Q2 2021 electroCore, Inc. Earnings Call
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Okay.
Greetings and welcome to the Electric Corps second quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation you can enter the queue for questions at any time by pressing star 1 on your phone.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host rich Cockrell. Thank you Sir you may begin.
Thank you all for participating on today's call. Joining me today are Dan Goldberger, Chief Executive Officer, Brian Posner, Our Chief Financial Officer, and Dr. Peter Staats Electric cores Chief Medical Officer.
Earlier today electric for release results for the second quarter ended June 30 of 2021, a copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During the call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant.
2 the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
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, our examination of operating trends and our future financial expectations are based upon the company's current estimates and various assumptions. These statements.
<unk> 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 the statements.
For a list of descriptions of the risks and uncertainties associated with the company's business. Please see the company's filings with the Securities and Exchange Commission.
Well after the core disclaims any intention or obligation except as required by law to update or revise any financial protections or for looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information that is accurate only as of the live broadcast today.
As for 2021 and with that I'll turn it on all over to Dan. Thank you.
Thank you rich.
Hello, everybody and thank you for joining us today I'm excited to report that Q2.2021 revenue was a record $1.3 million gross margins have expanded to more than 70% of net cash used in the operations decreased over 20% to $3.2 million for the second quarter of 2002.
'twenty, 1 from $4.1 million for the first quarter of 2021.
For the second quarter of 2021 total revenue of $1.3 million increased approximately 69% from $753000 in the second quarter of 2020.
Revenue from the government channel increased 88% to $779000 for the quarter ended June 30 of 2021 as compared to $415000 in the second quarter of 2020.
A total of 85 V a and D. O D military treatment facilities have purchased scam of core products through June 30 of 2021 as compared to 79 through the first quarter of 2021 and.
67 through the second quarter of 2020.
Note that there are approximately 1300, VA health care facilities and 475 in the military hospitals and medical clinics. So we still have plenty of growth ahead of us.
Revenue from outside the United States through direct channels increased 50% to $369000 in the second quarter 2021, as compared to $247000 during the second quarter of 2020.
These figures do not include newly appointed stocking distributors, which contributed $18000 of revenues from Canada and Western Europe during the second quarter of 2021.
During the quarter, we expanded gamma Coors global availability through our international distribution relationships in April 2021, the company announced that East agency will serve as the exclusive distributor of the gamut of course, Sapphire N VNS and Qatar.
In June 2021, we announced an exclusive distribution agreement with Chromalloy International Corporation.
The serve as the exclusive distributor of the gamut of course, Sapphire, and VNS and Taiwan and ultimately China.
Okay.
Net revenue from the U S commercial headache channel was $104000 for the second quarter of 2021 as compared to $91000 in the second quarter of 2020.
To take a few moments to explain our initiatives in this important opportunity.
We currently service approximately 12 million covered lives from pharmacy benefit managers, including Cvs Caremark and express scripts for patients that have the benefit design that does not differentiate between drugs and devices.
These patients are subject to of co pay of between 25 and $75 per month, depending on their specific benefit plan.
We also have a small number of patients that are paying cash for access to gamma core therapy.
Our unique level 2 healthcare common procedure coding system of our HCP C. S code K ones Euro 2 zero noninvasive vagus nerve stimulator became effective April 1.2021.
This is an important milestone in our quest to obtain reliable insurance coverage for gamma core therapy.
Previously all of our prescriptions, where COVID-19 is miscellaneous which made for an easy initial coverage denial for an insurance company.
Armed with our unique code, we are ramping up discussions with insurers, we've engaged policy reported or to help us negotiate with an initial list of 30 regional and national benefit providers Highmark Blue Cross Blue Shield was our first positive benefit determination and we are now negotiating their fee schedule.
I look forward to sharing news of additional payer wins in coming months.
More and more Americans have high deductible insurance plans, which means that patients are likely to be faced with the cash pay obligation even when coverage is available to.
To fill that gap, we've been carefully testing cash paid business models and direct to consumer promotions.
We had a small amount of revenue in the second quarter from these pilot programs and we hope to see accelerating growth from our cash pay consumer initiatives in the second half of the year.
<unk> joined US in May 2021, as our new sales in the year to leverage his long standing success with cash pay business models with the.
