] paid months of therapy shift in the United Kingdom increased 16% sequentially to 961 in the fourth quarter of 2019 from 828 in the third quarter of 2019.
Revenue from the United Kingdom increased 60% sequentially to $271000 in the Q4 219 from $170000 into Q3 or two that <unk> of 2019.
The discrepancy in growth rate between paid months to therapy in revenue is driven by the timing of revenue recognition and currency exchange fluctuations.
In January.
2020, we issued a comprehensive business update which is available on our website. So I'll just hit the highlights here.
Beginning with the federal supply schedule or FSS last year, we redeployed significant sales resources to focus on this important channel we continue to see positive growth in our key metrics as a result.
During the fourth quarter 54 Veterans administration and department of Defense military facilities purchase Canaccord.
Up from 48 during the third quarter and 35 during second quarter.
We launched our 93 day product offering in the fourth quarter at an attractive price per month of therapy compared to a 30 day awesome.
The 93 day configuration fits into the VA work flow much more gracefully and helped drive the growth in paid months of therapy.
Our average selling price decline during the quarter. This product mix shifted from the 30 day to the 93 day offering and we believe that this is level off in the current quarter.
In light of the coated 19 pandemic, we're going to temporarily have our sales team stock physically calling on VA facilities in order to give them space to deal with this crisis.
Our goal is to create a process that will allow providers to see patients virtually submitted in order for gamma core.
Then get therapy to their veteran in their home without the veteran having to leave their home.
I believe this program will show our commitment to the V.A. as a partner and our understanding of their needs to both manage the crisis and take care of their veterans.
FSS encompasses more than 9 million covered lives.
Some 400000 of whom saw VA health care providers for headache in 2018.
Based on activity through March 13th Twentytwenty.
We believe we're on track to ship approximately 1000 lots of therapy to the D.A. and military treatment facilities in the current quarter.
Moving onto the United Kingdom, The National Institute for Health and care excellence or nice in its final guidance has recommended the use of gamma core for the acute and preventative treatment of cluster headache in adult patients across the National Health service.
Interestingly the guidance document affirms the gamma core when used with standard of care can save an average of 450 British pounds per patient in the first year of treatment through a reduction in acute rescue medication.
Additionally, the NHS has indicated to us that it will extend the previously announced innovation technology payment program.
Through April 2021, and two six months stats.
NHS has also identified Ghana core as being eligible for the new Med Tech funding mandate mechanism, which if confirmed could provide a basis for the long term sustainable reimbursement of Canaccord.
We view these developments is important additional validations of the benefit of Noninvasive Vegas nerve stimulation therapy in general and Gamma course, specifically.
Furthermore, the monetary savings calculated by.
By the end I see is a powerful market access tool that payers across all channels find compelling to say the least.
In terms of our own progress during the fourth quarter 2019, we shipped the 961 paid monthly therapy to the NHS up from 828 in the third quarter.
Based on activity through March 13, 2020, we believe that we're on track to ship approximately 1002 months of therapy to the United Kingdom in the current quarter.
Turning now to our U.S. commercial activities.
In January 2020, we announced that we had entered into a rebate agreement with a sense health services on behalf of express scripts.
Transition to preferred brand coverage on all express scripts national formulary.
This favorable decision, which applies to beneficiaries with plan designs that unit differentiate between drugs and devices lowers the monthly preferred co pay to 25 to $45 and by doing so makes the gamut core device financially more accessible to significantly more express scripts members.
We've been told that more than 6 million, yes, I'm members have a benefit design of this type.
Meanwhile, Cvs Caremark continues to pay for prescriptions that are not exclusionary co pay of roughly 50 to $75 per month.
Those beneficiaries, who had the benefit design that does not differentiate between drugs and devices.
We believe that approximately 5 million Cvs Caremark members currently have a benefit design of this type.
Our distributors reported shipping about 368 eight months of therapy in the fourth quarter from Canaccord inventory that they had previously purchased from electric car.
We will continue to service, yes, I in CBS patience as we migrate to less expensive fulfillment partners in the first half of 2020.
We had suspended our previous partners in coverage program and substantially scaled back our co pay support.
We're not planning to invest sales or marketing resources in the commercial channel at this time and so we're not expecting any meaningful commercial revenue in 2020.
