Q1 2022 IsoRay Inc Earnings Call
Good day, ladies and gentlemen, and welcome to be ISO rate, Inc. Q1, FY 2022 call.
At this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Mark Levin, Sir the floor is yours. Thank you operator.
Good afternoon, and thank you for joining us today for the ice array fiscal first quarter 2022 earnings call for the quarter ended September 30th 2021.
Before we get started I will.
Take a few minutes to read the forward looking statements.
Certain statements in this conference call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 as amended.
When used in this conference call.
Words, such as will believe expect anticipate encourage.
And similar expressions as they relate to the company or its management.
As well as assumptions made by and information currently available to the company's management identify forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and beliefs about future events as of today November 10th 2021.
As with any projection or forecast they.
They are inherently susceptible to uncertainty and changes in circumstances and the company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward looking statements, whether resulting from such changes new information subsequent event.
Or otherwise.
Additional information concerning forward looking statements is contained under the headings of Safe Harbor statement and risk factors.
Listed from time to time in the company's filings with the Securities and Exchange Commission.
We will get in todays call.
With Lori Woods, ISO raised Chief Executive Officer.
And then Jonathan Hunt <unk> Chief Financial Officer.
Who will discuss the fiscal first quarter 2022 financial results.
Following their prepared remarks, we will take questions from our analysts and institutional investors.
I will now turn the call over to Lori Woods.
Thank you Mark good afternoon, and thank you for joining us today for ice raids fiscal first quarter 2022 earnings conference call for the quarter ended September 30th 2021.
Following my prepared remarks, our Chief Financial Officer, Jonathan Hunt will provide a more detailed review of our fiscal first quarter financial results.
I am pleased to share with you the steady growth we experienced in our first fiscal quarter.
Revenue for the first quarter of fiscal 2022 increased 8% versus the year ago quarter to $2.56 million.
I'm encouraged by the general trend we experienced this quarter has our prostate business grew year over year for a second quarter in a row.
Our non prostate brachytherapy business, notably the treatment for brain cancers, including the sales of gamut child therapy continues to become a more meaningful driver for the company.
As you May recall the summer months of July through September historically tend to show some modest seasonality.
This is typically when both physicians and patients take vacations or time off.
We believe this seasonality played an even greater factor this quarter than in past years.
We consistently heard anecdotes from both physicians and patients taking extended vacations during the summer months.
Many parts of the country began to reopen it.
Additionally, we are being told by hospital administrators that nursing and other related staffing shortages are making it difficult to perform elective non emergent procedures in many markets.
This reinforces the rationale of our recent strategic pivot to drive more procedures to ambulatory surgery centers and license physician offices were inadequate staffing is not as pronounced as it is presently in many hospital settings.
Ultimately cancer doesn't go away, we continue to believe that the increasing backlog of patients who have delayed seeking treatments or who may have not been diagnosed yet will eventually flow through the system and be treated.
That's a document that we expect will benefit cesium 131 treatment opportunities comes in the latest action from the center of Medicare and Medicaid services or CMS.
On November 2nd CMS released the calendar year, 2022 hospital outpatient perspective payment and ambulatory surgery Center payment systems final rule.
Which becomes effective January one 2022.
This will also include the final rule on the radiation oncology alternative payment model, where Aro eight P M.
In this final rule CMS has kept the proposed changes from July specifically that breakthrough therapy and sources such as cesium 131 are removed from the list of included modalities.
This means that breakthrough therapy treatments will still be reimbursed under the current fee for service model and sources or seeds will continue to be paid separately.
We maintain our belief that this will prove to be the best outcome for patients physicians and payors.
We expect one likely immediate benefit to patients will be for those who need dual treatment.
Treat intermediate or advanced prostate cancer.
Those patients will now have access that is supported by reimbursement from CMS.
And CMS guidelines typically drive reimbursement policies that other insurance companies follow we believe that this will increase the access for patients with private insurance as well.
Looking back on the quarter. Another very important development is one that we believe will create more market traction.
At the end of September we announced that the American breakthrough therapy Society has recognized cesium 131 need new consensus statement, a low dose rate prostate brachytherapy sources.
This was noteworthy because it represents the first time Cesium 131 has been included in an ABS is highly respected consensus guidelines.
We noted in our press release that ABS is a neutral professional organization.
It does not rank or endorse any specific treatment option instead remaining evidence space and providing insight into research surrounding the use of breakthrough therapy in addressing malignant and benign conditions.
Physicians hold this information in high regard. So we believe that this is another substantial step forward and provides additional credibility.
