Q3 2021 Vivos Therapeutics Inc Earnings Call
[music].
Please standby good.
Hey, everyone and welcome to the Veeva <unk> Therapeutics, Inc. Third quarter 2021 earnings call.
At this time participants earned in listen only mode.
Question and answer session will follow management's remarks. This conference call is being recorded and a replay of today's call will be available on the Investor Relations section of the Viva <unk> website and will remain posted there for the next 30 days I will now hand, the call over to Mr. Edward <unk> Vivas investor.
<unk> officer for introductions and the reading of the Safe Harbor statement. Please go ahead Sir.
Thank you operator, Hello, everyone and welcome to the <unk> Therapeutics third quarter 2021 earnings conference call a copy of the company's earnings press release is available on the Investor Relations section of our website at Www dot to People's life Dot Com.
With us on today's call are Curt Huntsman, vivo, as chairman and Chief Executive Officer, and Brad <unk> Chief Financial Officer.
<unk> will review the highlights and financial results for the third quarter 2021, as well as more recent developments.
Following these formal remarks, we will be prepared to answer your questions.
I'd also like to remind everyone that today's call will contain certain forward looking statements from our management made within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 1934 as amended concerning future results.
Words, such as May should projects expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements. These.
These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the company's control.
Our results, including the results of the <unk> growth strategies operational plans future potential results of operations, our operating metrics and other matters to be addressed by the risk management. In this conference call may differ materially from those expressed or implied by such forward looking statements.
Factors that could cause actual results to differ materially include but are not limited to the risk factors described in other disclosures contained in <unk> filings with the Securities and Exchange Commission, including our third quarter, 2021, 10-Q, which is being filed today.
Well as in our most recent Form 10-K, which can also be accessed on the <unk> Investor Relations website.
Except to the extent required by law <unk> assumes no obligation to update statements as circumstances change now at this time. It is my pleasure to introduce Kirk Huntsman, Chairman and CEO of Egos Kirk. Please go ahead Sir.
Thank you Ed and thank you everyone for joining us today on our third quarter 2021 earnings Conference call.
I'm eager to review our quarterly results and provide you with an update on our progress.
Afterwards, our Chief Financial Officer, Brad Amine, who will review the highlights of our third quarter financial results.
Following that we will be happy to take your questions.
The third quarter was an exciting period for <unk>, we recorded strong year over year quarterly revenue growth of over 38% a substantial increase from the prior year and also a 28% increase for the nine months ended September 32021 versus the same period last year.
During the quarter, we benefited from a material increase in appliance sales driven by our core of Vips.
And we also generated revenue from additional sources like our 1 billion intelligence services and mile correct mile functional therapy, which we didn't have last year.
While we experienced a late summer dip in VIP enrollments due in part to the COVID-19 Delta variant resurgence enrollments enrollment revenue was actually up due to due to our recognition of revenue from prior periods.
Overall, we believe this growth demonstrates the increasing recognition and adoption of our vivo system and related products and services by dentist as a treatment for patients suffering from sleep disordered breathing, including obstructive sleep apnea known as OSA.
We also believe our sales growth also highlights the benefits of our strategic growth initiatives, including our expanded sales and marketing activities and collaborations with third parties, which I will discuss in further detail in a moment.
In addition to our revenue results I'm pleased to report that for the third quarter of 2021.
We reported gross profit of approximately $3 2 million up 23% compared to gross profit of approximately $2 6 million for the same period in 2020.
We recorded gross margin of 70% compared to 78% for the third quarter of 2020.
The year over year decrease reflects higher costs associated with VIP enrollments, we ended the quarter with cash and cash equivalents of $28 5 million during the third quarter. We surpassed 22000 in total patients treated with vivo system compared to just over 13000.
As of the third quarter of 2020.
And as of September 32021, we have trained over 1350, dennys globally and they use an application to vivo system, providing our VIP with training and other related value added services compared to just over 1000 as of the third quarter of 2020.
We are very pleased with these results Brad will review our financial highlights with you in more detail later on.
Digging a little deeper here in addition to the revenue from our core business of VIP enrollment revenue on appliances. We also saw growing activity and brand development as well as revenue contributions from the value added services. We offer dentists that are enrolled in our vivo integrated practice or VIP program and their patients.
Including our vivo score diagnostic product and my I'll correct therapy service as well as some management revenue from our medical integration division or M. I D.
As for vivo score.
