Q3 2021 NeuroMetrix Inc Earnings Call
Good morning, and welcome to the neuro metrics third quarter 2021 earnings call. My name is Catherine and I'll be your moderator on the call on this call. The company May make statements which are not.
Not historical facts and are considered forward looking within the meaning of the private Securities Litigation Reform Act.
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 of neuro metric.
<unk> future results of operations 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 risk.
Of certainties, including the factors described under the heading risk factors in the company's periodic filings with the FCC available on the company's Investor Relations website at neuro metrics dotcom and the S. E. CS website at S. E C Dot Gov, Neurometrics does not intend and undertake no duty.
And to update the information disclosed on this conference call.
And I'd now like to introduce the neuro metrics senior Vice President and Chief Financial Officer, Mr. Thomas Higgins Mr. Higgins.
Thank you Catherine.
Thanks to those of you attending today's earnings call Dr. Sean <unk>.
Judy.
<unk> is participating in this call.
By way of background Neuro matrix is a Boston based medical device company with extensive proprietary intellectual property.
We are innovation, driven and focused on the development and global commercialization.
Noninvasive medical devices for the diagnose.
Diagnosis and treatment of pain and neurological disorders.
Our business model is based on recurring revenue from our installed customer base.
During the third quarter, our revenue was $2 1 million this was up slightly or 1% from Q3 of last.
<unk>.
Aftermarket revenue as a percentage of that total was 82% versus 80% in Q3 2020.
TPN track, our diagnostic for peripheral neuropathy contributed the majority of sales and grew 7% year on year if sales are primarily.
Last year in traded in U S Medicare advantage outs.
Outside the U S TPN check in Asia, which is Japan, and China posted year on year growth in the consumables biosensors.
Advance electrodes, which are used in evaluating focal neuropathy, such as carpal tunnel syndrome posted slight on.
Contemplate year on year growth in quell revenue declined from the prior year on reduced promotional spending.
Our gross.
Profit on revenue was $1 4 million.
The gross profit margin rate was 70% versus 73, 6% in Q3 of last year.
Three.
Three 6% margin contraction was due to unfavorable purchase price variances on electronic components due to the global parts shortage.
We see increasing challenges in sourcing critical parts and components lead.
Lead times are being stretched and costs are rising.
Avidly.
Tuition as industry wide with no expected resolution or returned to normalcy within the next several quarters.
We expect further margin contraction in the near term and higher inventory balances as we increased stocking levels to maintain production.
Our operating expenses totaled $2 1 million versus $1 8 million in Q3 of last year, an increase in opex of $376000.
R&D spending of $725000 included new regulatory activities for our fiber or qualify bromine Alger initiative.
Sales and marketing spending of $442000 included new personnel costs related to expansion of the DPM check commercial team.
And G&A spending of $966000 included 2021 equity awards and incentive compensation accruals.
Our net loss for the quarter was $687000 versus $257000 in Q3 of last year.
The net loss increased by $430000.
<unk>. The previously described margin contraction and increased Opex spending.
On a per share basis our.
<unk> per share was <unk> 12 versus <unk> Q3 2020.
With regard to the balance sheet and our capitalization, we ended the quarter with $23 $2 million in cash on hand, $6 6 million shares outstanding and stockholders' equity of $24 2 million.
Net loss.
We used the remaining capacity under our ATM shelf registration in the third quarter of 2021.
Raised $16 3 million gross and new funding.
This third quarter equity raised effectively completed the recapitalization of the company.
Which began with the June 2019 business restructuring to reduce cash losses.
<unk> profitable growth and to clean up and simplify our capital structure.
Since that time cash losses have been reduced significantly.
Our new product opera.
<unk> are under development, which I will discuss shortly our capital structure today is clean common equity only and debt free.
We now have adequate capital to invest in these new opportunities and drive profitable growth.
We will shortly file a new shelf registration statement in ATM.
This is this feature as an important tool in the CFO toolkit for assessing for accessing capital at low cost should that be necessary or prudent in the future. We do not have immediate plans to deploy the ATM to any great extent.
Dr. <unk> will now address our.
<unk> strategy.
Thank you Tom.
I will provide updates on our product lines and identify several growth catalysts that shareholders may want to note.
With regard to DPM check we have two updates.
First we are planning to launch the second generation DPM check device in the United States in the first quarter of.
Overall any too.
We will be going into production this quarter.
This is a culmination of a multi year R&D effort, we will provide details on the devices technological features and customer benefit at the time of launch. However in broad terms, we believe it will support further adoption within Medicare advantage and solidify.
Our first mover advantage.
Now due to production constraints created by the worldwide electronic component shortage, we will need to phase in the second generation device into the market over the course of 2022.
Second yesterday, we announced the addition of <unk> to our management team as SVP population health and value based care.
Sue has 20 years of sales strategy and business development experience in Medicare advantage.
We believe that under <unk> leadership, we can substantially grow GPM check sales in Medicare advantage and other value based markets.
For those unfamiliar with this terminology value based care is when reimbursement is more closely tied to the quality of care provided rather.