As a result, we believe it should further augment isa raise opportunity to continue to gain market share within the prostate brachytherapy market.
Another potential driver for future growth in our prostate business is one that you may remember, we shared with you at the beginning of the calendar year 2021.
At that time, we received FDA five 10-K clearance for the use of <unk> imaging serious MRI markers with cesium 131 seats.
We believe that the pairing of these innovative technologies gives doctors, who prefer to use MRI as our imaging component and even more precise targeted prostate brachytherapy treatment option.
I am pleased to report that we completed our pre market activities related to the serious marker in September.
We have now begun our product performance evaluation of this technology with the first few patients having been successfully treated in the past couple of weeks.
Outside of prostate we remain excited about the prospects from the University of Cincinnati Phase one two clinical trial you may remember that this involves a study of the combination for our cesium 131 seeds with Merck's PD, one inhibitor immunotherapy drug keytruda.
Uh huh.
For the treatment of recurrent head and neck cancers.
We are pleased to report that the first patient was enrolled at the end of October and has begun receiving treatment.
Of note are the hospital related restrictions that have been in place in many parts of the country due to COVID-19.
These have proven to be a headwind for finding and enrolling patients in clinical trials such as this.
Hopefully we are turning the corner on that front and enrollment will begin to expand from here.
We believe that immunotherapy in tandem with resection in cesium 131 breakthrough therapy could be an effective treatment option for patients who continued to battle. This critical cancer.
We're not alone in this belief we have recently heard from other leading institutions, who have expressed interest in potentially collaborating with the university of Cincinnati on this study.
If this were to evolve into a multi center study it could likely speed up and broaden patient enrollment for this study.
We look forward to keeping you updated on further developments.
We recently attended the annual meeting of the American Society of therapeutic radiation oncology or Astro held last month in Chicago.
There were several presentations and abstracts on seem to see them $1 31.
That continued to support the use of cesium 131 for recurrent brain cancers, with gamma tile and ice arrays legacy product with strands.
We believe the results of these presentations and abstracts continue to add to the growing body of data, suggesting that cesium 130 ones targeted radiation therapy has a place in the treatment of brain cancers.
We remain excited about <unk> potential here as the ease of use of gamma tile therapy with cesium 131, and the related therapeutic benefits may serve to drive further adoption of our unique radioisotope has a compelling option in the treatment of brain cancer.
Yeah.
Cesium 131 received additional positive recognition in the treatment of different cancers. In the recent addition of a respected regional medical publication.
I hope you've seen the article on Cesium 131 in South Florida Hospital News in Health Care report.
It is on our website under news and has recently been featured in social media posts.
The article includes comments from three doctors, who are treating brain head and neck and prostate cancers, respectively.
A bit of information about the publication.
It is the south Florida regions, only monthly health care newspaper.
Its reach includes more than 32000 health care professionals in the Broward Miami Dade Palm Beach, Monroe and Martin counties.
His audience is an extensive group of professionals comprised of health care executives administrators practice administrators and managers.
Hospital Department heads of all key areas positions business executives of health focused companies and South Florida's top business and political leaders.
The article was shared through their print publication as well as one of their email newsletters serving to maximize its reach.
We are interested in expanding our presence in this key market given its demographic profile.
To that end, we will have a full time salesperson located there starting January 2022.
Before I turn the call over to Jonathan I wanted to touch on some of the increase in expenses this quarter.
Recall that we are continuing to evaluate a number of strategic opportunities.
This process has extended over the past several months since our capital raise earlier this year.
To successfully capitalize on potential new opportunities as well as the growth we anticipate from our existing business. We continued to add more staff in key areas, including operations and R&D over the past several months.
A specific example is our new project management office, or PMO, which we initiated during the quarter.
This department will be integral in the implementation of the strategic opportunities that we are currently evaluating.
As our innovation pipeline continues to evolve we concluded that it was strategically critical to have the dedicated resources, a framework and the necessary processes here within the organization.
The PMO bridges strategy and execution to ensure that ice right has the ability to successfully integrate these opportunities.
We believe that these investments in additional head count and functions are critical to support the scaling of the organization in anticipation of future growth.
Now I will turn the call over to Jonathan to review the results of our fiscal first quarter in more detail.
Thank you Laurie.
Going to discuss some of the financial information that was contained in our press release for the fiscal first quarter ended September 30th 2021.
We released a short while ago.
We anticipate that our Form 10-Q will be filed with the SEC on or around November 12.
Revenue for the first quarter ended September 32021.
8% to five $6 million versus $2 three $8 million for the same period last year.