Our home sleep apnea test that we introduced earlier this year. We have continued to see increased usage of this product throughout our VIP members. We consider vivo score powered by sleep image technology to be a breakthrough screening and diagnostic tool to promote increased diagnosis of sleep apnea.
Strategically vivo score has taken center stage as a powerful marketing tool to generate greater awareness and usage of the Viva assistant.
<unk> seen vivo scores increased usage not only indicates greater awareness of OSA. It also helps to promote specific recognition for vivo as products and services.
Complementing. This we have continued our efforts to expand dentist awareness of <unk> and potential VIP enrollment.
Engaging with dental support organizations also known as Dsos.
For those of you less familiar with Dsos dsos acquire and operate multiple dental practices to provide critical business management and support.
These dsos control thousands of general dental and specialty practices across North America and their recommendations to their affiliated providers carry substantial weight.
As more people become aware of the health issues associated with sleep disordered breathing dsos are anxious to provide more support and education for their affiliated dentist, who wish to treat OSA.
In addition, dsos are constantly looking for new and profitable services. They can offer to patients. We believe are vivo sleep treatment program represents the largest single profit opportunity for dsos since the introduction of implants over 20 years ago.
Given these prevailing trends and our extensive industry relationships, we see great benefits and accelerated growth potential in engaging with these organizations and educating them on the benefits of the vivo system.
We continue to have active discussions with several leading dsos, representing nearly 4000 affiliated dental offices and expect to launch pilot programs within target markets beginning here in the fourth quarter and even more as we move into 2022.
Concurrently with our engagement with Dsos. We are also actively expanding our social media marketing outreach to engage more directly with consumers medical providers and large employers.
Beyond our financial results and our success with these strategic initiatives. We also celebrated a number of significant milestones in the quarter.
Since we spoke with you on our last earnings call and partially in response to discussions we have on a regular basis with the investment community.
We reported more detailed survey and study data highlighting certain rather striking clinical benefits of our products.
For example in July we announced results from a national study commissioned by Devos to assess patients airway function and OSA symptoms after or undergoing the vivo <unk> treatment.
In this study one in four or 28% of the 74 adult patients treated with our FDA class one DNA appliance for certain oral facial anomalies reported no remaining OSA symptoms, which is defined as patients having an apnea hypopnea index or <unk> score.
<unk> of less than five post treatment.
Now there are some doctors out there who would say that patients who have their hei scores reduced to less than five are effectively cured of their sleep apnea.
Regardless to the best of our knowledge and belief no one has ever before reported eliminating or reducing OSA symptoms down to within normal limits non surgically and without ongoing intervention.
We believe this data further as the case, we've been making that our products are both highly effective and highly differentiated and that our technology represents a significant breakthrough in the battle against OSA and its related health conditions.
In August we announced a more detail more detailed data from this study which reported that prior to treatment 20 patients had severe OSA.
Which from an Adi perspective improved post treatment or is improving mid treatment by 53%.
Of these 20 patients none have reported worsening of their OSA symptoms, while three patients still have severe OSA 12 have moderate OSA four have mild OSA and one has no OSA.
The study data also showed that for the 18 patients who began the study with moderate OSA. The average percent improvement in <unk> scores were 64%.
Although future results may differ from this study data. We think these positive results are quite impressive and we are extremely happy to provide our investors with this real world data about our devices for those of you interested in reviewing the more detailed summary of these national study results. This is available on our company website at W.
Ww Dot Needless life Dot com under the Investor Relations section.
In addition to these national study results during the quarter, we officially opened our vivo Institute International Training Center in Denver, Colorado.
This 15000 square foot state of the art facility complements our online training programs and was established to offer advanced post graduate education and training to dentists dental teams and other health care professionals from around the world in a live hands on setting.
The Institute focuses on educating healthcare providers about OSA and vivo as treatments for OSA within their practice areas along with training on Veeva says related practice management tools for dentists.
While we pivoted and had success last year and this year with online training, we continually hear that live hands on training is preferable to many practitioners and we agree.
Creating an opening that vivo Institute was a major strategic objective for our company in 2021, which we were pleased to have completed and opened with great with a great kickoff notwithstanding the COVID-19 related challenges.
Rover, we are extremely excited about the future of this facility and believe this dedicated state of the art Forum will be a core hub, where we can train independent Dennis with patients suffering from Dentofacial malformations that may be associated with OSA and introduce them to the vivo system as a treatment option.
