Q3 2022 Nuwellis Inc Earnings Call
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Good day and welcome to the New wireless third quarter 2022 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
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Please note this event is being recorded.
Now I'd like to turn the conference over to Vivian Cervantes Investor Relations. Please go ahead.
Thank you operator.
Thank you everyone for joining us on today's conference call to discuss <unk> corporate developments and financial results for the third quarter ended September 32022.
In addition to myself with US today are natural her mellow wireless as president and CEO and Lynn Blake CFO .
Eastern This morning, New wireless released financial results for the quarter ended September 32022.
He has not received new wireless its earnings press release, please visit the Investor page on our company and our web site.
During this conference call the company will be making forward looking statements except for historical information mentioned during the conference call.
It's made by the management of new Wallets are forward looking statements that are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Forward looking statements involve known and unknown risks and uncertainties that are based on managements beliefs assumptions expectations and information currently available to management.
Those risks include but are not limited to risks associated with the possibility that the company may be unable to grow revenue in future quarters that the company may not be able to commercialize its products exactly the possibility that it may be unable to raise the funds necessary.
The company's anticipated operations and the other risk factors described under the caption risk factors and elsewhere in the Companys filings with the SEC.
The company believes that these forward looking statements are reasonable as of today's date. However, you should not place undue reliance on forward looking statements because to me they speak only as of the date when made.
By providing this information the company undertakes no obligation to update or revise any projections or forward looking statements, whether because of new information new developments or other circumstances that might subsequently rise.
You should review the cautionary statements and discussion of risk factors included in the company's press release issued earlier this morning.
The company's latest 10-K.
Subsequent record reports as well as its other filings with the SEC under the titles risk factors or cautionary statements related to forward looking statements for additional discussion of risk factors that could cause actual results to differ materially from management's current expectations and those discussions regarding risk factors as well as the discussion of forward looking statements and such.
Sections are incorporated by reference in this call and are readily available on the company's website.
With that said I would now like to turn the call over to Dexter.
Thank you Vivian and good morning, everyone welcome to new wellness third quarter 2022 earnings call.
First I would like to start this call by welcoming our new Chief Financial Officer, Lynn Blake, who started in this position on October 19th.
I'm confident that lean would be an asset to the new wellness team and create significant value for all our stakeholders of the company.
And on behalf of the new wellness team I would also like to thank George Montague for his significant contributions to the wellness George who will be missed.
On today's call I would like to provide an overview of our third quarter performance and give an update on our strategic initiatives.
Lynn will then provide detailed financial results followed by my closing remarks before opening the call up for questions.
During the third quarter, we achieved double digit year over year revenue growth and gained significant momentum on our key strategic initiatives.
Our goal of making the athletic system the standard of care for restoring fluid balance remains with clear focus on executing our strategic initiatives, which include to build out our clinical education team and continued rollout of our focused sales strategy.
Penetration of our ambulatory clinical treating heart failure patients continued development of clinical data supporting the aqueduct systems clinical and economic value and a steady progress on our new product pipeline, such as our product our pediatric continuous renal replacement therapy.
The device.
In my following remarks, I will provide an update on each of these initiatives before doing so I would like to thank the entire new wellness team you make possible everything that we do and without your hard work and dedication to our mission, we will not be at this exciting point of growth.
Turning now to our quarterly results revenue for the third quarter of 2022 was $2 $1 million, representing 11% year over year growth and a decline of 7% as compared to the second quarter of 2022.
Compared to the third quarter of 2019, we saw significant growth of 65%.
In late 2019, we implemented our expansion strategy to diversify our therapy base beyond heart failure and are pleased to see this strategy continues to gain traction.
The third quarter year over year revenue increase was driven in large part by our pediatric customer segment.
Since we decided to increase our focus on this patient population, we have seen our efforts pay off and we look forward to helping more children suffering from fluid overload in years to come.
On a sequential basis the results reflect typical seasonal trends in our business and follows a relatively strong second quarter.
Our third quarter revenue mix was 42% from critical care.
27% from pediatric <unk>.
And 'twenty one from heart failure.
Increasing contribution from our pediatric business again demonstrates that our investment in this patient population is paying off and provides further support for the expansion strategy. We implemented beginning in late 2019.
Compared to the third quarter of 2021, our pediatric customer segment grew <unk>, 6%, our critical care segment declined by 9% and our heart failure customer segment remained the same.
We are encouraged by the steady adoption and increased use of our war athletics ultrafiltration therapy.
As well as continued positive reception of our smartphone console, which is our latest generation athletics system that incorporates smart diagnostics to guide therapy.
In the third quarter, we added three new accounts and reactivated five accounts.
We sold eight consoles to be three new accounts in the quarter for a total of 17 console sold versus <unk> 14 in the period.
In the period in the prior year period.
