Q2 2021 NeuroMetrix Inc Earnings Call
[music].
Good morning, and welcome to the neuro metrics second quarter 2021 earnings call. My name is Michelle and I'll be your moderator on the call.
On this call of 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 statements.
Statements that are predictive in nature that depend upon the offer to FERC future events or conditions are forward looking statements.
Any forward looking statements reflect current views of their metrics.
Future results of operations and other forward looking information you should not rely and forward looking statements because the actual results may differ materially as a result of a number of important factors, including those set forth and the earnings release issued earlier today. Please.
Please your first of the risks and uncertainties, including the factors described under the heading risk factors and the Companys periodic filings with the SEC available and the company's Investor Relations website, and never metrics Dot com and on the SEC's website and as you see that Gov. Their magic does not intend and they're just takes no duty to update the information.
And to close the conference call.
And now I'd like to introduce the Neurometrics Senior Vice President and Chief Financial Officer, Mr. Thomas Higgins Mr. Higgins.
Thank you Michelle and.
Of your attending today's call Dr. Shai Giussani of our President and CEO of is also participating in the Q2 review.
Your metrics as a leader and proprietary noninvasive medical devices from the diagnosis and treatment of pain and neurological disorders.
Design and deploy of recurring revenue business model and all of our products.
Commercial products include the neuro diagnostic technologies of DPM check and advance plus of our chronic pain treatment technology and quality.
Our results from the second quarter of 2021, and we're just released.
Overall financial performance was in line with our expectations, we continue to make progress and positioning our commercial products for future growth, while supporting the ongoing research and development programs, which I will address shortly.
Turning to the highlights of the Q2 earnings report.
Q2 revenue was about $2.2 million and improvement of 63% from 1.4 million and Q2 of last year last year results. However were depressed by the pandemic related decline.
And customer orders that we saw across the industry.
Within total revenue TPN check was the largest component.
And within DPM check our domestic Medicare advantage business was the largest contributor.
International <unk> sales, which are primarily in Japan, and China and.
Improved from Q1 of this year, but continue to lag last year. We believe this reflects conditions on the ground and those 2 countries.
Advance electrodes sales delivered another strong quarter. This was both year on year as well as on a sequential quarter basis.
The electrode unit volumes and pricing were both higher advances primarily used to evaluate carpal tunnel syndrome by hand, surgeons and by occupational health physicians and industrial settings.
<unk> continued to deliver positive operating margins.
Our gross profit on revenue for the quarter was about $1.7 billion that represents a margin rate of 74, 8% per.
63, 6% and the prior year quarter.
This improvement of 11, 2 percentage points is primarily due to increased cost absorption and the higher due to the higher production rates. Currently Q2 of this year versus the low production volumes of last year.
Operating expenses totaled $2.2 million RMB.
R&D spending of about $600000 was relatively constant year on year.
Sales and marketing spending of 300000 was lower than last year due to reduced quell advertising spending.
And G&A spending of $1.3 million was up about 600000 and from 2020 the.
This primarily reflects the timing of equity awards and incentive comp accruals professional services and state sales tax obligations.
Our net loss for the quarter was 532000, which compares favorably with the net loss of 852000 and the prior year quarter and on a per share basis, our net loss was 13.
Versus <unk> 28 loss per share and Q2 of last year.
Regarding the balance sheet, we ended the quarter with cash of $8.4 million.
Our cash balance was subsequently increased to over 10 million following ATM equity sales of $2.3 million, which we made over the last 3 weeks.
For the first 3 weeks in Q3, we believe that our cash on hand provides the company with sufficient resources for the foreseeable future.
Operating cash usage was $567000 during the quarter and that included a $350000 payment to settle our retailer closeout per <unk>.
Excluding this onetime payment our net operating cash consumption was $217000 in the second quarter of this year.
Stockholders' equity at the entity at the end of the quarter was $8.8 million or of $1.75 per share and now Dr. <unk> will address our overall strategy.
Thank you Tom.
First I would like to comment on the recent activity and our stock.
And we appreciate the interest that was generated generated by the recent announcements that <unk> received FDA breakthrough device designation. It is gratifying that new investors of learning about neuro metrics and our efforts to improve patient health through our diagnostic and therapeutic products.
Our business strategy is guided by 3 principles. The first is continued R&D investment and our technology platforms to drive market penetration and to open up additional markets. The.
