Q4 2020 NeuroMetrix Inc Earnings Call

Good morning, and the walk him through the neural metrics fourth quarter 2020 earnings call.

My name's, Anthony and I'll be your and want to return the call and this call. The company May make statements, which are not historical facts and are.

Considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995.

And I thought are predictive in nature that depend upon or refer to future events or conditions are forward looking statements.

Any forward looking statements reflect current views of the neuro metrics about teacher and results of operations and other forward looking information.

Not to rely on forward looking statements because actual results may differ materially as the result of a number of important factors.

Including those set forth and the earnings release issued earlier today.

Please refer to the risks and uncertainties, including the factors described under the heading risk factors and the company for periodic filings with the Skus available on the company Investor Relations website, the Neurometrics dot com and on the S. E. T swept aside of the S. E T. He got the golf share metrics of stop intent and undertake.

No G P.

The information disclosed on this conference call.

And I like to introduce your metrics senior Vice President and Chief Financial Officer, Sir Thomas Higgins doing that and we get.

Thank you Anthony.

I'm joined on the call by Doctor of <unk>, Our President and Chief Executive Officer.

Neurometrics was focused on the development and global commercialization of noninvasive medical devices for the diagnosis disorders involving the nurses the nervous system.

The earnings release earlier today conveyed solid financial results for the fourth quarter of 2020 and comparison with the pre pandemic year ago quarter. The.

Key financial metrics of revenues gross profit and net loss and cash usage all showed improvement over Q4 2019.

Q4 revenues were $1 8 million this year TPN check continued to deliver year on year growth Medicare advantage was strong and offset weakness in international orders and.

Advanced electrode sales were about level with the prior quarter and with Q4 2019.

And quote continued its positive operating contribution with improved efficiency and advertising spending.

Gross profit and revenues was $1 3 million that represented a margin rate of 73, 7% versus 62% and Q4 2019.

A gain of 11 five percentage points on the gross margin or 19% over Q4 2019.

Operating.

Expenses totaled $1 7 million.

Spending was down over $1 million or 39% from Q4 of last year. It was roughly in line with spending during the early quarters of 2020.

Quarter on quarter spending reductions were achieved across the three major opex categories of R&D sales and marketing and G&A.

<unk> and staffing facilities and outside services contributed to the lower spending levels.

Our loss from operations was 326000 compared with the loss of nearly $1 7 million and the year ago quarter and overall net loss for the quarter was also 326000 and.

The prior year loss was.

And $1 1 million and it's benefited by $600000.

From the final development milestone under our GSK collaboration.

Shifting to the full year results a few comments.

The comparability between 2020 and 2019 as difficult for several reasons. The first obvious one as the COVID-19 effects during 2020.

But in addition operations were restructured and mid 2019.

At that time of P&L charge of $2 6 million was recorded for staff reductions inventory facilities and other items.

In 2019, the call marketing approach was radically altered focus shifted to profit line contribution with lower revenues and away from top line growth.

As a result, most retail distribution was curtailed AD spending was reduced and redirected from TV to digital advertising.

Opex spending and 2019 per mid year onward was significantly reduced including reliance on outside professional services.

Also the quell GSK collaboration and 2019 and vault extensive R&D effort to achieve development milestones and similar activities did not occur in 2020, so with those events and mind a few brief comments on the 2020 full year numbers.

Revenues were $7 4 million. This was a nearly $2 million dropped from $9 3 million last year.

And reflected the company's focus on profitability, leading to reduced <unk> revenues as well as the pandemic effects.

2020 gross profit on revenue was $5 2 million margin rate was 71, 2% versus 24% and 2019.

Excluding the charge to cost of sales for the inventory elements of the 2019 restructuring charge. The 2019 rate was 54% so still a substantial improvement in gross profit this year versus last year.

2020, operating spending was $7 3 million.

Opex in 2019 was $13 8 million and included as I mentioned and greater staffing levels and the first half of the year staff severance costs higher R&D spending.

And broader quell advertising.

As well as more extensive professional services.

Other income was negligible in 2020, however, during 2019 $7 $7 million was earned for achievement of development milestones under the GSK collaboration.

And the net loss for 2020 was $2 1 million and that was an improvement of $1 7 million from the prior year net loss of $3 8 million.

Cash at the end of this year was $5 2 million.

It's an amount sufficient to fund our operations well into 2022.

The company's capital structure remains debt free and there are about $3 $8 million and shares outstanding and.

And so in summary of the 2020 financials conveys significant improvements to the business while revenue did contract by $2 million gross profit Opex spending net loss cash usage were all superior to the prior year we.

We exit 2020 with operations that are flexibly structure to accommodate growth and where the balance sheet that has improved over the end of 2019.

We believe the 2021 and particularly the second half of 2021 will provide growth opportunities as the pandemic effects begin to recede and our R&D initiatives mature.

Dr. <unk> will now address our overall strategy.

Thank you Tom.