This tells us that our customers have incorporated ultrafiltration into multiple specialty units within the hospital.
<unk> positioning us well for increasing disposable utilization in our installed base.
Throughout the third quarter, we have decreased our total operating expenses by 15%.
This decrease in spend and prudent allocation of capital has allowed us to effectively manage our expenses, while focusing our airports on investments on our strategic initiatives, including the hiring of field personnel progress on clinical research and the development of a new pediatric device.
Next I would like to provide a business update on our four key strategic initiatives outlined earlier.
Our first initiative is the implementation of our new and focused sales strategy.
As we have previously mentioned this is both a strategic and operational in nature.
All of this strategy is to drive utilization gains and target high volume accounts in geographic locations, where we are confident in our ability to create significant growth.
Of note utilization rate in our top 10 accounts continued to show year over year improvements.
We also continued to make progress in our field organization expansion, which includes the hiring of key clinical education specialists or CES.
The C. S plays an important role supporting our account manager within the inpatient and outpatient facilities.
Our CSS all of whom are trained nurses.
Direct lead partner with the patients care team on the optimal use of our ultra filtration system.
In so doing they facilitate not only successful patient outcomes, but also increasing use of our therapy.
We are encouraged that the staffing shortages that we were that we're it's widespread throughout much of last year are beginning to ease and we have been successful with our hiring activities.
We remain on track to complete our targeted number of clinical education specialists hires by the end of this year.
Longer term, we plan to continue to invest in our clinical education team and maintain a ratio of two clinical specialists.
Supporting one account sales manager.
Our internal metrics show that these two to one ratio equates to greater utilization within the accounts.
Kris efficiency and stronger more sustainable growth.
The second strategic initiative is to target outpatient clinics treating heart failure patients.
Following the assignment from CMS.
Our new and dedicated category III CPT codes for therapeutic ultrafiltration from the American Medical Association in January of this year, we have been in active conversations to reactivate outpatient clinics, who had been using our equinix therapy, but discontinued due to lack of reimbursement.
<unk>.
As previously noted our category III CPT code provides reimbursement for ultra fluctuation administered in outpatient setting.
Our conversations to reactivate this outpatient.
<unk> have been constructive and well received because of the potential to reduce inpatient admissions.
On reimbursed Readmissions and Hospitalisations due to fluid overload.
And as these outpatient clinics welcomed patients.
There is an opportunity to generate real world patient data.
Can leverage in support of increasing reimbursement and to obtain broader category, one CPT code likely to happen in the next two to three years.
We have also made progress building awareness in outpatient centers that have historically performed similar therapies laying the foundation to develop them penetrate this market.
Our third strategic initiative is to grow new well as body of clinical evidence.
On June 29, we announced enrollment of the first patient in the pivotal reverse Hart H F trial.
Representing a key milestone for the company.
As a reminder.
Primary effectiveness endpoint of reverse H F will evaluate mortality in heart failure events within 30, and 90 days as comparison between athletics therapy, an intravenous Luke diuretics.
As an update to this trial on September 27, we were pleased to announce the activation of three additional sites Jefferson Abington Hospital in Pennsylvania, The University of California, San Francisco and Baker Morton plant Hospital in Florida.
In addition to these sites, we anticipate at least 12 additional clinical institutions to participate in this study.
We are grateful to the many doctors who are making this study possible and for their contribution and gathering additional evidence supporting the benefits of ultrafiltration therapy in heart failure patients.
As a company we are committed to the ultimate goal of making Equinix therapy. The standard of care for fluid management in fluid overloaded patients that are unresponsive to direct.
We believe a successful trial will provide additional evidence including evidence of health care economic benefit.
We needed to have old roughly duration included within medical Society practice guidelines.
Which would lead to many more patients benefiting from the Equinix therapy in the future as it would be the standard of care.
Okay.
Additionally, on the clinical front on August 31st we announced the publication of new peer reviewed clinical data demonstrating 100% survival at 30 days following the use of ultra fluctuation in high risk post operative coronary artery bypass grafting.
Or cabbage patients.
These results are very exciting for new wellness and our physician customers are these.
Data shows ultra fluctuation for these patients provides a safe and effective method for managing fluid balance and reducing mortality rates.
To provide context on the prevalence of obesity indication there are around 520000 cabbage procedures performed per year worldwide.
Of which approximately 120000 are performing the U S.
Of this an estimated 7% to 10% are for high risk patients, representing a large market opportunity for new relic.
This study was the first of its kind and highlight the benefits of athletics therapy for this for this high risk cabbage patient population.
Lastly on the clinical front.
The new results of the avoid H F clinical study demonstrating statistical superior clinical benefit of the Aqua therapy in reducing heart failure events and mortality were presented at the 2022 Heart failure Society of America's annual scientific meeting in September .
As we expected the results of these new analysis demonstrated a statistically superior benefit from using ultra fluctuation over direct for fluid overload heart failure patients Ulta.
