Q2 2022 Milestone Scientific Inc Earnings Call
hospitals are among the top 20 in the nation. And as we begin to penetrate some of these larger, well recognized names, it will continue to add credibility and validation to the instrument, which we hope will create a snowball effect. We also continue to launch a CompuFlow epidural system within pain clinics across the US. With over 11, sorry, with over 11 million reported epidural procedures each year, the pain management market is at least twice the size of the labor and delivery market segment. The pain management market not only includes numerous hospitals, but also specialty centers, outpatient centers and sports medicine centers. Shifting gears, it was an honor to have our CompuFlow epidural system incorporated into the student registered nurse anesthesia or RSNA program at the University of Scranton. According to the United States Bureau of Labor Statistics, nurse anesthetists already outnumber anesthesiologists in the US and every year more nurse anesthetists are entering the field and playing an increasing important role in anesthesia. For this reason, having our instrument integrated into the curriculum is not just an important validation, but key to our long term commercial strategy. Another major accomplishment this quarter was the receipt of a CPT code from the American Medical Association
for the CompuFlow epidural system. I cannot overstate the importance of having our own CPT code, which has the potential to open new doors by enhancing potential reimbursements. With the CPT code now in hand, we are seeing increased traction with potential customers. As an example, we expect to announce shortly another major health system that operates six hospitals and four medical centers.
providing patient care to more than 1.5 million patients each year.
We expect this institution will immediately begin implementing CompuFlow across three distinct departments.
the operating rooms, labor and delivery, as well as acute pain.
We look forward to providing an update on this institution in the days ahead.
In addition to our direct sales channels, we are also expanding our network of distribution partners.
We recently re-engaged with our US distribution partner Clinical Technology Incorporated, also known as CTI, and added a new international distributor in Greece.
CTI is a leading specialty distributor of medical products in the Midwest and East Coast regions of the United States. Although we initially started our collaboration with CTI in 2018, we mutually agreed to delay the launch based on customer feedback in 2018.
Specifically, we agreed it would be helpful to have the economic benefit analysis in hand, as well as initial adoption by key referenceable hospitals.
We accomplished both of those goals, including the addition of key referenceable hospitals, healthcare systems, and pain management clinics, as well as publication of the economic benefit analysis, which demonstrated real-time pressure sensing technology reduces costs by about $504 per average patient hospital stay.
Equally important.
To them was the issuance of our new CPT code, which I mentioned a moment ago. We are actively preparing a full launch plan in anticipation of this new AMA-cleared CPT code that will be implemented in the first quarter of 2023.
On the heels of receiving the CPT code, we immediately re-engaged our partnership with CTI, which illustrates the significant progress we have achieved over the past years. CTI is an ideal partner, bringing a sizeable Midwest and East Coast sales force, extensive relationships with physicians, pain clinics and hospitals, as well as a proven track record of introducing new medical devices.
In Greece, our new partner, FNM Feed, is a leading provider of medical equipment, devices and consumables. They bring over 40 years of experience in the field of healthcare, having a successful track record launching new medical devices and equipment.
We believe that Greece is another important market for us with a population in excess of 10 million people and 76,000 childbirths each year. We look forward to announcing additional international distributors as we advance our commercial rollout.
So as you can see, we make significant progress for the medical segment.
Let me now take a moment to discuss some important financial initiatives that we have undertaken.
First, we have reallocated additional resources towards our medical segment, which we believe represents the future of the company. We expect our dental business will continue to grow and now have a solid distribution network and marketing support in place to cost effectively scale the business.
On the other hand, our medical segment represents a much larger addressable market, not only driven by cost and convenience for the provider, but driven by the safety considerations, cost savings, and the ability to have remuneration given the success of obtaining the CPT code, which we believe will ultimately lead to the CompleFlow becoming standard of care.
In the meantime, we have significantly reduced our operating expenses and corporate overhead by nearly $700,000 in the second quarter. We are also implementing additional cost reductions beginning in the third quarter of 2022, which we believe will be reflected in our financial results in the coming quarters.
As a result of these initiatives, we are implementing a much leaner cost structure that should drive operating efficiency and improve profitability as we continue to grow revenues.
Combine that with our disposables, which provide high-margin, recurring revenue, we believe we are well positioned to drive shareholder value for years to come.
We also ended the quarter with approximately $11 million subcash on hand and no long-term debt.
which provides us sufficient capital to continue executing our business strategy.
