Q3 2022 Movano Inc Earnings Call
And in recent weeks afterward, I'll cover the highlights of our quarterly operating results and provide perspective on our financial position.
Finally, <unk> founder and Chief Technology Officer, Michael Lehman, and Stacy Salve, our vice President of strategy will join John and me for the Q&A.
Before we begin I would like to note. We've made the conscious decision to change our company name to <unk> health to better align with our mission to make medical grade data accessible and actionable for all while our legal company name will remain Murano, Inc. Our DBA is Murano health, which we believe better reflects our identity.
I want to remind everyone that we will make forward looking statements during today's call whether in prepared remarks or during the Q&A session. These forward looking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factors section of our filings with the Securities and Exchange Commission, specifically in the company's forms 10-Q and 10-K.
Except as otherwise required by federal Securities laws, Lovato health disclaims any obligation to update or make revisions to such forward looking statements contained herein or elsewhere to reflect changes in expectations with regards to those events conditions and circumstances.
Now I'd like to turn the call over to our CEO, John Master to Taro.
Thank you Jay and welcome everyone. Thank you for joining us for <unk> Health's third quarter earnings call.
We are on the cost of bringing our first product to market and our work over the last quarter continued to be laser focused on preparing for a successful commercial launch.
After several years of research, we're confident that we're developing the right wearable health solution at the right time.
Data from the American Heart Association and the centers for Medicare and Medicaid services has brought to light some pretty harsh realities as of 2020, nearly 40% of Americans are living with a chronic illness and in that same year. The U S spent almost 20% of its total GDP on healthcare.
When you lay around the impact that pandemic has had on consumers overall health.
In an environment, where people are eager for a solution that helps them to better prevent or manage illness.
Wearable devices offer an unparalleled opportunity for people to take control of their health outside of their annual Doctor visit.
While wearables have undoubtedly made people more aware of their health through data.
The way its presented often in the form of complex graphs and charts can be overwhelming for anyone who isn't an elite athlete and accuracy remains a concern.
<unk> health it is our mission to make medical grade data accessible and actionable for everyone.
We're developing technology at the intersection of medical and consumer devices.
By combining medical grade accuracy, with an intuitive user experience and contemporary and comfortable designs.
Our goal is to create devices that consumers want to wear and can trust to deliver meaningful insights that help them improve health outcomes over time.
What makes us different is that we are a medical device company at our core and we're holding ourselves to a higher standard than traditional wellness companies by developing solutions that qualify for FDA clearance.
Our commitment to commercializing FDA cleared wearable devices has presented a couple of major opportunities for us.
The first is our direct to consumer launch of our smart ring and the opportunity to help women better understand what's going on with their bodies and motivate them to do the things they need to feel healthier.
As we researched the need state amongst consumers it became clear that there is an imbalance between how engaged women are in the health care system.
Often making decisions for themselves and their families.
And how much more likely they are to feel dismissed by the health care system as well as how unprepared many women feel for the inevitable life stages, they are going to experience.
We aimed to address these issues with our smart ring, which is launching in the first half of 2023.
Second.
We are the only wearable company pursuing FDA clearances on the entire solution, including our hardware. We believe there is a significant enterprise opportunity from a vital health working directly with a range of potential <unk> partners.
As we've highlighted in the past healthcare entities, such as pharmaceutical and medical device companies as well as integrated health networks and insurers are looking for wearable solutions that can provide actionable medical grade data.
We are proactively seeking such opportunities.
We are optimistic about the future potential given our medical device routes and the fact that many of these organizations have sought us out.
We've made significant progress in Q3 and recent months to bring these opportunities to life and I want to go into more detail on our efforts.
Throughout the third quarter and into Q4.
We have been internally testing the ring experience to optimize accuracy comfort and battery life and <unk>.
Anticipation of our first beta programs, which is slated to commence this quarter and continue into the early part of 2023.
As it stands today, we're excited to have formalized beta programs with four excellent partners.
We recently announced that our first beta program will be with Nov on health, an integrated system of medical centers that reported over $7 billion in revenue in 2021.
With more than 800 physicians, providing care through close to 6 million annual patient visits at nearly 800 locations across North Carolina, South Carolina, and Georgia, No bought health is seeking novel technology like mobile solutions that can provide doctors.
Greater visibility into patients' day to day health metrics.
The beta program will involve <unk> internal teams as they evaluate the technology for its possible use cases for patients.
We're looking forward to kicking off the beta program with Nevada health in the near term.
As we talked about our last earnings call. We're conducting a beta program with Stanford University's applied Sports Science Department will be testing our device with a group of Stanford athletes in January to evaluate how our solution can improve performance and recovery.
