Q4 2022 Daxor Corp Earnings Call
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Morning, and welcome to the Daxor Corp fiscal year, 2022 financial results and corporate update conference call at.
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I would now like to turn the call over to Scott Gordon President of core I or the company's Investor Relations firm. Please go ahead Sir.
Thank you Shelby good morning, and thank you for participating in today's conference call. Joining me from Jack for his leadership team are Michael <unk>, Chief Executive Officer, Robert Michel Chief Financial Officer.
During this call management will be making forward looking statements, including statements that address <unk> expectations for future performance or operational results.
Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
More information about these risks please refer to the risk factors described in <unk>. Most recently filed annual report on form 10.
CSR and subsequent periodic reports filed with the SEC.
In <unk> press release that accompanies this call, particularly the cautionary statements in it.
The content on this call contains time sensitive information that is accurate only as of today March 2nd 2023, except as required by law that sort disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
My pleasure to turn the call over to CEO , Michael <unk>, Michael. Please go ahead.
Thank you very much Scott good morning, everybody to begin the call I would like to invite Bob Michel Our Chief Financial Officer to give a presentation on the financial results that we just reported Bob good morning.
Good morning, Thanks, Michael Good morning, everyone, Here's a summary of our fiscal year 2022 financial results.
For the year ended December 31, 2022 to <unk> net assets increased 37% to $28 million 969400, $60 million or $6 75 per share as compared to $21 million $152719.
Or $5 24 per share at the end of December 31, 2021.
The value of the operating division increased $9 $5 billion to $26 million at December 31, 2022 from $16.500 million at December 31, 2021.
The increase during 2022 is based on the annual valuation performed for the year ended December 31, 2022, utilizing a hybrid of methods.
<unk> approach using the discounted cash flow method and a market approach utilizing a recent arm's length transaction.
In November 2022, approximately 221000 tax where treasury shares were sold at a price of $9 50.
This recent arm's length transaction was weighted more heavily in the valuation than in the past as this transaction was completed just prior to the measurement reporting date is December 31 2022.
Discount cash flow used 40% weighting and the income approach utilized 60% of the weighting.
For the year ended December 31, 2022 decks or had net dividend income of $223916.
Net realized gains on investment activity of $2 million $736375.
There was a net decrease in the unrealized depreciation of investment options Securities borrowed 2.763 million $895 as we sold portions during the year.
2022.
Prior period significant unrealized gains unwound into realized gains for the period.
Included in the net increase in net assets real real rate excuse me, resulting from operations of <unk>.
$5 million $178133 is noncash stock based compensation expense of $786642.
Efforts to provide incentives to employees officers agents and consultants of the company, we utilize stock based comp compensation incentive awards.
There was a net realized loss of $3 million $264419 from the operating division relating to investments in research and development sales overhead as the company continues to invest judiciously in research and development for our 222022 2023 product launch.
Ramping commercial sales teams as well as production facilities for our next generation of blood volume analyzers.
And with that I'd like to turn the call back over to Michael.
For any other comments.
Wonderful Bob Thank you very much and good morning, everybody.
Fellow shareholders.
My pleasure to report and comment on our progress as a company.
For those of you.
Who have had a chance to review our filing in the shareholder letter that's attached to it.
You'll be aware that this is a pivotal.
Period of time for that score as a company. We are on the brink of our product launch of our next generation analyzer is the most important analyzer.
That we've ever created or launched its the most important product for us and a 20 year time period, but before getting into the details of that I want to kind of step back for a moment and speak about the business.
And our strategy as a company as a whole.
So one of the things that I've spoken about in the past about paas to shareholders is that for us to succeed as a company we have to really succeeded at doing three things.
Quite importantly in simultaneously.
First of all we have to succeed at commercializing our existing product line and growing this business and obviously, that's something that we take.
Takes a great deal of emphasis on and I'll speak about in a moment. The second thing that we need to do is we need to.
Further the clinical evidence around our novel diagnostic one of the reasons why that's quite important is because unlike let's say a company that produces another version of a commonly used diagnostic that has some kind of marginal competitive advantage often companies like that that seek to take market share from an existing.
The company.
And then of course to face the challenges of other competitors undercutting their innovation and doing the same we are pioneering.
The pivotal shift in fluid management by a direct accurate.
Quantification of a patient's fluid levels and the current state of the art is to use a variety of proxy measures. Many of which are basically somewhat you are quite costly all of which are vastly inaccurate and suboptimal compared to our solution. So advancing the clinical evidence around not only the superiority of our merger.
Sure.
Allocations that that has for.
Clinical outcomes of the patients and the health economic implications of that is a crucial part of our gaining market share attention and recognition or our.
For our unique product line.
Third area.
We have to focus on.
For us to be successful.
