Q1 2023 Neuroone Medical Technologies Corp Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Neuro One medical Technologies Corporation first quarter fiscal year 2023 financial results Conference call today's call will be conducted by the company's Chief Executive Officer, Dave Rosa and Chief Financial Officer, Ron Clark before I turn the call over to Mr. <unk> I'd like to remind you.

This conference call will include forward looking statements within the meaning of U S. Federal Securities laws with respect to future operations financial results events trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified date.

We're looking statements may involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements senior old ones corporate update press release, and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ.

As required by law, we undertake no obligation to update such forward looking statements with that said I'll turn the call over to David Rosen CEO of in your old one Dave.

Thanks, operator, and thanks, everyone for your attendance today.

During our first fiscal quarter, we achieved one of the most significant milestones in the company's history. When we received FDA 500, 10-K clearance for the Evo SCE electrode for less than 30 days use Zimmer.

Zimmer Biomet is still targeting the end of the first calendar quarter of 2023 to begin a limited commercial launch.

We're particularly excited about the synergies that exist between using zimmers Rosa robotics robotic platform with our Evo <unk> electrodes.

The company also ship the initial Evo SCE G limited market release order to Zimmer biomet during the first fiscal quarter and continue to manufacture products and additional orders for a future full product launch.

We also made tremendous progress with our one RF therapeutic ablation electrode system as we completed a successful animal feasibility study study with Dr. Jamey Van Garble at the Mayo clinic in Rochester, Minnesota.

The results confirm that the system is capable of both recording brain activity in <unk> brain tissue using the same electrode.

Im also pleased to report that we met our goal of completing the development of the system by the end of the calendar year 2022.

We are excited that the system is performing to our specifications and our final steps already complete design validation testing.

We also remain on target to submit a 500 10-K application to the FDA early in the second calendar quarter of 2023.

Now I'll discuss our efforts in developing electrodes that can be used for chronic stimulation and recording.

Our focus remains on treating chronic back pain due to multiple failed back surgery.

Our goal is to offer a percutaneous lead placed paddle electrodes that can be deployed in a comparable manner to existing percutaneous systems, while offering and increased stimulation area.

Proved conform ability and lower energy requirements.

We have already developed and tested percutaneous delivery system prototypes that have received positive feedback from key opinion leaders.

The company also engaged in discussions with potential strategic partners and are exploring opportunities to expand our offerings to other markets.

While there is nothing definitive yet regarding these discussions I am pleased to see the level of interest in our technology.

We are also continuing to explore the potential for our technology to offer the ability to deliver genes or drugs as well as record the Asia agents impact to the patient.

We expect to conduct preclinical feasibility studies to assess the device's potential but are enthusiastic based on physician feedback to date.

The company was also active with poster presentations highlighting the Evo <unk> electrode performance at the following meetings Congress.

Congress of neurological Surgeons society of neuroscience, and the American Epilepsy Society.

Our products were also displayed at the Zimmer biomet booths at the CNS and Aes meetings.

We will continue to target key society meetings to present, our data in an effort to increase our exposure.

And relating to increased exposure I also had the pleasure.

<unk> interviewed on the show mornings with Maria during the quarter as well.

In addition, the company was invited to ring the NASDAQ stock market closing bell to celebrate the FDA clearance milestone for the Evo SCE technology.

Thanks for your time and attention I would like to now turn the call over to Ron <unk> for a more in depth review of our fiscal first quarter financial results Brian .

Thank you Dave.

Product revenue was 115000 in the first quarter of fiscal 2023 compared to product revenue of 34000 in the first quarter of fiscal 'twenty two.

We had collaboration revenue of 1.4 dollars 6 million in the first quarter of fiscal 'twenty three compared to collaboration revenue of $6000 in the first quarter of fiscal 'twenty two.

Collaboration revenue is derived from the Zimmer development agreement represents a portion of the exclusivity licensing payment that is eligible for revenue recognition as of December 31st 2022.

Total operating expenses in the first quarter of fiscal 'twenty, three for $3 2 million compared with $2 8 million in the same period prior year.

R&D expense in the first quarter was $1 6 million compared with $1 1 million in the same period of fiscal 2022.

SG&A expense in the first quarter of fiscal 2023 was $1 six 6 million compared with 174 million in the prior year period.

We had a net loss of $1 7 million or <unk> 11 per share for the first quarter of fiscal 'twenty threet compared to a net loss of $2 8 million or <unk> 18, a share in the first quarter of fiscal 'twenty two.

As of December 31st of 22, the company had cash and short term investments of seven 6 million compared to $11 1 million as of September 32020 to our most recent fiscal year end.

The company had no debt outstanding as of December 31st 2022.

That concludes my remarks, I'll now pass it back to the operator to open up the call for Q&A.

Thank you and 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.

Confirmation tone will indicate your line is in the question queue you.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Our first question comes from the line of Alex Nowak with Craig Hallum Capital Group. Please proceed with your question.