So to summarize, we have positioned our company for positive growth in the common quarters. We remain committed to our goal of establishing the CompuFlow epidural instrument as the new standard of care in epidural anesthesia by providing patients with effective pain relief while reducing the risk of complications.
Given recent developments, including the addition of new hospitals, expanded distribution, the new CPT code and a streamlined operating structure, we believe the future is bright.
At this point, I'd like to turn the call over to Kiesha Harken, controller to go over the financials in detail. Please go ahead, Kiesha.
Thank you, Arjun.
Consolidated revenue for the three months ending June 30th, 2022 and 2021 was approximately 1.6 million and 2.4 million respectively.
Gentle revenue decreased approximately $795,000 for the three months ending June 30, 2022, as compared to the three months ending June 30, 2021.
For the three months ending June 30th, 2022, dental domestic revenue decreased approximately $21,000. And dental international revenue decreased approximately $248,000 compared to June 30th, 2021. For the three months ending June 30th, 2022, the company recorded no revenue from China as compared to approximately $525,000 for the three months ending June 30th, 2021. DmitryATINA.org
Medical revenue increased approximately $17,000 for the three months ending June 30, 2022, as compared to the three months ending June 30, 2021.
Consolidated gross profit for each of the three months ended June 30, 2022, and 2021 decreased approximately $689,000, or 41%, versus $1.4 million, or 56% of revenue for the second quarter of 2021.
The ZEALCE is related to the company recording and allowance of approximately $430,000 on low-move and medical-finish goods during the three months ending June 30, 2022.
Consolidated, selling, general, and administrative expenses for the three months ending June 30, 2022 and 2021 were approximately $3.3 million and $4 million respectively. The decrease of approximately $729,000 is categorized in several ways.
Consolidated research and development expense for the three months ending June 30, 2022 and 2021 was approximately $267,000 and $215,000 respectively. The increase of approximately $51,000 is related to the company exploring enhancements on the FTA single tooth anesthesia system products.
The loss of operation was approximately $2.9 million for the three months ending June 30, 2022 and 2021 respectively.
Consolidated revenue for the six months ending June 30, 2021 was approximately $4.3 million and $5.4 million, respectively. Dental revenue decreased approximately $1 million for the six months ending June 30 as compared to the six months ending June 30, 2021.
For the six months ending June 30th, dental domestic revenue decreased 67,000 and dental international revenue decreased approximately 216,000 compared to June 30th, 2021. For the six months ending June 30th, the company revenue to China decreased approximately 672,000 compared to June 30th, 2021.
Medical revenue decreased approximately $46,000 for the six months ending June 30, 2022, as compared to the six months ending June 30, 2021.
Consolidated gross property for each of the six months ending June 30, 2022, and 2021 decreased $809,000.
25 percent. The decrease is related to the company recorded allowance of approximately $430,000 on slow-moving finished goods for medical and the reduction of dental revenue.
Consolidated sale in general and administrative expense for the six months ending June 30, 2022 and 2021 were approximately $6.4 million and $6.8 million, respectively. The decrease of approximately $363,000 is categorized in several areas. Consolidated revenue research and development expenses for the six months ending June 30,
and 2021 was approximately 731,000 and 231,000, respectively. The increase of approximately 499,000 is related to the company's continued enhancement of the STA single-tooth anesthesia system products. The loss from operation was approximately 4.8 million and 3.9 million for the six months ending June 30, 2022, a owners-run
and 2021 especially. As of June 30th.
2022 the company has incurred net losses of approximately 2.9M or loss.
For the three months ending June 30, 2022, versus a net loss of $2.7 million or $0.04 per share with a comparable period in 2001.
As of June 30th, the company has incurred a net loss of $4.8 million.
loss or 7 cents per share for the six months ending June 30, 2022, versus net loss of 3.7 million or 5 cents per share for the comparable period in 2021. On June 30, 2022, Milestone Scientific had cash and cash of approximately 11 million and working capital of 12.3 million versus working capital of 15.8 million on December 31, 2021. For more information, visit www.milestone.com
For the six months ending June 30, 2022 and 2021, we had cash flows used in operating activities of approximately $3.8 million and $2.1 million, respectively. At this point, I would like to turn the call back over to Arjun Hamelholz.
Thank you, Kishia.
To wrap up, we believe we have developed a cost-effective and highly scalable platform.
to drive growth within both our dental and medical divisions.
We are witnessing growing interest in both our instruments and our disposables, and we believe we are well positioned to take advantage of the opportunities available in the market.