So as Tom outlined we are pleased with the company's performance and the fourth quarter and are optimistic about our prospects for 2021.

I will take this opportunity to review our go forward business strategy.

And is built around two core principles, the first being to attain profitability and the near term and the second is to continue with industry, leading product innovation to drive our long term growth.

Focusing first on profitability.

As we have communicated for the past year and a half we have prioritized the attainment of profitability to this and we have established and efficient cost structure throughout the business. Our head count is 2000 and full time employees and several part time contractors.

We have optimized manufacturing and marketing and distribution, which has led to lower operating expenses and improved gross margins.

Our ability to realize these efficiencies reflects the commitment and talent of our employees.

The fourth quarter of 2020 provided evidence of our progress on this front as we reported an operating loss of 326000, which follows the loss of similar magnitude and the third quarter.

And answer the question for our shareholders is when we will turn the corner to operating profitability and start to consistently generate cash.

We are not and are positioned to provide specific target cores for these outcomes at this time due to the continued uncertainty around the impact of COVID-19 on our customers the.

The need to get more experience with our business initiatives and because we need to maintain some flexibility to make opportunistic investments and growth.

Nevertheless, our expectation is that we will show year over year improvement and net income this year.

Moving to innovation and our market expansion initiatives, our corporate mission is to develop innovative medical devices and bring them to physicians and patients to improve health and quality of life.

Our products are unquestionably, the most advanced and sophisticated and their categories, whether that is neuropathy diagnostics or non invasive neurostimulation.

We will we have and will continue to maintain the historical focus and investment and R&D.

As we have previously announced we are updating all elements of the DPM checking the neuro diagnostic platform, which includes the device itself of the biosensor.

And the associated data management and reporting software with.

We launched an updated biosensor and the fourth quarter and expect to release, the new data management and reporting of software this quarter.

It includes the enterprise and security features requested by Medicare advantage insurance plans, which of our primary customer target and the U S.

Moving to <unk>, we believe that there are four leading clinical indications for the <unk> wearable pain relief platform.

Chronic lower extremity and muscular skeletal pain, fibromyalgia chemotherapy induced peripheral neuropathy, or CIP, and and restless leg syndrome or rls.

There are additional uses for <unk>, but these are the ones, we're specifically targeting.

Our current market focus is chronic lower extremity musculoskeletal pain, primarily chronic knee pain, which affects up to 25% of adults and the U S.

<unk> is available over the counter for this clinical application and is particularly well suited because of its placement near the knee and novel wearable design that enables use during activity.

The <unk> cloud now includes data from nearly 100000, quell users with chronic pain and making it one of the largest chronic pain repositories of the world.

We are mining this real world data to improve the product and conduct clinical research.

Beyond the call over the counter opportunity, which is not profitable for us we believe that the parameter of primary growth engine for the club business will come from its application to specific clinical indications as the prescription medical device.

We are working on three areas as I mentioned before of fibromyalgia chemotherapy induced peripheral neuropathy, CIP and and restless leg syndrome, again and our less.

And in combination these conditions represent a market of up to 20 million individuals and the U S alone with significant unmet treatment needs. The aquila is well suited to address.

We have encouraging pilot or randomized control trial data for all three.

The next milestone for our prescription <unk> business is the filing of a 500 10-K to treat the symptoms of fibromyalgia.

This submission will leverage clinical data obtained in the double blind randomized Sham controlled trial conducted at Brigham and Women's hospital in Boston and our current plan is to file and the third quarter of this year.

And this is a novel regulatory claim for four of trends could change the electrical nerve stimulation and and fibromyalgia, the complex and challenging condition to treat.

We cannot handicap the outcome. However, we are optimistic based on the data we intend to present to the FDA.

We will communicate our market strategy once we have additional regulatory certainty.

We're also closely following and the NIH funded multicenter randomized sham controlled trials trial of <unk> in chemotherapy induced peripheral neuropathy that is being run by the University of Rochester School of Medicine.

We are currently constructing our CIP and regulatory strategy and planning next steps, we should have updates on this program and the second half of the year.

Our our of less program Restless leg syndrome is not as far as long as of the two indications. However, we have the unique and relevant assets and the quell health cloud, which is data from over 10000 call users who report having Rls and addition of chronic pain. We are analyzing this large and growing real world <unk> data set for valuable clinical and <unk>.

Hitting insights.

So in summary, neuro metrics as novel products and are targeting large markets with unmet needs. We are committed and operationally we are a committed and operationally efficient organization that of structure to attain profitability while supporting growth.

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

Yes. The reminder to ask a question the only need the press star one on your telephone keypad and can withdraw your question press the pound key.

The standby, while we compile the Q&A queue.

Again in order to ask the question just price are one and your telephone keypad.

And there are no questions at this time I'll turn the call over to Dr. Terry does that mean.

Thank you again for joining us on this conference call and we look forward to updating you over the balance of the year.

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

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