The second is transitioning the business to operating profitability and cash generation and the third of establishing consistent and predictable top line growth.
I will take this opportunity to provide updates and each of these elements.
First with respect to R&D.
Our R&D strategy is to develop unique proprietary medical devices that utilize non invasive neuro stimulation to diagnose and treat neurological conditions and pain.
And we seek to define new product categories and leapfrog the existing technology.
We develop products using our specialized and house 10 person R&D team.
We have 2 near term R&D projects, along with several nascent programs today I'll focus on our near term programs.
We are in the late stages of our second generation DPM check development project as a reminder, DPM check is a proprietary rapid point of care test for nerve degeneration, such as due to diabetes chemotherapy and autoimmune diseases.
Paul and neuropathy as these conditions are called have and overall population prevalence of 5% to 10% that increases to over 25% and elderly individuals.
Our current expectation is to launch the second generation device in the U S. Before the end of the year.
This new DP and check captures our experience for the first generation device, which has been used for over 3 million patient tests.
The next generation DPA and check will solidify our first mover advantage and make it challenging for significant future competition to emerge and it will also further protect our growing high margin aftermarket consumables revenue stream, which accounts for about 80% of DP and check sales.
Our next program relates to fibromyalgia, we are developing a prescription treatment for the symptoms of fibromyalgia based on our <unk> technology.
<unk> the common chronic pain disorder that affects as much as 5% of the adult population of.
Although there are several FDA approved drugs, they have side effects and port Harris.
The global fibromyalgia treatment market size of several billion dollars with the U S being a large slice of that.
On Tuesday of this week, we reported that <unk> received the FDA breakthrough device designation for treatment of fibromyalgia symptoms in adults.
This is an important recognition of the need for better treatments for people living with fibromyalgia and the potential for <unk> to help address this unmet need.
Under the program the FDA will provide the company with priority regulatory review. In addition, there are government programs under consideration that if adopted may facilitate Medicare reimbursement following marketing authorization by the FDA I would like to emphasize that at this point and the use of quality of fibromyalgia as investigational.
We believe that the use of <unk> to treat fibromyalgia symptoms not just pain, but symptoms as a novel clinical application of noninvasive nerve stimulation and are therefore, therefore proceeding through the FDA de novo pathway.
And this regulatory categories designed for class II medical devices that do not have the predicate to which they can be compared for substantial equivalents.
Unlike most of the 5.10-K submissions de novo submissions often require randomized control trial data to demonstrate probable clinical benefit.
And we anticipate filing our de Novo application and the fourth quarter.
Subject to FDA review timelines and maybe possible to launch and the second half of 2022.
We will provide updates of this program progress as this program progresses.
Now moving onto the second element of our strategy, which is attaining profitability.
We have communicated over the past few years that we're emphasizing attainment of profitability and cash generation as covered by Tom and his discussions of the financials. We remain close to crossover. However, we're not quite there. We believe that we will continue to make progress over the next 4 to 6 quarters and in the meantime expect modest full cash usage.
We do caution that the path to profitability may not proceed linearly and we also may decide to make certain investments and our product lines.
To further enable growth, which could alter the timeline of profitability.
Now moving onto our third element of our strategy, which is growth.
We believe that we can consistently grow revenue, while remaining steadfast and our commitment to achieving profitability with.
And we see growth coming from a number of sources and the near term we are bullish about our <unk> business, particularly in Medicare advantage.
And where Medicare advantage represents about 40% of all Medicare beneficiaries are currently about $25 million covered lives.
The clinical value and return on investment of population level of Polyneuropathy screening with DP and check is established within Medicare advantage.
Several of the largest Medicare advantage insurers have already adopted DP and check and some of their networks and we are of a pipeline of candidates to implement DP and check this year and next.
Moreover, the Medicare advantage space itself is growing at nearly 10% annually and our large existing insurance customers are actively acquiring physician practices, which often leads to new <unk> business soon after the acquisition.
As evidence of our enthusiasm for this business, we are and the process of filling a VP of sales position to focus solely on Medicare advantage, including building out of sales force as justified by the size of the business.
We also see the quell business returning to consistent growth of the launch of the prescription fibromyalgia indication and the second half of 2022.
We also have clinical development programs ongoing and other prescription indications with chemotherapy induced peripheral neuropathy and restless leg syndrome, and the furthest along.
So in summary, neuro metrics as novel products that are targeting large opportunities within the neurology and pain markets.