I'd like to thank you for joining the call today and at this point we would like to open the call up to questions. Operator.
Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold one moment while we pull for questions.
Your first question is coming from Anthony Vendetti at Maxim Group. Please pose your question. Your line is live.
Thank you. So Ariane.
Just want to understand the you know, the dental business obviously some of the stuff out of your control with
the you know ongoing war in Ukraine and it sounds like
You had Russian and Ukraine customers that cancelled borders, which...
Totally makes sense. What's the magnitude of the business that you were doing in Russia and Ukraine prior to
Russia's invasion.
Yes, thank you, Anthony, and good morning. First of all, the results in the dental division are, of course, disappointing.
On one hand, we can say it is out of our control because the situation in China and the situation in Russia and Ukraine, I can share with you the magnitude of the business impact that we had in the first half of the year with Russia and the Ukraine, which was the magnitude of about $300,000 combined that we could not deliver. And on top of that, of course, the company is taking the position.
China as well. Does that mean that you're not expecting future orders from China or it's just less predictable?
Yeah, I think the honest answer here, Anthony, is we don't know because to your point it is less predictable. On one hand, you have of course also the economic and governmental situation in China. We know the real estate market, the GDP development in China is not in favor for the business as well as what we reported in the K-
any actions because of the situation in China, because of the cost involved. And that has been concluded for us that we take a wait and see approach. And to that point, it is extremely difficult to predict what and when and if we would get additional revenues within this year on the China business.
Okay, and then shifting gears, just want to ask a couple questions on the medical side. So you know, noticed throughout the quarter, obviously you've signed up.
of some nice universities hospitals that, you know, hopefully help drive the disposable component of the copy flow system.
Can you talk about...
where we are in terms of
hitting an inflection point, at least in your judgment, where you'll start to derive.
Material revenue from the medical side.
Yeah, so I think there are three important factors, right? If we go to the hospitals where we are currently active, we are in a number of hospitals active in trial and evaluation situations.
And as you know in labor and delivery that sales cycle is rather let's say longer compared to the paint segment. Nevertheless we continue to...
to penetrate these hospitals and I'm very pleased with the activity level that we are having based on these hospitals. So in light of that it's also very important that we have access to a distribution partner which is CTI because they are covered in about 22 states in the United States so they have a very large footprint. So that's the labor and delivery market segment.
I think that the turning point or the reflection point, not only from the hospitals, but also more importantly from the private pain clinics and the ASCs, is all very much so dependent on getting the reimbursement pricing for the CPT code ready. And as I mentioned in the poll this morning, the preparation of the loans for the CPT code is of utmost importance for the company moving forward.
as well as preparing for the CPT code. And then thirdly, also looking into other channel partner opportunities where we get access to other organizations and institutions thereby driving penetration and adoption of our medical technology.
Just the last follow up on the CPT code. Typically, there's a comment period and then.
The code goes into effect each year on 1-1, on January 1st, January 2nd.
whichever the case, but are you confident that the.
starting in January of 23, that you'll have a new code that's approved by CMS.
Okay, so let me explain it if I understand your question correctly, Anthony. We have been granted a CPT category 3 code.
which becomes effective as of January 1st, January 2nd, next year, 2023.
What we have to do then is in the extension to that.
and that's where we are working and preparing for right now, is instead of waiting till January and February and then getting access to insurance companies and getting a price or a reimbursement for the pain clinics, we are trying to set it up right now. So the first part of your question, the code, it's already confirmed that we will get that in January , 2023.
but we are preparing well in advance to be even more ready in the first quarter of next year because we strongly believe that we will hopefully sort effect of the CPT code during the first quarter of 2023.
Okay, great. That was helpful. Thanks, Arian. I'll hop back in the queue.
Thank you, Anthony.
Once again, if there are any remaining questions or comments, please press star 1 on your phone at this time.
Your next question is coming from John Corb. Please pose your question. Your line is live.
Our next question is coming from John Corb. Please pose your question. Your line is live. Yeah.
Yes, good morning, Jim.
Hi Aaron, John Corvam, longtime shareholder. I've talked with you before.
First of all, I want to share with you.
that this summer
I was the recipient of the STA technology with my dentist.
and it's everything Milestone has ever claimed is totally pain injection.
that.
Dennis loves it. I love it.
begs the question
How does it...
wide-scale and use.
The demo business has done
and a long time part of my life.
