Q4 2021 Neuroone Medical Technologies Corp Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Neuro One medical Technologies Corporation fourth quarter 2021 earnings call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host James Carbonara, Sir the floor is yours.
Thank you operator, and once again welcome to the neural one medical Technologies Corporation fourth quarter and full year fiscal 2021 earnings conference call.
Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa and its Chief Financial Officer, Ron Mcclurg before I turn the call over to Mr. Raj I'd like to remind you that this conference call.
Include forward looking statements within the meaning of U S. Federal Securities law with respect to future operations financial results events trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified date.
Forward looking statements may involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements.
Our earnings release, and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ.
As required by law, we undertake no obligation to update such forward looking statements with that said I'll turn the call over to Dave Rosa CTO of neural one Dave.
Thanks, operator.
Welcome everyone.
During our fiscal fourth quarter, we continued to make great strides in both of our development efforts for a therapeutic technologies as well as progress towards commercializing our second diagnostic product the Evo SCG electrode product line.
As a reminder from last quarters call. We have FDA five 10-K clearance for Evo critical diagnostic electrode and currently our marketing the product line through Zimmer Biomet is our exclusive distributor.
Our evo critical electrodes or a portfolio of high definition stripping grid thin film diagnostic electrodes for recording brain activity stimulation and monitoring for less than 30 days applications include identifying problematic areas of the brain during epilepsy surgery and intra operative mapping.
For brain tumors.
This product line represents our smallest opportunity as it relies on more invasive surgical procedures and SCG electrode technology.
I mentioned during last quarter's call that we were targeting commercialization of the <unk> electrodes by year end.
Pending 500 10-K clearance.
We received clearance for implantation less than 24 hours from FDA in September 22021 for similar indications as our Evo cortical product line.
At that time, we decided to conduct additional testing to submit to the FDA for extended use for recording brain activity stimulation and monitoring for less than 30 days.
He used to confirm that we submitted this application at the end of November and hope to have clearance from FDA by the first calendar quarter of 2022.
<unk> electrodes represent the bulk of diagnostic procedures performed today due to their lesson days of placement.
This product is expected to be used with Zimmer.
Robotic platform as it also is included in our development and distribution agreement.
Zimmer Biomet has already begun to place their initial orders for the product and our.
Manufacturing has begun.
And when FDA clearance for less than 30 day use has been received the company will begin to fill the orders.
As a reminder, the company has the opportunity to receive additional payments from Zimmer Biomet based on meeting certain performance milestones.
Moving to our ablation therapeutic electrodes system. We had previously reported we are targeting completion of animal feasibility studies in the fourth quarter with the potential to complete the project by the end of calendar year 2022.
As a reminder, the system is being designed to both record brain activity and oblique brain tissue using the same electrode.
Currently two separate hospital visits and surgeries are required to treat these patients that have seizures due to epilepsy, where brain tumors that contribute to the seizures.
Combining both diagnostic and therapeutic functions in one device is intended to save time money and contribute potentially to improve patient outcomes.
We also previously reported our intent to market, both the electrode and radio frequency generator to offer a complete system to our customers.
I am pleased to report that we signed a partnership agreement with RBC medical innovations a recognized leader in the development and manufacturing of electromechanical therapeutic therapies to both develop and manufacture RF generator. We also successfully completed an animal feasibility study with the assist.
<unk>, Dr. Robert gross a neurosurgeon at Emory University in Atlanta, Georgia.
We also continue to make progress on the testing of our electrodes that would be used for chronic recording <unk> stimulation.
This would apply for both.
Indications such as.
Mental health that is OCD depression, Parkinson's disease epilepsy back pain due to failed back surgery and other potential conditions, requiring a permanently implanted electrodes.
Our initial focus is to target the spinal cord stimulation market, which currently represents over $3 billion in the U S market alone.
The company initiated long term durability testing in the third fiscal the fiscal quarter and expects to report on the results next quarter we.
We also continued work on the development of higher definition electrodes that might be useful.
For current applications as well as artificial intelligence, we have sent devices for testing to the Mayo clinic, and Carnegie Mellon University and look forward to providing additional updates as we receive those results.
Another area of focus for the company has been the effort to generate pre and post market clinical data to support our technologies in the third and fourth fiscal quarters. The company presented at the Congress of neurological Surgeons the society for neuroscience, and the American Epilepsy Society conferences and.
In addition, we also successfully completed an equity financing with gross proceeds of $13 three $5 million after our fiscal year end.
I would now like to turn the call over to Ron for a more in depth review of our fiscal fourth quarter and full year financial results.
Thank you Dave.
Product revenue was 48000 in the fourth quarter of fiscal 2021, and 178000 for the full fiscal year compared to no product revenue in the prior year period.
