Q4 2021 NeuroMetrix Inc Earnings Call
Okay.
Good morning, and welcome to matrix fourth quarter and full year 2021 earnings call.
My name is to Wanda and I will be your moderator on the call.
On this call.
We may make statements, which are not historical facts and are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995 stay.
Statements that are predictive in nature that depend upon I'll refer to future events.
Conditions are forward looking statements any forward looking statements reflect current views of new metrics about future results of operations and other forward looking information.
You should not rely on forward looking statements because actual results may differ materially as a result of a number of important factors, including those set forth in the earnings release issued earlier today.
Please refer to the risks and uncertainties, including the factors described under the heading risk factors in the company's periodic filings with the SEC available on the company's Investor Relations website at <unk> Dot com and on the SEC's website at SEC Gov.
Metrics does not intend and undertakes no duty to update the information disclosed on this conference call.
I'd now like to introduce the <unk> Senior Vice President and Chief Financial Officer, Mr. Thomas Higgins. So you may begin.
Thank you Wanda.
Those of you attending today's quarterly review.
Dr. <unk> <unk>, president and CEO of their metrics is participating in this call.
So there was some familiar we are a Boston based medical device company focused on reducing the impact of neurological disorders and pain syndromes, both on individuals' populations.
Our technologies are noninvasive, we hold extensive proprietary intellectual property our business model is based on recurring revenue from our customer installed base and.
And our principal products, our GP on track a diagnostic device, providing rapid point of care detection of peripheral neuropathy.
And quell wearable neurostimulation device indicated for symptomatic relief of lower extremity chronic pain.
Revenues in the fourth quarter of the year were $1 $8 million, which was flat with Q4 of last year full year revenues of $8 3 million were up 11, 9% from the prior year.
DPM check sales to U S. Medicare advantage accounts constitute the majority of revenue.
Medicare advantage revenue was up 26% year on year, primarily reflecting pricing increases.
National CPM Shack sales, which are primarily to Japan, and China were up 7% year on year, however, within that growth rate.
Revenue from consumables grew 46% and this was a combination of volume growth and higher pricing.
Quell revenue in Q4 was up slightly quarter on quarter and down on a full year basis.
Spending continues to be carefully managed to ensure a positive product line contribution to operating results.
Our aftermarket sales, primarily our consumable electrodes and biosensors across all product lines.
Constituted 89, 9% of total 2021 revenue.
Versus 76, 6% in 2020 this was a meaningful year on year expansion of recurring revenue from the installed user base.
Gross profit on revenue was $1 2 million in the quarter down from $1 3 million in Q4 of 2020.
Spending to secure critical parts caused the unfavorable variance.
For the full year gross profit increased to $5 9 million from $5 2 million in 2020.
Okay.
Gross margin rates were 71, 7% in 2021 versus <unk> 71, 2% in 2020, an improvement of 20 basis, sorry, 50 basis points.
Looking back to 2020, we saw delays in parts deliveries and longer lead times on orders starting late in the second quarter early in the third quarter.
This evolved into the <unk> in the second half of the year into parts shortages at traditional sources.
So far we've been able to meet our production requirements by turning to alternate distributors, albeit at higher prices and with the margin effects, we experienced in the fourth quarter.
As we all know this is a global problem and it is not possible to predict when we will see a return to a more orderly supply environment.
And the next several quarters, we will likely experience further margin contraction as we deal with the situation and take all of central steps to maintain production.
Operating expenses totaled $2 2 million versus $1 7 million in Q4 last year for the full year Opex increased to $8 2 million from $7 3 million.
The fourth quarter of 2021, we transferred to R&D certain unique custom parts to support the development and the eventual commercialization of <unk> technology for specific disease indications with fibromyalgia being the initial prescription program.
These parts carried a value of $400000.
Also in the fourth quarter, we incurred sales and marketing costs related to an independent consultant consulting study and evaluation of commercialization options for the emerging prescription portfolio.
Increased personnel costs, including incentive compensation were recording recorded within all categories in Opex in the fourth quarter and during the full year of 2021.
Net loss for the fourth quarter was $1 million versus 326000 in 2020 on a full year basis. The loss was $2 3 million in 2021 versus $2 1 million in 2020.
Converted to per share net loss for the year was <unk> 45 in 2021 versus <unk> 69 in 2020.
