Q3 2021 Milestone Scientific Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the milestone scientific third quarter 2021 business update call.
At this time all participants are in a listen only mode and the floor will be opened for your questions and comments following the presentation. It.
It is now my pleasure.
David Waldman with Investor Relations, Sir the floor is yours.
Good morning, and thank you for joining milestone Scientifics third quarter 2021 financial results conference call on the call with US today are oriented overhauls, Chief Executive Officer, and Keisha Harcum controller of milestone scientific company issued a press release today Monday November 15th containing third quarter 2020.
<unk> financial results, which is also posted on the company's website. If you have any questions. After the call would like any additional information about the company. Please contact crescendo communications at 21267110 to zero the COO.
Company's management will now provide prepared remarks, reviewing the financial and operational results for the third quarter ended September 30th 2021, before we get started we'd like to remind everyone that during this conference call. We may make forward looking statements regarding timing and financial impact of milestones ability to implement its business plan expected revenues and future success.
These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond milestones control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward looking.
<unk> or general economic conditions failure to achieve expected revenue growth changes in our operating expenses adverse patent rulings FDA or legal developments competitive pressures changes in customer and market requirements and standards and the risk factors detailed from time to time in milestones periodic filings with the Securities and Exchange Commission, including without limitation milestones report on form.
<unk> 10-K for the year ended December 31, 2020 of milestones.
Our report on Form 10-Q for the third quarter ended September 32021 to forward looking statements made during this call are based upon management's reasonable belief as of todays date November 15, 2021 milestone undertakes no obligation to revise or publicly update any forward looking statements for any reason with that we'll now turn the call over to Orient, our halls Chief executive.
<unk>. Please go ahead.
Thank you, David and thanks to everyone for joining us today.
Pleased to report continued revenue growth for the third quarter as we achieved a 69% increase in revenue to $2 1 million versus $1 2 million for the same period last year.
This growth reflects the continued strength of our dental division is dental offices continue to reopen around the world.
Actually our dental division continues to generate solid cash flow on a standalone basis.
At the same time, we are starting to see the results of our aggressive sales and marketing initiatives within the medical segment as.
As we have discussed previously we have pulled back on some of our sales efforts to preserve cash during the pandemic. However.
However, hospitals have begun to meet with our sales representatives and international distributors and during the second quarter, we really kicked off an aggressive sales and marketing push.
We have invested heavily in a new sales force and now have 11 full time experienced sales representatives in the field that are calling on hospitals every day.
Of course, it's not only about recruiting the right talent, but more importantly, developing the sales team and monitoring its performance closely on a daily basis.
At the same time, we've invested heavily in our marketing initiatives to build brand awareness for the <unk> epidural and Caf check system and provide us sales representatives with the tools to be much more effective including training videos corporate brand video educational literature.
Digital marketing materials and much more.
These efforts are paying off as our sales pipeline is now more solid than at any point in the company's history.
And the feedback from physicians hospitals, and major health care system has been positive given the safety and economic benefits of the <unk> epidural system.
As an example, we were recently selected to supply a complete flow epidural and cash check system throughout Florida Memorial Health Care network. The first hospital within this health system Memorial Regional Hospital has begun using the concrete floor epidural and cash check system.
Memorial Regional Hospital is one of the largest hospitals in Florida.
We look forward to expanding our sales across the other hospitals within their network, which includes to Joe Dimaggio Children's Hospital Memorial Regional Hospital, South Memorial Hospital, West Memorial Hospital, Miramar and Memorial Hospital Pembroke.
More importantly, each hospital, we add provides strong validation of the instrument and provides retro ansible accounts, making it easier to open up subsequent hospitals.
As we sit here today, we are in advanced discussions with a number of premier hospitals, and large health care systems, which we look forward to announcing in the future.
Turning to our global efforts, we have added three new international distributors for our concrete flow epidural instrument.
We are pleased to expand our reach in Canada with the addition of <unk> medical and Slovenia with shallow Laborde D D.
And in the United Arab Emirates, with new our <unk> surgical and medical equipment.
These are important global market and each of these distributors brings extensive relationships for introducing medical devices within their respective territories.