Successful is for us to innovate into our next generation of.
Analyzers and so the area of analyzers.
That has existed.
Existed prior to Dax or come into existence, we're all quite slow cumbersome and difficult back store was the first company to innovate with a single dose pre loaded syringe injection system for the quantification of blood volume and when we did that we were able to reduce the time that high blood volume analysis took which was over.
Eight hours and quite cumbersome and something that.
Meet the tests something that was not even viable to do outside of our research paradigm into something that could be.
Administrated the bedside with results generally available within 60 to 90 minutes.
We endeavored to.
Innovate from that Mark two our next generation systems and that's what the company is focused in right now.
No.
Couple years ago, we began a process of interacting with the United States Department of defense and with the National Institutes of Health and we received a contract award funding to create a portable rapid.
Syed analyzer that was Ruggedized battery powered just as accurate as our current lab based system, but that could perform the analysis.
Cool.
With a cartridge system that obviated the need for a moderate complexity CLIA license.
I'm happy to report that in 2022, we successfully completed our army contract that provided funding for the creation of a working prototype model that was suitable for FDA submission and validation.
Yeah.
Currently the company is endeavoring to complete his validation process. So that the analyzer may be submitted for approval with the FDA now the application that that's what we're seeking is a so called dual five 10-K CLIA waiver application.
This application is something that we have been.
Assuming through a process of interacting with the FDA that began in the.
Second quarter of 2022 that sort of successfully had a so called pre submission meeting with FDA officials in the third quarter of 2022, where the company will see.
Already on the form of a validation study and other metrics that FDA would seek to see in our package for submission will allow for the approval of our system.
Since that time <unk> has been.
Undertaking the process of <unk>.
Setting up and executing on this validation trial.
We are anticipating that we will submit our application and seek approval within a 90 day timeframe, which is the guidelines for five 10-K submission.
And to achieve a mid year approval for commercial launch of our next generation analyzer and systems.
<unk> and management are limited in what they can say to clients at this time due to FDA regulations regarding the inability of companies to market in sort of unapproved device.
Our disclosures to investors similarly are.
Limited to the publicly available information that we've already shared in that area are available through the contracting process.
Switching gears for a moment to the commercialization plans of the company.
Our commercial teams are led by our senior Vice President of commercialization from Nortel.
She is a veteran of both Medtronic and <unk> and she has been focused on recruiting top talent.
For our sales team and bolstering it with clinical support new territory managers in order to drive strong growth in our accounts as Bob Michel Just noted we've had strong increase in both revenue and sales for our company within the operating Division we reported.
A 59, 5% increase in the kit sales, which are single use disposable kits.
2022 compared to 2021.
Also reported.
Substantial increase in the total revenue of our operating company up over 20%.
I want to be clear that the increase in kit sales.
While larger than the percentage increase in revenues does not imply a compression of our margins rather our revenue from our division is a combination of.
U S military contracts along with our.
Existing analyzer business. So it's worth remembering that we completed our U S Army contract in the middle of 2022.
And we are now eligible for further phase III funding and contract extension award from the U S Army and the U S. Air Force. So that work is ongoing with the military and the.
Company continues to contract.
With those different funding bodies at the Dod.
Okay.
In terms of our.
Our strategy for achieving.
Greater.
Virtualization and uptake the company has been focused on modeling growing out our sales team.
Clinical's 14, but also partnering with.
Larger entities to teach the acceptance of our system central raise the clinical awareness. So specifically <unk> now corporate partners, both with the heart failure Society of America, and the society of nuclear Medicine. Those are two very influential and important governing bodies that set standards for the clinical.
Application of new technologies.
And we've been able to leverage that relationship in order to gain significantly greater profile of our technology amongst members.
Also entered into an important partnership with met Axiom group last year that axiom is a wholly owned subsidiary of the subsidiary of the American College of Cardiology.
It is a very important.
Group, which is known for.
Introducing best in care practices for their clinical members, which are amongst the leading hospital systems in the United States. So they are acting in many ways as an ambassador for <unk> technology.
Raising its awareness amongst their members.
As actively participated in the conferences, we will participate in their transform conference in the spring we were part of their fault transform conference. In addition that axiom has issued a white paper, which still any substantial clinical evidence and health economic benefits of <unk> technology to its members.
And also hosted Webinars on the topic. So this is this is all part of <unk> strategy of raising clinical awareness.
<unk> guideline recognition for our technology and raising the.
Felt need amongst the administrators of leading hospital systems to take advantage of <unk> technology to both improve clinical outcomes, but also quite importantly to save costs.
That leads me to the third area that I wanted to touch on briefly with investors, which is what's going on with clinical research one of the most important things that happened last year with Axel was we participated in the heart failure Society of America annual.