We are studying the viability of re launching in the commercial category, perhaps through the medical benefit pathway in the future.
Moving on to our clinical development activities.
We previously announced that F.D.A. had requested more information related to our five 10-K submission seeking approval to expand began a core label into migraine prevention.
We met with the agency during the fourth quarter of 2019 and has subsequently responded to their information requests.
Our advisors believed that the FDA it will be satisfied with the answers to your provided without the need for additional clinical trials.
Furthermore, premium to is the only study again of course therapy that the company has been funding directly.
Premium too is a randomized double blind sham controlled clinical trial of gamma before for the prevention of migraine being conducted at approximately 30 sites in the United States.
So the end of 2019, we didn't rose slightly more than half of our 400 patient targets.
However.
After careful review of the enrollment timelines and ongoing cost associated with this trial.
And in light of our focus on areas immediately impacting revenue generating channels, we decided to pause enrollments and premium to to further conserve cash in the short term.
It's worth emphasizing here that we believe our decision to pause enrollment into premium to study just not in any way impact our ongoing discussions with Sta related to our five 10-K submission for migraine prevention.
The suspension of enrollments in premium to as part of a broader cost savings initiated as we continue to identify opportunities to streamline our organization.
Aside from premium too there are other investigator initiated studies of gamma core underway.
Those trials are primarily supported by third party grants and are exploring these again the core an indication that would be considered more exploratory still.
Those studies speak to the potential broad clinical utility of noninvasive Vegas nerve stimulation.
And we look forward to results from those ongoing studies as they become available.
Guidance in our January 2020 business update we announced revenue guidance for full year 2020 revenue to be a range of $7 million to $9 million since that time. The covert 19 pandemic has affected the geographies in which we operate.
Since we do not yet know the full extent of the impact of this global health crisis. We are suspending guidance until we have a better understanding of when our customers who will return to normal operations.
At this point I'm going to turn the call over to Brian for a more in depth review of our financials and other guidance items.
Go ahead right.
Thanks, Dan.
For the quarter ended December 31, 2019 electric car reported net sales of $675000 compared to 683000 in the third quarter of 2019.
Revenue in the company's channels to focus the VA and the United Kingdom increased approximately $200000, 45% from third quarter of 2019 levels. This increase was offset by a decrease in revenue from the U.S. commercial channel.
The increase in revenue compared to the fourth quarter of 2018 reflect increased sales in the VIP and the United Kingdom.
Total operating expenses for the fourth quarter 2019 were approximately $8.9 million compared to $15.9 million in the fourth quarter 2018.
The decrease was due to a reduction and ask DNA expense, which declined to approximately 7.3 million in the fourth quarter 2019 from approximately 12.4 million for the comparable period in 2018.
Primarily driven by a decrease in compensation and other expenses.
Consistent with the cost reductions implemented in 2019.
GAAP net loss from operations for the fourth quarter of 2019 was $8.5 million, that's compared to a loss of 15.3 million in the fourth quarter of 2018.
Adjusted EBITDA from operations for the fourth quarter of 2019 was a loss of $6.7 million.
54% decrease when compared to adjusted EBITDA net loss from operations, a $14.5 million for the same period last year.
The company defines adjusted EBITDA from operations as GAAP net loss from operations.
Excluding income tax expense stock compensation expense restructuring and other severance related charges legal fees associated with stockholders litigation and total other income and expense.
A reconciliation of GAAP net loss from operations to non edge non-GAAP adjusted EBITDA net loss from operations has been provided in the financial statement tables included in today's press release.
Now looking at the full year.
For the full year 2019, we generated revenue of $2.4 million as compared to 993000 for the full year of 2018.
The gross profit for the full year 2019 was $1.2 million as compared to $414000 for the full year 2018.
Total operating expenses were 47 point Threemillion.
For the full year 2019, as compared to 55 million for the full year of 2018.
The decrease in full year operating expenses was due to significant reductions in our cost structure implemented during 2019.
GAAP net loss from operations for the full year 2019 was $45.1 million as compared to $55.8 million for the full year 2018.
Our adjusted EBITDA loss for the full year was $39 million as compared to $46.9 million for the full year 2018.
Cash cash equivalents and marketable securities at December 31st 2019 totaled $24.1 million as compared to 68.