In August we achieved another important business milestone with a U S. FDA granting vivo five 10-K market clearance for our <unk> RNA device for treating mild to moderate OSA sleep disordered breathing and snoring in adults. This is quite a boon for us and for for those suffering from OSA.
Today more than 1 billion people worldwide and $54 million in the United States suffer from sleep apnea.
What's more disturbing is that over 80% of these people still remain undiagnosed and continue to suffer in silence.
This 500 10-K market clearance is extremely important as it opens the door for patients to have a viable patient friendly and most often permanent treatment option for the current standard of care to the current standard of care.
Also it paves the way for expanded insurance reimbursement coverage for the M M RNA device, including Medicare as well as for potential future government contracts and reimbursement from commercial payers that follow Medicare guidelines. This opens up the vivo system to a much wider audience of potential patients.
Also in August we announced a new cooperative relationship with empower sleep.
Once again the importance of this relationship cannot be overstated as it helps our vivo dentists overcome an important barrier to getting patients properly diagnosed and into treatment and.
Power is a San Bernardino, California based company that provides patients with affordable accessible and personalized telemedicine sleep care and supply is critical diagnostic and medical consultation services to people across North America, who suffer from OSA.
By leveraging our vivo score diagnostic technology and combining it with empower sleeps telemedicine model providers and patients now have easy access to confirming diagnoses of their sleep disorders in an easily accessible and.
And affordable manner.
This relieves dentist from having to seek out and cultivate local sleep specialists, who may not be as easy to work with or as convenient for patients.
Most importantly patients will be able to receive the appropriate treatment for any sleep related breathing disorder, they may be experiencing including mild to moderate OSA.
Towards the end of the quarter in September we announced the formation of the <unk> Medical consortium. This.
This physician working group led by doctors <unk> of Stanford University, and <unk> of the University of Alberta.
Will collaborate to advance vivo says OSA technology capabilities together, they lead a team of multi disappearing planarian physicians from prominent academic institutions across the U S and Canada with specialties, including sleep medicine, neurology, Pediatrics Pulmonology and.
The geology pain medicine, otolaryngology, obstetrics and gynecology cardiology and forensic pathology. The key reason for taking such a multi disciplinary approach and constituting the medical consortium is that sleep apnea effects, the clinical care and treatment of patients across many.
Medical specialties.
<unk> Medical consortium will assist us with the planning dissemination and conduct of key research initiatives enhancing physician dental collaborations and expanding novel applications at the Viva technology for additional medical conditions, we are optimistic that our medical consortium will enhance our scientific progress.
And research endeavors as well as raise further awareness of our technology within the medical community.
Subject to quarter end in October we announced that results from a peer reviewed published study by Dr. Toshi Heart.
And independent vivo clinical advisor found that a significant found a significant reduction of tooth decay in pediatric patients after undergoing treatment using our FDA class one registered vivo sky.
Flexible BPA free based polymer intra oral device the vivo <unk> guide is preformed as a preformed oral appliance intended to prevent a child's teed from shifting position and has been shown to be helpful and converting mountain breathing children to nose breathing.
Data from this study demonstrated that the risk reduction of tooth decay per child in the treatment group versus the control group at six months and 12 months. After beginning vivo Scott use was lowered by 76, 4% and 57, 9% respectively.
Both of those figures by the way were statistically significant.
The vivo <unk> guide was well tolerated by the children in the study with no reported complaints from children or their caregivers. We are extremely happy with the results from this study which helps to show how the vivo skied internal device may promote nasal breathing and reduce tooth decay.
And more recently in October we announced a strategic collaboration with candid care a digital platform for oral health care, primarily focused in orthodontics.
Through this relationship we will look to provide patients with a comprehensive whole mouth solution to diagnose and treat obstructive sleep apnea in adult patients and provide orthodontic treatment from the same provider network at the core of this collaboration Vivers and candid, we'll market each other's products and air.
He is a expertise to deliver a comprehensive sleep and oral health solution to patients in the United States and Canada.
Focus of the collaboration will be candidate candid pro clear aligner for straightening teeth, and the vivo system for treating the OSA. The two companies will also share educational resources training and key opinion leaders to bridge the gap between airway health and orthodontic therapy.
Additionally, under the terms of the agreement the boson candid will join forces to explore new research and development opportunities for device development and other alliances related to orthodontics OSA and snoring.
Canada will also conduct specialized training sessions at our vivo Institute.