That's simply for provision of services.
Medicare advantage is the largest value based care model.
<unk> has been adopted by a number of large Medicare advantage insurers for use within some of their affiliated provider networks. So we have a good start.
Moving to the quell neuromodulation platform, we are expanding beyond over the counter.
As for lower extremity chronic pain to prescription treatments for specific pain syndromes.
Our lead prescription program is for fibromyalgia, a complex chronic pain condition with inadequate treatment options.
Affects up to 5% of the adult population in the U S.
In July we received a FDA breakthrough designation for.
For use of quell to treat fibromyalgia symptoms in adults and earlier. This month, we announced that we had filed our de Novo request for this clinical indication.
If we are granted the de Novo authorization that we believe the quality the first medical device indicated for treatment of fibromyalgia.
I've talked to FDA review timelines, we expect to launch.
In the second half of next year and should record initial revenue from this indication in the fourth quarter of next year.
At this time, we are focused on the ongoing regulatory process for the quell fibromyalgia indication and development of the go to market strategy.
We will provide further information on our commercial approach and strategies as we get closer.
Launch.
My last update is on the quell CIP and indications CIP and spending for chemotherapy induced painful neuropathy.
Which is another one of our prescription programs as a reminder, the National Cancer Institute Cancer Institute is funding a multicenter triple blinded randomized sham controlled trial.
With <unk> in patients with CIP in this condition is a disabling complication that occurs in over half of patients receiving chemotherapy.
There are few treatment options for cips and those that are use have limited effectiveness in may cause serious side effects.
Based on the enrollment to date and target enrollment, we expect the trial to readout in the second half of next.
Next year and if the results are positive we will look to file a de novo request for this indication.
In the first quarter of 2023.
If those timelines hold we may be in position to launch for this indication by the end of 2023.
So in summary, narrow metrics as a committed and operationally efficient organization with.
With novel diagnostic and therapeutic products for unmet needs in the pain and neurology markets.
Those are our prepared comments, we'd be happy to take questions at this point.
Thank you.
To ask a question you will need to press star one on your telephone.
While your question press the pound key again.
To ask a question press the Star then the one key on your Touchtone telephone.
Please standby, while we compile the Q&A roster.
Again, if you would like to ask a question. Please press the Star then the one key on your touch.
With all of them.
And I'm showing no questions in the queue I would like to turn the call back to Dr. Giovanni for closing remarks.
Thank you very much we appreciate your joining us this morning, and we look forward to updating you.
After the end of the year. Thank you.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Good morning, and welcome to the Neurometrics third quarter 2021 earnings call. My name is Catherine and I'll be your moderator on the call on this call. The company May make statements, which are not historical facts and are considered forward looking within the meaning.
Many of the private Securities Litigation Reform Act.
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 of neuro metric about future results of operations 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.
Please refer to the risks and uncertainties, including the factors described under the.
Heading risk factors in the company's periodic filings with the SEC available on the company's Investor Relations website at Neurometrics Dot com and the SEC's website at SEC Gov, Neurometrics does not intend and undertake no duty to update the information disclosed on this conference call.
And I'd now like to introduce the neuro metrics senior Vice President and Chief Financial Officer, Mr. Thomas Higgins Mr. Higgins.
Thank you Catherine.
Thanks to those of you attending today's earnings call, Dr. Shaun <unk>, President and CEO of newer metrics is participating in this call.
By way of background neuro metrics is a Boston based medical device company with extensive proprietary intellectual property, where innovation driven and focused on the development and global commercialization of noninvasive medical devices for the diagnosis and treatment of pain and neurological disorders.
Our business model is based on recurring revenue from our installed customer base.
Yeah.
During the third quarter, our revenue was $2 1 million.
This was up slightly or 1% from Q3 of last year.
Aftermarket revenue as a percentage of that total.
Was 82% versus 80% in Q3 2020.
TPN check our diagnostic for peripheral neuropathy contributed the majority of sales and grew 7% year on year. If sales are primarily concentrated in U S. Medicare advantage.
Outside the U S.
TPN check in Asia, which is Japan, and China posted year on year growth in the consumables biosensors.
Advance electrodes, which are used in evaluating focal neuropathy, such as carpal tunnel syndrome posted slight on year slight year on year growth and quell revenue declined from the prior year.
On reduced promotional spending.
Our gross profit on revenue was $1 4 million.
The gross profit margin rate was 70% versus 73, 6% in Q3 of last year.
This three 6% margin contraction.
Was due to unfavorable purchase price variances on electronic components due to the global parts shortage.
We see increasing challenges in sourcing critical parts and components.
Lead times are being stretched and costs are rising rapidly.
Situation is industry wide.
<unk> with no expected resolution or returned to normalcy within the next several quarters.
We expect further margin contraction in the near term and higher inventory balances as we increased stocking levels to maintain production.
Our operating expenses totaled $2 1 million.
Versus $1 8 million in Q3 of last year, an increase in opex of $376000.
R&D spending of $725000 included new regulatory activities for our fiber or qualify for my Alger initiative <unk>.
