Q2 2020 NeuroMetrix Inc Earnings Call
Morning, and welcome to the neural metrics second quarter 2020, <unk> earnings call. My name is Carlo and I'll be your moderator on the call.
On this call the company makes they can't which are not historical facts and are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995.
Statements that are productive in nature depend upon or refer to for future events or conditions are forward looking statements any forward looking statements reflect current views of neurometrix about future results of operations and other forward looking information you should not rely on forward looking statements because actual risk.
Ultimate differ materially as a result of a number of important factors, including those set forth in the earnings release issued earlier today.
It was her for please refer to the risks and uncertainties, including the factors described under the heading risk factors in the company's forgotten <unk> filings with the S E C.
Be little under companies Investor Relations website at neural metrics dotcom.
No wonder if each website, that's easy dot com Neurometrix does not intend in undertakes no duty to update the information disclosed on this conference call I know like introduced a neural metrics senior Vice President and Chief Financial Officer, Mr. Thomas tickets Mr. Higgins. Please go ahead.
Thank you Carlos and welcome everyone Who's joined the call. This morning.
I'm joined on the call by Dr., Shai Gozani, our president and Chief Executive Officer.
Matrixx develops and Commercializes neuro stimulation based medical devices for the diagnosis and treatment of chronic health conditions.
Our commercial products RTP on track advancing to quell.
DPN check as a point of care test for the detection of peripheral neuropathies.
Advance is a point of care device. It provides nerve conduction studies as an aid and diagnosing and evaluating patients suspected of having folklore systemic neuropathies.
And quality is a wearable mobile app enable neuro stimulation device indicated per symptomatic relief and management or chronic.
It is available over the counter.
The second quarter 2020 was a continuation of the suppressed business activity evident in late Q1. This year as a result of the carpet 19 pandemic.
Late in the second quarter during the month of June we saw a modest increase in orders for our diagnostic devices and consumables.
This was encouraging.
However, at this point it wouldn't be premature to extrapolate the June activity to any conclusions regarding a broader recovery of the business.
We haven't will continue to maintain staffing and production capabilities to support our customers as well as to advance our priority R&D programs.
During the second quarter, we took advantage of opportunity in the equity markets to strengthen our balance sheet.
This provides us a degree of production protection against a lay on the economic recovery.
Turning to operations.
The second quarter total revenue was about $1.1 million.
Gross profit on that revenue was about $900000, representing a gross margin rate of nearly 64%.
This was despite the low production volumes and low fixed cost absorption in the quarter.
By comparison in Q2, a year ago revenue of 2.4 million generated a gross profit of one point threemillion were 54%.
Yes of course is after adjusting the prior year numbers for 2.1 billion dollar inventory charge. Therefore, you're on your gross margin improved by nearly 10 percentage points.
DPN shirt contributed revenue of $828000 down 33% from 1.2 million second quarter last year.
Medicare advantage business was slow in April and May this year with some recovery during June.
This Medicare advantage decline was partially offset by new stocking orders from China in support of the recently announced collaboration between our China distributor Omron healthcare and your Biopharmaceuticals.
The pediatric margins rubber 75% of Macquarie.
Advance revenue was about $100000 compared with 314000 in the prior year quarter.
Margins on advanced were 71% and coal revenue was $433000 versus 800, an $11000 in Q2 2019.
Grow gross margin rate was 76% a significant improvement on the 41% margin of a year ago.
Well continue to make a positive operating contribution.
Q2, operating spending was 1.7 million.
And can.
In comparison with about $4 million prior year quarter.
This dramatic reduction in spending.
The 7% reflected last year's business restructuring, which was.
In addition, the company's future profitability.
R&D spending of $660000 was down about 40%.
Current period R&D includes the benefit of 114000 end GSK funding for joint crawl projects.
Sales and marketing costs of $379000 for down nearly 70% cross staffing consulting in advertising, we're all significantly reduced from Q2 last year.
She is spending of $678000 was down about 60% year on year.
This was due to lower staffing and professional services primarily legal.
[noise] collaboration income was zero in the current quarter. Following completion in 2019 of the GSK quell development project.