We are thrilled to be working with candid in our and our companies look forward to combining our dual strengths to offer a full service solution for patients suffering from OSA.
So all in all the third quarter was an exciting and productive period for <unk>, we delivered solid financial results. Despite some COVID-19 related headwinds, while seeing increased usage of our vivo score sleep apnea test. We also continued to actively engage with dsos and expect to share further developments with you all.
On this front by the end of this calendar year <unk>.
Additionally, we celebrated a number of significant milestones as our strip strategic initiatives come online and begin to reap benefits for our company.
With our progress and achievements to date, we believe we have established a strong foundation for our continued and future growth going forward. We will continue to advance our strategic growth actions to drive VIP enrollment growth and appliance sales, while working to foster greater recognition and adoption of the vivo system as well as <unk>.
Our expanded product offerings by following this path, we will enable many more patients to receive the care they need for their OSA. So they can improve their overall health and lead happier Fuller lives. We are very proud of what we've already achieved so far and look forward to updating you on our continued progress.
This concludes my opening remarks, now I'll pass the call onto Brad who will review our financial results Brad.
Thank you Kirk and good afternoon, everyone today I'll review, our third quarter 2021 financial results.
We reported total revenue of $4 $5 million for the third quarter of 2021, 38% increase compared to $3 $3 million for the third quarter of 2020.
The increase was related to revenue from VIP enrollments appliance sales due to volume increases building intelligence service subscriptions initial management fees from our medical integration division or <unk> program.
And from the introduction of <unk>, correct oral facial mile functional therapy or OMG services.
Third quarter 2021 revenue growth was partially attributable to the negative impact of COVID-19 on our revenue during the third quarter of 2020.
Also as Curt mentioned, we experienced a late summer dip in VIP enrollments due to due in part to the Delta variant reset.
Resurgence, but enrollment revenue was actually up year over year due to recognition of revenue from prior periods.
During the third quarter, we enrolled 56 VIP is net of cancellations and recognize revenue of approximately $2 $3 million compared to 64, Vips and revenue of $1 $7 million during the same period last year.
During the three months ended September 32021, we sold 2996 total oral clients arches for revenue of approximately $1 $6 million.
An increase from the three months ended September 32020.
We sold 2245 total lower appliance arches for revenue of $1 3 million the increase in appliance revenue is due to volume increases.
For the nine months ended September 32021 revenue increased 28% to approximately $12 5 million compared to $9 8 million for the nine months ended September 32020.
The increase was attributable to the same factors I just mentioned.
During the nine months ended September 32021, we enrolled 162 VIP is net of cancellations for revenue of $6 $4 million compared to 194, Vips and revenue of $5 $8 million for 2020.
Additionally, our billing intelligence service revenues increased.
From $400000 for the nine months ended September 32022, approximately $700000 for the nine.
Months ended September 32021.
During the nine months ended September 32021, we sold 8648 total oral appliance arches for revenue of $4 $5 million and for the nine months ended September 32020, we sold 5610 oral appliance arches for revenue of $3 2 million.
Again, the increase in appliance revenues due to volume increases.
Note that our appliance revenue is coming from a relatively concentrated core of dedicated VIP rooms, and we are working very hard not only to increase our VIP enrollment overall, but also to get more VIP has to be more active and consistent in case starts which will only augment our apply.
<unk> revenue potential.
Gross profit was $3 2 million for the third quarter of 2021, and $9 5 million for the nine months ended September 32021, compared to gross profit of $2 6 million and $7 7 million for the comparable periods last year.
Gross margin for the third quarter was 70% compared to 78% during the last years third quarter, reflecting higher costs associated with VIP enrollments gross margin for the nine months ended September 32021 was 76% compared to 79%.
For the nine months ended last year.
We should note that we are continually refining our sales and marketing and promotional efforts with potential vips in order to not only drive revenue, but to maintain our gross profit and margins. This includes our expanded social media marketing outreach that Kirk mentioned.
Sales and marketing expense increased by approximately $1 5 million to $2 million for the third quarter of 2021 compared to $400000 for the third period of 2020. This increase was primarily due to a.
Approximately $600000 increase in marketing expenses due to the deployment of Veeva score rings as demos to be used as.
Current marketing events and marketing campaigns and approximately half a million dollar increase and new marketing campaigns updating marketing materials for investors and consumers.
Proving the Bmo's website, and promoting conferences and events taking place in 2021, such as the vivo Institute Grand opening.