Collaboration revenue was $5000 in the fourth quarter of fiscal 2021, and 65000 for the full fiscal year compared to collaboration revenue of $1 9 million in the fourth quarter and full year of fiscal 2020.
Collaboration revenue for the 2020 periods was derived from the Zimmer development agreement and represented the portion of the upfront initial development fee payment that was eligible for revenue recognition as of September 30th 2020.
Total operating expenses in the fourth quarter of fiscal 2021, or $2 6 million compared with $2 1 million in the same period of the prior year.
<unk> expenses in the fourth quarter was 1.0 million compared with <unk> 8 million in the same period of fiscal 2020.
SG&A expense in the fourth quarter of fiscal 'twenty, one was $1 6 million compared with $1 3 million in the prior year's period.
Total operating expenses for all of fiscal 2021, with $10 2 million compared with $6 8 million in the prior year.
R&D expense for all of fiscal 2021 was $3 9 million compared with $2 1 million in fiscal 2020.
SG&A expense for all of fiscal 2021, with $6 3 million compared with $4 8 million in the prior year.
Net loss was $2 6 million for the fourth quarter of fiscal 2021 compared to a net loss of $6 6 million in the prior year period.
Net loss was $9 9 million for the full fiscal year of 2021 compared to a net loss of $13 6 million in fiscal 2020.
As of September 32021, the company had cash of $6 9 million compared to 4 million at September 32020.
The cash balance at September 32021 does not include proceeds from an underwritten registered public offering of $4 million 172000 shares of its common stock at a price of $3 20 per share, resulting in gross proceeds of approximately $13 $3 $5 million received sub.
Sequent to year end.
The company had no debt outstanding at September 32021.
That concludes my remarks, I'll now pass it back to Dave Dave.
Thanks, Ron.
And looking at the past fiscal year I want to highlight some of neuro ones accomplishments.
The commercial launch of our first product to Evo cortical electrode family.
500, 10-K clearance of our second product the Evo seg electrodes for less than 24 hour use <unk>.
Design freeze for the <unk> product line occurred by December 15th 2020 as required for a milestone payment under the Zimmer Biomet distribution a development deal.
The appointment of Ron Mcclurg, as CFO and experienced senior financial executive and the appointment of Josh Harris as Vice President of marketing formerly of Medtronic.
Completion of a financing for gross proceeds of $12 5 million. In addition to adding prominent institutional investors a.
Our successful NASDAQ up listing that will help position.
<unk> us to generate even greater interest in the company from leading institutional investment firms across the broader national and international investment community.
Partnership with RBC medical innovations to develop and manufacture our ablation electrode power source.
Accessible completion of feasibility study I'm, sorry of feasibility testing of our ablation electrode facilitated by Dr. Robert Gross Emory University.
Initiation of testing for the Companys chronic use electrode platform.
Receipt of initial orders for S. EEG electrodes from Zimmer Biomet.
<unk> of electrode Technology development Center located in California.
A completion of a public offering raising gross proceeds of $13 $3 5 million after year end.
In closing the company made great progress in fiscal 2021, and a wide variety of areas, including commercialization development and capital raises which will allow us to continue to execute our plan with the intent to introduce meaningful advances in electrode technology for a variety of neurological applications.
I want to thank you for your time and attention.
And operator, now we will open it up for any questions.
Certainly ladies and gentlemen, Florida is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask them about posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone please hold while the poll for questions.
Your first question is coming from Alex Nowak from Craig Hallum Capital. Your line is live.
Great. Good morning, everyone. The resubmission of the depth of our charge was around rerouting. The biocompatibility testing sailing could you just walk through the test results did anything stood out to you if everything was pretty much just all green light good to go.
So.
Everything was within the range of acceptance criteria.
Alex It was a very very detailed analysis and that's just for one of the tests one of the test was an extraction test where they analyze any substances that are found in solution, while the electrode as place there over a 30 day period.
And the report just for that analysis was just about 140 pages.
So.
Our biocompatibility expert who's a former FDA biocompatibility reviewer.
Said to me he was actually the day after Thanksgiving He said.
Working with a number of companies now and I know I asked him I said are there any weaknesses that you see or any potential areas of risk and he said of all the companies and I'm working with you.
You are the only company that had clean data.
So and he is generally a pessimistic guy.
And under promise over deliver individuals so I was.
Really happy to get that feedback from him.
No that's very good to hear.
Maybe just on the conversations you've had now with the FDA since submitting the recently in the 10-K back here.
Remember correctly should be a special five 10-K, so a 30 day review clock.
Had any conversations with the FDA I know the FDA is backlogs I think your commentary around expecting approval Q1, 2022 makes sense, but just any any update with the FDA or.
Around that.
Sure so yeah.
The FDA has gotten back to us and notified us that they don't require any additional information from us that the submission was complete with.
Really everything that they were looking for so that's the good news.