Also establish the customer experience team in New Jersey lead by Lisa Martin BSN R. N. The support physicians and their patients taking advantage of our cash pay programs.
At this point I'm going to ask our Chief Medical Officer, Dr. Peter Staats to provide an update on our various clinical initiatives.
<unk>.
Thanks, Dan.
Is that progress across our trials on various fronts this quarter.
April of 2021, we announced the publication in nature of reduced neurology of the peer.
Peer reviewed article entitled highlighting the role of noninvasive vagus nerve stimulation and BNS Anthony emerging treatment for cluster headache.
This is the second peer reviewed publication, suggesting and DNS as a first line therapy for cluster headache.
As you may recall that in July of 2025th Alger recommended and DNS is the first line treatment for both of the acute and preventive treatment of cluster headache in the highly relevant treatment option for patients suffering from migraine.
In May of 2021 of the U S Department of Veterans Affairs announced an investigator initiated trial on the <unk>.
The gamut of course Sapphire ran DNS for the treatment of post traumatic headache.
Post traumatic headache of PTH accounts for approximately 4% of all symptomatic headache disorders and is 1 of the most common consequences of mild traumatic brain injury.
Or also known as tbi or concussion.
In June of 2021, the company announced the publication of the peer reviewed paper entitled Noninvasive Vagus nerve stimulation improves clinical and molecular biomarkers of Parkinson's disease and patients with freezing gate.
In the capital.
Entitled Nature partner journals, and PK Parkinson's disease.
This paper reports the results of the randomized double blinded Sham controlled crossover trial conducted at the Institute of Neuroscience in Calcutta, India in collaboration with the Department of Medical Science at Newcastle University in the <unk>.
England using <unk> Sapphire.
The study provides preliminary evidence supporting the safety and efficacy of N VNS and treating motor and non motor symptoms of Parkinson's disease.
Most patients were able to self administer and DNS and subjects for reported the satisfied with the treatment.
Also on June the company announced the publication of the peer reviewed paper entitled effect of Trans continuous vagus nerve stimulation on cognitive performance under sleep deprivation stress.
This was published in the Journal Communications biology of nature publication.
The paper reports of the ability of <unk> to reduce fatigue and increased performance in a randomized double blind Sham controlled trial conducted at Wright Patterson Air Force base, using Gam of core and sponsored by the United States Air Force Research laboratories, or U S. A F. R L.
At this point I'll turn the call over to Brian for a review of our financials and other guidance items.
Ryan.
Thank you Peter.
For the second quarter ended June 32021 electric core reported net sales of $1.3 million as compared to net sales of $1.2 million in the first quarter of 2021.
Is 5% sequential increase in revenue was in line with previously stated guidance and was driven by growth in the channels, where we reliably get paid the VA Dod and United Kingdom.
Gross profit for the second quarter of 2021 was the $895000 as compared to 840000 for the.
First quarter of 2021, and 480000 for the second quarter of 2020.
Gross margin for the second quarter of 2021 was 71% compared to 70% in the first quarter of 2021 and 64% in the second quarter of 2020.
Total operating expenses in the second quarter of 2021 for approximately $6.1 million a reduction of approximately of 126000 or 2% from $6.2 million in the first quarter of 2021, and a reduction of 306000 or 5% from 6.
<unk> 4 million in the second quarter of 2020.
Research and development expense in the second quarter of 2021 with $825000 as compared to $500000 in the first quarter of 2021 of <unk>.
From approximately $326000 sequentially.
The increase in R&D expense during the quarter was primarily driven by the initiation of the GAAP PTH program.
And the expense decreased by 206, thousands of dollars of 20% from $1 million during the second quarter of 2020.
Selling general and administrative expense in the second quarter of 2021 was $5.3 million as compared to $5.7 million in the first quarter of 2021.
SG&A expense was flat compared to the second quarter of 2020.
GAAP net loss in the second quarter of 2021 was $2.9 million compared to first quarter 2021, GAAP net loss of 5.4 million, primarily due to the extinguishment of debt associated with the forgiveness of our PPP loan and the tax benefit from the sale of our New Jersey.
Noel tax carry forwards.
GAAP net loss decreased by 39% for.
