Q1 2022 Brainsway Ltd Earnings Call
Greetings and welcome to brain Brain's way first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Bob you had it with lifestyle advisors. Thank you you may begin.
Thank you Doug and thank you all and welcome to brands ways first quarter 2022 earnings conference call with US today, our brains weights, President and Chief Executive Officer, Chris von JAKO.
And Chief Financial Officer, Scott Ah Rigoletto, so format for todays call will be a discussion of recent trends.
And business updates from Chris followed by a detailed discussion of the financials from Scott.
Then we will open up your call.
Then we open up the call for your questions earlier today <unk> released financial results for the three months ended March 31, 2022, a copy of the press release is available on the company's Investor Relations website.
Before I turn the call over to Kristin Scott I would like to remind you that this conference call, including both management's prepared remarks, and the question and answer session.
<unk> contain projections or other forward looking statements regarding among other topics brands ways.
Anticipated future operating and financial performance business plans and prospects and expectations for its products and pipeline, which are all subject to risks and uncertainties, including shifting market conditions, resulting from the COVID-19 pandemic.
Global supply chain crisis, as well as the use of non-GAAP financial information.
Additional information regarding these and other risks are available in the company's earnings release and its other filings with Securities and Exchange Commission, including the risk factors section contained in brain waves form 20-F.
With those prepared remarks, it's my pleasure to turn the call over to Chris von JAKO CEO Chris.
Thank you Bob welcome everyone and thank you for joining us today to begin our business continues to perform extremely well, while the only crime variant.
Slight impact early in the first quarter demand for our therapy in multiple indications continues to remain steady importantly, we expect that our current positive operating trends that are driving our strong growth in recent quarters highlighted by our latest achievements on commercial clinical and regulatory.
And reimbursed in France will lead to further growth for brain's way throughout 2022 and beyond.
While I will review, our future prospects in greater detail shortly but first I will provide a brief summary of our most recent accomplishment and an overview of our key first quarter financial results are.
Our first quarter revenue of $8 million represented both a 30% increase over the first quarter of 2021, and our seventh consecutive quarter with year over year growth the demand for deep Tms was driven by depression, anxious depression and OCD therapies.
Reflecting an emerging balance in the business in fact, we shipped a nearly equal number of H, one helmet for depression, and eight seven helmet for OCD during the quarter.
I'd like to discuss our key recent accomplishments within the prism of the 2022 key priorities I outlined on our last call.
The first of these pillars is becoming the market leader in the noninvasive brain stimulation market.
Brains waste continued strong growth demonstrates that we are leading the way and we are taking the steps that we believe will allow us to further this trend.
To achieve this revenue growth, we have assembled a best in class commercial team.
Most recently, we appointed Eric Hart as our new Vice President of sales Eric is a veteran of sales leader with more than 20 years of experience in the medical device sales at leading medical device companies, such as Covid in Tel effects, and Integra lifesciences as well as for the smaller growing companies.
We look forward to him leveraging his deep expertise.
The increased visibility for brain's way and its market, leading deep Tms therapy.
As I said in our last call our focus for this year is to build out our infrastructure by going from two regions with 18 territory sales managers to three regions was 21 territory sales managers.
Collectively these sales professionals are focused on broadening our U S customer base.
Our territory sales managers are complemented and supported by skilled teams our practice development consultants and field clinical engineers.
These highly knowledgeable professionals have in the past and will continue to be laser focused on achieving customer success.
Debating, our expanding customer base and delivering on our overall mandate to provide superior support to our customers.
Another aspect of this strategic pillar is increasing market awareness.
Our recently overhauled web site has been enhanced for search engine optimization to make deep Tms therapy more visible for all the need I am pleased to report that our organic website traffic continues to grow.
Increasing 46% in the first quarter of 2022 as compared to the first quarter of 2021.
Our website chat robot H coil logged nearly 1200 engagements with individuals in the first quarter importantly, approximately 20% of these online chat lead to further discussions for progressive perspective customers and patients.
Additionally, nearly 50 sales meetings with potential clinics were also booked this tool.
Moreover, it may is mental health awareness month, and we have a number of exciting initiatives planned, including an online patient centric campaign utilizing the hash tag don't Miss another moment.
This will feature deep Tms patients describing certain experiences. They are now able to enjoy following treatment will share further details on mental health awareness month activities on our next call.
Collectively the goal of these initiatives is to reach any patient seeking an alternative to traditional medical management of their mental health.
We believe that our increased website engagement and greater use of social media channels will ultimately lead to more patient engagement and awareness of our breakthrough technology.
