Q2 2022 electroCore, Inc. Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Electric Corps second quarter 2022 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation should you require operator assistance.
During the conference. Please press star zero to single on operator. Please note. This conference is being recorded I will now turn the conference over to your host Rich Cockrell Investor Relations. Thank you you may begin thank.
Thank you all for participating at today's electric core earnings call. Joining me today are Dan Goldberger, Chief Executive Officer, Brian Posner, Chief Financial Officer, and Dr. Peter Staats, electrical as Chief Medical Officer.
Earlier today electric <unk> released results for the second quarter ended June 32022.
A copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make.
Statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95.
Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements a forward looking statement, including without limitation, our limitation of operating trends and our future financial expectations are based upon the company's current estimates and various assumptions. These statements involve material.
Risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements for a list of risks and uncertainties associated with the company's business. Please see the company's filings with the Securities and Exchange Commission.
<unk> disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information that is accurate only as of the live broadcast today August 4th 2022.
And with that I'll turn the call over to Dan.
Thank you rich Hello, everyone and thank you for joining us on today's call.
Our business performance continued to improve in the second quarter ended June 30 of 2022 revenue for the second quarter of 2022 at a record $2 $2 million, increasing approximately 70% over the second quarter of 2021 and approximately 14% sequentially.
Gross margins expanded to 83% and net cash used in operations was about $3 $2 million. This quarter ended June 32022.
We continue to invest in the U S commercial channels, especially cash pay.
MS models, including position dispense comprised of GEC direct <unk> and direct to consumer to our ecommerce platform.
Our position dispense program has grown to about 637 active prescribers across all cash pay programs.
We plan to continue investing in our consumer awareness campaigns initially through paid search and social media.
In effort to drive headache patients to our various channels in the United States and the United Kingdom.
We also plan to expand our social media efforts in coming months.
Net revenue from the U S commercial headache channel was $501000 for the quarter ended June 32020% to 382% increase from $104000 in the second quarter of 2021.
Approximately $452000 of our commercial revenue in the second quarter came from those cash pay programs.
Net sales from the department of Veterans Affairs, or the VA and department of defense or D. O D $1 $2 million, an increase of 53% as compared to $779000 in the second quarter of 2021.
A total of 106 D a and D O D military treatment facilities have purchased gamma core products through June 30 of 2022 as compared to 85 through the second quarter of 2021.
Note that there are approximately 1300, VA health care hospitals, and clinics and over 400 military hospitals and medical clinics. So we still have plenty of potential growth ahead of us revenues from channels outside the United States and exclusive of the Cajun license fee increased 8% to 419000.
In the second quarter of 2022 as compared to $387000 for the second quarter of 2021, and we look forward to continuing growth in this channel through the rest of 2022.
That said currency fluctuations continue to be a headwind to our international revenue.
On April five 2022, we announced an exclusive license agreement with Tejan limited for Japan.
And as a global conglomerate based in Japan, and they will be an outstanding commercialization partner for the long term.
This license covers our proprietary noninvasive vagus nerve stimulation technology for headache, and includes provisions to expand to additional indications and or territories in the future.
Patients will be responsible for working through the regulatory process in Japan at patient expense.
Support from electric or in leveraging previously published pivotal data.
The initial license fee will be recognized over the next four quarters of which $48000 was included in the quarter ended June 32022.
The agreement provides for additional license payments tied to successful completion of regulatory and commercial milestones in the future.
It also requires an annual license fee that will come due every year starting in April 2023.
In addition to the cash consideration. This license agreement further validates the long term commercial opportunities for N VNS therapy around the world.
On April 19, 2022, we announced the gamba core non invasive vagus nerve stimulation or N. BNS has been selected for additional funding by the department of defense biotech optimize operational solutions and tactics the boost program.
The Bush research program, which will be conducted under the leadership of the 711 human performance wind performance optimization branch of the United States Air Force.
Seeks to optimize and validate the efficacy of N BNS and accelerated training sustained attention reduce fatigue and improved mood among air force personnel.
Should the boost program confirm previous findings the project schedule calls for electric CT to supply field ready devices to the Air force in the second half of 2023.
We are optimistic that the solution will ultimately provide to the air Force will also find favor among other branches of the active duty military and the United States the blood in the future.
