Q1 2021 NeuroMetrix Inc Earnings Call
Yes.
Good morning.
And welcome to the neuro matrix first quarter 2021 earnings call.
My name is GAAP, Brian and I will be your moderator on the call.
On this call the company May make statements, which are not historical facts and Arkansas deterred forward looking within the meaning of the private Securities Litigation Reform Act of 1995.
Statements that 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 from neuro matrix about future results of operation.
And other forward looking information.
You should not rely on forward looking statements because actual results may differ materially.
As a result of a number of important factors, including those set forth in the earnings release issued earlier today.
Please refer to the risks and uncertainties, including the factors described under the heading risk factors in the company's periodic filings with the S. E T available on the company's Investor Relations website at neuro matrix Dotcom.
And on the SEC's website at SEC Gov.
Neurometrics does not intend and undertakes no duty to update the information disclosed on this conference call.
I'd now like to introduce the neuro matrix Senior Vice President and Chief Financial Officer, Mr. Thomas Higgins Mr. Higgins. Please go ahead.
Thank you Debra from those attending today's earnings call.
Shai Giussani Neurometrics, President and CEO, who is participating in this Q1 2021 review.
For metrics as a leader in proprietary noninvasive medical devices for the diagnosis and treatment of pain and neurological disorders, we design and deploy a recurring revenue business model in all of our products is.
These commercial products include the neuro diagnostic technologies of TPN shack in advance plus.
Plus our primary chronic pain technology quell.
Our Q1 2021 earnings release demonstrated continued progress toward profitability combined with modest net cash usage.
Among the relevant details from the Q1 results.
Q1 revenue was 2.2 million this represented 19% sequential growth from.
From the fourth quarter of 2020 on approximately flat revenue with Q1 of 2020 of 2020.
Our sense is there continues to be some delay, albeit diminishing in our customer base returning to its pre pandemic diagnostic testing levels.
<unk> was the lead revenue generator domestic Medicare advantage sales were up both sequentially and year to year.
International sales, primarily Japan like Q1 of last year.
Advanced sales were also up sequentially and year on year, this reflected higher volume levels as well as improved pricing.
Credit continued to deliver a positive operating margin.
Okay.
Our gross profit on revenue was $1 6 million the margin rate was 73, 3% for 71, 4% in Q1 of last year, an improvement of 190 basis points from the Euro earlier resolved.
Operating expenses.
Expenses totaled $1 6 million.
Spending on in Q1, 2021 was reduced by 570000 or 26% from Q1 of last year.
R&D expenses benefited from a onetime credit of $450000 upon the resolution of a technology license.
Opex also reflected a charge of $187000 to write off the remaining right to use asset under the company's lease on its Walter on Massachusetts facility.
This facility was idled in 2019 and offered for sublet.
For current market conditions make it unlikely that a sublet will be secured during the remaining lease term, which is about a year.
Net loss for the quarter was approximately $60000, which compared favorably with a net loss of $657000 in Q1 of last year.
And on a per share basis for the net loss was two cents per share versus <unk> 45 cents last year.
Regarding the balance sheet, we ended the quarter with $5 1 million in cash and <unk>.
Net cash usage during the quarter totaled $81000.
The company's cash resources are sufficient to fund its operations well into Q2 of next year and likely beyond.
Stockholders' equity at the end of the quarter was $5 2 million from $1 39 per share the company's capital structure remains debt free and there were $3 8 million common shares outstanding.
Doctor Giussani will now address our overall strategy.
Thank you Tom.
Our current business strategy is guided by three core principles.
The first is continued R&D investment and our established TPN check in quell technology platforms to drive their respective market penetration and to open up additional markets.
Second is to continue transitioning the business to operating profitability and cash generation.
And the third is establishing a consistent and predictable top line growth.
I'll take this opportunity to provide brief updates on each of these elements.
First focusing on R&D, our R&D strategy is to develop unique proprietary medical devices that utilize noninvasive neurostimulation to diagnose and treat pain and neurological disorders.
We always seek to define new product categories or leapfrog existing technology, we develop products using our in house 10 person R&D team.
We have two near term R&D projects, along with several nascent programs.
First on VPN check we are in the late stages for our second generation <unk> project. Our current expectation is to launch in the U S. Before the end of the year.
This version of <unk> captures our experience for the first generation device collected over 3 million patient tests.
We believe that the new <unk> will solidify our first mover advantage and make it highly challenging for future competition to emerge and it will also protect our growing high margin aftermarket consumables revenue stream.
New device includes a number of features that will position us to grow both the domestic and international businesses.
Some examples include improve usability features wireless communication with reporting software and multiple language support.
Our next program is in the disease state of fibromyalgia.