We have a number of other exciting marketing awareness related initiatives planned for 2022 that we look forward to sharing with you in the coming months.
We're and whenever possible, we continue to leverage critical in person interactions with existing and prospective customers in.
In fact, it picks up quite a bit over the next few months as we only participate in seven medical meetings on site, including the clinical Tms Society. The American Psychiatric Association annual meeting and other psychiatric and mental health conferences across the U S Europe and.
Trail yet.
I will now turn to our progress on deep Tms for the treatment of OCD. Another aspect of our first strategic pillar as a reminder, our brands way is the first T. M. S device to achieved FDA clearance for this hard to treat condition and remains the only Tms company to ever receive this clearance.
Based on pivotal placebo controlled data conduct it on its own device.
During the first quarter, we shipped 35 add on helmet for OCD treatment, increasing that total number to 337.
We are pleased that nearly 45% of our total installed base now includes OCD treatment capability.
We view this progress is a testament to our customers' strong belief in the benefits of deep Tms treatment for OCD and within the broader context of our emerging and reimbursement in this area.
As a reminder, with our recent palomino coverage determination.
Total number of lives now eligible for OCD reimbursement on a device is approximately $60 million. The Palmetto LCD also positively impacted those using deep Tms to treat depression and anxious depression since it reduce the requirement of four failed medications to just to fill beds.
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Further expansion of OCD reimbursement is an ongoing area of focus for <unk>.
I'm also excited that on May 1st we launched a brand new and upgraded program to better support our customers with reimbursement.
This new program enhances the support resources training and materials available to <unk> customers in order to facilitate their access to and increase the likelihood of broader OCD coverage.
The collected OCD developments achieved to date, both in terms of customer adoption and then reimbursement are indicative of the significant traction we're seeing in this key indication.
In order to further accelerate customer adoption and additional reimbursement progress we continue to publish compelling data in support of the use of deep Tms in OCD.
To this end we're excited to have important research published earlier this year in two leading peer reviewed journals, highlighting the durability and cost effectiveness of deep Tms OCD.
Moving on the second pillar in our strategic plan is to lead through superior Science and evidence we continue to advance our real World data collection efforts at all of our major indications, including depression, and anxious depression, and OCD and smoking addiction with a focus on publications and presentations.
<unk> at key industry conferences.
In addition, we intend to initiate several new key feasibility studies in certain psychiatric neurological and addiction indications.
The third and fourth pillars of this strategy are capitalizing on our platform.
And enhancing business development activities. These are both critical long term drivers for us to this end, we appointed Doctor Joe Sydell to the newly created position of Vice President of corporate development and strategy.
Doctor Sydell has more than 20 years of experience in the medical device industry and has held positions in business development corporate strategy program management and research and development. He is responsible for pursuing strategic opportunities for brain's way and overseeing our global corporate development initiatives.
Doctor said Dallas appointment reflects our commitment to continue pursuing new market opportunities in both the U S and internationally in order to continue growing our business.
In addition, this week, we promoted Hadar Levy previously senior Vice President and General manager of North America to Chief operating officer in this role Hadar, who has been with brain's way since July 2014 will be responsible for leading operations for the entire organization with a focus on.
Developing and implementing a strategic plan for long term international business growth and enhancing our customer support function.
In his prior role Hadar focus was on the U S business. During this three year period brain's way its U S revenues and total number of assistance nearly doubled we look forward to her daughter's broader impact on our business, including in international markets in his new role.
With that I would like to now provide a brief update on our commercialization plan for deep Tms for smoking addiction.
As a reminder, this offering the first of its kind in the medical device space and our first addiction product was launched in a phased rollout about a year ago.
We pursue this strategy in order to further cultivate our message develop optimized business models for customers refine ideal addressable patient population and build post marketing data to develop our reimbursement strategy. We previously completed the first phase, which was a control micro lease and more recently concluded.
Our limited market release, we transitioned to a full mark or at least early this year and we're pleased with the progress to date. We're currently developing patient testimonials to support our sales and marketing efforts.
As in our other key indications, we continued to publish compelling data highlighting the efficacy of deep Tms in trading smoking addiction.
Most recently nature, a leading scientific journal published a randomized placebo controlled deep Tms study they use the brain's way H for coil to treat schizophrenic patients who are also smokers.
The results, which we presented along with we're presented along with imaging data confirmed that active deep T. About successfully reaches its deepest target the insula and alters blood flow in that region, allowing therapeutic intervention.
Data such as these will be leveraged in our efforts to secure reimbursement in smoking addiction, which as you know does not yet exist for deep Tms for this indication.