Society meeting in that meeting was a dedicated.
Session that was focused on comparing the existing ways in which heart failure congestion is his managed based upon pressure metrics, which are quite prevalent has compared to direct volume measurement. It's notable that at that session tax or is the only FDA approved technology globally that allows for direct.
Quantification of the patient volume status, along with measured patient norms.
As well as information around the capillary permeability of those patients now at that session that was highlighted by a leading board of key opinion leaders that in fact compared to pressure measures volume measures are actually more clinically relevant germain and ultimately are the more promising area.
For the development of further direct targets for pharmaceutical companies.
Ratified to see this level of recognition in front of several 100 key opinion leaders.
Leading positions from hospital systems around the country around the merit of <unk> technology, and the importance of blood volume measurement I think the blood volume measurement has become increasingly.
<unk> amongst clinicians we've seen it with the acceleration of our sales, but also we've seen it from the perspective of the large number of research publications, which have been coming out supporting the validity of our technology and the value that it brings to clinical users the world, where it doesn't publications and leading journal.
<unk> and conference presentations last year on <unk> technology.
A substantial uptick in interest from independent researchers at hospital systems at leading academic medical centers across the country.
And just to highlight some of the important information that came out at the heart failure Society meeting research was presented that showed that the use of our diagnostic for hospitalized heart failure patients.
Upon admission reduced the total length of stay of those patients by a full two and a half days right now within our hospital systems and <unk>.
<unk> care organizations costs.
Mount Challenge any kind of technology that could reduce the length of stay in our case as measured by the study by 55% of full two and a half days represents a very substantial cost saving opportunity for health care systems have become the key driver for those health care systems to adopt our technology.
<unk> two to place units at New hospital accounts that we did place.
And to open up 18, New hospital accounts last year.
Again, a substantial jump in sales not only the kit sales, but in opening up new accounts, we've had to convince our customers that not only does our technology improve patient outcomes.
Proves health economic outcomes.
It's also a viable technology to introduce into the pathway of care. That's one of the reasons why we're particularly excited about our next generation analyzers, because our next generation analyzer is pumps to be several times faster than the current technology capable of being administered potentially by users beyond lab technicians for.
Nurses and doctors, because if the CLIA waiver status that we're seeking.
And also something that can be performed and generate results directly at the bedside.
Within as little as potentially 15 to 17 minutes. So.
This is something where when we look at our overall strategy for the acceleration in the adoption of our technology the growth of our business across several sectors. What we're seeking to do is to combine.
Clinical outcomes, which highlight the utility of our diagnostics both cut readmissions cut length of stay would substantially reduce mortality combining that with the health economic implications that that has.
Care pathways solution, which is easily adapted by.
Care teams such that they can put our diagnostic patrick into their care pathway could become part of their order set and then b protocols as part of their standard way in which patients are treated and then also simultaneously to achieve the kind of recognition and guideline recommendations that will drive adoption of our technology.
So with that being said I do.
You want to highlight that.
<unk> has faced headwinds.
Just like every other company.
We've also experienced inflationary pressures.
In terms of cost of.
Our head count.
Inputs into our process, we've been able to successfully respond to that by raising our prices are.
<unk> injection kit was priced at $325 in 2020 debates the price successfully.
$55 last year.
And continue to see substantial uptake in terms of the kit.
Kit utilization at existing accounts as well as new accounts, so that price increase was absorbed while and the company intends to further raise prices by an additional 9% to $385 effective at the end of Q1. So we've been in touch with our existing customers around that and continue to judiciously raised prices.
Offsetting inflationary pressures that we've been seeing.
Of other.
Pending items to cover before I open things up for questions and some final comments I just wanted to point out that that's what continues to have a number of important randomized control trials underway that have been funded by the NIH.
We have a inpatient.
Prospective randomized control trial that's underway.
EBITDA Center, which we anticipate that the phase one trial, which we anticipate will complete enrollment.
In Q2 and be subject for further.
Extension for a much larger phase two trial, which we will seek.
<unk>.
Approximately 10, VA hospitals, we have in outpatient.
RCP, which is underway pricing, where medical center. When you have a multicenter prospective COVID-19 trial, which has been underway for the past 18 months, which has been expanded to also include sepsis patients as Paul and Thats actually a very important trial, because I want investors to be aware that it's not only the area of heart failure, but it's.
Also in the areas of critical care, the tax or his found uptake for our diagnostic and substantial.
There is a very large total addressable market in heart failure alone in the United States with over 6 million patients, having heart failure of $1 million.
Our admitted every year for.
Pete.
Decompensation in treatment, but also in the area of critical care. There are several million patients that are admitted for great coffee critical care.
Treatment in the United States volume management.
And fluid management.