$26 million at December 30, Onest 2018.
Net cash burn was $9.4 million for the quarter ended December 30, Onest 2019.
It should be noted that the December quarter cash burn included several nonrecurring items, such as previously committed purchases of inventory as well as severance and fees related to the company CEO transition.
Cost, resulting from the company's 2019 comprehensive redeployment and cost reduction plan.
Now looking ahead.
As Dan indicated we have suspended revenue guidance for 2020.
We expect to continue to reduce quarterly research and development expenses throughout 2020.
We expect to continue to reduce quarterly SDMA throughout 2020.
Our expected cash requirements for 2020 and beyond our based on the commercialization success of our products and our ability to reduce operating expenses.
There are significant risks and uncertainties as to our ability to achieve these operating results, including as a result of the potential adverse impact on our business from the ongoing co bid 19 pandemic.
Due to these risks and uncertainties, we may need to reduce activity significantly more than our current operating plan and cash flow projections assume in order to fund operations to the end of 2020.
And now I'll turn the call back over to Dan.
Thank you Brian.
The covert 19 pandemic has changed our lives and our ability to plan for the coming months.
Core employees have been asked work from home effect is Monday March 16, 2009 2020.
But we continue to take orders and process shipments from our new Jersey facilities to provide canaccord therapy to patients in the United States and abroad.
Yes of course therapy can be dispensed virtually unlike our pharmaceutical competitors botox and she GRP antibodies, which require an injection by health care professionals.
That may become yet another marketing advantage for noninvasive Vegas nerve stimulation.
I want to take a moment to thank our employees and service providers are physicians and their patients and our investors for your support during this uncertain and difficult period.
With that operator, please open the call up for questions.
Thank you at this time, we'd be conducting a question and answer session. If you would like that's a question. Please press star one on your telephone keypad confirmation. So indicate your line is in the question Q.
My first start to be we'll let your move your question from the Q.
For participants using speaker equipment, and they'd be necessary to pick up your head said before person sarkies.
First question comes on line of Ryan Zimmerman with BTG. Please proceed with your question.
Great and then Brian can you guys there okay.
Yes, I guess [laughter] Henry.
Good I know these are challenging times certainly for a company your size and appreciate all the updates maybe Dan just the star you alluded to potentially using tele health to train some of the veterans in their homes.
Where are you at in terms of setting that up you know how long could that potentially take you.
That's let's start there and then and then I want to ask just in terms of.
No characterizing kind of what you're hearing from had a clinics and clinicians in those channels, where do you have been successful on and how long you're kind of assume and for the impact in terms of model in the slowdown and appreciating that you know it. This is a very fluid situation.
Yes, all I'll I'll take the last question first we have no idea when.
No when normalcy comes back in terms of patients are visiting.
Their physicians in the clinics.
Nobody does at this point.
But coming back to your opening question.
The V.A. system, where we've been focusing in the United States has been migrating to tele health solutions for quite awhile, especially for.
I'll call it no more routine therapies like headache like recurring migraine.
And certainly for cluster headache.
In January.
We started shipping product directly to the patients home.
And so during the first quarter, a we became fully capable of.
A physician, having or tele health consult with new patient or.
Returning patient.
ER physician writes a prescription it goes to the supply chain folks in that the are.
They send us the PEO when we ship directly to the patient so for returning patience.
They already know how to use the device for a new patients. They can proves to be prescribed and receive the therapy without having to leave their homes and we have a variety of.
Video support in of course telephone support for those new patients. So.
You know, calling good planning or call. It a you know just in time, but.
We have a fully serviceable tele health solution for heady patients into the system.
As of January of this year, and that's been very very well received.
As far as are our run rate.
I alluded to it on the on the call but.
Our.
The prescriptions that we're writing that we're filling in the V.A. system in the United States and in the UK.
Are on plan.
No we haven't seen any drop off and so you know were nervous about.
Whether things will slow down, but right now things are still humming.
That's helpful.
Then.
Ryan just one for you you talked about R&D coming down through the year.
As well as us unit coming down to the air and obviously, that's that's an assassinated but if you can any provide any more color in terms of you know how.
Rapid can you wrap up premium to the point, where you have very little R&D costs that maybe just some some color there I think it would be helpful for People's anything about opex for there.