To further facilitate our efforts in this regard we also intend to conduct post marketing research and data collection efforts in 2022, which we believe will serve us well in our commercialization efforts.
Turning to Investor Relations, we hosted a well attended Kols event in March focused on anxious depression. This virtual event featured Doctor Shawn C. D E and neuropsychiatry missed at the Brigham and Women's Hospital and assistant Professor of Psychiatry at Harvard Medical School.
He provided a trip a terrific overview of the clinical and market importance of the recent expansion of deep of our depression label to include anxious depression.
We also conducted multiple institutional and high net worth focused virtual non deal road shows in the first quarter and we will present several healthcare investment conferences throughout 2022.
Finally.
And as always I.
I would like to thank our valued partners and providers, who battled a mental health crisis, each and every day as well as the entire brain's way team for elevating their commitment to excellence and delivering on our mission of boldly advancing neuroscience to improve health and transform lives.
With that I'll now pass the call to Scott for his review of our first quarter 2022 financial results Scott.
Thank you Chris as Chris noted revenue for the first quarter of 2022 was $8 million, a significant 30% increase compared to the prior year period revenue of $6 $1 million.
Revenue growth in the first quarter was driven by increased demand for our brain's way deep Tms system with 36 system placements in the first quarter of 2022.
This increases our installed base to 790 systems as of March 31, 2022, as compared to 652 systems or 21% growth versus March 31 2021.
Gross profit for the first quarter of 2022 was $6 $1 million or a 77% gross margin compared to $4 $6 million or 76% during the prior year period.
Moving onto operating expenses for the first quarter of 2020 to research and development expenses were $1 $6 million as compared to $925000 in the first quarter of 2021.
Expenses are due primarily to data collection to drive reimbursement.
Expansion of our platform and other key indications and development of our next generation system.
We expect these priorities to be a focus for our R&D team.
Sales and marketing expenses for the first quarter of 2022 were $4 $1 million compared to $3 $1 million for the first quarter of 2021.
As Chris mentioned earlier, we have increased our investments in our commercial team and have expanded our in person and digital marketing efforts.
Awareness is key to driving long term growth.
Moving on to G&A expenses for the first quarter of 2022 were $1 $9 million compared to $1 $4 million for the first quarter of 2021.
Operating loss for the first quarter was $1 $5 million compared to an operating loss of $801000 for the same period in 2021.
For the first quarter ended March 31, 2022, we incurred a net loss of $2 million compared to a net loss of $1 $4 million in the same period of 2021.
Moving onto the balance sheet, we ended the quarter with cash cash equivalents and short term deposits of $54 $7 million, a decrease of $2.7 million as compared to Q4, 2020 one.
On the equity side, our current ordinary shares outstanding at the end of Q1 is approximately $33 million or $16 5 million American depositary depository shares.
With a strong balance sheet, we have the flexibility to expand our sales and marketing efforts to drive additional adoption of our multi indication deep Tms system as well as invest in product development and clinical research to explore innovative new indications and markets for deep Tms to ensure our technology remains highly differentiated.
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However, we will continue to be prudent in managing our investments.
We are confident that these initiatives and investments will support long term shareholder value.
This concludes our prepared remarks I will now ask the operator to please open up the call for questions operator.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
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Our first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Oh, Hi, Christian Scott how are you.
Hi, Jeff how are you.
As far as.
Firstly from air and if you could talk about.
The commercial portion or you went through the expansion on the regions of managers through in 'twenty, one, but what's the size of the practice development consultants at least domestically and also field engineers in North America.
Yeah, we have H practice development consultants as we talked about this supporting our soon to be 21 territory managers.
With three regions and we have I believe a 11 field clinical engineers.
Perfect. Okay, you talked about Chris some current operational challenges at least in the press release from Q1, others are looking to Q2 and can you talk about recent findings.
Yes, well in my prepared statements I was really focused on you know the beginning of the year with Oh mccahon, the pandemic started COVID-19 coming back.
I don't foresee that at this time, we obviously, we're not feeling that at all at this point Jeff.
Okay got it and as far as system placements with Nick you talked about was it 45% no placements have OCD helmets.
Look for new placements.
Okay.
So Jeff Yeah, that's right I think I mentioned, a number of times when I first started I think we were I think we're around 30%. So we continue to see an increase in the demand for the aged seven for OCD now we're up to about 45%.
I think if you looked at the numbers almost we had almost equal the amount of H, one and eight seven helmets I think I've said in previous comments that you know I think that number will probably reach up to about 60% at some point, but we just had a real great demand in the first quarter for the seven helmets.
Okay, I don't think really enriched by really I was going to say really driven by obviously the product of the progress we've made in the reimbursement side there obviously.