Now turning to our clinical progress, we continue to advance and DNS across several trials, we participated in a pre submission meeting with the FDA on may 2nd of 2022, where we discussed our plans and close traumatic stress disorder, PTSD miles from attic brain injury, or concussion and DNS as a bridge there.
The pea for inpatient substance abuse programs and acute stroke. Among other topics. We believe our presentation was well received and we have several follow up items to pursue.
On July seven 2022, we announced that Mayo clinic launched an investigator initiated study to assess the efficacy of gamma core sapphire in patients with post Covid syndrome.
<unk> syndrome also known as long as Covid is a collection of symptoms that persist more than 28 days. After the initial onset of symptoms of infection.
Symptoms, such as headache, brain fog fatigue, gastric distress and bear a striking resemblance to the central sensitization syndromes. A group that includes fibromyalgia, chronic fatigue syndrome, and postural orthostatic tachycardia or parts.
The study entitled outcomes of treatment with noninvasive vagus nerve stimulation post Covid syndrome, a pilot study.
Is a randomized single center controlled trial enrolling up to 20 subjects Mcqueen here from the post Covid care clinic at Mayo clinic in Rochester, Minnesota.
Now I'd like to turn the call over to Brian who will review of our financials and other guidance items Brian .
Thank you Dan.
For the second quarter ended June 32022, electric <unk> reported net sales of $2 $2 million as compared to $1 3 million. During the same period of 2021. This represents a seven 8% revenue increase over the same period last year.
Gross profit for the second quarter of 2022 was $1 8 million as compared to $895000 for the second quarter of 2021.
Gross margin was 83% and 71% for the periods ended June 32022 and 2021.
Actively.
Our evolving commercial strategy has resulted in the launch of cash payment models under which we licensed certain startup devices.
The cost of the license starter device is being recognized as cost of goods sold over the estimated useful life of the starter device versus expensing the cost of goods at the time of sale.
Moreover, in recent quarters, we have sold an increasing amount of longer duration therapy, resulting in a higher average selling price.
These factors, including patient license revenue with no associated cost of goods and favorable absorption of labor and overhead costs due to an increase in the number of units sold contributed.
Contributing to the increase in gross margin.
Total operating expenses in the second quarter of 2022 or approximately $7 6 million an increase of approximately.
Approximately $1 5 million from $6 $1 million in the second quarter of 2021.
Research and development expense in the second quarter of 2022 was $1 3 million as compared to $825000 for the same period in 2021.
R&D expense for the quarter include investment for our next generation product currently under development.
Selling general and administrative expense in the second quarter of 2022 was $6 $3 million as compared to $5 3 million for the same period in 2021.
Total SG&A expenses for the second quarter 2022 included an increased investment in our sales and marketing efforts to support our cash pay initiatives.
GAAP net loss for the second quarter of 2022 was $5 3 million as compared to a GAAP net loss of $2 9 million for the same quarter of 2021.
Adjusted EBITDA net loss in the second quarter of 2022 was $4 9 million as compared to a loss of $4 1 million during the second quarter of 2021.
A reconciliation of GAAP net loss non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release.
Net cash used in operating activities. During the quarter ended June 32022 was approximately $3 $2 million as compared to $1.7 million in the second quarter of 2021.
Cash proceeds from the sale of our New Jersey NOL Carryforwards are included in both the second quarter 2022, and 2021 results.
Cash cash equivalents and restricted cash at June 32022 totaled approximately $26 6 million at.
As compared to approximately $34 $7 million at December 31, 2021.
Looking ahead.
For the third quarter of 2022, we expect net revenue to approximate Q2, 2022 levels and net cash usage to be between $4 $5 million and $5 million and now I'll turn the call back over to Dan.
Thank you Brian .
I'm very excited about our operating results this quarter and we continue to be in a strong financial position.
Longer term clinical indications beyond primary headache supported by the ongoing clinical development as discussed earlier could greatly expand the N VNS therapy market.
Patient license, we announced in April brings in some non dilutive cash and is a huge validation of the commercial appeal of N VNS therapy around the world.
Boost projects being financed by the Air force could accelerate the adoption of <unk> for a variety of indications among our active duty military.
We continue to build our intellectual property portfolio and we're developing a very exciting next generation product platform to leverage it.
A V a D O D channel and our direct to consumer initiatives are showing positive results.
Our UK business has recovered from a slow start with currency exchange continues to be a headwind so all of our international efforts.