Sure Ryan no problem.
I think you know running it down now and so I think Q1 will still be will be lower than Q4 in Q2 will be lower than Q1, and so on and so forth.
R&D they'll be coming in all at a much more manageable level off for the company as the year goes on.
Right.
And any commentary on SGN I [noise].
Yeah actually in a a a function of our S. DNA costs have been or some of the distribution costs associated with the partners for coverage and you know those wrapped up pretty much in Q4, something little bit of spillover in Q1, So we again or other ways to sell our products.
You know, we should see again significant reduction in DNA asked DNA as the year goes on as well distribution costs, but we're also looking at all other costs.
In the U.S. DNA line.
Okay. I appreciate you taking the questions that.
Thank you.
Well thank stay healthy.
Our next question comes on line of Craig because you with Cantor Fitzgerald. Please state your question.
Good afternoon, guys. Thanks for taking the questions.
Well, let me start with with just a couple of follow ups, so or a clarification.
Dan.
So it sounds like you guys.
I guess, let me ask directly I it sounds like I'm not sure. If you guys are seeing impact from Cobra 19, Ah I know you so but your access has been moved it but I suppose.
I guess I just want to be sure how's that Hum hasnt shown up in the numbers, yet or you're expecting expecting it to or it's a possibility. So I just kind of wanted to get that distinction.
Yeah and and so.
Hi, I'm choose my words carefully Craig, but through Friday, the 20, yes.
Prescriptions are coming in.
In fact last week was a record week for prescriptions in the U.S. So.
Yes, I just look through March 20th or you don't see any impact in paid prescriptions in our business.
That said.
Our sales reps are no longer traveling a the hospitals in the U.S. and in the UK no longer allow vendors to come in and frankly.
Even patients can't come into the hospitals. So you know, our we're anticipating especially our ability to bring on new patients too new to the therapy. We think is we expect is going be impacted.
But just looking at the numbers as of last Friday, you don't see it.
Got it. Thank you thank you for that.
Maybe another follow up on the program to deliver a little bit to veterans at home.
I mean, I guess you know what do you guys have to do either steps or maybe limitations to transition more of that business too to tell health. Obviously it sounds like you got started in January and it seems like.
So yeah, it would be financially advantageous anyway.
Can maybe just talk about Oh, how how much you can actually the liberal true that pathway on and then plans for the rest of the year, even beyond the Covidien 18 impact.
Yeah. Good good question. So yeah, we piloted the program in in Florida, and California.
Hi in January and then we accelerated rolling it out across the rest of the country because it was going so well at this point, it's purely education and making sure. It at our existing customers are no that they have that capability and that we can provide support directly from electric core.
You know as we go further into the year.
We had a variety of of marketing programs that we had planned to both for awareness of a headache patients in the DJ system as well as the clinical folks, but we've placed all of them and hold.
Until we have better visibility on on what kind of access we have post virus.
Got it thanks, and one one more and you talked about it a little bit just but maybe more specific question on the impact of coated making in the UK.
I mean is there any other mean.
I think you talked about access being denied or restricted so is there any other ways or channels to you know to sell in the UK.
So that's it that's a good question.
We have had our success so far.
Through the I T T program.
And where lows to try and Tinker with that government funded programs since we've had so much success with it.
But as we as we've been experimented with tele health in the United States.
Our colleagues in the UK are watching carefully and we maybe able to roll that some of those programs.
But probably not this year.
Got it thanks, thanks for the color thanks for taking the questions.
Our next question comes on line of sway unpopular from bunker with H.C. Wainwright. Please state your question.
Thank you.
Good evening, Dan and Brian.
On the books its unhealthy.
Like Crazy times I've, a couple of questions.
Oh he's done so.
In terms of current revenue are in terms of what you have seen so far.
<unk>.
Is that a they will tell you to qualitatively and give us some kind of a calling up to one person that's revenue comes from.
You know determining patients in the sense because youre.
Pretty good yours clubs gundy basically they done electronically in that sense. You know you can just reload the device so how what percent of that.
I'm busy with comes on but but they are doing that.
[laughter] RK that's it.
Perfectly reasonable question or historically, we have not given out our data between.
New prescriptions in refills and so.
We're just not a position to do that right yet.
Okay fair enough.