Which leads to my next question any trends across the board on.
Your pricing.
Yeah.
So catcher pricing and reimbursement churns.
Call out right now.
Yeah, nothing I mean, obviously palmetto was a big thing from from you know getting the OCD clearance to start on March 13th.
Covering a bunch of southern states.
On the East coast.
I mentioned also in the prepared statements that they went from four on the depression side and anxious expression side down to two.
Which is great.
I think puts over 60% of Medicare now at either one or two failed medications for depression in extra suppression.
Yeah.
Okay got it and then lastly, a showdown and congrats to her during the promotion thanks for taking our questions.
Thanks, so much appreciate it.
Our next question comes from the line of Jayson Bedford with Raymond James. Please proceed with your question.
Hi, Good morning, just a few questions for me and maybe just.
And one of the questions earlier.
When do you anticipate having 21 reps.
Yeah.
Probably my guess is before the end of this quarter sometime that range beginning of next quarter.
Perfect and then just maybe more broadly the selling environment.
There's been some mixed feedback this earnings call on capital trends.
Curious as to how you would characterize the environment for capital right now and then maybe just to put a finer point on it in terms of kind of the new box who's gone up there or are they going to existing customers new customers would love to get a little bit more visibility there.
Yeah sure well when you say capital trends on this call you mean during this earning season or you're talking about yeah, absolutely. So.
No.
Capital and I realize that your end market is much different than most other companies in medical technology.
Some mixed trends in terms of some folks.
Tighter capital environment.
All right.
No issue, it's really just be curious as to your thoughts on appetite for capital from your customer base.
Yeah, I mean, obviously, our customer base is a little bit different where dealing with clinics in the community.
Obviously and.
You know I think in general our pipeline is pretty full so we continue to be obviously very positive on how we see Q2 and the rest of the year trending.
So I don't.
Obviously, it's different in the hospital environment for sure.
And then just your question about sort of the mix there I think over the over the course of the Paas.
Pandemic. The two years, we had the pandemic a large majority of our of our boxes that were going out we're more focused I think towards our high majority of our focus to existing customers and I think that was obvious you know they understood the need they understood the product the understood.
You know how to actually make a great business and they were expanding in either their current facility or an additional facility.
We had seen in Q1, we kind of expanded into a number of new you know our sites. So that number came down a.
A bit but I think our customers continue to fuel our growth and I think they will continue to fuel our growth in the future.
Okay, and then maybe just lastly for me.
It looks like Theres, a new player in the OCD space I'm. Just wondering does this change your perception of the opportunity at all and just from a positioning standpoint does it change the message.
Well I think theres a number of ways to look at this obviously the information on that is pretty fresh right.
It came out yesterday and I'll continue to highlight you know we're the only company that has deep Tms and we're the only deep Tms company out there that's received a clearance with pivotal sham controlled data on its own device.
But you can look at another view as well right in general the market you know.
Basically this is pretty big from an OCD perspective, and I think it's going to bring more awareness.
And develop the market, which ultimately probably shows the benefits of everybody in the market itself. So we can look at it in two ways I think obviously, we stand behind our product and we've represented that and we've seen really great things with it. So you know we're looking for for future success in driving continued OCD both from our adoption.
Two new customers existing customers as well as also getting our access with reimbursement.
Okay.
Fair enough. Thank you.
Thanks, Jason.
Our next question comes from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.
Thank you good morning, guys.
I wanted to.
Ill jump back onto the solid jump in OCD coils as a percent of total.
Can you talk about where youre seeing that picked up momentum you know obviously you talked about reimbursement is is where you're seeing it correlated in areas, where reimbursement turned on or is there a broader halo effect that you're starting to see.
No. That's a great question I think in general it's been since we started this and started getting reimbursement.
I think a year ago. After this call was the first time, we got coverage that was big with Centene as you remember I think I called you after the call but.
In general it has been a halo effect because people kind of feel that tide moving in the right direction, obviously in the.
Some of the coverage that we have our centene is covered kind of across the country.
So I think in general it's been a halo effect you saw almost 100% of the systems that we shipped.
<unk> had a seven coil so I think it just speaks volume about the technology and.
And what it's doing for this very difficult disorder.
Great. Thanks, Chris.
I guess, just turning to the recent executive announces with a Dar and Dr. Sidel.
It seems like international expansion might be increasingly and focus when we win as you were talking about both it is is that is that right and a primary.
Reason for the announcements and what do you see as the.
Initial opportunities for expansion outside of the U S itself.
Yes, Steve Thanks, that's a great question.