We are and innovative committed and the operational efficient organization that is structured to attain profitability while supporting growth.
And those represent our prepared comments, we'd be happy to take questions at this point.
If you would like to ask a question. Please press Star then 1.
And for your question has been answered and you'd like to remove yourself. Thank you. Please press the pound key.
And then to ask the question. Please press Star then 1.
1 moment of quick questions.
Our first question comes from January with Little West Austin. Your line is open.
Good morning, and.
And I want to congratulate you for rising and more.
And then.
And with senior citizens and the and.
And out of space across the world.
It's definitely and from.
Okay.
The diversified pain.
1 true.
And it's very important.
And.
Medicare.
And hopefully Medicaid.
<unk> medical device.
Sure.
In past years, Jerry Lewis of the comment.
He had the medical device and attached to the spinal fluid and a.
Prescott.
And the pain went away, but what we placed it whereas the very numb feeling dirty disclosed during the telephone.
And I'm wondering.
And I don't know.
Nir.
Our non sealing when.
<unk> for the total told me back to normal relaxed nurse would know.
And the needles of SaaS and needles scaling and your and the part of the body.
That is activating.
Reduce the pain as it reduced.
Pins and needles, it's what it means and mcl.
So thank you for the question and the kind of comments.
So the the way that quell and which I believe is what you are referring to operate as it does stimulate the nerves and order to and.
<unk> and LNG the core pain relief response that is a sensation that has experienced you can feel it.
And to most.
And to most individuals it is not uncomfortable but is it a cessation of sensation that is is felt.
And that numbness, but there is a feeling of stimulation.
Does it take away from your concentration and the day or you can continue the workforce or your daily activities as the senior citizens and retiree.
Yes, so it does not in fact distract and in fact is used by many people overnight and doesn't even disrupt their sleep.
And waiting to experience it help you.
Hope you put me on your list for clinical studies.
Okay. Thank you very much for the comments in the and the kind of words.
Thank you.
And no further questions I'd like to turn the call back over to the Doctor side.
Many of any closing remarks.
Well. Thank you very much for joining us on this Q2 conference call and we look forward to updating you over the balance of the year.
This does conclude the conference you may now disconnect everyone have a great day.
Right.
[music].
And then.
Okay.
[music].
And.
Yes.
And.
Okay.
[music].
[music].
Good morning, and welcome to the neuro metrics second quarter 2021 earnings call. My name is Michelle and I'll be your moderator on the call.
And this call of 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 once that are predictive in nature that depend upon the offer to FERC should have done well conditions are forward looking statements.
Any forward looking statements reflect current views and their magic about just the results of operations and other forward looking information you should not rely and forward looking statements because the actual results may differ materially as a result of a number of important factors, including those set forth and the earnings release issued earlier today.
Please your first of the risks and uncertainties, including the factors described under the heading risk factors and the company's periodic filings with the SEC available and the company's Investor Relations website, and never metrics Dot com and on the SEC's website, and that's you see that Gov and magic does not intend and undertakes no duty to update the inflow.
They seem to close the conference call and.
And I'd like to introduce the Neurometrics Senior Vice President and Chief Financial Officer.
Thomas Higgins Mr. Higgins.
Thank you Michelle and those of you attending today's call Dr. Shai Giussani of our President and CEO of is also participating in this Q2 review.
Neurometrics as a leader and proprietary noninvasive medical devices for the diagnosis and treatment of pain and neurological disorders, we design and deploy of recurring revenue business model and all of our products.
These commercial products include the neuro diagnostic technologies of <unk>.
<unk> can advance plus our chronic pain and treatment technology and quality.
Our results from the second quarter of 2021, and we're just released overall.
Overall financial performance was in line with our expectations, we continue to make progress and positioning our commercial products for future growth, while supporting the ongoing research and development programs, which I will address shortly.
Turning to the highlights of the Q2 earnings report.
Q2 revenue was about $2.2 million and improvement of 63% from 1.4 million and Q2 of last year last year results. However were depressed by the pandemic related decline.
And customer orders that we saw across the industry.
Within total revenue TPN check was the largest component.
And within the DPM check our domestic Medicare advantage business was the largest contributor.
International <unk> sales, which are primarily in Japan, and China improved from Q1 of this year, but continue to lag last year. We believe this reflects conditions on the ground and those 2 countries.