$1.8 million compared to a GAAP net loss of $4.7 million in the second quarter of 2020.
Adjusted EBITDA net losses from the second quarter of 2021 was for $1 million as compared to $4.2 million during the first quarter of 2021, and it's compared to a loss of $4.3 million in the second quarter of 2020.
The company defines adjusted EBITDA net loss the GAAP net loss excluding.
Excluding depreciation and amortization stock.
Stock compensation expense.
Restructuring and other severance related charges legal fees associated with stockholders' litigation.
Total other income and expense extinguishment of debt and benefit from income taxes.
A reconciliation of GAAP net loss for non-GAAP adjusted EBIT of net loss has been provided in the financial statement tables included in today's press release.
Net cash used in the quarter ended June 32021 exclusive of cash proceeds from the sale of N J NOL carryforwards, what's the.
Ultimately $3.2 million as compared to $4.1 million in the first quarter of 2021, and $5.2 million in the second quarter of 2020.
Cash cash equivalents and marketable securities at June 32021 totaled approximately $23.7 million as compared to approximately $25.5 million at March 31.2021.
Subsequent to June 32021, the company raised net proceeds of approximately $18.8 million through a public offering of $20 million 700000 shares of its common stock.
Looking ahead for the third quarter of 2021, we expect net revenue to be at least $1.5 million and net cash usage exclusive of financing activities to approximate $4.5 million the.
Expected increase of net cash usage is largely due to the annual renewal of our insurance policies.
And now I'll turn the call back over to Dan.
Thank you Brian.
We're pleased with our results this quarter and look forward to improving our performance during the third quarter.
We're in a strong financial position with the pro forma cash balance of $42.5 million as of June 32021.
We look forward to further penetrating the VA Dod channel and the growth of our United Kingdom business as the Med Tech funding mandate continues rolling out through the year.
The recent publication in Pharmacopeia economics, reiterating the evidence supporting a first year benefit.
The 450 British pounds per patient when gamma court therapy is used in conjunction with standard of care versus provides further support to our payer negotiations.
Longer term clinical indications beyond cluster in migraine headaches supported by the ongoing clinical development of the Doctor starts discussed could greatly expand the market for N VNS therapy.
I want to recognize our dedicated staff for their work and commitment in these trying times and thank the healthcare professionals and their patients for the loyal support of gamma of course therapy.
Finally, I want to congratulate our Dr. Peter Staats on his lifetime Achievement Award announced at the annual meeting of the American Society of pain in neuroscience in July 2021.
At this point I'll ask the operator to open the line for questions.
Thank you, ladies and gentlemen of the Florida is now open for questions do you have any questions or comments. Please press star 1 on your phone at this time.
Just a lot of posing your question. Please pickup your handset lifting on speaker phone to provide the optimum sand quality.
Hold while we poll for questions.
On the first question is coming from Jeffrey Cohen.
On the Ladenburg Thalmann Jeffrey your line of lives.
Or how are you doing Brian and Peter how are you.
Good thank you for the opportunity.
So.
A few from Aaron.
Can you walk us through.
The geographical setting now outside the U S I heard the the.
Virtual edition of time Warner.
Non.
I'm pretty familiar with what's going on in the UK.
Else are you currently.
We expect to be over the coming months.
So.
Jeff as you know we've got a wholly on subsidiary in the United Kingdom and that business is.
The growing nicely now that we have transitioned to the med Tech funding mandate. We're also starting to explore.
Some more traditional pharmacy based channels in the United Kingdom.
We announced earlier this year distribution arrangements in the Australia and Canada.
Several distribution arrangements in Europe more recently in Qatar, which is the first of what we think will be a few more in the middle East.
And most.
Most recently Quill maps.
In Taiwan, and ultimately in China.
We're going to continue to look for.
Stocking distributor relationships in other parts of Europe.
We also have initiatives.
For National Health care reimbursement in a few specific.
Target markets in Europe in May if we if we do get those coverage wins.
You should go directly in those countries as opposed to distributor but.
1 thing at the time.
Perfect I got it.
Could you talk little bit on there you mentioned.
Mitch and some of the other folks here could you talk about the.
On the DTC channel and sort of maybe kind of walk us through kind of.
And it could play out.