Sales and marketing spending of 442.
$2000 included new personnel costs related to expansion of the <unk> commercial team.
And G&A spending of $966000 included 2021 equity awards and incentive compensation accruals.
Our net loss for the quarter was 687000.
Dollars versus $257000 in Q3 of last year.
The net loss increased by $430000, reflecting the previously described margin contraction and increased opex spending.
On a per share basis, our net loss per share was <unk> 12 versus <unk> Q.
Three 2020.
With regard to the balance sheet and our capitalization, we ended the quarter with $23 $2 million in cash on hand, $6 6 million shares outstanding and stockholders' equity of $24 2 million.
We used the remaining capacity.
<unk> under our ATM shelf registration in the third quarter of 2021 to.
To raised $16 3 million gross and new funding.
This third quarter equity raised effectively completed the recapitalization of the company, which began with the June 2019.
<unk> business restructuring to reduce cash losses position profitable growth and to clean up and simplify our capital structure.
Since that time cash losses have been reduced significantly.
And new product opportunities that are under development, which I will discuss shortly.
Shortly.
Our capital structure today is clean common equity only and debt free.
We now have adequate capital to invest in these new opportunities and drive profitable growth.
We will shortly file a new shelf registration statement ATM. This is this feature as an important tool.
And the CFO toolkit for assessing for accessing capital at low cost should that be necessary or prudent in the future. We do not have immediate plans to deploy the ATM to any great extent.
Dr. Giussani will now address our overall strategy.
Thank you Tom.
I will provide updates on our product lines and identify several growth catalysts that shareholders may want to note.
With regard to DPM check we have two updates.
First we are planning to launch the second generation DPM check device in the United States in the first quarter of 2022.
We will be going into production this.
Tool.
This is a culmination of a multi year R&D effort, we will provide details on the devices technological features and customer benefit at the time of launch. However in broad terms, we believe it will support further adoption within Medicare advantage and solidify our first mover advantage.
Now due to.
Some production constraints created by the worldwide electronic component shortage, we will need to phase the second generation device into the market over the course of 2022.
Second yesterday, we announced the addition of <unk> to our management team as SVP population health and value based care Sue has 20 years of sales strategy and business development experience.
In Medicare advantage.
We believe that under <unk> leadership, we can substantially grow GPM check sales in Medicare advantage and other value based markets.
For those unfamiliar with this terminology value based care is when reimbursement is more closely tied to the quality of care provided rather than simply for provision of services <unk>.
Medicare advantage is the largest.
Saudi based care model.
<unk> has been adopted by a number of large Medicare advantage insurers for use within some of their affiliated provider networks. So we have a good start.
Moving to the quell neuromodulation platform, we are expanding beyond over the counter use for lower extremity chronic pain to prescription treatments for specific.
Vic pain syndromes.
Our lead prescription program is for fibromyalgia, a complex chronic pain condition with inadequate treatment options.
That's up to 5% of the adult population in the U S.
In July we received a FDA breakthrough designation for use of quell to treat fibromyalgia symptoms in adults and early.
<unk> month, we announced that we had filed our de Novo request for this clinical indication.
If we are granted the de Novo authorization that we believe that <unk> will be the first medical device indicated for treatment of fibromyalgia subs.
Subject to FDA review timelines, we expect to launch in the second half of next year and should record initial revenue.
This application in the fourth quarter of next year.
At this time, we are focused on the ongoing regulatory process for the quell fibromyalgia indication and development of the go to market strategy. We will provide further information on our commercial approach and strategies as we get closer to launch.
My last update is on the quell.
<unk>, CIP and indications CIP and standing for chemotherapy induced painful neuropathy, which is another one of our prescription programs. As a reminder of the National Cancer Institute Cancer Institute is funding a multicenter triple blinded randomized sham controlled trial of quell in patients with CIP in this condition is a disabling.
Complication that occurs in over half of patients receiving chemotherapy.
There are few treatment options for cips and those that are use have limited effectiveness in may cause serious side effects.
Based on the enrollment to date and target enrollment, we expect the trial to readout in the second half of next year and if the results are positive we will look to file that.
We will request for this indication.
In the first quarter of 2023.
Those timelines hold we may be in position to launch for this indication by the end of 2023.
So in summary, neuro metrics, the committed and operationally efficient organization with novel diagnostic and therapeutic products for unmet needs in the pain.
Apology markets.
Those are our prepared comments, we'd be happy to take questions at this point.
Thank you.
To ask a question you'll need to press star one on your telephone.
<unk> Your question press the pound key again, if you would like to ask a question press. The Star then the one key on your Touchtone.
<unk>.
Please standby, while we compile the Q&A roster.
Again, if you would like to ask a question. Please press. The Star then the one key on your Touchtone telephone.
Yeah.
Telephone and I'm showing no questions in the queue I'd like to turn the call back to Dr. <unk> for closing remarks.
Thank you very much we appreciate your joining us this morning, and we look forward to updating you at the <unk>.
After the end of the year. Thank you.
This concludes today's conference call. Thank you for.
Participating you may now disconnect.