For those patients is paramount, both pre and post surgically.
And Dax or has.
Then selected as a important technology for example by the Sepsis Alliance.
Yeah.
And so we have a.
Our view that.
And critical care is going to be a very important market for us, particularly with our higher speed analyzer that can produce bedside bubble test. So our COVID-19 multicenter trials has been expanded to also include.
Not only COVID-19, but also subsets and these types of Cogs smaller trial makes us.
From its larger trials and also partnerships with important government agencies and health care systems. So in closing I just want to say that the strong trend in health care is towards individualized care and cost effectiveness combined with solutions that can be integrated into the care pathway of health care systems.
Our BVA diagnostic is dominant base. So it is compared to many other solutions inexpensive it is rapid and so to speak.
To become quicker and easier to perform with our next generation analyzer and it allows care teams to solve the significant challenge of accurately managing the fluid levels of patients and that's true whether it's in heart failure for both inpatient and outpatient care, where I would like to add that the company has excellent reimbursement.
From both public and private insurance.
In hospitalized patients whether they're in the ICU or in the heart failure.
The momentum around the company from the number of published studies had pending studies is quite significant and I'm excited to see that.
Outcomes that have been published and the support that we're getting from clinicians at centers across the country.
Our goals are to help our clinical partners achieve their objectives, which are namely reducing readmissions mortality lowering complications lowering hospital resources is length of stay and.
Achieving a level of inpatient and outpatient care that lowers the total cost of care, which is particularly important for accountable care organizations.
Our strategy is to combine our accelerated clinical momentum.
Momentum that we have.
With commercial momentum and next generation technology, which we feel will be quite transformative in terms of the speed of adoption.
By our clinical partners and our total addressable market.
So with that I would like to.
<unk> My remarks for now and open this up for some potential questions that investors may have.
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One moment please for the first question.
Yes.
And we'll take our first question from Anthony Vendetti with Maxim Group.
Thanks.
Good morning, Michael Good morning, Robert.
Good morning, Good morning, I wanted to talk about.
The timeline for the new <unk>.
TVA so on shareholder letter.
I knew it was going to be a lot smaller than the affordable it was going to be a lot smaller than original I didn't realize theres going to be just 110th the size, so great job, bringing that down to.
And easy.
Easily portable movable.
Between.
Hospital rooms device that.
Hopefully can.
Can significantly increase adoption.
I originally thought that may be.
This would be submitted to <unk>.
And K application will be submitted by the end of 'twenty. Two can you give us I know you mentioned some supply chain issues. I was wondering if that was the factor just longer to put the submission together.
Where are you with.
And I know you mentioned a couple of things, but I just wanted to make sure I got the timeline right what the submission.
What's the timeline before the 90 day clock.
Starts.
And then his commercialization now.
Second half 'twenty three is it and if so is it the last the.
Fourth quarter and third quarter.
Any any color you can give on that would be helpful. Michael Thanks.
Yes, absolutely.
So.
Just to clear up a few things.
We met with the FDA in the third quarter of 2022 for our so called pre submission meeting.
And you don't really know what youre going to get from the FDA until you.
Have those sorts of meetings and then the reviewers make it clear what they want to see in the package.
This type of application is not just the 500 10-K application that's actually a 500 10-K flash clear determination application and our current device is a moderate complexity device and what that means is that you have.
To have a clear license in order to perform our task.
And the test while its administered at the bedside. The blood samples are then taken back to the CLIA certified lab for analysis now when we spoke to FDA you can actually do your application in two ways. One way that you can do it is you can submit your 510 application, which is a 90 day window and then you can ask for a clear determination after.
Woods.
So that's technically quicker, but it is slower because until you have your clear determination. If we just assume that you have essentially.
Moderate to extremely complex device and therefore, you are not allowed to really utilize that at the bedside amongst your clear trained operator.
For strategic purposes, and after speaking to the FDA, we decided that.
This is the FDA recommendations to do a dual 500 10-K clear determination study that entail slightly more complexity for us but in fact, it's faster because the aim of this sort of pathway is that they both approve our next generation analyzer and <unk>.
Give us a waiver.
For the performance of the tax then Thats what were seeking from them in our application. So we'd hope to complete the <unk>.
10-K.
Application package by the end of the year, we're actually now still doing the validation process and in terms of.
A commercialization timeline.
Looking like the second half of 2023, we're hoping that that's going to be able to take place in Q3.
We have working prototypes of this when we completed our army contract in 2022 part of that was showing the army equivalents between our new prototype device in our past device.
No from our existing contract work that we have something that meets the specifications of the army and it's worth remembering this small portable ruggedized device is not just for civilian use it was something that was determined to be a military importance as well for combat casualty care trauma care critical care use.
