Q4 2022 NeuroMetrix Inc Earnings Call
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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Good morning, and welcome to the neuro metrics fourth quarter and full year 2022 earnings call.
My name is Latanya and I will be your moderator on the call.
On this call the company May make statements, which are not historical facts and Arkansas forward looking within the meaning of the private Securities Litigation Reform Act of 1095.
Statements that are predictive in nature that depend upon or refer to future events or condition are forward looking statements any forward looking statements reflect current views of neuro metrics about future results of operations and other forward looking information you should not rely on forward looking statements because actual results may differ materially.
Really as a result of a number of important factors, including those set forth in the earnings release issued earlier today.
Please refer to the risks and uncertainties, including the factors described under the heading risk factors in the Companys periodic filings with the SEC available on the company's Investor Relations website at neuro metrics Dot com and on the SEC's website at SEC Gov.
<unk> does not intend and undertakes no duty to update the information disclosed on this conference call.
I'd now like to introduce the Neurometrics Senior Vice President and Chief Financial Officer, Mr. Thomas Higgins, Mr. Hogan you may begin.
Thank you Latanya and thanks to all of you who are joining our CEO , Dr. <unk> and myself for today's Q4 and full earnings and full year 2022 earnings call.
By way of background.
Neuro metrics as a med Tech company.
Our mission is to reduce the impact of neurological disorders and pain syndromes.
Individuals in a population health or.
Our commercial products are noninvasive address worldwide market opportunities and they have no direct competition alternatives exist, but not substitutes.
Our neuro diagnostics, our TPN check in advance and our newer therapeutics or the <unk> product line.
Our business model is razor razorblade aftermarket revenues as the principal component of product line profitability.
Our strategic focus is to expand VPN check in the Medicare advantage and Asia markets and to develop the crop portfolio for specific disease indications.
Earlier today, we reported Q4 revenue of $1 8 million and full year 2022 revenue of $8 3 million.
In both the quarter and the full year revenue was up slightly from the prior year.
Aftermarket sales across all product lines were about 82% of total revenue in both periods.
And both were up about 80% in the prior year periods.
TVN check posted a solid quarter with growth of 18%.
Sector Wise Medicare advantage was up 21%.
Reflecting primarily organic growth.
And international grew by 9% for.
For the full year, TPN shack posted 10% growth with Medicare advantage up about 13% and offsetting an approximate 9% decline in international sales.
Gross sales declined in the quarter and full year as we terminated over the counter sales at the end of Q3 in order to position. The Q4 launch of qualify bromine Alger.
Gross profit was $1 2 million in Q4, and $5 8 million full year.
These were slight contractions in both periods.
The Q4 gross margin rate was 67% versus 68% in 2021 and full year. The gross margin rate was <unk> 70 versus <unk>, 72% prior year each period was down by about two percentage points.
Margins continued to be burdened by higher raw material costs.
However, the 2022 shift in sales mix to higher margin TPN check products provided some offset to these higher raw material costs.
And we expect raw material supply and cost pressure to continue during 2023.
Our operating expenses totaled $2 1 million in the fourth quarter and $10 5 million for the year.
Opex was lower by 7% or 161000 from Q4 of last year.
A reduction of $400000 from last year, and R&D raw material costs was partially offset by higher personnel costs across the organization.
Full year Opex increased by $2 3 million.
And this is the effect in 2022 of our two year $4 million infrastructure program.
Which covers product development commercialization talent IP systems governance and other topics.
We estimate that about half of the spending will be variable and half will be fixed recurring.
Sure.
Our net loss in Q4 was $692000 or <unk> <unk> per share full year 22, net loss was $4 4 million or <unk> 62.
<unk> 62 per share.
Regarding cash flow and our balance sheet.
Net cash operating usage was $1 7 million in the fourth quarter and $5 9 million during 2022.
We ended the year with $21 $2 million in cash and investment securities.
And we maintain a simple debt free capital structure. There are about $7 8 million common shares outstanding as of year end.
We believe that these liquid resources are adequate to support our growth initiatives for this year and beyond.
And now for Doctor goes on his comments.
Okay.
Thank you Tom.
Our growth strategy is built on three core elements.
As organic growth in the DP and check Medicare advantage business.
Second is to establish and grow fibromyalgia indication in the U S market.
And the third is to advance the <unk> Neuro Therapeutics program, which may lead to additional indications and an expanded addressable market.
I'll now comment on each of these activities.
Regarding VPN check we haven't valued based commercial team focused on increasing <unk> adoption and the Medicare advantage market. This includes large medical groups health systems, and health assessment companies, where a substantial portion of their patients are covered under Medicare advantage.
We were pleased that our Medicare advantage business grew 21% year over year in the fourth quarter.
However in the past several weeks substantial uncertainty was injected into Medicare advantage due to sweeping changes proposed by the centers for Medicare and Medicaid services or CMS on <unk>.
32023, CMS issued a final rule regarding the Medicare advantage risk adjustment data validation or what's called the <unk> program.