And then and say 447, well in some areas where that is no physical access to the physician.
What walk does that typical interaction, but in a position on that on the Asian before this that doesn't have done in the sense.
Is that basically and and face to face meeting a under Sip is written our do that does the physician opted moves on specific.
Nod, yes on the base and or occasion just described.
You know therapy through that through the Vietnam.
It's very good question in our case, so you know historically.
Patients that has been offered gamma court therapy.
You know tend to be patients who have been into the headache clinic.
To their neurologists.
Historically right that they have some pattern with a with the physician that's giving them care. So they've had previous visits they've tried other therapies.
Going forward.
We expect a that that will migrate to the new patients being able to gain access to the therapy without it preexisting history.
But that's that's not what we've experienced so far.
On the nonetheless, plus and non the same way in terms of that Kelly health and whatnot. So.
How does.
Part of the physician and patient you know think about gamma or do they think it's quite up quite a bit up on innocuous therapy in defense, Hey, I can you and do all that stuff that I would like to do the night before they do you have to give you a sudden medicines builds or whatever but this isn't some do this is something that you're going to.
Five I'd be a rating and up all your to come come into the clinic. So that I can do all that does to give you a pill no doubt that started your work here are about that you know how has that been employed before.
So we think that's going to happen you know many of our most successful patients or are those that have been on.
Then on Triptans have had some number of botox treatments.
And finally get relief when when Gamma court therapy is offered to them.
You know given a that access direct access to the physicians is changing.
We think red Gamma core is going to move up.
Towards first line therapy, because it's so safe.
And because it can be delivered virtually and ER and so.
No proof, we'll see in the next six months.
But we do think that's going to happen.
Thank you. Thank you Dan and good luck.
Thank you. Thank you stay healthy.
Once again, if you like that's question. Please press star one on your telephone keypad. Once again, if you like just a question. Please press star one on your telephone keypad. Our next question comes on line of a who demand.
With noble capital. Please proceed with your question.
Hi, Dan Hi, Brian. Thank you very much for taking my.
Oh my.
So beyond the called me.
Do you have you now being named journey that let's say the lock them they'll continue you won't be able to manufacture do you have enough you mentioned, we all gamma car to deliver for the whole years.
Yeah, It's Brian we've got plenty of yeah, we have plenty of inventory plenty of them into art.
[laughter] now I think we have.
We have $7 million of inventory on the balance sheet and I think Brian is that right.
Yes, that's the number will we be reporting or about 6.9 billion.
So that's not something that's keeping us up at night.
Okay. That's nice to hear my question is on them.
Yeah. It's yeah I left that you were supposed to submit early March is it I know things are going to of course, but I'm. Just curious if you actually have meeting them better for the migraine prevention Dell and is that on track.
Yes, yes, we you'll recall that the FDA census questions. We met with the agency at the end of last year and we we filed our formal response or was February 20, Eightth February 27.
We filed our official response to the FDA question.
So we're still expecting put tank show clearance on that.
Internet, it's funny, if things go well.
Yeah, Yeah, who knows what's.
How the agency your staff these states either but yeah.
My expectation is that there will be a one more round of questions before we get to a final determination.
It's very hard to figure out what the calendar looks like.
Okay. Thank you for that and my last question is did Dr. Alan you grew up what do you think that many on that side for the fourth quarter and did you actually make any.
Changes some that do we expect moving forward to be expecting any adoption or acceleration on that side.
So short answer is no.
ER doctors medical.
Is set up as a distribution agreement they byproduct from us at a transfer price and then sell it into their channels for a workers comp and personal injury practices.
They made an initial purchase of 50 units in the third quarter and they continue to place those units but.
I don't think I think they place less than half of the original order or 50. So yeah. We don't its a good business relationship, but we don't anticipate any.
Substantial reorders for the rest of year, given the slow pace at which they then placing their original order.
Okay. That's helpful. Thank you very much. Thanks for taking my question I could be if they say great.
Thank you have a good evening.
Ladies and gentlemen, there seems to be no further questions left in the queue and I will like to turn the call back over to Mr., Dan Goldberger for any closing remarks.
Thank you operator, thank you all for making time to Ah Ah two here are a story.
We're all hoping for the best and a and planning for survival. So have a good evening everybody.
This concludes todays teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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