The sequelae.
And what that could be the insurers on.
It was 1 of your from DTC.
Yeah. So we really think that that's going to be that initiative is going to be the future.
Our commercial headache channel, we're going to continue to.
The work with the payers.
To establish reimbursement for a larger number of covered lives.
And in the meantime.
Develop these opportunities for cash pay business, where the patient works directly with their insurance company.
You've seen this model in a variety of.
Home health care.
Devices.
Similar to what goes on in diabetes therapy.
On the oxygen therapy CPAP for sleep apnea.
So we're following sort of a well worn path in terms of.
Operating a very.
The competitive cash pay opportunity.
Continuing to develop the more traditional insurance coverage options in the background.
Got it and then lastly for us on.
Peter Walk us through time lines on when we may see some.
Presentations on.
Do Ah trials or investigator initiated whereas the 2 for that matter.
The balance of the share in 'twenty, 2 maybe 3 specific the ratio of kind of approaching I heard of it for them.
Yeah, I think that the big issues youre going to be coming in 2022.
We've announced the completion of.
1 of the stroke studies, and we anticipate that that will be.
Submitted and hopefully presented at the.
The.
International stroke conference.
The next year I think that will be.
1 of the.
Upcoming meetings.
There's not too much coming in 'twenty.
21 for.
For the remainder of this year.
So I'm trying to think through the various issues a lot has been published and came out with the data on Parkinson's as I've mentioned in other interesting areas of coming out, but I don't I don't see.
Many of our presentations coming on in 2021.
Got it.
Perfect, but those are for.
Some of the sort of break of Q3 Q.
Thank you.
On the next question is coming from Okay.
From HC Wainwright, Okay. Your line of lives.
Thank you.
Good afternoon.
Then Peter and the Bryan.
So Inc.
In terms of.
Some of the growth drivers that we're looking at.
The sales.
On this in the.
The second quarter.
More of the.
Yes.
The clinics sub standard.
And the prescribing chemical usage.
<unk> 85 compared to the previous number of I think it's 17.9 in the.
In the first quarter, so how much of this is.
Ah repeat customers on some of on how much of this is the opening of the via centers on.
You know I mean.
Obviously, it's the.
The COVID-19 is coming back from southern states, but.
No.
To what extent.
And on what has worked.
In terms of the rest of the country that things of being opening up do you expect.
This growth to continue into the second half in the sense, what I'm selling the 90 day clock.
And beyond.
Yeah, So great question RK.
There are 2 ways to grow our business and the VA hospitals, 1 is 2.
To generate additional prescriptions from an existing hospital customer.
To go deeper into existing customers and the other is to open up <unk>.
New hospital customers and we're doing both and as the pandemic recede in the second quarter we.
We saw both of those initiatives really start to get some tracks subtraction.
Lots and lots of noise as you mentioned about about the Delta variant.
That may be a headwind in the current quarter too early to tell.
But.
We're very excited about being back in the field.
Being able to open up new hospital customers and as you saw we opened up 6 from hospital customers and the the 3 months ended June 30th and really nice growth compared to the previous year, but.
Most importantly, we're just scratching the surface straight out of out of more than 1000 facilities, we still have less than 100 of them. This country customers. So lots of room for upside growth as the pandemic recedes, and we get back to selling.
Yeah.
Okay.
In terms of.
The the headset is he is core debt.
You received on there for those for us.
Some of the discussions that you're having the payors.
Yes.
What what you know what.
What has been achieved.
The last.
A few months since you have heard the cord.
And.
Do you think 'twenty, 1 would see some growth from that or is it more of a 'twenty 2 event.
Yeah. So it's more of a 'twenty 2 event.
Hi, Mark Blue Cross Blue Shield was our first.
Favorable coverage determination.
And we're now we're negotiating of fee schedule with them.
We have conversations going on.
With the obvious national players, including Kaiser.
But more likely is that we'll get a few more we'll be able to announce a few more of the sort of smaller regional players the blue crosses.
Over the course of this year.
We really see the insurance reimbursement kicking in in 2022, but we have to do the legwork in the back half of this year.
So 1 last question for Brian.
On the Opex, obviously, you know as.
<unk> been able to.
Bringing as much efficiency as you can for.