So our devices designed actually to be sold both into our military channel and then also into a civilian channel.
So we're doing the work carefully and as quickly as possible in order to get that application completed.
And then from there the FDA has a 90 day clock to review it so for us to be able to hit that Q3 launch that we would hope to get our package submitted to FDA within approximately the next 45 to 60 days and give them a 90 day review period in which to be able to determine that we've satisfied.
All of their requirements, it's always challenging of course too.
Pacific timeline goals, because we don't control what the FDA does et cetera, but we're really trying very hard to get it right. The first time and Thats why we participated in a very thorough pre submission process with them I hope that answers. The question Anthony is there any debt that's great to clarify.
Yes, no that definitely clarifies.
And then just moving to some stats for the quarter.
Do you have the number of accounts.
Currently using the BVA.
And out of those accounts or some of the new accounts Youre speaking to what has been the.
Reception for the new portable device.
Great question. So I don't have the I don't have the current active.
<unk>.
Number in front of me I can give you more clarity we reported that we have 18, new accounts opened in 2022 with five more pending or in process. This quarter of this year.
And those counts are.
Mixture of some accounts, which have analyzers on site and some of which are using our so called reference lab.
So our reference lab service works in that we ship them or our test kit. They collect the patient blood samples and then they fedex them to us and at our own CLIA certified lab, we give them the results generally within 24 hours. So there are certain.
<unk> ambulatory patients for whom a 24 hour test turnaround prime is not a problem.
Many many medical type obviously, they dropped blood and then the Doctor calls you. The next day or whatever with the result, so theres a certain number of accounts that are starting with that reference lab and then switching over to the switching.
Switching over to hopefully in the future, having analyzers on site and to be able to do that quicker.
I know that was one part of your question was there a second part I'm sorry.
Okay.
And then have you had conversations.
With some of these clients.
About the new portable device and what has that reception been so far.
Correct. So thank you for that.
No.
Cause of FDA limitations, we are.
Bard from speaking to clients about our next generation analyzer, because that would be considered marketing up an unapproved device. So even though our current analyzers of course approved and we can speak to them about that we're not allowed to say to a prospective account for example, like hey start using DVA and by the way coming soon is going to be.
A transformative.
Easier quicker.
<unk> device, that's going to allow for much easier workflow that what we have right. Now. We're just we're just not allowed to say that some clients that follow our company and look at our press releases are aware of the next generation analyzer that some of the academic researchers that we've been working with them for some of our grant applications and work. They are very much aware of it and they are.
The reception amongst those clinicians has been one of <unk>.
Extreme interest and excitement.
Taking a test that can take an hour an hour and a half and then requires people to move the samples from the bedside to the lab et cetera.
And then turning that into something where a nurse could look to grab a dose of our of our inject paid put it into the patient that 15 minutes later to know the volume of the patient the red cell volume of plasma volume.
Potentially the capillary wall status those are exciting metrics for care teams to have and workflow really matters a lot. So I would love to be able to go out to our existing client base.
And of course, our newer clients with it but we're not allowed to get one thing I would like to say, though is that for our existing clients based upon our market research. We do anticipate that there'll be a substantial incentive for them to switch to our new system not only will they.
Save substantially on labor time for example.
But not tying up attack for an hour an hour and a half but.
But only a fraction of that but also the lower footprint of our device and the fact that it's portable and can be moved from room to win and it doesn't even have to sit in the midst of medicine lab anymore means it'll pre up space at a lower their regulatory headaches around having a CLIA license and it will increase the total number of tests that they can perform in a day, which will.
Therefore increase a lot of the revenue that they can generate from our tests. So we think theres a great value proposition for our existing clients to switch to this but we just can't go to them yet.
Understood and then on the.
The usage.
Between the new accounts.
Youre established base plus the ones that.
We'll we'll send it youll see the kits too.
And then they'll send it into your CLIA certified labs.
What kind of metrics from you should trends can you provide.
So.
The the usage trend that I can point to is that we had this 59, 5% year over year increase in.
The single use test kits, that's a good marker or utilization, we're really focused actually on two things not only opening up new accounts, but actually driving increased utilization at our existing accounts.
We're actually in the process come actually in our grid right now where we're headquartered for our national sales meeting and I've made it a clear priority that we want to increase the utilization rate at our existing accounts, you think that theres a lot of headway that we can make just without even opening further accounts, but going to hospitals, where they're not necessarily at capacity.
In terms of their utilization and driving further adoption of the technology within different departments within the hospital. So.
What I can say is that.
We feel that our utilization rate at some accounts is that the capacity of the lab to keep up with the orders, but certainly not at all of them and so we think that there is substantial utilization opportunity by increasing use at our existing accounts.
