Q1 2020 Earnings Call

With the FCC available on the company's Investor Relations website at the neural metric dot com.

He sees website at <unk> Dot Gov.

No metrics does not intend and undertakes no duty to update the information disclosed on this conference call.

I'd now like to introduce the no nitric senior Vice President and Chief Financial Officer, Mr. Thomas Higgins mistaken. Please go ahead sorry.

Thank you Justin I enjoyed another call today by Dr., Shai Gozani, our president and Chief Executive Officer.

Metrics develops and Commercializes neuro stimulation based medical devices that are used to diagnose and treat chronic health conditions are three main products are TPN shark advance quell DPN check because a point of care test for the detection of peripheral neuropathies.

The answer is a point of care device that provides nerve conduction studies as an agent diagnosing and evaluating patient suspected of having vocal or systemic neuropathies.

Well, it's a wearable mobile app enabled neuro stimulation device indicated for symptomatic relief.

Management or chronic pain.

It is available over the counter.

The covert 19 environment presented a challenge during the first quarter. We responded by modifying our operating structure to maintain customer support and to advance our R&D programs, all while supporting employee safety.

These will continue to be our priorities until circumstances improve.

For the first quarter of 2020.

We reported total revenue of 2.2 million.

Revenue was adversely impacted by a crop in March borders.

Gross profit on Q on Q1 revenue was nearly 1.6 million represent of your margin rate of 71.4%.

By comparison in the your earlier quarter.

Revenue of 3.1 million earned a gross profit of $800000 at a gross margin rate of 25.6%.

Adjusted that margin rate was 48% excluding inventory write offs in that period.

So the you're on your improvement in adjusted margin was 23 percentage points.

[noise] TPN shirt revenue of 1.3 or 4 million in the quarter.

Was up 17% from 1.12 million in the first quarter 2019.

This was a record quarter for TPN truck.

Growth was seen in Medicare advantage as well as distributor orders for our Asian markets.

Entered gross margins were above 80% in the quarter.

Advanced revenue was $260000 in Q1, compared with 330000, the prior year quarter margins were slightly under 70% and call revenue was $570000 versus 1.6 million in Q1 2019.

Overall gross margin rate was over 70% versus about 40% a year ago.

Importantly, well made a positive operating contribution.

Q1 operating expenses were about 2.2 million these were down over 50% from 4.5 million in the prior year.

R&D spending a $534000 was down $321000 or 37% year on year.

It includes the benefit of 115000 and GSK funding of join crawl projects.

Sales and marketing costs of $424000 were down one point sixmillion nearly 80% from Q1 2019.

Cross staffing consulting and advertising reductions, where the significant contributors to the reduction in spending.

She is spending of 1.25 million was down 368000 or about 23% year on year. This reflected lower staffing and professional services primarily legal.

There was no collaboration income in the current your quarter and 5.7 million in the year ago quarter.

The GSK collaboration development milestones were fully earned by the end of last year 2019 in the cumulative total of 20.6 million. Consequently, we expect no future GSK collaboration income.

As mentioned previously GSK contributions to funding of our joint quell development projects will continue to be recorded as a credit in R&D expense as required under U.S. gap.

Our net loss was three to $657000 were 45 cents a share and we ended the quarter with cash of 2.8 million.

This reflected offsetting effects of operating cash consumption of $800000 and an equity raise a $450000 through the sale of about 250000 shares under our ATM program.

Subsequent to quarter end in April we raised an additional 1.7 million on the sale of about 1 million shares in the ATM.

Our capital structure today remains simple is common stock only and it is debt free we have approximately 2.7 million common shares outstanding currently.

Dr. Gozani will now address our overall strategy [noise].

Thank you Tom.

First I will cover the impact of Cobot 19 on our company.

As Tom mentioned March sales were adversely impacted by the pandemic, particularly DPN checking advance which are clinic based diagnostic procedures.

Both health care clinics to stopped elective procedures and routine healthcare.

Well. It has also been affected as consumers financial situation has deteriorated due to the poor overall economy.

We expect the sales down turn to persist through Q2, and hope to see a partial return Q3 and relatively normal sales in Q4.

However, there is a high degree of uncertainty at this time is a pandemic progressive and direction from the state and federal government and public health agencies evolves.