Advance electrodes sales delivered another strong quarter. This was both year on year as well as on a sequential quarter basis.
Electrodes unit volumes and pricing were both higher advances primarily used to evaluate carpal tunnel syndrome by hand, surgeons and by occupational health physicians and industrial settings.
Well continue to deliver positive operating margins.
Our gross profit on revenue for the quarter was about $1.7 million that represents a margin rate of 74, 8% versus 63, 6% and the prior year quarter.
This improvement of 11, 2 percentage points is primarily due to increased cost absorption and the higher due to the higher production rates. Currently Q2 of this year versus the low production volumes of last year.
Operating expenses totaled $2.2 million R&D.
R&D spending of about $600000 was relatively constant year on year.
Sales and marketing spending of 300000 was lower than last year due to reduced quell advertising spending.
And G&A spending of $1.3 million was up about 600000 and from 2020 the.
This primarily reflects the timing of equity awards and incentive comp accruals professional services and state sales tax obligations.
Our net loss for the quarter was 532000, which compares favorably with the net loss of 852000 and the prior year quarter and on a per share basis. Our net loss was <unk> 13.
Versus 28 cents loss per share and Q2 of last year.
Regarding the balance sheet, we ended the quarter with cash of $8.4 million.
Our cash balance was subsequently increased to over 10 million following ATM equity sales of $2.3 million, which we made over the last 3 weeks.
For the first 3 weeks in Q3, we believe that our cash on hand provides the company with sufficient resources for the foreseeable future.
Operating cash usage was $567000 during the quarter and that included a $350000 payment to settle our retailer closeout per <unk>. Excluding this onetime payment our net operating cash consumption was $217000.
And the second quarter of this year.
Stockholders' equity at the end of the at the end of the quarter was $8.8 million or of $1.75 per share and now Dr. <unk> will address our overall strategy.
Thank you Tom.
First I would like to comment on the recent activity and our stock and.
And we appreciate the interest that would generate generated by the recent announcements the cloud received FDA breakthrough device designation. It is gratifying that new investors of learning about and there are metrics and our efforts to improve patient health of our diagnostic and therapeutic products.
Our business strategy is guided by 3 principles. The first is continued R&D investment and our technology platforms to drive market penetration and to open up additional markets. The.
The second is transitioning the business to operating profitability and cash generation and the third is establishing consistent and predictable top line growth.
I will take this opportunity to provide updates and each of these elements.
First with respect to R&D.
Our R&D strategy is to develop unique proprietary medical devices that utilize noninvasive neurostimulation to diagnose and treat neurological conditions and pain.
And we seek to define new product categories and leapfrog the existing technology.
We develop products using our specialized and house 10 person R&D team.
We have 2 near term R&D projects, along with several nascent programs today I'll focus on our near term programs.
We are in the late stages of our second generation DPM check development project as a reminder, DPM check as the proprietary rapid point of care test for nerve degeneration, such as due to diabetes chemotherapy and autoimmune diseases.
Polyneuropathy and as these conditions are called have and overall population prevalence of 5% to 10% that increases to over 25% and elderly individuals.
Our current expectation is to launch the second generation device in the U S. Before the end of the year.
This new GP and check captures our experience for the first generation device, which has been used for over 3 million patient tests.
The next generation DP and check will solidify our first mover advantage and make it challenging for significant future competition to emerge and it will also further protect our growing high margin aftermarket consumables revenue stream, which accounts for about 80% of VPN and <unk> sales.
Our next program relates to fibromyalgia, and we are developing a prescription treatment for the symptoms of fibromyalgia and based on our <unk> technology.
<unk> the common chronic pain disorder that affects as much as 5% of the adult population of.
Although there are several FDA approved drugs, they have side effects and port Harris.
And the global fibromyalgia treatment market size of several billion dollars with the U S being a large slice of that.
On Tuesday of this week, we reported that <unk> received the FDA breakthrough device designation for treatment of fibromyalgia symptoms in adults.
This is an important recognition of the need for better treatments for people living with fibromyalgia and the potential for <unk> to help address this unmet need.
Under the program the FDA will provide the company with priority regulatory review. In addition, there are government programs under consideration that if adopted may facilitate Medicare reimbursement following marketing authorization by the FDA I would like to emphasize that at this point and the use of quality of fibromyalgia as investigational.
We believe that the use of <unk> to treat fibromyalgia symptoms not just pain, but symptoms as a novel clinical application of noninvasive nerve stimulation and are therefore, therefore proceeding through the FDA de novo pathway.