Ultimately, creating the potential to provide significant cost savings to hospitals and improving the quality of life of patients.
The manuscript for the study is being submitted for publication in a peer reviewed journal.
One of new wells. This long standing goals is to have a strong clinical data to demonstrate our effectiveness in treating patients suffering from fluid overload.
We made major strides on this strategy in the third quarter.
We believe that the clinical data that we have developed and we will continue to develop.
Put the athletics therapy at the forefront of this field and ultimately make it the standard of care.
Finally, our fourth strategic initiative is on the product development front.
We continue to make progress in the quarter on our pediatric continuous renal replacement therapy device.
We have experienced significant traction in our pediatric customer segment and in order to best serve that patient population, we remain committed to rolling out this device to help as many children's as possible and are anticipating an IDE submission by early 2024.
We are highly committed to investing in our pipeline technologies, including protecting our intellectual property.
During the quarter, we strengthened our intellectual property portfolio with a new U S patent for a novel innovation that improves fluid balance and safety in Paediatric dialysis and hemo filtration.
In conclusion, our goal our goal remains the same.
To make the Aqua therapy standard of care for restoring fluid balance we believe that the work. We are doing now in terms of clinical data generation investments in new product development implementing a new and focused sales strategy and targeting outpatient facilities is setting the stage.
<unk> for strong and sustainable growth for years to come.
Now I would like to turn the call over to our new Chief Financial Officer, Lynn Blake to discuss the Q3 financial results.
Thank you Nestor and good morning, everyone I'm happy to be speaking with you today on my first earnings call as an analysis Chief Financial Officer.
Joining the company last month I've been working closely with the team to better understand the business and market and I can confidently say I see tremendous growth potential for this company and looking forward to updating you on our progress for many quarters to come.
Now turning to the Q3 financial results revenue for the third quarter was $2 $1 million, representing 11% year over year growth and a 7% sequential decrease from the second quarter. We were pleased with the strength in our pediatric segment, which grew 106% over the prior year validating that our commitment in inverse.
And in this patient population is paying off.
This growth was partially offset by a 9% year over year decrease in our critical care customer segment. Our heart failure segment was roughly flat compared to the third quarter of 2021.
Gross margin was 61% for the third quarter, an increase of 53 basis points compared to gross margin of 64% in the prior year quarter.
Our reported gross margin includes margin from our capital console products and disposables circuit products.
<unk> increase in utilization by our existing and growing installed base of customers will represent a tailwind to tailwind to gross margin over future periods, given the higher margin rate and our disposables.
Selling general and administrative expenses were $4 $3 million in the third quarter relative to the third quarter 2021, SG&A expenses decreased by approximately $400000 or 8% year over year and were roughly flat sequentially. The year over year decrease reflects both our previously communicated.
Commitment to conserve capital given the challenging macroeconomic environment as well as the fact that we had a number of open positions in the third quarter of this year.
Third quarter research and development expense was $928000 a decrease of approximately $800000 compared to the third quarter of 2021, and a decrease of approximately $200000 sequentially.
The year over year decrease is largely attributable to a nonrecurring license fee expense of approximately $430000 in the third quarter of 2021 as well as some timing of expenses between quarters. While we have been exercising increased cost vigilance. We also maintain committed to allocating a sufficient level and investment to the fore.
Key strategic growth initiatives that napster outlined earlier and specifically as it relates to R&D progress on development of our pediatric device continues as planned.
Total operating expenses were $5 $2 million in the corner, a decrease of about $1 $2 million as compared to the prior year period, and a decrease of approximately $200000 compared to the second quarter 2022.
Total operating expenses year to date has decreased 15% compared to the prior year, we will continue to prudently watch our spending levels for the foreseeable future while at the same time scale prioritizing investment in our strategic initiatives.
The net loss in the third quarter was $3 $9 million or <unk> 37 per share compared to a net loss of $5 3 million or <unk> 75 per share in the third quarter last year. We ended the third quarter with $12 $1 million in cash and cash equivalents and no debt on October 18th we closed an underwritten.
And public offering that raised gross proceeds of approximately $11 million.
After deducting underwriting discounts and commissions and offering expenses from the proceeds our pro forma cash balance at the end of the quarter would have been approximately $22 million. This new capital strengthened the balance sheet as we earmarked use of funds to increase our field team drive penetration of the outpatient market expand our growing body of <unk>.
Data and advance our product pipeline again is Nestor discussed earlier progress in these strategic initiatives will not only drive strong future revenue growth, but will enable new atlas to become the standard of care for treating patients with fluid overload across the continuum of indications.
I'll now turn the call back to NASA for some closing remarks.
Thank you Lynn.
As discussed earlier, we are encouraged by key milestones achieved in the quarter and remain focused on executing on our strategic initiatives.