So with with Joe side Al.
Absolute pleasure to get them on board he's had really great experience.
From a corporate development standpoint in strategy, we're obviously going to utilize these resources that and you're exactly correct from a <unk> standpoint, we are looking out internationally as well we want to make sure that we're growing both in the U S as well as internationally for head for Hadar and what his achievements what he has done in the U S have been just phenomenal.
And we want to lever, we all sort of like lean on his expertise.
And be.
The last I would say opportunistic which has been our specifically our strategy internationally to be a little bit more strategic.
He is working on plans with that effort as we continue to move forward and I look forward in future calls to kind of highlight what our strategy will be internationally, but you know were focused in a few different markets internationally. We've had obviously some good luck.
With opportunities in Europe as.
As well as in Asia.
So yeah. We're we're we're looking forward to expanding that and that's why we thought right now is that the right time to make this call.
Okay great.
And then just lastly, just wondering what your latest thoughts are on how on smoking cessation are now with the full launch you know obviously just beginning but.
Do you see potential for out of pocket pay for that indication or you are are you really saying, we need to see sort of that reimbursement and you'll you'll build build towards that like with OCD.
You know, it's a mixed with some of our customers some of our customers have actually done well with with cash pay but.
But you know we did we did some analysis on the market and actually looked at smokers in particular to find the ideal smoker.
That would be looking to quit and would want to pay for the technology and we continue to have.
With the group from our limited and controlled Mark or at least to have calls we just had a call a couple of weeks ago to update and educate them on that and we're trying to learn from them as well and then addition to that we are really focused on specifically on collecting data for reimbursement and we've just started that effort in a grand.
Way in.
In the last three weeks so.
The more data, we get the better and we can use that data to help us in our reimbursement strategy. So that's what we're doing today.
Got it thanks, Chris.
Thanks, Steve appreciate it.
Our next question comes from the line of Jason <unk> with Loop capital. Please proceed with your question Hi, Thanks for taking my questions. I don't know if you have any comment about the lawsuit was just filed relating to hum.
Depression.
From neuro networks.
Oh, thanks, Jason Thanks for bringing that up yeah, I guess it just got there was a press release that was done I mean in general we stand behind our studies, which are peer reviewed.
And the representation of our data.
Without getting too much into the detail or depression labeling expansion to include anxious depression, followed our submission to the FDA of data from several pivotal studies as well as other publicly available data.
So we look forward to examining the specific factual and legal allegations in euronext complaint and intend to Mount a vigorous defense.
As to the allegation that narrow networks effect size was manipulated by presenting an endpoint representing an incomplete course of therapy will use the endpoint of four weeks. After the start of the treatment, which isn't the same as narrow networks FDA cleared protocol.
Okay.
I hope I hope that clarifies for you Gino there. That's that's very helpful. It does clarify clarify a lot. So I appreciate that response. So moving on then in terms of the you know the distribution expansion from two to three regions.
How long should that process take.
In terms of when that gets fully executed and I assume we'll start to see the benefits immediately or starting in the next couple of quarters in terms of.
The effect on on revenues.
Yeah. So we started that process.
Towards the end of last year frame Hackett, our previous vice present of sales did an amazing job of actually developing three regions. We now have.
Three sales directors that head up that that area. So that that that expansion is already done with the three regions. Now we're the we're now filling in the territory sales managers into each one of those regions as part of the expansion. We also as I talked to him, but little bit before when I think Jeff asked the question we.
<unk> enhanced our practice development consulting group as well as our field clinical engineers to continue are you know I would say unrivaled support when it comes to making sure that we're in.
Enhancing customer success.
Great. Thank you very much I'll jump back in queue.
Thanks, Jason Jason.
Yeah.
Our next question comes from the line of Carl Byrnes with Northland Capital markets. Please proceed with your question.
Great. Thanks for the question and congratulations on the progress what are your expectations with respect to gross profit margin for the balance of 2022.
<unk> the OCD placement growth.
Expansion of reimbursement and also expansion of the sales force.
Thanks, Karl Thanks for the congrats there Scott you want to take that.
Yeah, So look I think the.
Increasing our revenues will.
Our gross profit should still remain sort of within the same range kearl like.
We're going to expand the markets, but the.
Gross profit should stay right, where it is right where its been consistent with prior quarters.
Okay.
Great. Thanks.
Yeah.
This call was that Ed.
No.
Sorry, operator.
Okay. There are no further questions in the queue I'd like to hand, the call back over to Chris von JAKO for closing remarks.
I just want to thank everybody for making the call today I appreciate the time and effort and your continued support of brain's way with that we'll end the call.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.