I see many potential growth drivers through 2022, and 2023, including continued penetration of our VA Dod channel in the United States.
Continued penetration of the United Kingdom market.
Growth in our U S commercial channel driven by cash paid business models and direct to consumer advertising, while we continue our efforts to gain commercial insurance coverage.
And finally expansion of our international business through our distributor network and added traction within the U K E Commerce store.
Longer term, we believe there are real opportunities for label expansion into PTSD opioid use disorder and mild traumatic brain injury.
The Air Force boost program could lead to incremental product sales to the active duty military as soon as next year.
Lastly, we are exploring growth opportunities to enhance the leverage distribution channels through acquisitions, we're focused on revenue stage targets that might enhance topline growth and aqua other synergies.
At this time I will turn the call over to the operator operator, please open the line for questions.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two.
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Our first question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your.
Hi, This is destiny on for Jeff. Thank you for taking my questions and perhaps I'll just start with.
Kind of a question to your last piece of commentary there how is the M&A landscaping looking for you know versus maybe at the beginning of the year not necessarily like what are you looking at because I understand would be something that is synergistic and revenue generating but more so what are you seeing as youre looking at some of these <unk>.
<unk> potential.
Potential targets.
Yeah, Hi, Hi, Destiny, that's it's a very good question Budd.
I'm, sorry, but I'm going to have to beg Oscars our.
Our M&A activities are relatively long term and we really asked it.
Maintain confidentiality.
Status and cadence of those activities, but there's nothing imminent.
If thats what youre asking.
Okay got it it was top secret information that's good thank you.
Could you discuss how you're optimizing your strategy and your messaging to ensure you're targeting the best individuals in terms of your social strategy, specifically as it relates to your paid effort.
Yeah. So.
We started at the beginning of the year.
Very carefully starting by just purchasing search terms related to migraine and cluster headache, we've been dabbling with Facebook and Instagram.
We're looking at expanding into other social.
Social media channels, there is a small group, but growing group of Influencers in.
In the various social media channels that are that are starting to talk about gamma core therapy.
But we're being very careful about that spend.
As we improve the efficiency of that spend and learn for example, which adds of which close to resonating more closely.
With the consumer audience. So it's very very exciting time for us.
And we're looking forward to excel.
Accelerating growth as we go through the year and really into next year.
Got it sounds like you're being careful but becoming more confident in investing our resources. There. So that that's great I'm. Just curious you said it better than I did thank you.
As you said you were expecting some additional growth drivers could you just.
Go into a little more detail there.
Yeah. So.
The vast majority of our international business comes from the United Kingdom, where the National Health service.
<unk> will pay for gamma core therapy.
The U K.
First part of the year was impacted.
By Covid, but even more so just by staffing shortages throughout their health care system, and while that has eased somewhat.
There is a lot of room for improvement.
Folks use up their vacation time and return to a more normal.
The nickel services cadence so we're optimistic that.
The sheer number of patients who is going to increase throughout the year.
Just being.
Recognizing that the currency exchanges are going against us.
And there are sort of the mid teens headwinds to the work that we're doing in the United Kingdom.
All of that.
And over time, all of that is going to even out.
But we expect solid.
Low teens to mid teens growth in our NAV.
S business.
Certainly on a unit volume basis, and ultimately that will.
Translate as currency shorts as currency.
Comes back to normal on a dollar value basis as well our European distributors.
Again are dealing with the disruptions caused by the war.
I guess, they are settling into a new normal and our relationship with occasion has ignited.
More interest around the Pacific rim.
Hopefully we can make some additional announcements as we get into the back half of the year.
Okay, Great and maybe just on that same trend with page and I. Appreciate you, giving us an overview and a reminder of the original agreement.
I'm curious do you have any idea of timing or are they keeping everything kind of kind of closed.
So it's early days are they have they are planning an initial conversation with the ministry of health to work out there.
Inventory approval process.
Key decision point.
Is around the pivotal data that has already been collected to support FDA clearances in the United States.
<unk> market in Europe , whether that existing data set will be adequate or whether the ministry of health.
Going to require additional data and so until they have that meeting and and digest. The response from the Ministry of health.
Really not in a position to speculate about timing.
Okay understood and then lastly for me, it's exciting to hear that you know the Mayo clinic is.