With the increase in shares outstanding in the last year diluting the EPS number.
With regard to the balance sheet and capitalization, we ended the quarter with $22 $6 million in cash.
$6 7 million shares outstanding that's three $3 38 cash per share and stockholders' equity of $23 2 million versus $3 48 a share.
We have adequate funding to invest in the growth strategies during 2022 and beyond.
Dr. <unk> will now address our overall strategy.
Thank you Tom.
So I will be covering updates on our product lines I'll discuss our growth catalysts and provide directional guidance for our 2022.
Starting with VPN check we are preparing for a focused launch of our second generation <unk> device in the U S market now.
Now Unfortunately, the breath of the launch is constrained by the supply chain challenges that limit our ability to build inventory due to these production issues, we expect to phase in the second generation device over the course of 2022.
The key innovations and a second generation device are round enhanced usability.
Leveraged our experience with the first generation device accumulated over about eight years, and nearly 2 million patient tests to substantially revamped the technician's experience to make it easier and faster to complete a DPA check test.
Both of which are critical for scalability at the point of care test.
Importantly, however, the underlying diagnostic measurements are unchanged. So the large body of published peer reviewed clinical literature that has validated diagnostic accuracy and utility of the <unk> test continues to apply.
On the commercial front, we are building our <unk> commercial team under the direction of Sue Bell, our SVP population health and value based care.
Brandy Dampier recently joined as VP clinical partnerships and we are expecting to hire several more individuals with deep Medicare advantage experience in the near term.
This is the first time, we have had a dedicated commercial effort targeting the Medicare advantage market and more broadly value based care.
We expect to see a positive revenue impact from this organization. Starting later this year given the long sales cycle characteristic of an insurance oriented business.
We believe that investing now in enhancing our <unk> commercial capabilities will provide a substantial and sustained return in the coming years.
Now moving to the <unk> Neuromodulation platform <unk>.
<unk> is currently FDA cleared for symptomatic treatment of lower extremity chronic pain and is available over the counter.
As we have discussed over the past couple of years, we are transitioning from over the counter prescription applications. In particular, we are building a portfolio of prescription wearable narrow therapeutics for specific disease indications. Our lead program is for fibromyalgia, a complex chronic pain condition that affects about 10 million U S. Adults.
In July of last year, we received the FDA breakthrough device designation for the use of quality to treat fibromyalgia symptoms in adults and in October of last year, We filed our de Novo request for this clinical indication, which is currently under review at the FDA.
Depending on FDA review timelines, we hope to be position for a focused launch of the prescription <unk> offering for treatment of fibromyalgia later this year.
At this time, we are primarily focused on the ongoing regulatory process, but we are also starting to ramp up our commercial efforts.
We have engaged a leading healthcare consultancy to conduct a go to market strategy analysis and would hope to provide more information about the market and our strategy as we get closer to launch. However, we can offer some general direction at this time.
The primary sales target for the fibromyalgia indications at launch will be about 10000, rheumatologists in pain medicine physicians.
Who are the key specialists that manage fibromyalgia.
We are planning to utilize regional and national professional conferences digital outreach and other novel strategies to educate these physicians about <unk> as a treatment option for fibromyalgia. At this time, we are not planning to establish a dedicated field sales organization.
We intend to work towards broad third party reimbursement for the fiber miles indication and there may be some patients for which reimbursement under the existing durable medical equipment benefit four tenths devices as applicable however, generic <unk> reimbursement is sporadic administratively burdensome to physicians and the co pays and coinsurance can be.
Expense for patients, particularly those with high deductible plans.
As a result, we do not expect a significant number of covered lives at launch because obtaining effective reimbursement that reimbursement will be a multiyear process.
As an alternative we are developing a streamline and cost effective self pay approach.
We are leveraging our extensive direct to consumer experience to create a subscription model that should be financially acceptable to most patients with fibromyalgia.
And will generate attractive sales and margins for the company.
From an operations perspective, we're not expecting to engage distributors or other third parties, we already manage prescription medical devices with our existing customer support and fulfillment infrastructure and believe that we can support the fibromyalgia prescription business business with modest growth in head count and systems.
My last update is on our chemotherapy induced peripheral neuropathy or CIP and program. This condition is disabling complication that occurs in many patients treated with common chemotherapeutic drugs. There are few treatment. There are few treatment options for cips and those are the use of limited effectiveness and cost side effects.