I didn't ask my dentist, but I assume he got this through a distributorship.
I'm more interested, maybe I shouldn't be, but I'm more interested in what's going on in the United States.
versus other countries with the dent.
Are you still hopeful that instead of muddling along with...
ups and downs of, you know, just down this quarter because we're comparing with Henry Shine uploading and then we lose China and then again this to get
attraction
in the dental area, is that still a hope and a plan for milestone scientific?
Yes, thank you for your question, John , and I'm very pleased that you had the experience that many other patients had with our SDA single tooth anesthesia technology.
So let me answer your question. You're absolutely right. Yes, I'm focusing, we are focusing as a company of further growing the dental business in the United States and to your point, not being only dependent on the distributorship with Henry Schein as we started with in the beginning of last year, we added a number of other distributors. So we went from an
exclusive distributorship with Henry Schein to a multi-channel or a multi-distribution sales channel. Now, was that enough to achieve the growth that we would like to see for the company? We came to the conclusion that that is not necessarily enough and we have to do more.
So to do more than that at the time, that we looked into other what I call channel partners. A very good example is Keystone Dental Group, which is a dental implant company, having a sales force of about 75 people and only carry, let's say, a dental implant and some of the prosthetic components in their portfolio. So,
Having then the opportunity to also offer our product and technology, giving them the opportunity to increase their business and increase their penetration in the general practitioner market segment without having an erosion of their, call it their profit margins on their core business, was a very attractive value proposition and they jumped on to it. So that's another important factor.
that we continue to look at and to identify those channel partners as for example a Keystone Dental Group. What's even more important I think from a growth perspective point of view is the development of the dental service organizations not only in the United States as well as in Europe but let's go back to the United States. I think currently about...
22% of all the dental business is done through these dental service organizations. So they have a central purchasing administration services, insurance, health, private health insurances that they offer to their patients. So getting access to that DSO market segment is of utmost importance. And that's culminated in us signing up an agreement with a dental service organization called AIDA.
value proposition for the DSOs to increase their revenues dramatically and drastically as we are able to document and demonstrate based on literature that they can increase their patient acceptance. Now I know it's a little bit a long answer to your question but in short and you know
It's not for me coming out of the valley and closing the gap. It's for me more important and for the company more important to focus on sustainable growth for the dental business in the United States moving forward.
Okay, thank you for that answer.
Moving on to Capuflow.
I haven't been up to speed, but.
I'm reminded of the initial.
thrust with milestone and the copy flow.
As I recall, you hired ten salesmen and going to focus.
east of the Mississippi River.
I was there when
You made that statement we have 10 capable sales force on hand that
They were going nowhere without the CPT code.
And I didn't even know there was such a thing as a CPT code.
And then you re-institute CTI.
relationship, I was not aware.
That wasn't going anywhere.
CPT card
that.
Hello, excuse me, can everybody hear me because we've lost
Hello? I can hear you.
I can hear you. Okay.
I didn't hear the second part of John's question.
I think I've lost John .
I think we lost him. You can go ahead and address the first part.
I think the question was 10 sales reps not necessarily being aware of the CPT code or the importance of the CPT code and the relationship with CTI.
So I will keep it short, the relationship with CTI as we stated, there was a relationship in 2018, but that was also at the time where the company decided to improve and to optimize the product at that time based on some customer feedback and also in parallel with that to conduct or in an independent study to conduct and to search for the...
health economic benefits of our technology and our system, which then resulted in the $504 cost saving per average patient hospital stay.
The question on the 10 sales representatives, as we also have mentioned in the queue, we have reduced the medical sales team in half. So we have a sales team of five dedicated people on the ground, which is a result of being laser focused and focusing on those areas where we have the best, and the best leads, so to say, and the highest activities.
in the hospitals in those territories. But the reason why we also want to go for a hybrid model is of course that through CTI, you get a geographical coverage and spread much higher than we can do on our own, as well as the cost efficiencies, because having a direct sales organization of 10, 20 or 30 people is a tremendous cost.
on our balance sheet and therefore we also decided to be re-engaged with CTI.
There appear to be no further questions in queue at this time. I would now like to turn the floor back over to management for any closing remarks.
Yes, well, again, thank you for your time. As I've stated before, we remain positive about and encouraged about the developments that we have seen and that we are focusing on in both the medical segment. We're working hard also and we believe also that we have the strategic plan identified to further substantiate on the dental business. So we remain encouraged and positive about the company.