As well as open new accounts as well and then of course that utilization rate should go up substantially with a new system that allows them to cut down on the tech time required to do.
So for example, with our new system, we think we could do three blood volumes in the time that it currently takes to do one so at some of these hospitals they'll say well look we only have enough time to do two tests a day. We just we just can't tie up our tax for more time than that.
Hospitals that are capacity limited by their nuclear Medicine Department go from two to six or even more especially the non med tech can perform the test so that means the doctors and nurses in the awards could perform the test it it has potentially substantial implications for the utilization of our technology at some of our <unk>.
Hospital accounts.
Yes, so okay. So not only is it 110th the size, but could you could do three tests versus.
What do we take to do one with your system.
Correct I would put also importantly, the operators who could do it if we receive our CLIA waiver is we're submitting it means that you wouldn't have to wait for a tech to come from the lab to perform the test trained nurse or physician could perform the test at the bedside and get the results immediately that opens it up to let's say critical care ward, where they are.
Want to run a test.
In the middle of the night or on the weekend times, where the lab is generally not necessarily available so.
It really means that there are certain departments at hospitals, where they'll say well, we just need the test to be more available or more rapid pressed to adopt it and we think that the new analyzer is going to open up a world of possibilities in that way and of course hospitals will be incentivized order multiple unit instead of having one unit or two units in the lab.
Order units for the heart failure clinics to the emergency department for the critical care area et cetera, I think when you start to think about the implications for the smart business model you understand why I wrote that this is the single most important product launch that our company is.
Has had in over 20 years.
Okay, Great and then last question is on the.
I know we spoke about this but maybe if you can I think every investor we probably like to notice. When do you think you can start start reporting as an operating company versus.
FTF financial company as you are right now and what specifically has to happen.
This can only happen at the end of the year audit.
And then what's the metric the SEC using as it.
Does the operating company.
To be greater than 50% of the assets.
Or are there other metrics the FCC uses to make that determination and then I'll hop back in the so thanks Michael.
Yes of course, so I'll just say strategically.
Reported as of 30 <unk> company until 2011, we've always considered ourselves an operating company not a financial company. The FCC for its own purposes change that determination in 2011, and and we have been trying to get them to change.
To actually turn the answer to that question, though around the specifics over to Bob Michel our CFO , because Bob has been interacting heavily with our our SVP of training on this question and we have been getting closer to that Mark Bob would you like to answer Mr. Ben that is quest.
Question around the <unk>.
Transition from 40% to 30 flex status to your knowledge, yes.
Yes.
It is a <unk>.
<unk> of the assets.
It's not a specific number.
There is a general but.
Guideline.
<unk>.
That's used in the between the 20 and 30% range of the assets now since this year and our operating division has been.
Valued.
Substantially higher than in the past.
We see that as probably a good time to address.
This situation with the SEC and we are now that the the audits over in the statements are filed.
We can address that.
And get a much better feel for the timeline.
Moving back to a 30 for our company.
Okay, and just just to clarify so.
Now that the audit is done.
You can have the conversations with the SEC.
Did.
Let's say hypothetically.
Hypothetically say, okay, well youre close.
We're not going to allow you to go back to the 34 Act now.
Is it generally mean, you'll have to wait another year or can you revisit it sooner.
How does that.
I don't think that Theres any stipulation.
Waiting to the next annual reporting period I can address.
Address that with my Securities Counsel.
<unk>.
If.
No.
I don't see that there would be.
A roadblock and waiting for the next year. If you at the end of the quarter. It's determined that we can move to the 34 Act.
We would.
File the right paperwork and forms and.
File a 10-Q for that quarter.
Yes. It would just it would just entail quite a substantial shift once we would get the green light from the SEC. There is there is a substantial amount of work that you have to do on our audit side and accounting side in order to affect that change just based upon the history of when they made us switchover.
<unk> 2011. Unfortunately, we're just one of a dozen companies that the SEC has historically done this too so there isn't a lot of press.
Precedent that we can.
Reliably rely on four.
For guidance exactly and what this process looks like moving between the two and I will just say in a final way that the SEC has been.
Frustratingly slow at responding to questions from us.
<unk>, perhaps theyre very tied up with other regulatory challenges that they have but when it comes to an obscure question around 34% to 40 Act switching status et cetera. We think generally just sort of go into the queue of questions. They will answer them, but they're not nearly as responsive as we wish that they would be and that has added to our frustration.
Management, we sued the FCC in 2011 to stop them from making US report as a 40 Act company, we've spent actually over $1 million on legal fees fighting them.
And then still at the end of the day, we're told that the regulators are going to do what the regulators are going to do so we're at their mercy. What we are trying to effect this change.
But there isn't clear statutory guidance on our process for this so.
Just a certain amount of uncertainty around it.
Okay that's on that.