Prostate brachytherapy revenue increased 4% versus the first quarter of fiscal 'twenty.
2020 one.
First quarter revenue was comprised of 77% for prostate brachytherapy with the balance or 23% of revenue.
Attributed to other grades.
Driven primarily by seat and services revenue from GT Medical technologies.
Breaking therapy revenue increased 20% versus first quarter of fiscal 2020 one.
Gross profit as a percentage of revenues for the first quarter ended September 30.
2021.
41% compared to 52, 3% for the quarter.
September 30 of 2020.
The gross margin decline was primarily.
35% increase in cost of product sales when compared to the year ago quarter.
Due to actual sales volumes being lower workshops in volumes, we had exercised took one which went unused.
Other material costs increased due to supplier price increases.
Additionally, payroll and benefits expenses increased as a result of greater head count versus the comparable.
Period, as we continued right.
First quarter gross profit dollars of 1.0, $3 decreased 17% compared to the same period last year.
Okay.
Total operating expenses, consisting of research and development sales and marketing and general and administrative.
69% to $3 $3 million.
Versus $196 million in the first.
First quarter of 2021.
As Lori mentioned in anticipation of future growth, we've increased head count throughout the organization, which contributed to the year over year increase expenses in general.
Additionally, recall that our annual employee director stock grants were granted in July rather than the fiscal fourth quarter ended June 32021 like in prior years.
As a result.
<unk> first quarter 2022, total share based compensation expense increased to $596000.
From $85000 prior year comparable period.
Majority of this expense.
Approximately 552000.
Yeah.
Total operating expenses.
As a reminder, stock based compensation expense, including non cash expense.
Total R&D expense increased to 125% versus the comparable prior year quarter to $702000.
The increase in total research and development expenses.
Primarily the result of increased payroll and benefits expense due to greater head count.
Increased share based compensation expense due to the aforementioned timing issue annual employee stock grants.
And how your market research expenses versus the prior year comparable period.
Sales and marketing expenses increased 31% versus the comparable prior year quarter to $761000.
The increase in sales and marketing expenses was driven primarily by increases in travel and trade show costs as well as higher share based stock compensation expense versus the prior year comparable period.
G&A expenses of $1 $4 million represented an increase of 72% versus the fiscal first quarter 2021.
The year over year increase was primarily the result of increased payroll and benefits expense due to annual merit increases and greater head count.
Increased employment hiring expenses.
Increased share based stock compensation expense due to the timing shift.
Director stock grants versus the prior year comparable period.
First quarter net loss was $2 million to $4 million versus a net loss of $714000 versus the same period last year.
The net loss per basic and diluted share was two songs.
The net loss of one center for them.
<unk> fiscal first quarter.
Basic and diluted share results are based on weighted average shares outstanding of approximately $141 9 million in fiscal.
Fiscal first quarter 2022 versus $68 9 million for the prior year period.
As of September 32021.
We had cash cash equivalents and certificates of deposit that totaled $61 $7 million.
<unk> 44 per share compared to $63 $8 million.
Full year 2021 ended June 32021.
The company has no long term debt.
Shareholders' equity at the end.
The fiscal first quarter 2022 totaled $65 million versus 67 $4 million.
Full year 2021.
I will now turn the call over to the operator to take questions from our analyst and institutional investors.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now.
If your question has been answered.
Are we still ask it you May press star cube to be removed from the queue. We do ask that if you are listening by a speakerphone. Please pick up your handset for optimum sound quality. Once again, if you have any questions or comments. Please press star one now.
Our first question today is coming from Frank.
At Lake Street Capital markets. Your line is live you may begin.
Laura Jonathan Thank you for taking my questions today I wanted to start with the headwind you were referencing in the corner as it relates to more than average.
Average vacation time over the summer months as well as staffing shortages can you help us quantify just how much that impacted the quarter and then can you maybe give us a feel for if some of these headwinds have subsided as we look into the fourth quarter and how October has looked.
Hi, Frank.
So typically we see a little bit of seasonality in the summer as as you would in this industry with people, taking vacations, but with the country and to some degree the world opening up a bit we saw extended vacations from some of our physicians. They went on vacation and then decided to stay on vacation a little longer and we also got information from them.
But a lot of them were taking extra vacation because their patients seem to be taking vacation. So we feel like that there was definitely a little bit more seasonality than what we would typically have.
Have this tough this time of year in terms of just access to care what were hearing from hospitals is that during the pandemic they've had to lay off nurses and even physicians, who did a lot of their elective surgeries and what we're hearing back is that they are having a hard time filling those empty positions that are ready to get.