We recently announced that we received a second FDA breakthrough device designation for treatment of chronic cips by <unk>. There is also an ongoing national cancer Institute funded multicenter randomized sham controlled trial of <unk> in patients with CIP and the trial is expected to complete this year and if the results are positive we anticipate a regulatory.
Billing for this indication in 2023.
If those timelines hold we may be positioned to launch this indication by the end of 2023.
Now, although we are not in position to provide specific financial guidance for this year, we can provide some directional guidance relative to relative to last year.
In terms of overall revenue, we expect it to increase driven primarily by growth in the domestic <unk> business. Now this will be partially offset by a temporary decrease in <unk> revenue as our business transitions from over the counter to preserve prescription neuro therapeutics as.
As well as a continued downward trend in advanced revenue, which is a legacy business that lacks attention due to our focus on other priorities.
We expect a modest increase in operating expenses, reflecting investment in our <unk> chicken club growth initiatives.
We also anticipate a modest increase in net loss due to relative timing of investments and the resulting revenue growth.
Finally cash will decrease due to negative income. However, we expect to finish the year with about $20 million on the balance sheet equivalent dose of cash on the balance sheet and at this time, we are not planning to execute financings outside of opportunistic use of our ATM facility.
Yes.
So in summary, neuro metrics as a committed and operationally efficient organization with novel products that are targeting large markets with unmet needs and that represents our prepared comments and we'd be happy to take any questions at this point.
Thank you, ladies and gentlemen, as a reminder to ask a question.
Press Star then one on your telephone.
To withdraw your question press the pound key.
Yes, Thats star one to ask a question please.
These standby, while we compile the Q&A roster.
We will have a question from the line of Josh.
Your line is open.
Yes. This is Jared Cohen Hello, Hi.
Hi, Jared how are you.
Alright.
Yes.
So I guess, yes, you said this is a transition year.
In the sense that you will both have over the counter and ultimately go to a prescription based model.
Ultimately in terms of at least.
I'm talking about the well.
Speaker 1: Because I keep getting emails about that. So ultimately, you'll go to a total prescription-based model for the quill. I'm just a little confused by that.
And.
Because I keep.
Keep getting E mails about that so ultimately youll go do a total prescription base model for the well.
A little confused by that.
Speaker 2: Yes, so thank you for the question, Jared. The plan is to ultimately wind down the over-the-counter business and transition completely to a focus on prescription products. So you are correct in that.
Yes. So thank you for the question Jared.
Plan is too.
Ultimately wind down the over the counter business and transitioned completely to a focus on prescription products. So you're correct in that.
Speaker 2: That process will proceed through the course of the year.
That process will.
Proceed through the course of the year.
Speaker 2: But ultimately, we see the real opportunity for us and the strongest growth in these disease-specific prescription indications that we've been talking about. That being said, we have FDA clearance for over-the-counter, so we will continue to support and provide product to all our existing over-the-counter consumer customers.
But ultimately we see the real opportunity for us.
The.
The strongest growth in these disease specific prescription indications that we've been talking about that being said we.
We have.
FDA clearance for over the counter so we will continue to support and.
And provide product to all our existing over the counter.
Consume.
Customers.
Speaker 1: Okay, so it's to the existing customers, they can keep getting Reusables and then to new indications will be a prescription model. Okay. Exactly. Exactly Okay. All right. Thank you very much
Okay. So its to the existing customers they can keep getting.
Reusable and then two new indications there'll be a prescription model okay.
<unk> exactly.
Okay, Alright, thank you very much.
Absolutely.
Thank you.
Speaker 3: As a reminder, ladies and gentlemen, that's star one to ask the question.
As a reminder, ladies and gentlemen, Thats star one to ask the question.
Speaker 3: I'm showing no further questions in the queue. I would now like to turn the call back over to Dr. Ghazani for closing remarks.
I am showing no further questions in the queue.
I would now like to turn the call back over to Dr. Giovanni for closing remarks.
Speaker 2: Well, thank you very much for joining us this morning, and we look forward to keeping you updated over the balance of the year. Thank you very much.
Well. Thank you very much for joining us this morning, and we look forward to keeping you updated over the balance of the year. Thank you very much.
Speaker 3: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a.
Ladies and gentlemen, this concludes today's conference call.
For for your participation you may now disconnect everyone have a wonderful day.
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