Additionally, we had about $300000 increase in conference expenses as a result of one conference hosted in Dallas, and our Grand opening of the vivo sensor and Denver, Colorado Lash.
Lastly, there was approximately $100000 in sales commissions on increased sales.
Sales and marketing expenses increased by approximately $2 7 million to $4 2 million for the nine months ended September 32021, compared to $1 $5 million for the nine months ended September 32020. This increase was primarily due to the factors I described earlier for the three.
Months periods.
General and administrative expenses were approximately $6 5 million for the third quarter of 2021.
And $17 $7 million for the nine months ended September 32021, compared to $3 8 million and $11 $5 million for the three and nine month periods ended September 32020, respectively.
Year over year increase was mainly due to our higher head count and expenses related to supporting our sales growth as well as our status as a public company, which started in late 2020.
Additionally, these increased expenses are related to higher revenues from our core business as well as initial revenue from our new products and services, including our vivo score diagnostic product <unk> therapy services management fee revenue from our <unk> Division and sponsorship revenue.
New all of which accounted for approximately 6% of third quarter revenue.
On the whole we were satisfied with the deployment of proceeds from our IPO and underwritten follow on offering this last spring to both our sales and marketing efforts and our general and administrative expenses.
That is because we believe these investments have already started to variety and provide us with returns in the form of strong revenue growth.
In addition, we believe these initiatives will enhance our long term growth potential.
Net loss was approximately $5 $5 million for the third quarter of 2021 compared to $1 8 million for the third quarter of 2020, the year over year increase was primarily due to higher G&A and sales and marketing expense due to the factors I just discussed.
Net loss for the nine months ended September 32021 was approximately $12 $9 million compared to $5 $8 million for the nine months ended September 32020.
Turning to our balance sheet now at September 32021, our cash and cash equivalents were approximately $28 $5 million compared to cash and cash equivalents of approximately $18 2 million at December 31 2020.
With the proceeds from our December IPO and follow on offering we completed in the second quarter of this year, we anticipate having ample financial resources to meet our capital requirements and our operations and continued.
Execution on our growth strategy for the foreseeable future and.
In summary during the third quarter, we continued to see strong year over year sales growth, reflecting growing demand and expanded usage of veeva products and services.
This rising demand speaks to the growing awareness and acceptance of the benefits of the vivo system for the treatment of OSA and both the dental and medical communities, which has been driven in no small part by our targeted sales and marketing efforts, including most importantly, the develop the deployment of our Aviva score.
Home sleep test rings.
Further our revenue growth in the third quarter came not only from our core business.
But also from newer revenue streams. This includes our recently introduced products and services such as Milo correct and the M D as well as increased adoption of our value added services, such as billing intelligence services.
Looking ahead, we are looking for sales momentum to continue here in the fourth quarter and into the coming year, notwithstanding any potential impact related to COVID-19, we remain very excited about our growth prospects and look forward to providing you with further updates on our continued and our continued progress.
Second that concludes our prepared remarks now I'd like to open the call for questions. Operator. Please go ahead.
Thank you.
I've got a quick question. Please take note by pressing star one on your telephone keypad.
We are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again that is star one to ask a question I will pause for just a moment to allow everyone an opportunity signal for questions.
Okay.
And we will take our first question from Alex Nowak with Craig Hallum Capital Group.
Great. Good afternoon, everyone to start on Brad's point, there about oral arch is coming from a concentration of Vips and you speak to your new marketing initiatives, you've mentioned a bit in the prepared remarks, but just how are those campaigns are resonating with this with patients and then how is the build out the sales team going on.
These reps live and active in the field.
Yeah. Good question so.
We have built out now three sales teams, which is what we had forecast I think we.
We feel like those three teams are trained up and capable of generating about 60, new enrollments a month as we go forward. We are also.
So looked at.
Brad mentioned that we were continually updating our model and we are actively looking at right now.
A.
An update to our model that would be.
<unk>.
More appealing and more broadly accepted by members of the of the dental community are our entry fee here for somebody to become a <unk> provider is a pretty hefty lift not only are there fees that are payable upfront and investments in capital equipment, but there.
There's a learning curve and and what happened with Covid for a lot of these offices is that they trained up all their staff and then when they came back from Covid. They.
Staff didn't come back and so they had to hire new staff and that meant going through all the training all over again. So some of these practices have stumbled as they've come back from Covid, we're trying to get everything reinstituted as far as systems and policies. So what we're doing Alex is we are actually looking at a newer a new program.