Back to doing more elective surgeries, but they're having a hard time hiring nurses in particular is what we've been hearing so we feel that it's going to take a little bit of time for everybody to get geared up and you know not having a crystal ball I'm really hoping we're not looking at a winter where COVID-19 rears its head again, but.
Assuming that it doesn't and that we can start getting back to more normal.
Season, we would hope that is going into the fall here people will start to get back to see their doctors they will get diagnosed get into the system and then get treated.
Okay.
Its helpful I wanted to shift over to the nonprofit state business.
It looks like that was a little bit more impacted in the quarter or 20% growth that's impressive, but I think you've been more closer to triple digit percent growth on a year over year basis and had a lot of exciting things going on there, but it looks like that may have taken a little step back maybe just tease out those specific customers as well.
And then can you just touch on given sort of level set on how many accounts right now are actually offering.
Non prostate brachytherapy.
So in terms of growth for the summer I would say the same thing happened with with nonprofit state that happened with prostate there was an awful lot of people on vacation and that really did kind of the seasonality of it and package. It not seasonality I definitely believe was affected by the fact that people can get out and move around again, so I would say this.
Same thing applies for the non prostate business.
The second part of your question was how many.
How many accounts currently offering non prostate brachytherapy do you have.
At this point in time, we would have to add in the G. T numbers and so I don't have a number for you specifically of how many people are actually ordering promise because we wouldnt know what their number is but it's a solid number of accounts and we continue to see growth in that area as well.
Got it okay I'll ask one more just a little bit higher level. It sounds like Theres a lot of things going your way guidelines papers 10 year data Ro APM.
So maybe just take a step back in.
Focus us in on the most important things, what's going to drive the business to grow at a more aggressive rate.
Where we can start to potentially double the top line and go beyond that obviously, we're in massive end markets, but it's a little bit challenging to.
Penetrate those further but just maybe run through some of the tailwind do you have and which ones are most important to really start to grow the topline.
Yeah, absolutely. So you know assuming that we're getting past COVID-19 and that things will start to come through the pipeline again, we see several things that will be very beneficial one would be there are a lot of patients out there that havent gotten back into the system again, you know the American cancer Society estimated that this year, we would see a huge increase in patients coming through from.
2020, well unfortunately covers extended longer than we thought it would and so we haven't seen that group of patients come through in the numbers. We would have expected yet. So we still believe that there are patients out there that are going to get into the system and come through the system and so when you talk about our core business and the prostate brachytherapy.
The things we are working on and making sure we're set up and in place are things like our brand and product awareness. We're doing some new things that you guys will be seeing soon proximate and our physician training and getting proxy in multiple hospitals. So we can do virtual training as well as in person training and then we have the.
Four markers that we are hoping that we'll be able to look at rolling out in a broader way later this year as well as working with Abbott advocacy groups like zero cancer, making sure patients are aware of their options. So we feel like there. There are several things on that front that we can do to really get R. R.
Core market back including.
Taking advantage, where we really weren't able to before because COVID-19 hit it hit US just as we were rolling out our 10 year data.
It's going to be very important in what we're doing and then have a b S support the fact that they're adding cesium into their consensus report is also going to be very beneficial for us four positions as well when we look at our non prostate business. You know we're excited about that because we really see that there's a lot of opportunity on the brain side of things.
Initial treatments and the University of Cincinnati first enrollment on the ladder curious if you know yet how soon you might hear on a collaboration that could enable a multicenter study and how that could impact the timeline, both with and without the multicenter if you can.
Speculate on any of that.
Yeah absolutely.
So we hope to actually hear of some additional institutions, joining and collaborating with the University of Cincinnati here in the next couple of months I mean, you know that takes some time because the hospitals have to run these kinds of things their IRB and other committees to get them approved so it's not going to happen overnight, but we also do.
You see a lot of very serious interest. So we believe that that process will go as quickly as those regulating bodies allow them and then once once we have more centers on that absolutely opens up the ability to get more patients on enrolled and.
You know the University of Cincinnati is doing a wonderful job of spreading the news about this they've done some really great things about letting the community know that they have this available, but there's only certain amount of patients that they're going to be able to enroll and so having multiple institutions getting the word out like that to multiple communities should be very beneficial and we would expect it to be.
Great. That's that's helpful color and then you know.
Understanding about seasonality in the quarter just reported the nurse shortage, but you know how much is COVID-19 still impacting your core prostate business would you say are there you know.
Still restrictions in place and you know kind of alongside that realizing its early days, but have you seen any traction yet with the new virtual training program proxy what you mentioned.