That's very helpful. Thank you I'll hop back in the queue I appreciate I appreciate all the <unk>.
The answers.
Absolutely. Thank you so much.
Our next question, we'll take Leo Carpio with Joseph Gunnar.
Hi, good morning, gentlemen.
Three questions. The first question is regarding the post pandemic hospital spending environment is that being helpful or favorable for sales activity for your product.
And then the second question with that is where does BVA fall is seeing hospital cap spending or operating spending priorities is in the top of the list before Peter we considered.
Or is it in the middle with other devices and then the last question is your current sales force sufficient to support the sales plan or do you need to add or build.
To add more members to your team.
Great.
Well I'll start at the first question you might have might have to refresh me.
The subsequent questions after I answer.
What I'll say is that the overall environment right now.
For health care spending and in the post pandemic world.
Favorable price and the reason for that is that.
There is tremendous focus on value and value based care.
Starting.
Several years back the Medicare <unk>.
<unk> started the so called <unk> HR RP program, the hospitalization readmission reduction program and a tremendous amount of focus has been brought to bear on the health economic metrics and impacts of different interventions.
In terms of the cost of care. So our diagnostic allows care teams.
To quickly and accurately see what the problem is with the patient and heart failure management overwhelmingly add a lot of posts.
Surgical care in the ICU care overwhelmingly is informed by the question of optimizing the patients fluid status and their blood volume and the reason for that is very simple. The blood is what carries oxygen to the tissues and it is vital for the for the immunity and for the nutritional needs of the patient et cetera.
Making sure that the patient has an optimal bloodline is crucial so.
If they are relying on a set of proxy measures or inaccurate or invasive tools right now, which they are and that leads to a greater length of stay for the patient every day that they spend in the ICU or in the heart failure Award, it's very very costly. So when we go to the value analysis committees.
The various hospitals that we talked to you about bringing in the technology, we start by saying what is your priority the priority is less about.
Weather.
Specific.
Capital equipment piece of it but the number one thing that they ask US is essentially is what will be the impact of this financially on our operations to bring the technology and the answer to that really.
In the form of <unk>.
Few different.
Features first of all number one our diagnostic and one of the first questions. I'll ask you what does your products have reimbursement number one because if you don't have reimbursement letters for drug or per device, you're really not getting go very far in the health care world of today, because the bottom line is really paramount.
Fortunately <unk> has actually excellent reimbursement for our diagnostic or outpatient use within the hospital cutting it also reimbursement in the ambulatory.
Surgical setting as well as physician offices as well. So we have strong reimbursement for hospitals. There is a very good cash flow positive model towards using this test to treat outpatient heart failure patients and that has a twofold benefit of not only is there a revenue side to it but patients.
With heart failure on an outpatient basis that are accretive with our diagnostic are much less likely to become readmissions, which are costly for that same hospital system. So we're working with heart failure outpatient clinics at our existing heart failure hospitals in order to ensure that the metric is used on outpatient basis for the <unk>.
Inpatient side I pointed out earlier that the research that was published last year that showed that.
The utilization of our diagnostic at the beginning of the care pathway.
Lower the length of stay by 55% for all sides heart failure patients. So if you can see two two and a half days from a patient's hospital stay for each one of those days in the hospital cost the hospital several thousand dollars now they receive only a single bundled payment under the DRG system for treating that heart failure patient, so they're going to get $15000 for that.
Patient, whether they take two and a half days or five days or eight days.
So the hospitals are very very concerned about making sure that they get these patients treated and get them out of the hospital as quickly as possible and also because the HR ERP program that they don't readmit within that 30 day window, So our diagnostics really exciting because what it healthcare teams from the beginning is exactly what's.
One with the volume of these patients right now they're guessing a lot of the times with very precise information and they often go down the wrong roadway.
We talk about this idea that it's sort of like having GPS and your card.
The GPS on as soon as you leave your driveway you can go straight to your destination multi run a bloodline analysis on Hartford accretion of cyclically at present.
What's wrong with them and which drugs and intervention they need in order to optimize their outcomes. So when we talk to these hospitals from a capital spending point of view or from a priority point of view everything thats about improving their financial performance because the COVID-19 epidemic has put tremendous financial pressures on them. So are they willing to spend capital to bring our <unk>.
Systems in order to lease our system. So rent our systems. The answer is yes, because we have a very strong pro forma model that we present to them at their value analysis committee level. So in order to bring our system and you need to get clinical buying and the clinicians have to be excited about it but really the administrators are going to be the ones that are going to be the final arbiters about whether we get adoption into our system.
Hum.
Does that answer your question and what follow up to that.
Yes, it does and actually the follow up was.
Regarding when you have these conversations with the hospitals and when you've committee on these capital planning committees.