I mentioned earlier, our investment in marketing.
In addition to helping our internal sales force. These new collateral materials have been very helpful. In opening up new distributors as we are able to equip them with all the information they need to open up new sales channels.
It's important to note that milestone has traditionally been our research and development focused organization.
In the in the short time since I joined the organization, we have overhauled the sale.
<unk> organization.
We are setting high performance standards for ourselves team and I believe we now have the tools in place to make this a truly commercial organization.
And speaking directly with our customers our mission to establish our technology as didn't use standard of care arena dual anesthesia for labor and delivery has been further validated for me.
This has been a long road to get here and we faced setbacks due to the pandemic, but similar to other medical device companies and products are personally been involved with before milestone.
It often takes years several years to properly seed the market.
I believe that we are reaching the point that shareholders should start to see the results from all of these efforts and we look forward to creating significant shareholder value in the months and years ahead.
The market for these instruments is substantial and given the nature of the disposables our business model is largely built around a high margin recurring revenue model.
Not only is a good model for us but it also provides a strong return on investment for the hospital as the comp with flow <unk> system has been shown to significantly reduce the total cost per hospital state.
This does not even factor in the potential liability for both hospitals and physicians.
Because the physicians and hospitals will now have a clear choice to use the concrete flow epidural system in instruments or continue performing epidural procedures, using the traditional and antiquated technique.
We expect this potential liability will be magnified as we gain broader adoption of the instruments.
Our <unk> epidural system offers objective detection of pressure changes to very volume.
Through lots of resistance and confirm epidural space within minutes, the clinical and safety benefits of the comp flow epidural system backed by extensive published clinical data demonstrating significant reductions and epidural pouches and complication rates we.
Expect to announce additional publications that further reinforce the clinical benefits of our technology.
So to wrap up we have overhauled our sales and marketing initiatives and have brought on experienced sales executives to capitalize on the market opportunity. We are also seeing a more normalized environment. Following the height of the pandemic and are realizing the bend.
It fits all of our efforts with growing demand and displacements of our instruments.
We are starting to achieve the ambitious goals that we outlined in the past and intend to continue on this trajectory with a solid sales pipeline and additional discussions underway.
At this point I'd like to turn the call over to our controller Keisha Hawken to go over the financials in detail. Please go ahead keisha.
<unk> total revenue for the three months ended September 32021, with approximately $2 1 million versus $1 2 million for the same period last year.
<unk> revenue increased approximately 836000 due to the.
The reopening of dental offices throughout the country the rest of the world.
China.
Medical revenue increased approximately 26000, as we added new distributors and begun to penetrate hospital company flow epidural instrument in the company.
This trend to continue as we anticipate adding additional hospital in fourth quarter 2021.
For the nine months ended September 32021 was approximately $7 4 million versus $3 2 million for the same period last year.
Rental revenue increase.
Approximately $4 1 million for the nine months ended September 32021, as compared to the nine months ended September 32020.
Medical revenue increased approximately 108000 for the nine months ending September 32021, compared to the nine months ended September 32014.
Gross profit for the three months ending September 32021, 1 million or 65% of revenue versus 836500 or 67% of revenue.
Ending September 32020.
Gross profit for the nine months.
2021 four.
$4 5 million or 60% of revenue versus $2 2 million or 68% of revenue for the first nine months of 2020.
The decrease in gross margin.
Increase in sales to China, which has a lower gross margin.
Operating loss for the three months ended September 32021 was approximately $2 million versus approximately 153.
Three months ended September 32000 planning.
Operating losses for the first nine months of 2021 with approximately $5 8 million.
Approximately $6 3 million for the same period last year.
Net loss was approximately $18 million or leases per share for the three months ended September 32021.
Net loss of $1 5 million or <unk> <unk>.
<unk> per share of a comparable period for 2020.
Net loss for the first nine months of 2021 was $5 7 million or eight Christina.
First net loss of $6 3 million or <unk> 11 per share for the comparable period in 2020.
Now I would like to turn your attention to liquidity and capital.
As of September 32021, the company had cash and cash equivalents up $14 5 million and working capital of approximately $15 7 million versus cash or equivalents of $14 2 million and working capital of $15 7 million for December 32020.