And they they did tell us and express a desire to get back to us before Christmas but.
But I think they were a little surprised by the amount of information we submitted.
Just maybe taking a step back the FDA had actually given us an option for a few different options as to how to address the submission for less than 30 day use.
And actually one of them was to simply make an argument as to why we shouldn't have to do additional testing and we felt that was very high risk.
And actually <unk>.
Conducted a couple of the tests that they recommended which were very robust test to really demonstrate.
And that the product would meet those biocompatibility requirements and.
And we were very confident in the that honestly going into it so.
So where things stand now is.
They told us that they've already started the review.
And.
And again, we'd like to get back to us before Christmas So.
Given how things are back up at the FDA.
Feeling is that.
Hopefully you know, we'll get feedback before Christmas and given that.
There was nothing else they were looking for from our submission.
I'm still hoping that we here before the end of the year, but.
It's probably.
Just given the environment today more likely that.
It will be in January but.
We'll wait and see the good news is.
It's complete.
They had no additional requests.
And they've already started the review and they are prioritizing this according to our communication with them.
No that's great. That's good to hear maybe expand on zimmers launch plan once the depth electrodes approved just what has been the initial response from the neuro centres that Zimmer has already reached out to and just given the initial stocking orders. How are you thinking about upon a full commercial launch here with growth. So one how you think about ordering patterns.
Going forward.
Yes, so that's a that's a fair question.
I think we've.
We've been definitely encouraged by the fact that.
Without going into details that Zimmer has been increasing their forecast.
Ahead of launch.
I think we've mentioned before that.
They also as part of our agreement with them or providing accessories.
That will allow our electrode to be used with <unk>.
The robot.
So once those accessories are ready and we have clearance.
FDA to ship the product.
The process will begin so it's really.
Waiting on FDA, and ensuring that they have enough inventory and they are ready.
With their accessories. So in terms of enthusiasm, there's a great deal of enthusiasm.
A tremendous amount of planning, especially compared to the cortical launch which.
We were just about done with the product. It was very late in the game and then.
We got clearance and they had to launch so there wasn't the preparation time that they have now.
Uh huh.
They are spending a lot of time and.
Have invested.
A lot of.
I'm, assuming dollars as well as personnel to really ramp this up as quickly as possible now all that being said as a company.
I've always run into it.
And these launches.
Making sure that we walk before we run so you never want to get into a situation where you launch the product.
To every center and then find that Theres something unexpected that occurred and that's just a matter of practice. So there is expected to be a limited launch initially.
But zimmer really we'd like to ramp this up as quickly as we're able to provide additional products. So.
As far as ordering patterns.
It's been a little irregular because they keep increasing.
Quantity so <unk>.
Remains to be seen.
That will continue.
Throughout this year or next year.
Yeah, Okay, and then just two more questions and just can you walk through the necessary actions to get FDA approval of the ablation electrode and then just what are the key items to watch there.
Yes, so we're planning on having a pre submission meeting with them to get further clarification.
On the.
The status. So I think we've discussed before that were approaching it is a 500 10-K.
There are other ablation technologies that have five 10-K clearance.
But we want to make sure that the FDA is in agreement with our plan.
So I think in the February.
We're still waiting to hear back from FDA, but it's probably going to be in the February March timeframe.
Really assuming that they agree with our strategy and our plan.
And then really it's getting the development done to the system the testing done.
But at this stage, we're not anticipating that there'll be any clinical data required.
But that's what we want to confirm with the FDA. So.
This we're treating this as it would be a standard 500, 10-K submission that would give us the ability to add an indication too.
Our current or what we expect to be our 30 day indication for diagnostic purposes, but simply adding.
The ability.
To perform ablation procedures with the device so.
We will be better to wait until we get further clarification from FDA, but we feel confident that we have a strong argument and our strategy.
Or really marching in that direction.
Yes understood and then just last question. This one is a longer term.
<unk> here, but can you walk through the game plan around the chronic electro just how to get that ready for use and whether or not spinal cord stem or deep brain stem.
A little bit the game plan there.
Yes. So the first thing we feel we have to do is demonstrate that the electrodes will have the durability.
That's required.
To last at least five years so.
When you look at historically the issues with <unk>.
Thin film technologies like ours.
It's always revolved around.
Fluid getting in between the layers of the film and shorting the circuit or imagine. The fact that these are a lot less thinner so theres less metal that's.
Thats involved with the electrodes and imagine just pushing through.
Current through these electrodes.
Stimulating.
$24 seven whether it's in the brain or in the spine.
Over time as you know the metal eventually grades at some point.
There's obviously the potential to lose the ability to stimulate in that area.
So.
So step one is.
With the technology that we have will it last.
And I really anticipate we'll be releasing the information.
And probably the February timeframe.
When all the samples will reach a five year time limit in terms of testing. So that's step one and then step two more to your question is okay. So where do you go from there and for me.