We are developing a prescription treatment for the symptoms and functional impairment associated with fibromyalgia based on <unk> technology.
For my outages, a common chronic pain disorder that affects 2% to 6% of the adult population and is more common in women than men.
Although there are several FDA approved drugs, including per gambling and <unk> they have side effects import hearings.
The global Fibromyalgia treatment market size is several billion dollars with a U S being a large slice of that.
A recently completed double blinded randomized sham controlled trial using quell produced encouraging results with evidence of several important treatment benefits compared to sham, particularly in certain well defined patient subgroups.
We anticipate scientific presentations at pain medicine conferences later this year and a couple of manuscripts will soon be submitted to peer reviewed medical journals.
We are finalizing our regulatory strategy and anticipate a filing in early 2022 with commercialization to commence by the end of 2022, and we will provide updates as this program continues to develop.
Our next program, which is at an earlier stage is for chemotherapy induced peripheral neuropathy or CIP and we.
We are monitoring a NIH funded multicenter double blinded randomized sham controlled trial of quell in CIP and that is being managed by the University of Rochester.
We believe that this study could read out in the first half of next year at which time, we will evaluate whether to proceed with the CIP on indication for <unk> based on the study findings.
CIP as a common type of neuropathic pain that affects many of the 650000 people who received chemotherapy each year, an encouraging pilot study of quell for CIP and that was published several years ago by the University of Rochester team.
Was was encouraging and so we are hopeful that this ongoing RCT will build on those earlier findings.
Our next element is profitability.
We have communicated for the past two years that we are prioritizing prioritizing attainment of profitability and cash generation is covered by Tom in his discussion on the financials. The first quarter of 2021 provided evidence of our progress.
Assuming that our business continues to develop as we anticipate we expect to show continued progress towards profitability this year and should be in position to crossover in 2022.
However, we do caution or we're still we're still grappling with uncertainty in terms of how rapidly our DPA chip business will grow regulatory timelines for investigational quell device for fibromyalgia and continued uncertainty around COVID-19. So we will provide updates as we learn more Moreover, due to long sales cycles and are deeply on check Medicare.
<unk> business and the Choppiness of the TPN check international business for the past profitability may not always proceed linearly.
And the third element is growth, we believe that we can steadily grow revenues, while remaining steadfast in our commitment to achieving profitability.
We see growth coming from a number of sources.
In the near term, we are bullish about our <unk> business, particularly the domestic market.
<unk> is now well established in Medicare advantage, we have a good pipeline of insurance companies and other entities in the Medicare advantage space. There are candidates to implement <unk> this year. Moreover.
Moreover, the Medicare advantage space itself is growing at nearly 10% annually.
And our largest customers are actively acquiring physician practice groups, which often leads to new <unk>, new <unk> business soon after the acquisition closes.
We are looking for ways to we're also looking for ways to restart our OTC coil business.
Which is focused on lower extremity pain to this end we expect to launch several initiatives. Later this year one of which is a novel feature that we believe will generate interest among individuals with chronic knee pain.
A bit further out we see the quell business returning to strong growth with the launch of for fibromyalgia indication in 2022.
So in summary, neuro metrics as novel products that are targeting large markets with unmet needs. We are committed and operationally efficient organization that is structured to attain profitability while supporting growth.
Those are our prepared comments, we'd be happy to take questions at this point.
If you would like to ask a question. Please press star one on your telephone keypad.
That is star one to ask a question we'll pause.
For a moment to compile the Q&A roster.
Your first question comes from Bill Church with <unk> capital.
Hi, good morning, Thanks for taking my call.
Earlier this year.
Net debt both of you were taking some or all or some of your salary and stock and.
Slide you supported the company and what Youre doing for the shareholders.
Mike comment question.
Tennis channel.
They usually have commercials for trial at all and then Cymbalta talking about fiber miles on.
Pronounce the name.
And then with a whole long list of side effects.
And being a longtime tennis player in older and arthritic on all that sort of thing I know my friends have.
Pain, and arthritis, and all that sort of thing and there are a couple of people on the tour that have arthritis, too and so I think we all look forward to see if <unk> can help.
One of the solutions for what we're experiencing and keep it going on the court and so that's all I have thank you.
Thank you Bill.
And your next question comes from the line of Jared Cohen with JM Cohen and company.
Yes Pete.
Questions. One can you give us.
Just as a percentage of revenue the breakdown between VPN well.
So Jared this is Tom.
We decided not to not to lay out each product line revenue and profitability.
But certainly DPM check is the dominant.
Part of the part of the revenue chain and and <unk> as we said.
We operate at a much lower level than in the past.
But we ensure that its operating profitability as we look to reposition that product going forward.
Okay.
Uh huh.
So that's good.
I know.
Alright.