We will also be conducting beta programs with two additional partners a global pharmaceutical and medical device company as we previously highlighted in our second quarter 2022 earnings release, we continue to be amazed with the depth of demand and anticipation for our beta program.
Confirming theres not only interest in what we're doing but also in the category overall.
We believe that leading pharmaceutical and medical device enterprises are seeking to participate in the company's data programs as a result of our commitment to deploy medical grade data and a consumer wearable device, which has the potential to help these enterprises improve remote care as well as provide critical.
Clinical trial and post market surveillance health data.
In addition to gearing up for a beta programs, where we are working closely with our best in class marketing research partner and mobile App developer to build the brand and prepare for the commercial launch of our first product.
Alongside these partners we've interviewed over 1000 women health focus groups and conducted deep dives to identify key user journeys. So we developed a targeted and sticky user experience that meets or exceeds consumer needs.
Earlier this month, we put out our first newsletter to over 8000 people, who have contacted us through our web site to gain credibility as thought leaders engage our existing followers and laid the groundwork for our brand launch at CES in January 2023.
At the show.
We will announce the new brands for our first product and unveil additional launch details.
We recently shared some exciting news about our ring, we're one step closer to our first FDA submission for the measurement of heart rate and <unk>.
Following a successful pilot hypoxia study in July, which compared the accuracy of Novato House heart rate in Spo two data to reference devices. We completed the pivotal hypoxia study in October.
In the initial pilot study, our wearable solution achieved a margin of error well within the fda's accuracy requirement for <unk> and the ring also estimated heart rate with an accuracy commensurate with the FDA standards.
Based on the positive results from our first study we expect to achieve a similar level of accuracy from the second hypoxia study and plan to provide more information. Once the study data is officially released by the clinical center later this year or in early 2023.
Assuming the results of the pivotal study are in line with the industry standard used by the FDA for evaluating spo two devices, we will be in a position to file for FDA clearance on these metrics early next year.
Another important health measure for any individual is the quality of their sleep.
Because of this we will initiate formal sleep studies before year end to optimize our algorithms for sleep detection and assessment.
As is the case with every metric we monitor clinical evaluations will be conducted for regulatory requirements with an end goal of achieving optimal accuracy for the assessment of sleep disturbances.
While we are preparing for the commercialization of our first product we continue to make good progress developing and testing our proprietary single chip solution, the smallest ever custom IC for cutlass blood pressure and noninvasive glucose monitoring.
The last time, we updated you we were integrating the chip into the smallest risk worn wearable prototype we've built to date.
We have since completed the integration and have successfully bench tested the prototypes.
We're about to evaluate the efficacy of the new prototype in a blood pressure study, which is scheduled to begin in Q4.
The study will take place at Mcdonalds clinical lab with roughly 100 subjects.
Shortly after the blood pressure study wraps up we will be testing the prototype in a glucose study.
Each time, we have reduced the size of our prototype in the past we've seen major improvements in the fidelity of the RF data, we collect and we expect to achieve similar improvements with.
With the new prototype as we March toward the opportunity to integrate such data into our wearable health solutions.
Our company is deeply committed to developing wearable devices that go beyond the status quo and give consumers a higher level of confidence and trust in their health data.
Pursuing the medical device route is not easy it requires extra infrastructure documentation testing and capital. However, we've received overwhelmingly positive feedback from potential strategic partners consumers as well as the media on our differentiated approach and feel confident in our.
A direction.
At the same time, we've been very thoughtful about the investments we've made in our team and technology and believe we have been good stewards of capital on an absolute and relative basis.
Im truly excited to be part of a company with this broad range of opportunities ahead of us there's a lot of excitement and anticipation building and we're all looking forward to the day, our product is introduced to the market.
Thanks, John we detailed the financial results in today's third quarter earnings release, which you can find on our website, but I'll share a few key line items Lovano health reported an operating loss of $8 $7 million in the third quarter of 2022 compared to an operating loss of $5 $2 million in the year ago period the increase.
Was primarily related to the expansion of our team and accelerated R&D and commercialization initiatives, our cash burn in the period was $6 $4 million in line with the prior three quarters. However in third quarter of 2022, the burn was partially offset by $1 9 million in net proceeds raised.
Our $50 million ATM facility.
As you'll recall, we executed our ATM agreement in August of this year and raised nearly $2 million in gross proceeds at an average price of $2 94 per share over the last half of the quarter. We continue to view the ATM as an opportunistic source of capital and are pleased with the execution to date.
At the end of the third quarter, we had $16 $8 million of cash cash equivalents and short term investments and total assets of $19 $5 million.