Last year, a one point Fourmillion was earned under this offer.
GSK continues to fund joint crawl development projects.
Which funding is included as a credit to R&D expenses I just mentioned.
Net loss in Q2, 2020 was $852000 were 28 cents per share.
This is a loss of three point fourmillion or $3.72 a share in the second quarter 2019.
Cash at the end of Q2 was $5.4 million the cash position benefited from common stock sales of 3.7 million during the quarter under the company's ATM facility.
Cash is forecast to be adequate to fund operations for at least one year forward.
The company maintains a simple clean capital structure of common stock only and debt free.
There are currently about 3.8 million company shares outstanding.
Dr. Gozani will now address our overall strategy.
Thank you Tom.
First I will cover the impact of the Cobot 19 pandemic on our company as Tom mentioned Q2 sales were adversely impacted particularly DPN check in advance which are click based diagnostic procedures.
Most health care clinics stopped elective procedures and routine healthcare in March have only recently started to resume these types of visits.
It has been affected as well, although to a lesser degree as consumers financial situation.
Curated due to the poor overall economy, we saw a reduction in new device sales.
Based on sales in the second half the June we expect to see some recovery in Q3, although not to normal levels.
We are hopeful that Q4 will have relatively normal cells.
However, there remains a high degree of transparency as a pandemic progresses and direction from state and federal government in public health agencies evolves.
Our largest Medicare advantage accounts for the TPN checked product or in California, Texas, and Florida, which are also currently seeing high cobot 19 infection rates and therefore, we have to be cautious about the pace of wood sales will rebound.
As a supplier of medical devices, we are an essential business and have continued to operate largely uninterrupted we successfully transitioned our business operations in early March to provide for employee safety well continue to support our customers, particularly those using quell for pain management.
Functions that could be performed remotely such as R&D finance a customer service have been operating from home while manufacturing fulfillment functions continue at our Woburn, Massachusetts facility with appropriate for cautions.
We did not undertake any layoffs or furloughs.
We recently reopened our facility to all employees with adherence to state guidelines, although we expect that most employees will continue to work at home on most days for the foreseeable future.
Now moving to our Q2 2020 results were pleased with the company's performance. Despite the severe slowdown in April and May and the partial recovery in June our ability to limit our quarterly loss to inherent $50000. Despite the impact that that pandemic as evidenced that we've made substantial start strides in establishing and.
And cost structure.
These efforts will serve us well through March towards achieving operating profitability, which remains our primary corporate goal.
Theres more work to be done and the pandemic will now pushed profitability into late 2021, but we have taken the right steps.
Along these lines we have some highlights.
We continue to make good progress in updating our DPN checked technology. This includes a second generation device.
And technology in a disposable biosensor that will control reuse and prevent any future risk of knockoffs, given its very high margin.
We're also launching improved reporting a data management software that moves DPN check from a clinic based products to to enterprise solution.
All these elements will be commercially launched this year or by early 2021.
We believe that these product improvements will position the de Patrick business to grow faster through better pricing and has utilization by existing customers and new market opportunities.
We made up we also made progress in expanding DPN check distribution by signing a collaboration and distribution agreement with Biomet exit of Medicare advantage market and by supporting our China distributor Omron medical and their partnership with you about pharmaceuticals.
We expect that these and future partnerships will help drive continued growth of a DPN check business.
Finally, we have been updating our call strategy, which has led to some substantive changes to the cloverleaf website toward digital marketing strategy and we will soon initiated physician outreach efforts to drive call recommendations for lower extremity chronic pain.
In summary, Neurometrix is excellent products are targeting large markets. We are committed an operationally efficient organization that is structure to support growth and move towards profitability.
And that concludes our prepared comments I'd be happy to take any questions at this point.
Thank you we will now begin the cleanup question to ask the question you will need to press star one in your telephone keypad.
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We do have a question that this time I would now like to hand, the call it back to Dr. Gozani.
Thank you very much for joining us on the call today, and we look forward to continue to update you through the balance of the year.
Thank you difficult includes today's conference call. Thank you all for attending you may now disconnect.
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