That will.
Be more broadly.
More broadly appeal to the masses of Dennis there is close to 200000 dental practices in the U S and Canada and what our goal is to get as many of those doctors aware of and producing.
In one way or another and what we're what we're doing now is we're leading with our vivo score, we're putting the vivo score screen and refer program into dental offices.
The entry cost for this is extremely low.
It gives us an easy way for a dental office to participate in screening and their patients for OSA, but they don't have the heavy capital lift of Capex expenditures or the training lift of of training staff and the doctors clinically and what to do all they have to do is use the vivo score.
Device powered by sleep image, they use that device and they they screen their patients and they refer to an active VIP or they have the VIP come to their office and do the services. So we are continually to experiment with those the reception and level of our program continues to.
To be very high among providers and patients the challenges are around getting getting the staff and the doctors and the patients are all on the same page what we what we really have felt good about is the degree to which as we've rolled out this initiative through the hygiene program with hygiene.
Using the vivo score rings in these practices.
A number of.
Tests that are being performed today are just outstripping every every Ah <unk>.
<unk> forecast that we had were very very pleased with the way that the dental community has responded to the vivo score technology patients like it we're seeing a multiple fold increase in in the rate of new.
New.
Diagnoses or screening that we're doing on a on a monthly basis does that does that help.
Yes. It is it does help and maybe you can expand on that score we found in our Texas, well that just feels like vivo score quite a lot, but they're not just using it from a screening perspective. It also seems like they're using a somewhat more for throughout the treatment process.
Curious.
Thus far is in a second.
Much revenue today, but do you ever consider making that more of a revenue line item for vehicles. In addition to obviously the arches and the VIP enrollment.
<unk>, we are we rolled it out as a product that we wanted to we wanted to see just what how this product would play in the market we wanted to see.
What the response would be from both providers and patients and we are now tweaking the model, let's say in order to turn it into a profit center for US we will have some further.
We will have some further reports for you on that as we close out the year and move into 2022, but I can say that it's going to be it's going to become a <unk>.
An important it's going to always be an important part of our of our strategy, but it will turn into a profit center here as we roll forward.
Oh, that's great and then just last question for me just any update on the status for the Stanford study and actually two part question on staff on the San Fran study and then just how are you thinking about sales growth going into 2022.
So the Stanford study is something that we have it seems like we've been talking about that for over a year now and it's it's in fact I think we may have mentioned it in our IPO. Stanford has had some administrative snafus that just to have just delayed things we are.
To go we stand ready to get started at any moment and I think Stanford.
Is is in their administrative department I think Stanford has.
Has checked all the boxes and I think theyre very very close now I mean, we we believe that this we could get the green light at any moment and so I think we're right there on the cusp of having this happened there there are no. There's no budgetary things that I know of that are outstanding there were some tweaks that were made here just in the last couple of weeks to the.
Our budget I think we should be pretty much in agreement with them on all of that now and I think we're very very close so that should be that should be something very close as we think about our sales going forward into 2022, I would point to our penetration in the DSO market, the DSO market and leading with the vivo <unk>.
Core program.
What we're calling the airway alliance program by the way don't know if I mentioned that earlier, but.
The program I described before it was we call it the airway Alliance program and and Thats, where we go into just general dentistry offices with the vivo score devices being distributed through the hygiene Department.
But we're taking that same program to the to the Dsos in the Dsos have loved it because it's simple it's easy to execute and they can use a hub and spoke model to get their local practices to screen and refer into the hubs that they actually have where they'll actually they'll actually train up the doctors trained up their staff.
Complete the Capex requirements, and then they'll have in a given market, let's just take take Orlando or Denver or any market. They might have 15 offices in that market and they will take three or four of them turn them into <unk> centres of sleep treatment and they will get the other offices in that market that they have under there.
They're watching their control and they will have them screen and refer into those hubs and so that there is a lot of excitement out there theres a lot of buzz in the DSO community about this and we are in.
Or in the C suite at the C suite level.
With with all of the top Dsos that we've targeted so far.
That's great I appreciate the update thank you.
Yes.
Thank you and next we'll move on to Scott Henry with Roth capital.
Thank you and good afternoon, a couple questions I'll start on the income statement.
Gross margins.
Decline from kind of 80% to 70%.
Do you expect that to ramp back higher.