Specifically those outpatient settings.
Absolutely so.
In terms of seasonality and restrictions due to COVID-19.
We continue to see some of that and it tends to kind of.
Come and go a bit if in certain areas of the country. There's a lot of cases, we see some of the hospitals.
Hospitals, who are getting a high number of COVID-19 patients not able to handle some of the the rest of.
The patients that need to be seen a lot more of that now is less about the number of beds available. Then it is the number of employees at the hospital, specifically nursing staff to be able to actually handle the volume of patients. So we've seen a little shift in it going from you know no.
No beds available in the hospital two there might be beds available in the hospital, but they still don't have the staffing that they need to be able to address all of this so.
We are hoping as more and more people get vaccinated or more and more people have COVID-19 that we will get past this and start to see the restrictions ease certainly in parts of the country. There are no restrictions and so again it really depends on how overwhelmed the hospital is feeling and whether they can actually accept patient.
Or not.
In terms of our virtual training, we are working with approximately right now on several centers of getting it put in and it takes a little bit of time to actually do that so from a virtual training perspective, I think we're still a little bit have a little bit of time before we actually do the first one of those but then.
In terms of training other physicians right now we've been able to do some in in office types of training we've done some training using other things other than proximately, we've done some phone training. We've done some video types of work. So there's other ways. We are addressing that right now, but we're really excited about this products meet.
Product because you know.
Being able to do it virtually and in person is is what we think will be really one of the best ways to do it.
Absolutely. Thank you so much for all the color there.
Thanks, Mike.
Thank you all.
Our next question today is coming from Tim Chiang at North.
At Northland Capital. Your line is nine you may begin.
Alright. Thanks.
Lori could you talk a little bit about just.
Hey, Kevin Teletherapy.
<unk> been doing as of late and do you expect.
Resurgence in growth.
Assuming.
Nurses and health care practitioners start to go back to the hospital hopefully.
It's not this year or sometime early next year.
Yeah, absolutely Tim.
We are really excited about the potential of gamma child therapy, and I am going to talk about what's been going on at Astro. So the American society of therapeutic radiation oncologists met in Chicago, and I'm I mentioned that in my presentation, but what was really great was gammon tile therapy had several.
Presentations, there that were very interesting they do.
Drew a lot of interest from the physicians, who are attending and others that we're tendering attending remotely and virtually and so you know, although they're suffering from the same kinds of problems. We are I'm very very.
Encourage that there's a lot of interest there that showed up at Astro I think that bodes well for the future as these patients start getting back into the system as doctors can look at bringing on new technologies again, and you know our sales group and gamma tile sales group can get in front of these physicians so.
I think the summer definitely had seasonality that impacted everybody, but I would say that going forward I'm I'm very encouraged about the opportunity that gamma tile has to continue to make strong inroads into the market.
And maybe just one follow up Laurie.
Talked about this combination with cesium 131, and Keytruda, but.
But when do you think we could actually see some data from this university of Cincinnati.
Ah study.
So we've been we have been having trouble enrolling patients. So that's going to be the first the first hurdle we have to get over so getting these other institutions on I think will be very beneficial than the other part of the study really is because it's phase one phase two we're really looking at safety and how these patients do so they can't just be treated and then.
We report on it we're going to have to give it some time to see how these patients do them before.
Before we can report that so I'm very eager to share that information with you guys, but I am going to have to be patient while it actually you know these patients get enrolled and then we make sure that this is a safe and efficacious way to treat them. So we're gonna have to feel I'm going to have to be a little patient for sure.
Yeah.
And Laurie I think on the last call I asked you about just business development.
Have you guys looked at more business development.
Type of opportunities.
As of late and you know how do you sort of see that market developing for you.
You know, we're looking at that those opportunities every single day and again Astro was really good opportunity for us to have some really well placed conversations with other companies that were there as well and there's a lot of strategic companies. There are lot of startup companies. So we had a lot of interesting conversations with people and as I.
And you know, we are narrowing down or opportunities and I think some of the.
The meetings, we had at Astro, we're very beneficial to help us narrow down the opportunity to see what people are interested in understand what physicians are looking at for the future and what other companies are doing and it was a really helpful place to continue our business development process.
Okay, Great that's helpful and I'll, hopefully hopefully, you'll you'll narrow down the scope and.
Get to the finish line on a couple of deals.
Next six six to nine months.
Yep, we're hoping so too.
Thanks.
Thank you.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one now.
We have no further questions. Thank you at this time.
Okay.
Thank you everyone for joining us today and have a great evening.
Bye bye.
Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day. Thank you for your participation.