Okay, great. Good afternoon, everyone. I know, we were waiting for Zimmer to receive FDA approval for drill bits and some various accessories to go on the Rosa robot.

That was all going to be done.

Commercializing the depth electrodes, so just where does that stand with those sites in case.

Yes.

Regarding Zimmer there was only one device that required a 500 10-K and that was the drill bit Alex.

They did receive 500 10-K clearance on that.

Okay. So.

With that in hand is there anything else that I guess, what is the next barrier to doing the commercialization at the end of this calendar year or is it more or less getting the reps trained getting a product out there into the field. During the initial sites trained up is there any other caught roadblocks or barriers to watch for or is everything pretty much right.

The golf.

Yeah.

Well theres still procuring some of the accessories.

So.

At this time I'm not aware that they have all the product that they need in terms of the accessories in house, yet, but in terms of regulatory holdups or anything like that.

There shouldnt be.

And yes, all the other things that you mentioned field training site training the sites have been identified at least the target sites that they plan on going to but all of that work really needs to be done in the next six weeks.

Okay understood and then so you've got the depth approve which is great zimmers committed to the launch and they are ready to go with the rest of the robot. So how do we think about that launch is this going to be.

In the next 12 months of thinking about like a hockey stick sort of worldwide launch youre going to see it being used at a lot of Rosa cases, maybe a majority of Rosa cases, or should we expect it to be a bit more about a pilot rollout to select rows of users just how do we how do we think about modeling this.

Yes, so it's not going to be a worldwide launch the device is only going to be commercialized in the U S. So we don't have O U S clearance, but it will be a controlled rollout.

There.

I do think that the.

First three to six months.

We're obviously going to be making sure that everything is fine with the technology, which is really why you do a limited launch we don't expect that there's going to be any issues based on the experience that we have.

It'll it'll be a very.

Controlled.

Article launch.

In the first.

The second quarter.

And then after that I would expect.

The goal is for the technology to be used in all of the procedures.

And all the robotic procedures.

And to that point.

And the initial kols discussions that you've had either yourself or Zimmer together.

With the Kols and their initial feedback to these initial sites intend to replace all the electrodes that they use with your electrode is it going to be using kind of a one off situation. Our first and then slowly ramps.

Yes, so I havent participated in discussions about how they plan on using it with Zimmer has held the meetings.

We've definitely been able to.

Attend the sessions, where these doctors have been but the feedback was that was really requested was on the electrode itself and the.

The feel of the tactile feel of it the features of it.

There was there was definitely no discussion about using this and just select cases, there would be no reason.

To use any other electrode over our electrode and at least none of that ever came up in any of the discussions that I participated in or had ever heard of so this is intended to be a replacement for.

All of the SCG electrodes.

Being used today.

Okay. That's great and then just two more questions. The first one is just any update around the pulse generator that you plan on using for the product use electrode.

I know you've talked about some potentially some strategic partnerships there in the past is there any update and then just the second question is with regards to capital needs for capital just how to think about that and should we also think about there could be.

Whether it be something similar to <unk>, where you have non dilutive capital coming in through a partnership.

Yes, so I'll answer the capital part first.

So yes, I mean at some point during the course of 2023, we're going to need capital.

Regarding the ablation technology that I talked about.

We'll just say theres been strategic interest.

That technology. So the goal here is to explore non dilutive capital first.

And those discussions are happening now.

That's always going to be the first option and if not obviously theres other ways of generating capital.

We have an ATM in place we can always do.

The capital raise as well.

Our efforts right now are really focused on non dilutive capital because of the interest and the ablation system that we have and I'm, sorry, but I forgot what your first question was.

Okay, just any update around the pulse generator FERC product use.

No I mean, the same options that we had before we still we still have.

So there's really nothing new with that.

What we are working on in addition to the electrode as now we have to start.

Designing the connectors so that the electric can communicate.

With the system that we're intending to use but nothing further on negotiations or anything like that.

Okay understood I appreciate the update thank you.

Thank you Alex.

Our next question comes from the line of Ben Hayner with Alliance Global Partners. Please proceed with your question.

Good afternoon, guys. Thanks for taking my questions.

Wanted to check one thing did you say is everyone was watching planning on launching by the end of this calendar quarter was at the end of this calendar year.

Yeah.

This calendar year.

It would be a calendar quarter.

Okay.

Right, Okay, just making sure.

Don't scare them okay. Okay.

Maybe I misheard it I apologize.

Can you characterize kind of the product forecast on that.

The <unk> electric.

Electrical that you've got and then any implications that has for.

Manufacturing on your end.

Yes, so I mean, we we have a forecast that Zimmer has given us over the next 12 months.

We're actually manufacturing right now.

As I said in my.

My comments.

Units for the rest of the year.

I'm not sure.

In essence, what you're if you're wondering like what the impact is from a manufacturing capability is that where you're going or is it something different.

Well yeah.