It's used to recover and proper risk adjustment payments to Medicare advantage plans.
And then on February one 2023, CMS issued its 2024 and Medicare advantage of beds notice, which included significant changes to the hierarchical condition categories, our ACC risk adjustment model for calendar year 2024.
These have broad implications for the Medicare advantage space.
And if adopted with substantially revise the risk adjusted adjustment environment.
Jim include limitations on HCC codes for some types of peripheral neuropathy.
Overall these changes have been poorly received by the industry and we're expecting to see significant pushback.
These events do not alter the fundamental clinical promise behind DPA check that our customers strongly believe which is that peripheral neuropathy is a common and debilitating condition in the elderly and that early and accurate detection with VPN chegg is essential to minimizing complications and reducing overall health care costs.
However, the eventual impact of the proposed program changes on <unk> sales is unclear at this time.
If they are implemented without modification they will create headwinds that we will need to navigate.
We have a number of R&D activities that will support continued <unk> growth in the Medicare advantage market and help us manage the aforementioned uncertainty.
First we fully launched our second generation device called UPN check to point out in the fourth quarter.
This device has improved usability, while maintaining the high diagnostic accuracy and reliability of the original DPA check device.
Another important R&D program is the <unk> cloud, which is a data analytics platform that allows our customers to monitor and optimize the <unk> implementation and address key population health questions through our family of web based dashboard.
Dissipate launching the pension quiet in the first half of this year.
Finally, we are working to improve integration between the DPM check reporting software and our customers' electronic health record systems.
We are collaborating with a leading EHR middleware company to provide comprehensive and profitability.
Moving onto <unk> fibromyalgia.
We have now completed the transition of the <unk> business from a non specific over the counter treatment for chronic lower extremity pain through a prescription narrow therapeutic platform.
As of the fourth quarter of last year <unk> was no longer available over the counter and starting with our fibromyalgia indication Qual technology is now only available by prescription.
As a reminder, fibromyalgia is a complex chronic pain syndrome, that's as many as 10 million people in the United States.
Only FDA approved treatments or three drugs, pregabalin, <unk> and the massive spread which often have substantial side effects.
We received FDA breakthrough designation for this indication in July of 2021 and de Novo authorization in May of 2022.
<unk> is the only FDA authorized medical device indicated to help reduce the symptoms of fibromyalgia.
We are in the midst of our strategic launch and start which started in late fourth quarter that is intended to optimize the effectiveness of our prescription management solution to refine the clinical and marketing messaging and to collect key performance indicators that will allow us to plan further commercial expansion, we have a growing number of physicians.
Many of which are key opinion leaders and fiber miles in chronic pain are now regularly writing prescriptions for their patients with fibromyalgia.
And we are now starting to receive.
And processing prescriptions daily through our partnership with the National online pharmacy.
Our next commercial decision will occur in late Q2 of this year at which time, we may expand our sales operations. If we are satisfied with the business metrics collected during the strategic launch.
If everything falls into place as we hoped while revenues may resume growth later this year.
Okay.
Regarding the quality of our Therapeutics program as I mentioned, the third element of our growth strategy is to develop the club near our therapeutics pipeline beyond the initial fibromyalgia indication.
That is furthest along is for chemotherapy induced peripheral neuropathy or cips.
Which affects as many as 70% of people who received chemotherapy.
It could be a chronic and debilitating side effect of cancer treatment.
NIH and National Cancer Institute funded multicenter double blinded randomized sham controlled trial has been underway for the past couple of years and recently completed enrollment.
The study results should come out in late Q2 of this year.
If the results are supportive then we will consider making an FDA filing before the end of 2023.
As a reminder, we received FDA breakthrough designation for treating moderate to severe CIP and in January of 2022.
And those represent our prepared comments and we'd be happy to take any questions at this point.
Certainly ladies and gentlemen, if you do have a question. Please press star one one on your Touchtone telephone.
If you would like to withdraw yourself from the queue. Please press star one one please standby, while we compile the Q&A roster.
Again, ladies and gentlemen, if you do have a question at this time. Please press star one one on your Touchtone telephone.
One moment for our first question.
Okay.
And our first question will come from Gerard Cohen of Cowen Your line is open.
Yes, just to add.
Quick question.
So you have a trial with the quell in terms of.
For cancer pain, but I was just wondering.
When you might see the results of that trial.
Yes, thanks for the questions. Eric So that is the trial I mentioned, so it's okay for chemotherapy induced peripheral neuropathy.
Yes.
<unk> manifest as pay but in addition, other symptoms. So that trial is over we are expecting to hear results.
Second quarter.
Okay, Alright, alright, thank you very much.
Again, ladies and gentlemen, if you do have questions. Please press star one one on your Touchtone telephone.
Okay.
And I'm showing no further questions I would now like to turn the conference to Dr. Giovanni for closing remarks.
Thank you for joining us this morning, and the conference call and we look forward to keeping you updated as we go through this.
Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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