Getting to the market as quickly as possible is really.
A critical aspect here and we have an opportunity to license.
A pulse generator technology, which had previous clearance.
From FDA for spinal cord stimulation.
And <unk>.
Assuming that the electrodes ready.
We would make some tweaks to that system license. It may make some changes, but be able to really avoid all the development and testing.
That's required.
To go to FDA, we will still have to obviously or we still anticipate that we will have to have clinical data demonstrating.
That the device will do what we say it will do but be able to avoid or minimize the testing required in the development time.
Just huge so that's why we're really.
<unk> spinal cord stimulation.
Already generating a significant amount of revenue, it's the highest among any indication.
Given that we can.
Gain access to a pulse generator.
That's already been cleared by FDA as a huge.
Time savings for us in cost savings.
Yeah.
That's great really appreciate the update thank you.
Thank you.
Thank you. Your next question is coming from Bill <unk> from Alliance Global Partners. Your line is live.
Good morning, gentlemen, can you hear me okay.
Sounds great.
Good deal.
Congrats on all the progress and thanks for all the color here I was just wondering on the.
On the Zimmer forecast you mentioned, how they've been consistently increasing those.
Is it safe to presume that.
That's based upon the feedback and the reception that they've got in.
You know kind of feeling out the market and the potential market for the product.
Yes.
I can't disclose obviously with Zimmer is actually doing.
Specifically, but.
Look they they clearly.
I've spent a lot of time and diligence.
And talking to physicians to get feedback on the electrode.
We've provided them with samples.
<unk> had discussions as recently as the American Epilepsy Society meeting earlier this month.
And the.
The short response to all this is there is definitely enthusiasm in the community and the confidence level that.
The product will perform in and be accepted and.
Desired so to speak by neurosurgeons. So that you know we still have to get the product out there get some use which is why.
Hence we're doing a limited launch at least initially but the early response has been very positive and very encouraging.
Okay, Great. That's helpful. And then just on the accessories on their end.
<unk>.
You have a.
Sense of Windows will be ready I mean, you guys can.
Obviously on the control.
Side of things and then.
You know on your side.
The increase in forecast.
You know, how how does your ability to kind of ramp up manufacturing stand.
Well.
We are going back.
To our vendors and increasing our orders.
But it's like any other product launch, especially of the new product.
You cant start out building.
High volumes day, one you want to make sure that everything is going fine in the manufacturing process and.
And gain confidence so that you can go to higher volume. So we are pushing all of our vendors.
To produce really as much as we've ever asked them, it's more than we've ever asked them to produce.
And the fact that we're anticipating commercialization being commercial readiness in really Q1.
Yes.
They have some time obviously to.
To start building at least some inventory.
Way out in front of when do we expect.
Commercially launch the product so.
We'll have to see.
Our vendors have express confidence that they can manufacture the product.
It really is going to depend on the quantities and how quickly.
Theyre able to catch up to.
Zimmers requirements are right now we feel we can meet their annual requirements.
Over the course of 2022.
Starting out slower and then ramping up.
So that's the game plan for now but.
So far so good COVID-19 is definitely.
Having an impact it's interesting that for really two years, we had no impact and now it seems like.
Just.
Companies are increasing their orders.
On our suppliers and.
That's that's got the potential to slow the process down but the fact is we got out in front of it so.
So we'll have to see but that.
It's really probably the biggest wildcard is the potential.
Impact of Covid, if if things don't change I'm, just kind of surprised that it took two years to see any impact.
No.
Any color there is helpful.
Just kind of on the clinical data front anything we should it should be on the lookout for there I know you had the recent kind of.
Presentation publication.
And then and then do you have a strategy.
Youre kind of developing for.
The ablation electro and in terms of publications or clinical data that youre planning to get out there.
Yeah. So I think there's still some more things we can do.
On the diagnostic side, even with critical electrodes.
So there is.
Traumatic brain injury procedures that are done.
Sure.
Physicians would neurosurgeons would love to be able to.
Put it an electrode and they do this already but theres no thin film electrode.
Whereby they can make it very tiny incision and insert the electrode so.
Having some conversations to see if we can.
Yeah.
Put together a small post market study just demonstrating the ability to use our current strip electrodes for that purpose.
The clearly the establishment of the.
Ablation Advisory Board.
With the neurosurgeons that we added the intent is.
As we get closer to the finish line is really utilizing those key thought leaders to help us develop post market data well have animal data, but ultimately.
I really want.
And data.
So we'll be using those those centers to really help us generate supporting clinical data.
Okay, great well, that's all I had gentlemen, thanks for taking the questions.
Alright, guys.
Any other questions.
Thank you there are no further questions in the queue. Thank you everyone for joining today's call you may now disconnect your lines.
Thanks very much.