Starting in their own investigator initiated trial I'm curious is that an indication that U S electric or would pursue at some point or are you rather wait and kind of see the data and then make a decision from there or is that I guess bigger picture is that even an area you would think to pursue.
But we already have an emergency use authorization.
To treat known or suspected COVID-19 patients who are having.
Our respiratory trouble so.
One way to think about it is that we already have.
Clearance technically I shouldn't use the word clearance, it's an emergency use authorization.
To promote the therapy and COVID-19 so.
We've been.
Relatively unsuccessful in our efforts to commercialize around the COVID-19 therapy and having a.
Very credible institution like Mayo clinic.
Recruit patients and ultimately publishing trial published study.
That could cause us to reevaluate our commercialization efforts for COVID-19.
Alright got it thank you for taking my questions.
Oh, absolutely appreciate your time destiny.
Ladies and gentlemen, as a reminder to ask a question. Please press star one. Our next question is from Jon Vander motion with Zacks.
Good afternoon, guys. Thank you for taking my question.
Notice the pickup in R&D and obviously, that's great because you guys have a lot of opportunities out there.
And I heard you say, Brian I heard you say that.
Going to be allocated towards your next Gen products and I was wondering how does that next gen product differ from what you have now with Sapphire.
Yeah, I'll take that one Jon so.
We have a.
We published quite a bit of intellectual property around.
A noninvasive vagus nerve stimulator that communicates with a mobile device and so much of today's consumer.
Consumer electronics is app enabled.
So it would be reasonable to connect those dots and say that we're working on a next generation platform that will communicate with the smartphone.
And allow us to leverage all of that digital health capability inherent in a mobile platform.
Okay.
Very good and then continuing on the R&D theme.
I remember the PTSD was a priority for you should we expect any R&D expenditures for the second half of this year and perhaps into next year being allocated in that direction.
Yes, absolutely we're continuing to support all of the clinical work around PTSD around opioid use disorder.
Parkinson's.
Mild traumatic brain injury.
All of those clinical activities are proceeding we're very very fortunate in that.
Our out of pocket investments in those clinical trials is relatively low most of those clinical trials are are being supported.
By government money either in the U S or abroad.
Yes.
We had a meeting with the FDA.
Round, our technology our clinical.
Progress in June .
We're going to have a pre sub meeting.
Round.
You would use disorder, that's being co sponsored by neither the nationals drug abuse.
We are.
After we do that we're expecting to.
Schedule, a similar meeting to talk about the pathway for PTSD. So we should have quite a bit to report.
In our November call when we talk about our September 30th themselves.
Okay, Great, yes, looking forward to that and then regarding the national spine and pain centers relationship.
Just a couple of questions on that the unit is going to be there on site.
Are they going to describe.
Prescribed by physicians there is that how that's going to work.
Yes, so that is.
Structured along the lines of our <unk> program and so.
The various clinics.
We have sort of a master agreement with.
With national spine, and health and then each individual clinic, we will have a certain number of our devices and inventory that can be demonstrated.
And prescribed by the health care, our health care professionals in the clinic and ultimately dispensed to patients who are customers.
Customers of that clinic, so it's a very exciting national account.
<unk> <unk> <unk> program.
Yes, yes, exactly I looked at the map and they are pretty focused I think on the east coast and kind of coming down to Texas.
So.
Are there any other opportunities in that in that corporate account type.
Area and United States.
Absolutely and it's a and we look forward to.
Our cadence of reporting more and more of those national accounts kinds of deals.
Great well I'll leave it there for now thank you for taking the questions.
Absolutely appreciate your time.
Ladies and gentlemen, we have reached the end of the question and answer session now I would like to turn the call back to Dan Goldberger for closing remarks.
Thank you operator and to all of you who participated today. We appreciate you making time to join today's call I'd like to give a special thanks to all of our employees, who have been working tirelessly to deliver these amazing Ah <unk>.
Both financially, but even more so delivering our therapy to patients.
Their hard work and commitment in trying times have helped stage set the stage for the growth. We've demonstrated so far during 2022 and of course, we're looking forward to 2023.
I'd also like to thank the healthcare professionals and their patients for their loyal support of gamma core therapy.
We have made so much progress and it couldn't have been done without your unwavering support thanks everybody.
Yeah.
This.
Today's conference electric or thanks, you for your participation you may disconnect your lines at this time.
Okay.
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