At this point I would like to turn the call back over to origin.
Thank you Felicia.
As <unk> mentioned, we continue to maintain a strong balance sheet with approximately $14 $5 million of cash and cash equivalents as of September 30 of this year, which provides us sufficient funds to continue to execute on our business strategy.
It's also important to note that we continue to carefully manage our expenses, although cash used in operating activities for the third quarter of 2021 increased by approximately $456000 compared to the second quarter of 2021 three.
$356000 of this amount whats directly related to the development of a new instruments and disposables, which will be introduced in 2023.
In summary, we.
We are witnessing growing interest in our concrete flow epidural instrument and cap check system, among anesthesiologists and hospitals and believe we are well positioned to take advantage of the growing momentum and adoption of our technologies as we continue to pursue our goal.
Aiming at becoming the new standard of care for epidural procedures in labor and delivery.
We remain committed to driving shareholder value and with a solid sales pipeline expanded sales force and increased interest in adopting our products. We are encouraged by the outlook of the business.
I'd like to thank you for joining the call today, and we look forward to providing further updates as developments unfold.
At this point, we would like to open the call up to a few questions operator.
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.
We ask that you limit yourself to a few questions to allow for other parties time to ask their questions.
We also ask that while posing your question. Please pickup your handset CFO, Sam speaker phone to provide optimal sound quality.
One moment, while we poll for questions.
Your first question is coming from Anthony Vendetti with Maxim Group.
Your line is live.
Thank you.
RJ and I was wondering if you could talk more about the Florida Memorial Health care network in terms of.
How many hospitals are in that network.
And just talk about the progress within that network and how you see that that rolling out and then on your disposable that.
Going to or expected to introduce in 2023.
What specifically is that disposable for and what's the what's the pricing for that relative to your.
Prior disposals.
Yes. Thank you Anthony for your question.
Absolutely as we speak.
Our sales team is of course, not only focusing on the first hospital below two memorial health care systems.
We have.
A couple months ago, and the Indymedia relief that we did a couple of weeks ago. There are four additional facilities at the hospital below into the group.
That we are currently visiting and also have discussions with to further expand and increase the adoption of under penetration.
All of our technology within the within that group.
So thats definitely we are very pleased like we said is the largest hospital one of the largest hospitals in Florida and we are very pleased that we have that opportunity to further enhance our penetration and adoption.
As to the second part of the question.
I prefer not to give any additional details on that we will make the announcements.
The new instrument and disposables.
At a later stage old so it's too premature to discuss about any pricing or pricing ranges.
As things can always.
Happen between now and the beginning of 2023.
Sure and then just a follow up on the.
The hospitals, obviously also announced one in Canada and another one internationally.
So youre expanding your reach but you have 11 sales reps now.
What's the expectation.
As much as you're able to share with us in.
In terms of either a quota in terms of hospitals. They are expected to sign up in 2022.
Or is there a sales quota in terms of in terms of dollars for each of these 11 sales reps.
Yes so.
We still are in 2021 and so on.
Focusing short term, what we can achieve with hospitals that are placing orders within this quarter.
Year to move into 2022 four.
For obvious reasons.
I cannot share what the sales quota. It's floating 11 sales reps that are primarily focusing in the U S.
The market in the domestic market as you know.
We have internationally, we use a distribution network. So we do not have a direct sales force on the ground but.
Rest assured that they have their ambitious.
Sales targets and quote us.
I don't know if well too.
Any further details what's disclosed us are going to deal with what they are.
Also not giving any forward looking statement of what the expectation for the medical business would be in the year 2022.
Understood and then just last question on the on the utilization for the systems that you have in place.
What are you seeing in terms of the utilization.
And right now at this point.
Yes. Thank you for asking that question, because I did not comment on that but.
Like I've said in the previous call.
I am extremely pleased with the talent that we have been acting in particular.
The new Vice President of sales that has an extensive experience in NFC Gi in particular in the chronic pain market.
As we speak in the last couple of weeks, we have been really increasing our activities and our sales calls also.
So into <unk>.