We will not be providing specific financial guidance, but as you heard in today's quarterly report as well as through our commentary on previous calls, we're making great progress towards the direct to consumer launch of our smart ring in the first half of 2023 and doing so in a capital efficient basis.
That concludes our formal remarks, we'd be glad to take your questions. Operator, we are ready to begin the Q&A section of the call.
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.
You May press Star two if you would like to remove your question from the queue participants using speaker equipment. It may be necessary to pick up your handset before question just darkies.
If you joined us over the webcast you may type of questions by clicking on the question Mark icon, and then clicks and to submit your question.
One moment, please while we poll for questions.
Operator, while youre doing that it looks like we do have a few questions.
And through the webcast. So I can go ahead and start to.
Read or ask those and then we can come back to the phones afterwards.
Sure.
No.
Great.
Okay.
First question Stacy this looks like one that you can take.
The questioner asked you talked about the research conducted recently and your focus on women can you talk a little bit more about why you decided to focus on this demo and any expansion plans you might have in the future.
Sure and thanks, so much for the question Jay.
So as John mentioned, when we research the need state unless consumers. It was really clear how underserved women have been and continue to be.
Our studies show that women often feel that's backed by the health care system and it can be dismissed when they go to the doctor and feel underprepared for the inevitable life stages that they experience.
When we talk to the thousand women that John was talking about it really confirmed our understanding leading us to the decision to lean in and build out our solutions for her will certainly speak more to this.
In the future, but to start this really means being a resource that women can trust and providing a way for her to find balance which is truly personnel.
And as we look beyond our first product we of course have plans to develop solutions for everyone. We thought it was important to remain focused out of the gate on a population where theres a real gap in care.
Okay great.
Let's go to the second question.
I think John you and Stacy can actually both answer. This one you mentioned you are well positioned to submit for FDA clearance and be the first medical grade wearable does this clearance manner to the average consumer.
Thanks, Jay I'll start before I get to the answer of how important the clearances to the average consumer let me first give a little bit more color to what we're doing with the data and how we get to the point, we can file for FDA clearance. So.
During the hypoxia study the medical center that was conducting it for us periodically collected blood oxygen samples that they measured which they're using as the control measurements for this study.
They are sending us at time and date.
Where they want us to provide our measure that they will then take back and they will look at the accuracy that so they're basically giving us a spreadsheet of times and dates we have to populate that spreadsheet with the measurements from our device send it back to them and then they'll do the analysis ability and so assuming that the accuracy.
Is where we hope and expect it will be based upon the prior study that we conducted we'll be ready to file with the FDA and we expect to do that in the very beginning of next year now in terms of the what the importance of the clearance.
First do you want to comment a little bit about how important this is to health care entities and as we've seen from major pharmaceutical companies coming to us major medical device companies come to us and integrated health networks, like Nevada health coming to us. They are very much excited about the fact that we have a medical device and they really do see.
This is almost table stakes to be able to use a product like this and their processes, whether it is direct for patient care in the case of an integrated health network or whether it's for the purposes. For example, up conducting a clinical trial or post market surveillance.
For a big pharma company and all of these cases, they're looking for accurate data that they can trust and having the FDA seal of approval behind it is really important for those <unk> opportunities and with that I'll pause and now turn it over to Stacy to talk a little bit about the importance of the clearance to the average consumer.
Yes of course, thanks John.
Consumers really are very familiar with fitness wearables, we really believe that as this overarching space. This towards health, it's imperative to deliver medical great data.
FDA clearance allows us to make claims that we can diagnose treat or help manage a particular condition, which over time will provide significant benefit to our users.
Women in particular have been dealing with a wide variety of offering in the health space that really don't always deliver a provide sometimes bunk information.
Aimed to be a trusted resource with FDA clearance really redefining the expectations of wearable devices in general.
Okay, let's take one more from the webcast and then I see we have operator, it looks like we have one question.
Over the phone lines. So they can do that after this next question here from the webcast.
So Stacy do you want to take this one as well can you tell us a little bit more about what youre planning to announce at CES.
Sure.
Last year, we unveiled the <unk> concept and we did so virtually due to Covid. We received great media response, and we're excited to show all of our progress since that time.
This year at CES, we will be announcing the launch of our new brands as well as our new website and showing the ring itself.
And of course, the companion App along with several features this is going to be our big push as we prepare for the commercial launch in the first half of 2023.
We're going to be hosting key meetings with strategic partners media analysts and investors at RC in the Venetian.
So be sure to reach out to us.
Yeah.
Alrighty, Okay, Chris do you want to to the question.
The phone.
Sure.
With the first question there we have comes from the line of Marie Thibault with <unk>. Please proceed with your question.
Hi, Good evening. Thank you John James Thank you for taking the questions.