On the operations.
And you know.
You still brought it down by 2%.
Compared to the first quarter.
With some of.
On the VA hospitals opening of some of these.
Sales.
Expenses for <unk>.
The until they're going up.
Do you think.
The kind of reached the amount of efficiencies that you can get out of the operating.
Lines or do you think there's still some more.
Efficiency to Eke out of the system.
Hi, RK. Another good question I think theres always potentially.
To cut costs, but I think right now the focus is on growing the top line and with our balance sheet being strong we're looking to make the appropriate targeted investments to help generate that growth, but again, we're always looking.
For ways to cut costs, where appropriate.
Okay.
Thank you. Thank you gentlemen for taking my questions.
Thanks RK.
Net.
Thank you and the next question is coming from John is on there most of them from Zacks SCR John Your line of lives.
Hey, good morning, guys. Good afternoon, Gosh, I don't know what kind of this.
We're most excited about a lot of the distributor agreements that you have I mean that seems like a really great way to get out there and obviously you had the Taiwan and China arrangement.
That was announced recently.
Is it expected to take until that they can go through the regulatory process and we will proactively pursuing headache or is there a broader opportunity than that in the near term.
Yeah. So that's a good point John in the.
The United States, we are FDA cleared for prevention and treatment of cluster headache and migraine.
But outside the U S. We have a much longer list of indications 2 of the CE, Mark and our international distributors that arent explicitly covered by the CE Mark system generally mimic the.
The indications on our CE, Mark which include depression, and the epilepsy and reactive airway disease and bronchospasm and.
Really quite a long list.
Showing that the future of what.
Noninvasive vagus nerve stimulation could be in the United States.
The the regulatory process in Taiwan.
Is.
Pretty bureaucratic unfortunately.
We were dealing with document requests right now I don't have good visibility on exactly what the timing is.
Just.
It is the paperwork intensive process. So on the no more on a few days.
Okay, Great and obviously that is the access to the largest populations on the world, China, Taiwan I think of them.
A lot smaller I think 20 to 30 million of something like that but.
A little bit higher wages, there a little bit higher.
Economic status on what kind of penetration do you think you can get into these areas and I mean is this the most material.
Arrangement that you have out there.
It will just be based on the population or is it another 1 perhaps western Europe. How do you have the rank. These I guess in terms of.
Yes.
Long term.
Like you could take true.
The 3 of the best ones are the kind of run with them is that is that something you may alter now now that you have a little bit more cash on the balance sheet.
<unk>.
And I think the sequencing and Peter alluded to some of it the the sequencing is secondary headache.
In traumatic brain, and sorry, headache associated with the traumatic brain injury or concussion.
The work that the the Doctor Bremner has been doing on P. T S D and opioid use disorder. The work that the Doctor Chapman published in the UK around Parkinson's.
Those are the sort of the closer in on.
<unk> for us to get expanded indications.
Okay, great. Thank you day.
If I could just add 1 little comment there.
There's the alias work with Doctor Cabinet and there's of course, the month of all work in Parkinson's Uhm, but some of the really interesting things that you're saying in the Parkinson's work, it's really significant changes income biomarkers.
Which are the AD in my mind validity to the entire field of non invasive vagus nerve stimulation. So liberally per those types of activities with the <unk>.
Nations are very open minded and an insurance companies don't affect what we're doing in the V. A channel so.
Fingers crossed that this that this passes and get back to a normal life sooner rather than the later.
Okay. Thanks, and then 1 of more of a bigger picture of question of we talked a lot you have a lot of plates spinning when it comes to the studies and what the what the Gammacore capable of just.
Is there any sort of you know maybe some art.
Clarity on the timeline of when we could expect if it's 2022, another 5.10-K submission and possible you know clear on for another indication of what would that be.
Yeah, we we specifically haven't given any guidance on on expanded indications, you're you're likely to see a clinical publication.
Before we say anything about regulatory approvals.
Okay, Alright, so that's all I have thank you so much.
Okay and that's all the questions. We had on 1 of my humble posture dangled does that for any closing remarks.
Thank you operator, and and thank you all for joining our call greatly appreciate your time and attention and look forward to to better things in the future.
The night.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at the time I have a wonderful day. Thank you for your participation.
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