Your line is how much this still does.
There's revenue coming from our reusable CEO.
Electrode.
For.
Let me just.
It's running in the range of about 60%.
For usable.
Okay.
And then my last question because I.
I was wondering in terms of new revenue opportunities for quell also beside for once you've mentioned.
Tony Thanks for chronic pain.
What about there.
Okay.
More or less product and then saw are sort of on the acute side I'll give you. An example, something like.
For people who bet.
Recent back surgery, which seems it doesn't work initially as well and have to go for rehab.
Pain right after the back surgery and.
They are trying there.
Alleviated somehow and correctly at night.
We don't sleep and so for are there opportunities for.
Prescriptions from doctors and so forth for the.
The use of the quell.
I'll give you a perfect example, something like route by <unk>.
Mother-in-law, Ret fusion surgery installs Abbey.
So you add that two months ago on is having problems for pay and so forth.
And it's been on.
With initially on opioids, and then of course, you can't use them forever.
Yes.
It's a good question Jared.
We believe that calls for.
Quell technology strength wise in chronic conditions.
Based on its design, where ability for factset. It can be used for prolonged periods of time.
Both within a day as well as over over a long over a long period, so our reliance on new products.
Product gross.
Right right.
Alright.
But I would say more yeah for months or so forth or even years right.
Yes, so we're focused on.
In principle it could have utility in a more acute settings, but our our focus on again I think where the strength of the technology lies in chronic conditions.
So we're focused on of course, lower extremity chronic pain, which is what it is currently available for over the counter and then.
From the investigational side, we're working on as I mentioned of course, fibromyalgia, which we have very good clinical data on and.
And then and then chemotherapy induced peripheral neuropathic pain, and then some additional chronic conditions potentially after that as well.
Alright.
I was curious because I always tried to convince you I'd rather not to do the back surgery or you just use the quell.
It was more absolute.
I am actually bought it for and see just use deferred day in <unk>.
Yes.
I gave it back to me.
Yes.
It turns out for Baxter.
It wasn't.
It wasn't as great as we thought it was.
Yes.
So that's why I was just curious.
Alright, Thank you very much thank you Jared.
Your next question comes from Ken <unk> with EBT.
Thanks for taking my call.
Question around the consumables, it's consumable revenue was about 60% and that's great.
<unk> is the company doing to drive greater persistence with the product and therefore, greater consumable revenue overtime.
Are you referring to the specifically the <unk> business because the quell business in particular, yes.
Well, we have a number of different programs in place. We have features on the mobile app that supports the project that they try to drive.
Engagement and retention.
For users so there's a number of things that were.
We're doing on on an ongoing basis, but our as I said most of our R&D focus at this point is on these.
Specific day.
This disease specific applications, such as fibromyalgia that we're pursuing we believe that in those specific instances, we'll be able to drive even better long term engagement.
Got it thank you.
Okay.
And your next question comes from the line of Bill Church with <unk> capital.
Thanks, I just following up on <unk> question.
The experience I've seen from a couple of people coming back from ACL surgery, using the <unk> for a period of six to 10 or 12 weeks during rehab and both of them said that they were.
Not that the cloud really helped them get through this.
This pain as they were going through rehab, which can be kind of painful.
And then after their rehab was over and they were sort of pain free that kind of dropped at one of them now seems to have arthritis, and inter day and she is about to start using it again, but I'm wondering if you're sort of getting back to jarrod is about with the mother in law use it one day I mean, I know, it's not like advil on or something like that but do you see on your studies.
That.
Over longer use, let's say week or two weeks or something that tends to build up.
On some comfort or relief from the pain.
But we don't have specific clinical studies that address that question. We've done a lot of work looking at the real world data that we have.
Through the call health cloud is net.
Most the majority of call users linkup, there their devices via the App to our to our cloud server. So we have we have published some work on that and we do we do think that it has a.
So for aggregating benefit over over several weeks and historically our sense has been that it takes two to three weeks at least for most chronic conditions chronic pain conditions for it to start to take effect.
But we really don't have a lot of experience on the acute side for me to comment on it.
It is an interesting application.
That we may revisit on the future, but at this point.
We have to be fairly narrowly focused so we've we've chosen these kind of large chronic chronic conditions such as fibromyalgia too.
To put on to put our energy into at this point.
Sure Okay. Thank you.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
There are no questions in queue I would like to turn the call back over to Mr. Hagan for closing remarks.
Well is this a shy, but I would like to thank you for joining us on our call today, and we look forward to keeping you updated over the balance of the year.
This concludes today's conference call. Thank you for participating you may now disconnect your lines.
[music].
Yes.
Got it.
[music] zone.
Okay.
Yes.
Okay.
Uh huh.
Yes.
Yes.
[music].