Call it the ASC, so ambulatory surgical centers as well as private pain clinic.
Because our technology could also be used in these clinics for.
<unk> administration.
Of pain relief.
<unk> medication.
So in other words.
Instead of only being dependent on technology.
To be used in that'd be dual mlg's, yet doing labor and delivery.
I would like to also have the opportunity to be more flexible and moving into another segment of the market.
Yeah.
The sales cycle is shorter where you do not have.
Large or.
Long decision, making process with value assessment committees and whatsoever in these private clinics, so I'm very.
Positive and encouraged about the initial response that we also got full.
For medical doctors within the pain.
Pay market segment.
Okay. Thanks for that.
I'll jump back in the queue. Thank you. Thank you Anthony.
Your next question is coming from James Terwilliger from Northern Securities.
Your line is live.
Yes. Good morning can you hear me okay.
Yes, James good morning.
Excellent. Thank you a couple of quick questions.
First of all on gross margins, they popped up sequentially and it was a good number.
Was it a product mix issue anything there on the gross margin side that you can comment.
Yeah, it's not so much the product mix issue I think what we what has happened in both the.
The second in the previous quarters is that.
Fair to previous years.
The influence of.
The revenues in China.
<unk>.
The pricing is different for the Chinese market. They have put pressure on the gross margins, but nothing alarming to that extent.
Okay. Okay, Great and then just looking at my model R&D in terms of expenses, which is great kind of increase your sequentially a little bit is there anything on the R&D I know you talked a little bit.
On some of the things you are working on is there any any additional comments you have about the increase in R&D expenses.
The only additional comment I want to make is what we have said.
<unk> the beauty of our technology is that it can be used in any.
Any different.
Area, where the hypodermic syringe issues, then I think I mentioned that on the previous calls as well that the available funds that we are having we are.
Investing in the right sales and marketing activities for both dental business in the medical business.
But even more importantly, we also looking into areas, where we can further.
Expand our platform through the use of our technologies.
So.
We are looking at different products, both in medical and in dental to make improvements where needed and they can be smaller or it can be they can be larger with like I said I do not want to preempt on.
Oh my statement of the new instrument and the disposables that we are bringing in 2023.
No I think it's great that you're ramping up the R&D spending so I appreciate that and then my last question is really for a lot of my other companies if they got hit pretty hard with Covid Delta, Varian, especially with Florida, and Texas and delaying procedures and it was very bad in those two areas.
You've got some great clients in Florida, and in Texas that Youre trying to work with.
Get the Delta Covid variant negatively impact you at all in terms of trying to take additional market share within those systems or was it kind of a non event for you at this time.
Yeah no. Thank you. Thank you for that question I think it's an important one.
To be honest with you my my my personal.
Opinion, when the Delta Varian.
Sort of came along.
I wasn't expecting that we not necessarily throughout the entire United States, but in particularly in those states that you mentioned that we would get a setback.
However, surprisingly to that extent, we were able to.
Gets.
They put a chase or whatever at the hospital in Florida also throughout this year, we were able also to get the second facility.
M D.
Definitely what I can share with you.
The process was delayed and getting the right paperwork.
In front of us signed by the hospitals to get these.
The spirit of Chase orders and internal steps that we had to fulfill to get them in place.
It's very difficult to.
To see what the future development is going to be and what the.
What the Delta very intuitive pandemic, what kind of yeah.
Damage potential damage that might cause in the future in Europe now there is research of the pandemic again, that's always heated some some a number of countries that we are in or are in locked down.
But at the end of the day based on the activities that I see from my direct sales team.
We are still able to common front end to getting front.
On the medical health care providers being it in a hospital environment or in an ambulatory surgical center environment over in the price of pain clinic environment.
Well, that's great news, especially operating under these conditions.
Which are out of your control and then my last question very quickly and I was looking at the Q.
You don't see your supply Youre very comfortable with your supply chain as it as it stands as of today.
These are having problems with supply chains, but you seem to be well positioned as that yeah.
Yes.
Absolutely.
I mentioned it also in the previous call.
Earnings call.
The issue is not manufacturing there is no manufacturing issue or there's no capacity issue at all.