Grant's on the Nova.
Beta program I wanted to hear a little bit more about that in terms of do you believe it will have any revenue contribution in 2023 and could this become sort of a template if you will for how move.
<unk> intends to sort of commercialized more medical.
Focused rink. Thank you.
Jay I'll start and then I'll turn it back over to you.
Okay. It sounds good thanks for the question Marie appreciate it first off the way we structured the beta programs as we wanted to give our partners an opportunity to experience and use the devices. The first step, but every partner who's come to us has really come to us because they see that this could add value to them in their healthcare.
Systems, I can't speak to how broadly and Nevada health may want to use it but in those other discussions I've had I can tell you this that.
Payers are health care systems that are managing.
Many individuals', obviously have cohorts, who are typically high risk individuals as part of their practice and I would envision that we have two opportunities in these networks one for high risk people I think they may want to provide the device to them just to be able to collect the data coming from the device. So they can track and <unk>.
<unk> their general health and well being how much activity theyre getting how well theyre sleeping, but also their resting heart rate respiratory Shin spo two measures to just get a sense for the general health and be able to track that longitudinally to see if there's any changes over time, we do though also plan to seek reimbursement in the future.
<unk> provided we can demonstrate the value of the technology now our technology is not going to be very costly at all when compared to other medical devices and so the financial bar that we have to get above in terms of the value of the product is not real high but we do believe that by using that technology for us.
<unk> insights to users and explaining to them the cause and effect of their lifestyle and what it means for their health metrics that we will have an opportunity to show real benefit with it as well. So I do believe just based upon that as it relates to the health care network that there could be significant opportunities in our <unk> structure moving forward.
Once we launch and I think I'll pause, there and turn it back over to Jay for any follow up.
Thanks, John I think you've covered a lot and I am Murray thanks for the question.
Basically add that I think one of the things that really stands out for us over the last year almost since we first announced that we were.
Going to be launching a ring.
And doing a specifically for women.
One of the things that really stood out has been just the general interest from potential partners, especially on the healthcare side over the last several months.
And.
While we're working with Nevada, and we've talked about others like Stanford.
A few.
Relatively large pharma and med device companies. We've also said publicly that.
We've been talking with a variety of other potential partners as well and I think the fact that we are a medical device company doing this with.
The intention of getting FDA clearances on the entire device.
Really stands out.
And.
So I think we've been just.
Positively surprised.
Regards to this potential enterprise opportunity. So we don't provide formal financial guidance looking forward, we don't have any <unk>.
Revenue that we have.
Projected.
Or anything like that but we do see this as.
A significant opportunity.
Generally across pharma med device integrated health networks et.
Et cetera, so it's pretty exciting from that standpoint.
Very good and yes, great great to hear maybe I can ask my follow up here on the manufacturing side. How are you doing in terms of manufacturing capacity do you feel that youll be.
Or what more do you need to be doing I guess in order to ramp up for that first half 'twenty three commercial launch here. Thank you so much.
Well I can thank you Marie I can I can comment this way from the day, we hired R V.
<unk> of operations, who is a very seasoned person with 30 years experience in this space with electronics and whatnot. He went out and started seeking an ordering components.
For our ring and he has done an exceptional job, making sure that we have the inventory of the raw materials that we need.
<unk> been struck a partnership with <unk>.
Multibillion dollar contract manufacturing firm, who also has really deep supply chain expertise and <unk>.
Has their own initiatives in that area.
And so we feel really good about where we stand right now in terms of our ability to first off have the raw material to make numerous plentiful rings, but secondly, also with the manufacturing processes and between us and our partner we spent a lot of time working through the manufacturing process itself and how.
To streamline that and be able to ramp up rather quickly. So if the demand does come we think we're in a really good position to be able to address it.
Very good Thats all I had thank you.
Okay, operator, let's go back to the webcast.
Looks like we have one more question there and I can actually take this question gives.
Given the state of the financial markets do you think you'll have to make any adjustments to the way that you're operating.
The business before you launch.
So I would just basically answered that as saying that we've worked within our means over the last couple of years as a public company.
And obviously prior to that as a private company.
Our budgeting process, we have assumed the potential for turbulent times.
Including the supply chain disruption that we've seen inflation et cetera.
We've been very focused on capital efficiency is very much in our DNA.
And I think you've seen that in the consistency of our financial results to date.
That's basically how we're planning to continue to operate as we launch the ring camp.
And beyond.
Okay doesn't look like there's any more questions in the webcast operator any more questions on the phone lines.
Note there are no more questions over the phone.
Okay well. Thank you all for your time today as a reminder, you can stay connected and up to date on Novato health news and events by checking out our investor website at IR Dot Novato Dot com.