In the short term as in fourth quarter, and how should we think of that I don't know if there is some mix impacts it sounds like there were some one time events, but.
Just trying to think about how to model that line going forward.
Yes so.
This is where we're Brad was referring to again, we are tweaking our marketing efforts and our sales efforts and what we did in.
In the third quarter here as we started bundling up some of the some of the.
The sleep image vivo score rings, and services and and putting them into the the package as an inducement to doctors to get them to to.
Enroll and we use that to see how that would work that lowered that ended up having the effect of lowering our gross margins in the short run but it also it also has led to a what appears to us to be a more rapid onset of doctors getting in and starting to test patients getting into di.
Log with patients and starting production.
So it was it is something that did.
<unk> a what we think is a short term.
<unk> hit on our gross margins I think we're finding ways now of being able to accomplish that without necessarily experiencing that so as we move I was as we've moved into the fourth quarter. We continue to tweak our services, our enrollment offerings and as we move into 2022 I would see those margins start to.
A rebound back into the mid seventy's or upper seventies.
Would you would you agree with that assessment, yes, and Scott.
<unk>.
Providing these five.
<unk> Viva score rings to dentists really gives them a tool to help them assess their patients.
OSA.
And although we have a medical doctor reviewing those once the test is done.
Got it.
Actually helps the dentist.
With their tool chest as to how they can start to increase the number of VA.
The Ips.
<unk>.
It helps them to determine how many.
Ah patients in their practice.
Have obstructive sleep apnea and construct take more case starts faster.
We've also increased the number of <unk>.
That we have and they are working closely with our vips in order to to help them not only.
With the Bureau score devices, but also doing more cases, and becoming more efficient as well.
Okay. Thank you for that color.
And then.
I guess.
I've got a big picture question and then a smaller.
Our more targeted question.
Yes.
Yeah, I guess I'll give them both to you at the same time, maybe to get a sense of where I'm going with it.
<unk>.
Hill VIP is when you talk about three sales forces that could generate 60, new enrollments, a month, which would equate to a 180 per quarter.
Obviously, we're not.
We're still in the double digits right now and kind of around the middle I mean, I know there were some unique things in <unk>.
I guess the question is.
Two part one when should we expect new enrollments to to hit that 100, Mark again.
And two as you add in this focus on the vivo score.
And screening more patients to grow that funnel bigger.
I mean, it's the revenue model just in general you're Gonna change, maybe you know maybe we're not going to see the growth in new VIP. So we're gonna see more on appliances, just trying to get a sense of.
How we should model that in.
Some of these new strategy changes will will change the model.
Thank you.
Very good question very good question, let me see if I can take a stab at it.
Of all.
I think we see.
A lot of unrealized potential out there for <unk>.
For enrollments and we're frustrated we were frustrated in the third quarter with the <unk>.
That we were impacted by some of the attendance at some of our events that we held we hold events every month to try to get doctors to attend and these are two and a half days of.
Total immersion into all things views and.
Prior to the Delta variant.
Sort of.
Blow up that we had in July and August we were seeing some really nice attendance with really high conversion rates at one event in particular, we closed 80% of the attendees there and then when this when the Covid variant hit we ended up with <unk>.
Expecting over 100 dentists in our Tampa event for example, and we ended up with 30 that came they just didn't want to travel.
And so so we rebounded nicely with our event in October where we had some really nice attendance, we were oversold for our Las Vegas breathing Wellness conference we were.
We just didn't have the capacity to take all the people in who wanted to come in October So between August and October everything just flip back again, so we're very optimistic about that.
But I I will have to tell you that I don't foresee us getting.
In the near term I don't see us getting up into the triple digits as far as monthly enrollees and I would say that a lot of our growth is going to come about as from the DSO enrollments.
And also from.
The.
The airway Alliance program the airway Alliance program in our in our testing we've done so far has been extremely well received by the community they're excited about the opportunity to to get to play.
The airway game without having the heavy lift that vivo and other airway programs require and and it gives them a chance to just sort of see if thats something that they want to do and if they don't want to do at these dentists still have the opportunity to screen and refer their patients and that and they can benefit from that financially. So.
So I think youre going to see a a very.
Sort of pedestrian growth in our in our enrollments each month for the next few months. The next say six months, but I think youll start to see that supplanted by a rapid rise in the rollout for Dsos and and all the compensation that.
When it comes along with that so there'll be some.