But of course, we are definitely also facing the logistic challenges with the containers.
Absolutely but.
But we have taken all measurements.
In place well in advance to mitigate that risk.
So to that extent.
What you see then also is that our inventory levels are currently lower than what they normally are.
But there is no reason for any alarm or red flag the situation is under control.
Well great. Thank you. Thank you for taking my questions and I'll jump back in queue. Thank you very much.
As a reminder, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone now.
Your next question is coming from Leslie Amit.
Your line is live.
Okay. My name is Leslie comments actually but thank you for that.
At last conference call I asked about the profitability of milestone and your reply was you foresaw a profitability in 2022 does the accounting numbers from the last conference call to this conference call indicate that run the right track towards comps.
Towards profitability.
Well I don't I don't think that I've mentioned that we will be profitable in next year in 2022, I said in the previous earning call that our ambition would be.
To become profitable in the next coming years now.
It all depends on what I, what I also mentioned in the last call. It all depends on the uptake.
And creating the basis in the baseline.
The number of hospitals that are using <unk>.
Our technology. So it really is about increasing the adoption and the penetration into hospital settings.
Secondly, it all depends on the micro.
<unk> economic environment, how that will develop.
But definitely we are making steps in the right direction, but I will promise you that during the year 2022 that the medical business will be.
Cash positive to that extent.
Thank you for that clarification, one more question, what's the most significant barrier that you have to address the game profitability.
Sorry say that again, please I couldnt hear the question apologies.
The most significant barriers that you have to address the game profitability.
Well I think it's all about.
We made the investment in the sales team and it's all about.
The acceleration and the exponential growth on the revenue side right.
So it all depends on like I said earlier Q3 and Q4. This year is very important for us to.
To create that base side and then in 2022, it's all about acceleration of getting weaker in revenues, increasing the penetration of the baseline that we have created as well as.
Adding additional new customer acquisitions that further will support and will drive the growth of the medical.
The medical business. So those two I think it's not it's not related to the effect winter hospitals.
You know are willing to invest in our technology I think what we hear.
From now and also like I said in my call today and in my comments.
The pipeline is robust.
It's very solid and more than ever in the history of the company. So it is all about execution.
I do not even see that as a barrier the main barrier could be if something happens again.
It depends I make.
Or any anything like that.
But I'm very encouraged of what I'm currently seeing and I'm also very encouraged about the future development of <unk>.
Company.
Oh.
Your next question is coming from Howard Yeager with Newbridge.
Your line is live.
Hey, how are you.
I'm doing well how it. Thank you I was just wondering if you could comment a little bit on the sales force pipeline, where they are.
In reference to the pipeline now that we have a 11 reps in place.
Yes.
It's a very interesting question Howard and thank you for asking that question.
We have the.
The comment that I want to make is instead of throwing out.
Numbers. Okay. We have we have multiple I would say we have multiple hospitals, where we are in advanced discussions.
In.
And getting.
And getting a PEO this year now I'm not going to comment on whether that is 10 2030 or 40.
Because you always know that things take time, but I I am positive and encouraged about what I see what I can tell you is that the sales pipeline.
It has never been.
<unk> solar has never had the quality that we are currently having.
Compared to previous years so.
The last year so.
Positive about that and I'm positive about how the sales team.
It's really.
Focused.
<unk>.
Driving the company forward absolutely.
Is this for both products would you say no.
For both products. So the sales force is.
That we are having in place is primarily an only focusing on the medical business.
So for us theres not focusing on the dental business in the dental business, we have taken a number of initiatives to help them to distributors.
In.
In generating leads.
We.
We are looking into and have had some good discussions and also already so collaboration with what we call dental service organizations Group management.
Platform companies that are that.
We are able then to to put in front of the distributors, thereby tend to increase the lead generation. So.
That strategy of only.
Distribution related we are also expanding that into other areas to create more corporations with different types of companies.
In the dental community.
Okay, perfect and look I, just want to say and just speaking from my team. I think you guys are don't want a great job.
Gave a great outlook I think you guys are executing on the plan and all I can say is just keep up the good work.