As a supplier medical devices, we are an essential business and have continued to operate.

We successfully transitioned our business operations in early March to provide for employee safety, while continuing to support our customers, particularly those using quell for pain management.

Functions that can be performer remotely such as R&D finance, a customer service, our operating from home, while manufacturing and fulfillment functions continue to continue at our Woburn, Massachusetts facility with appropriate precautions.

We are not implementing layoffs or furloughs.

To assist in managing through this period, we have submitted a payroll protection plan loan application, which we hope we funded in the program extension under because currently under consideration by Congress.

We will maintain this operational mode pending public health direction from Governor Baker of Massachusetts, We did not expect any substantial changes until June.

Now moving to our Q1 2020 results.

We're pleased with the company's performance despite the slowdown in March due to the Coven 19 pandemic, we delivered good financial results in the top and bottom line on the topline you Patrick revenue as a record of 1.34 million overall company gross margin was over 70% for the first time in 10 years and operational expenses decreased by over 50% from the year ago.

Quarter.

This resulted in a net loss of 657000.

In aggregate. These results indicate that we are well under way towards achieving operating profitability.

However, there is work to be done we're not yet profitable and our challenge is also took over the top line.

We believe there we are taking the right steps to achieve these goals in the near term.

Along these lines we have some highlights.

We have made good progress and updating our deep contract technology. This includes the second generation device include improved reporting and data management software and new technology and the disposable biosensor. All these elements will be commercially launch this year or by early 2021.

We believe that these product improvements will position the DPN check business to go faster through better pricing and has utilization by existing customers a new market opportunities.

We've also formerly launched development of a new prescription product called Qual flex for treating fibromyalgia pain.

This new product is based on our core call technology and the preliminary version will be used in a large NIH funded study run by the University of Iowa, and Vanderbilt University.

To them and treatment fibromyalgia physical therapy clinics.

This was recently announced.

We believe that the fibromyalgia market as I view it as it has is large and has substantial unmet needs and there has been little innovation.

Particularly on the device side.

Currently anticipating a regulatory filing in the second half of the year and pending five 10-K clearance, we'll look to launch.

In the second half of 2021 I will note that there is a lot of work to be done some timing uncertainty that we hope to decrease over the coming several quarters.

In summary, Neurometrix is excellent products are targeting large markets, we are committed and operationally efficient organization structure to support growth and move towards profitability.

That concludes our prepared comments, we'd be happy to take questions at this point.

Thank you.

As a reminder to ask a question you'll need to press star one on your telephone.

Which all your question press the pound.

Please standby was compiled acuity roster.

And once again that is star one if you like to ask the question.

And ladies and gentlemen, if you'd like to ask a question that is star one.

And that is star one if you'd like to ask a question.

And what we have a question from build church from TG are a your line is now open.

Yes. Thank you for taking the question could you went through a little more detail with the test with the Iowa and Vanderbilt and what are we trying to get to were show were proved that we don't know yet.

Yes so.

This is a a study that is being run as you as noted by numerous iowan banner, both the large studies looking at.

Let's call it pragmatic study so it's looking at how.

This device improves the care patients with fibromyalgia.

In physical therapy clinics. So it's.

The prior studies have already demonstrated that this particular approach is clinically efficacious. So in a randomized controlled trial. So this is looking at the at the practical benefits.

In practice as opposed to the.

In the clinical trial setting.

So this will give this will give a lot of insight into how to actually deploy a device like this into the fibromyalgia community end market.

Okay. Okay.

This does this help us get approval for a Medicare reimbursement.

Just so these kinds of well every call pragmatic or real World studies are very beneficial and getting reimbursement approval that's correct.

Because they demonstrate the practical the practical benefits of technology as opposed to just the is the benefits and controlled trials.

Okay, and if all goes.

Smoothly, which broke off to a rough start with it.

Covered my team, but what did you say the timing is again.

This this study is slated to begin in the fall.

There is being ramped up at this point.

Okay.

Okay. Thank you very much.

Thank you for us in question. Thank you.

And I am showing no further questions I would now like to turn the call back to Dr. Gozani.

For further remarks.

Thank you very much for joining us during today's conference call. We look forward to updating you and balance of the year end.

I hope everybody remains healthy.

As well with their families. Thank you.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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