Compensating factors here that will offset that but I think we recognize that we're not going to win the game with 50 enrolling 50 doctors a month, that's just not going to win the game and we are prepared to do whatever it takes to increase that level. So that we broaden out the horizon.
We get more doctors participating with us both medical doctors and referring.
Dental practices. They all have patients that have this condition. They all need places to send them and one of the things we glossed over a little bit. That's also on the horizon. Here. We are we have begun to approach and have been approached by very large insurers, who not insurers very large employers who have.
Large.
Populations that need to be screened and need treatment and so we are working with some corporate initiatives with those large organizations will have further data on those as we come across as we get things actually button down, but we are in active negotiations with a number of large employers with and.
And others with large patient populations that need what we have to offer so all of those things are on the horizon I wouldn't if I was modeling this I would not model up triple digit.
<unk>.
Enrollments in the near future I don't see that happening.
I don't know for clarity I'm seeing on a quarterly basis not on a monthly base right right. Yeah I get it I just I think I think we're probably we're probably.
We have the capacity in our three or three groups to do 60 a month.
Some of those May we may end up.
We may end up 60 to 80, but I just don't see I don't see a huge amount of that kind of growth in the near term.
I may I may be wrong, I want to not be out over my skis when I when I tell you guys. This but that's how I see it I do see I do see more than compensating balances happening in terms of growth through our dsos. The dsos have been extraordinarily receptive to our initial.
Entrees in fact, just prior to this call we got a call back from one of the leading dsos in the country and they accelerated their their desire to have a follow on call.
With us and to set some actual data for initiating our trial with them. So we have lots of things going on that are going to be.
Our main growth strategy as we go forward into 2022, I think vivo score will continue to be the tip of the spear I think the DSO initiative will will more than it will begin to overshadow and eventually overtake our current independent dentist enrollment initiatives and that's how I would that's how I would model it.
Okay. So kirk.
I certainly understand the alternative channels.
And growing that market.
In other ways makes a lot of sense with the vivo score, but the question is when I.
How will we see the success of those alternative channels will we see it in sequential gains in the number of arches sold.
Would that be a good place to be.
I think it's more volumes.
Yeah.
I think so I think youll start to see it now initially initially Scott we're going to have.
There is a ramp up right. We have to train. These guys. We have to get them started we have to do we have to get them all rolled out and it takes a little while for everybody to get their systems in place and get their referral patterns in place and to get everything set up and running so that's.
I don't there's no there's no magic bullet for the for the next few months, but I would expect to see we charge the dsos enrollment fees and training fees theyre not at the same level that we had with our independent doctors, but we do charge for that service and we do expect to see.
Enrolment fees continue.
To remain fairly high I, just don't think that.
I just I just feel like the DSO. The DSO community has been so overwhelmingly positive and their reception to theres not theres not a DSO out there today and there is there is about 2000 dsos in the United States and there is not a DSO that we are aware of that has.
Any size to it at all that has a sleep program.
You were talking about 20 or 30000 practices in the United States and Canada that are under the under the direct management and control of these DSO organizations and none of them have none of them have.
That we can find any way that have sleep programs. So this is a huge greenfield opportunity the dsos seem to have a great appetite for this they see the revenue opportunities. Some of the Dsos have tried to implement sleep before and failed and so when we introduce the products that we have.
We showed them exactly why.
Our program has overcome all the weaknesses of the programs that have historically been out there on the market and they are just they bought it they bought it so there will be starting in the next couple of weeks, we'll be starting our first.
Pilot test with a large DSO and we're just going to keep going with that and I think that's what's going to drive the growth.
Okay, Great Kirk Thank you for the color and thank you for taking the questions.
Yeah.
Thank you.
I'm showing no further questions in the queue at this time I would like to turn the call over to Mr. Kirk Huntsman, Chairman and CEO for closing remarks.
Thank you operator, I would like to thank everyone for joining us on today's call and for your continued interest in vivo therapeutics as we stated we are.
Optimistic about what 2022 holes and we're pleased with what we've been able to do so far under the circumstances that we've had.
We see.
A lot of bright lights ahead, we see a lot of good things happening and we are.
Working diligently to make sure that we are translating those opportunities into.
Financial results. So again, we thank you for your time and your your.
Your interest in vivo <unk> and we look forward to sharing our progress with you in the future.
Thank you very much and have a great day.
Operator, thank you.
This does conclude today's call. We do appreciate your participation you may now disconnect.
Yes.
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Yeah.
Yes.