We're committed to growing our commercial operations, including this bag is the expansion of clinical education specialists additions to our product portfolio.
And building our body of clinical evidence.
Further progress on this collective objectives will not only help new well is new with new business increased penetration in existing accounts and fuel a steady growth.
But also enable us to achieve our vision of making the equinix treatment the standard of care for fluid overload.
I would like to conclude by thanking all of the stakeholders employees of new wellness and health care workers in the field.
With our year support we would not be able to achieve the key advances in the treatment of patients suffering from fluid overload.
I would now like to open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
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And our first question will come from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.
Hello, Master and where and how are you.
Good Thank you Jeff good morning.
So I guess, firstly can we talk about the.
Placements from a console so it looks like you've done quite well virtually all new accounts and consoles place, but we're just trying to get a better understanding of.
The growth and what's driving it and where should coming from is it coming from the the new placements and their utilization or are you getting any traction from the.
Catalysts, which are being reactivated as well.
Good question, Jeff the growth in the console is coming from two areas. One is opening new accounts.
And the second one is in our existing accounts the customers are starting to expand the utilization of equinix in other specialty units requiring additional concepts.
Many of them are also upgrading to the smart flow from there.
Flex force.
So those are the two or three areas.
Where the increase sales of console is coming.
Okay got it and then.
Could you talk a little bit about ftes and new hires sitting how that relates generally speaking to our opex levels or does it.
Like this is a good level, where youre right now from Q3 to carry forward and it should be.
The short term or medium term or would you expect.
More edge there on the on.
On the F T S.
Yes.
Lynn mentioned in the third quarter, we have some openings in.
In the field and but we feel that now we have all territories.
Fully staffed with the exception of one which we are right now in the process of recruiting.
An account manager, but in terms of Dcs as we have every territory.
Fully staffed with our clinical specialist.
Okay got it and could you talk about the trial a little bit the CHF trial, it looks like you've got a <unk>.
Four or five centers open now and rolling I know that the.
The expectation is 372 could you give us an update on how many IRA bts are out there in enrollment data if you could.
Yes, we have approximately five sites right now enrolling patients.
We have started the process and also calibrating the protocol as you know this is a new study for us.
And we are calibrating, the inclusion and exclusion criteria to make some slightly modifications to make sure that we're enrolling the right amount of patients and the right type of patients.
So it's going well.
<unk> is going well, we're very pleased with the progress that we have made.
Okay got it and then one more for me.
On the clinical side as far as heart failure, and cabbage or you're seeing utilization prior to procedures or is the vast majority.
Post procedure.
The vast majority is post procedures.
We have accounts that are starting to use the <unk> eggs in transplant patients and in that patient population. They are using it pre transplant and post transplant.
And the pre transplant is used to tune the patient as decisions.
Let's call it and but after the transplant is primarily to remove the additional fluid that is infused into patients during the transportation.
Okay got it that's helpful. Thanks for taking our questions and congrats on joining.
Yes, Thank you Jeff.
Our next question will come from Thomas Mcdevitt.
Apologies Thomas has just disconnected. Our next question will come from Brooks O'neil with Lake Street Capital. Please go ahead.
Hi, This is Charlie months' hang on for Brooks O'neil just a couple of quick questions for me, it's kind of a two part question, but given the significant risks to hospitals and the others from hospital Readmissions as well as clinical risks to patients from heart failure and other conditions.
Why do you think it's taking so long to gain acceptance of your ultra filtration products now.
Well.
The main reason has been the lack of direct clinical evidence to support the <unk>.
Reduction in Readmissions and hospitalization in the past most of the clinical studies that we have.
That we have so far on the therapy have signal benefits and improvements using the athletics, but we'll be avoid heart failure.
The new data proves that indeed, there is a significant benefit statistical superior benefit I should say.
Abusing the athletics and removing fluid overload.
Specialty in heart failure patients that are unresponsive to direct.
So I believe that now that we have the clinical evidence we will see a and.
An increase in sales.
Can I just add Charlie.
Nestor in addition to the clinical evidence that we can now demonstrate maybe touch on the health care economic benefit that we're beginning to lay out for the decision makers.
Administrators in the hospitals that is a good point to them.
We have a we have been showing pro forma to hospitals about the risk the financial risk that they have with the unreimbursed Readmissions and is gaining a lot of positive response from the administration of hospitals.
Okay, great. Thank you for that explanation that actually answers both of my questions. So that's it for me. Thank you guys.
Okay. Thank you. Thank you.
Again, if you have a question. Please press Star then one.
As there are no more questions. This concludes our question and answer session I would like to turn the conference back over to CEO , Mr. Hermia for any closing remarks.
Thank you very much everyone for joining our third quarter 2022 earnings call.
I wish you a happy day.
The conference has now concluded. Thank you for attending today's presentation you may now.