Historically, you know at least a point historically, you've mentioned that the product forecast that.

Zimmer is giving you.

Maybe Ben.

Increasingly.

Favorable or aggressive that at all in the right way to characterize it but.

Just kind of getting at trying to get at is what.

You know what their outlook is.

That changed any positively or negatively and then.

Does that change.

What activities you have to undertake on the manufacturing side.

Yeah, well I think you always have to be concerned with your supply chain being able to meet not not just demand.

The forecast that you have but beyond that.

So.

We've been spending a lot of time.

With our supply chain to make sure that.

They can exceed what we're doing.

So in terms of Zimmer and their attitude I I think Zimmer has always been excited about this technology from <unk>.

At the time, we signed the contract a few years ago. I mean this is the technology, that's really synergistic with.

Robot and.

They they remain at least in all the discussions I have with them just as excited to get going as we are so I would say theres really.

No change.

There is.

Ben This pent up excitement that all of us been waiting for over the last year and hopefully.

And the next couple of months.

We'll be able to.

Start to show.

And then yeah.

Just a couple of months, you've got a meeting coming up here.

<unk>.

Are there any activity as planned.

The USDA <unk> drove that.

He'd been privy to that.

With the Zimmer launch or at that show or.

Anything special plan that you can share.

Yes.

I don't know what the plans are for that show outside of exhibiting I think we also have to be careful.

Yes, especially when you're doing a controlled launch.

That you don't go out and try to bring to many sites on at one time.

So as I said earlier, it's going to be a very controlled methodical launch where we walk before we run.

Just to make sure everything's performing.

The way, we needed to and make sure that we have the product supply that we need.

When theres a full launch.

But nothing that I'm aware of yet.

Okay, No problem and then a couple of them.

They don't have the R&D project.

Yeah.

So thats one of our apps and in a couple of months here. It sounds like at what parts of it will be on the V N V in the animals.

The additional animal testing.

Yes, I mean, it's it's really documentation you know beyond that.

And it is not trivial.

We've we've completed let's just say we've gone through the heavy lifting I mean, I'm not trying to minimize the amount of testing that has to be done.

Because it's not it's not trivial but.

Once once we got the design behind us in the development behind us and in some of these additional.

Feasibility studies I mean, we feel really good about the technology and where we're at that we will be able to submit sometime early in Q2, now thats barring anything unforeseen.

And that's D. D testing I mean, theres always something that could come up but so far I mean, the last few months, we've been doing a lot of testing with the system and are really encouraged with.

With the performance.

Okay, Great and then on the drug delivery device that can stimulate in record.

Is that something that you can actually generate some near term revenue for drug trials and such for research use only applications. I know you mentioned you plan a preclinical study, but you know how quickly because they're there be revenue associated with that device.

Well.

It's not like you're starting over from scratch to develop this now.

We're going to develop your own drug pump.

That obviously would add to the time, but what we're trying to do is.

Is to really leverage the design that we have now.

To be able to do this with an off the shelf system.

Drug pump.

<unk>.

Near term revenue I mean, it depends on how you define near term I mean, this is not expected to be a PMA with.

A extremely long development process.

But we have to make sure that we.

We can deliver the drug.

A N a.

And an efficacious way because there are things that you have to take into consideration in terms of backflow.

And even drug dispersion.

That that we've only done some initial testing on so.

If your question is really like in the next six months.

No I don't I don't think it will be ready.

To generate revenue in that timeframe, but the goal here is to expedite this as quickly as we can.

Then that the feedback that we have is that it would not only have a place.

For research studies.

It could also have a clinical benefit.

So with.

With the device in place you could deliver a drug theoretically through the lumen and actually see the impact to the brain tissue that a neurosurgeon is intending to remove and.

Depending upon the reaction to that drug it may inform the surgeon that this may not be a good thing to do.

To remove this particular tissue so there's definitely some therapeutic benefit.

So what this can do clinically as well and were investigating whether or not.

We can proceed with this with a 500 10-K.

Okay.

So stay tuned there and then lastly for me.

Regarding the spinal cord stim.

All right.

Anything we should be able to look out there for and kind of the near term maybe on potential for.

Partnership agreement.

Yes that that I can't talk about because I.

I mean, there is a possibility but.

There's really nothing I can report at this time I I do think Youll see some additional.

Reports on just preclinical testing that we're doing.

And really in particular, how we're going about it but as far as any strategic discussions and things like that.

That's going to take some time, assuming that it continues to move forward. So.

Really really can't talk any more about that.

Okay got it. Thanks, Thanks for taking my question guys and congrats.

All the progress.

Thanks Brent.

And we have reached the end of the question and answer session I'll turn now turn the call over to Dave Russo for closing remarks.

I just wanted to again thank everyone.

For joining the call today.

Please stay tuned for future progress I.

I think we really think it's going to be an exciting year this year with.

With respect to the new technology that we've been developing.

Thanks, again and have a good evening.

And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Yeah.

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