And this regulatory category is designed for class II medical devices that do not have the predicate to which they can be compared for substantial equivalents.
Unlike most 500.10-K submissions de novo submissions often require randomized control trial data to demonstrate probable clinical benefit.
And we anticipate filing our de Novo application and the fourth quarter.
Subject to FDA review timelines and may be possible to launch and the second half of 2022.
We will provide updates of this program progress as this program progresses.
Now moving onto the second element of our strategy, which is attaining profitability.
We have communicated over the past few years that we're emphasizing the payment of profitability and cash generation as covered by Tom and his discussion of the financials. We remain close to crossover. However, we're not quite there. We believe that we will continue to make progress over the next 4 to 6 quarters and in the meantime expect modest full cash usage.
We do caution that the path of profitability May not proceed linearly and we also may decide to make certain investments and our product lines.
To further enable growth, which could alter the timeline of profitability.
Now moving onto our third element of our strategy, which is growth.
We believe that we can consistently grow revenue, while remaining steadfast and our commitment to achieving profitability with.
We see growth coming from a number of sources in the near term we are bullish about our <unk> business, particularly in Medicare advantage, where Medicare advantage represents about 40% of all Medicare beneficiaries are currently about 25 million covered lives.
The clinical value and return on investment of population level of Polyneuropathy screening with DP and check is established within Medicare advantage.
Several of the largest Medicare advantage insurers have already adopted the pn check and some of their networks and we have a pipeline of candidates to implement the pn check this year and next.
Moreover, the Medicare advantage space itself is growing at nearly 10% annually and our large existing insurance customers are actively acquiring physician practices, which often leads to new <unk> business soon after the acquisition.
As evidenced of our enthusiasm for this business, we are and the process of filling a VP of sales position to focus solely on Medicare advantage, including building out of sales force as justified by the size of the business.
We also see the quell business returning to consistent growth of the launch of the prescription fibromyalgia indication in the second half of 2022.
We also have clinical development programs ongoing and other prescription indications with chemotherapy induced peripheral neuropathy and restless leg syndrome of the furthest along.
So in summary, neuro metrics as novel products that are targeting large opportunities within the neurology and pain markets.
And innovative committed and the operational efficient organization that is structured to attain profitability while supporting growth.
And those represent our prepared comments, we'd be happy to take questions at this point.
If you would like to ask a question. Please press Star then 1.
And if your question has been answered and you'd like to remove yourself. Thank you. Please press the pound key.
Again to ask a question. Please press Star then 1.
1 moment for questions.
The first question comes from January with Little West Wall Street. Your line is open.
Good morning, and.
And I want to congratulate you for rising the mall.
And <unk>.
We are senior citizens.
And the United States across the World.
Suffering from.
The diversified pain.
And 1.3 points.
And it's very important.
Medicare.
And hopefully and Medicaid.
Honor the medical device.
I saw and <unk>.
Last year's Jerry Lewis of the comment.
The medical device and attached to the spinal cord and a press kit.
And the pain went away and what we placed it whereas the very numb feeling dirty disclosed during the telephone.
And I'm wondering.
Because I don't know.
As Nir.
And numb feeling when the devices on the total told me back to normal relax nerves and would note pins and needles of SaaS and needles scaling and your and the part of the body.
That is activating.
Reduce the pain as it reduced.
Pins and needles, it's what it means and mcl.
So thank you for the question and the kind of comments.
So the the way that quell and which I believe is what you are referring to operators. It does stimulate the nerves and order to and do.
<unk> and LNG the core pain relief response that is a sensation that has experienced you can feel it.
The most.
And to most individuals it is not uncomfortable but is it a cessation of sensation that is is felt.
And that numbness, but there is a feeling of stimulation.
Does it take away from your concentration and the day or you can continue the workforce or your daily activities as the senior citizen and retiree.
Yes, so it does not in fact distract and in fact is used by many people overnight and doesn't even disrupt their sleep.
And waiting to experience it help you.
You put me on your list for clinical studies.
Okay. Thank you very much from the comment and the kind of words.
Thank you.
And no further questions I'd like to turn the call back over to the doctors.
Any for any closing remarks.
Well. Thank you very much for joining us on this Q2 conference call and we look forward to updating you over the balance of the year.
This does conclude the conference you may now disconnect everyone have a great day.