Thank you Howard I appreciate it.
Your next question is coming from Bill Stein with solid on financial.
Your line is hey, John how are you.
I'm doing well bill.
I just wanted to ask you.
Are you doing any work as far as attracting the pain management groups not just the hospitals, but the pain management groups and using the device and if you are is it is the question. There is it an insurance thing or is that a client, saying as far as them using it versus just going after the highest.
But also.
It's an excellent question and thank you for asking that question absolutely.
Not only.
We are marketing activities, but we are.
<unk> and <unk>.
<unk> and participating in the discussions with different.
Call it national paint organizations.
As an example, we have also been.
In contact with education organizations, where we focus on the training enhanced training and education for <unk>, both in anesthesia for labor and delivery, but also.
The national organizations.
We are in discussions with.
The patient safety Foundation.
<unk>, we have been at the recent.
I can society of anesthesia meeting in.
<unk>.
In San Diego, which was where you meet.
Let's say also that people in medical doctors that are focused on.
On the pain, all the private pain clinic. So absolutely now your second question is an important one.
<unk>.
The code the reimbursement codes is important absolutely.
As we speak we are looking into.
Further evaluation of how we could position our technology.
And that whole area of reimbursement code as you know.
<unk> is actually used in the private pain clinics.
And it is not so much the application of the steroid.
The use of the technology, which triggers to PCT Cogs right now through Uroscopy in my own discussions with owners of private pain clinic Fluoroscopy is is a high cost item for the private pay clinic, it's not only the.
Cost of the equipment or the amortization of the equipment, but also.
Using a radiology assistant that has to complete two four hours every day to be able to do the fluoroscopy for these patients.
And then also on top of that.
Those clinicians they need to have at the age of 40 cataract surgery because of their exposure to the radiation now we have had like I said based on.
My VP of sales, we have had several discussions with.
With these private pain clinics.
And.
There is definitely a level of interest.
Our technology and as you need to as a place for our technology to be used.
And I also believe absolutely if we would have the PCT out then it will definitely be a game changer, but theres also a place where our technology without DCT coat the den the magnitude is.
Lower than for example, if we have the PCT code. So we are working hard in.
In further investigating that.
Being able to position ourselves in that marketplace.
That's great to hear.
I just wanted to ask you how confident as far as the hospitals do you expect.
Yeah.
Kind of a domino effect, where certain hospitals start saying, yes, do you believe that.
Certainly sounds encouraging from what you said as far as the sales team working on all of these prospects, but it's been slower than we.
Everybody wants, but I mean, how confident can you expect a domino effect on hospital deals would you think.
Yes.
Very ambitious.
And positive person.
No it's no option for me.
I've always said, it's full myself. This is my personal opinion.
I do believe in that Domino effect and it is not only it's not only let.
Let's say the adoption of the hospitals, but it is also related in what we are doing in the background like for example.
I believe and I strongly feel that the responsibility that I have but I have to bring to the company is also to educate.
Let's say the society like educate.
Women being pregnant at the age of 18% to $40 45 years.
<unk> B.
The associated risk factors with these procedures our role our task is to educate them, but there was a recent study done by stand for publication.
And where.
The adverse events.
At Purdue anesthesia.
Expressed in into via headaches.
These headaches being more than.
Just the migraines, but really terrible headaches for.
For the woman, which also with interrupting the breastfeeding cycle, Florida, Florida woman and her child now what we tend to do these days at the hospitals for a patient with a woman on the building and Abdul analgesia.
Have to sign a bunch of over a number of papers.
From liability issue. So my point is just.
Why do we allow that to happen. If there is technology available that's kind of avoid that situation and that can improve health care outcomes that can.
Prove and enhanced safety.
The woman and the child.
Actually made this.
Giving birth.
One of those moments in life that the woman and the child will never have to forget I think that is our.
That is how responsibility.
That is our goal and that is where I want us.
The entire organization in the company to play a very important role.
Thanks, so much and good luck, you're doing a great job there. Thank you. Thank.
Thank you so much.
There are no further questions from the lines at this time.
Ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.
Thank you very much and thank you very much for your attention and please stay safe all the best.
Yeah.