What type of or what our technologies are you often find yourself competing against what other priorities are they are looking at that you find yourself.
Secondary technologies or other technologies that you are trying to advocate and trying to gain a sale versus whatever else, they're looking at that moment.
So what's exciting is that we're the only game in town when it comes to direct volume measurement of northern considered the gold standard and.
We have the greatest amount of clinical evidence and over 140 published peer reviewed papers and presentations on our technology from leading academic medical centers.
And a long history of relationships with these hospitals, so when they're looking at us they are really saying why should we shipped from the standard of care that we use now which could be pressure measures.
Clinical exam, what evidence do you have that if we bring this technology and put it into a care pathway that we're going to get specific benefits and so that's when we talk about things like lowered readmissions.
Shorter length of stay and then on the patient side.
Patients have a substantially lower mortality when they're treated with BVA and they're going to have a higher quality of life. So.
Peer reviewed published studies have shown for example.
A 56% reduction in 30 day, readmission, which is something they get penalized for 55% shorter length of stay also an 82% reduction in mortality on a 30 day basis, and a 6% reduction in 365 day mortality. So when we go to them and say look you're going to get your patients treated faster.
Out of the hospital less likely to readmit, they're much less likely to die. They will have much higher quality of life as a result of having optimal treatment. So really what BVA does take their existing treatments and it makes them. So much more effective because they apply the right treatment to the right patient at the right time because of the BVA test to help them something that no. Other tests that they have access to dos.
And then the last question is if the BBA the product development timeline unfolds as you are.
Predicting in 2023 is your current sales force sufficient for support and sales activity or do you need to add more salespeople in particular skills that need to be added or broadened.
Well so what we see is that the current sales force focused on.
Judiciously, expanding them and and upgrading them in terms of their capabilities. Their clinical acumen is very high compared to sales teams that we have in the past the tools that they have are much better. So we have white papers pro forma is we have a remote learning management system that we implemented.
In the second half of last year that allows clinicians to train with videos online for example.
Quizzes and.
In order to gain proficiency with our system. So we've been leveraging technology in order to have zoom calls grand rounds conferences Etsy.
Et cetera, and all of that has shown that those are the things that need to happen in order to increase clinician awareness and utilization of our tests.
Think that the.
Focus of management right now has been to increase the productivity per territory manager and.
So in other words, if the territory managers selling X.
Their hospital accounts, we want that number to go up by two or three ex.
And we want to deploy the resources that we have.
And the best practices that were learning from different accounts in order to drive utilization and to increase per rep productivity.
That sets the stage for us to substantially increase the sales force. So some companies for example try to grow their revenues by just throwing more people at the problem. They are like well if our revenues are X and we want our revenues go to <unk>.
Triple our sales force.
Problem with that is that over time yesterday drive increasing revenue, but often they widen their operating loss as a result, and so instead of focusing on individual rep productivity. They just focus on some kind of top line revenue number.
I think that that can be.
A.
Highly value destructive process, because it's easy to hire people, it's easy to throw more troops at the problem.
But that's not necessarily a.
Very good thing for your business model. So for US we're seeing a substantial rise in sales, but without massively increasing our sales force now with our next generation analyzer driving things forward I anticipate that that productivity per rep and per territory is going to increase significantly and that will set the stage.
For us too.
And our sales force, but right now as our Salesforce large enough to look our total addressable market not even close it's not even 1% of what it could be to address the total market because the total addressable market just in the United States and we're not even talking about internationally.
<unk> represents a market of over 5000 hospitals that could benefit from having one of our analyzers there to help treat patients. So there is a massive market potential here.
We're driving the business model forward.
And getting productivity up and that sets the stage for us to expand the sales force is what I'd say.
Does that answer your question.
Yes, it does thanks.
Alright.
Great.
Okay.
And we'll take our next question from.
John Bendall with J PC partners.
Yes, good morning, Michael.
Cause you time after time John .
So kind of a job and three is and you saw a lot of new outlets.
Sean.
So I applaud you for what you're doing.
So.
Wanted to just say that.
People around.
But because of the appreciation that they hoped.
Yes.
Would you have forecast and talk to you about.
I think is remarkable and we're not doing I understand is if.
This was a vision.
And came out with.
I know this is within the Boston side.
Products.
I think the street.
Are they analyzed it.
So on those comp base.
On the line what is happening with the baby.
And the potential everything you hear it.
The legal would take and say I cannot understand being a longtime shareholder.
All involved with everything that you've said knowing about.
<unk> continues to make new loans now, we all know that it's a very.
But that's not.
Major problem.
It is for any kind of a cyclical situation.
But they are finding out the right kind of sales at two one.
All of them out, but when we see every day.
Strategy one.
What it is.
Hi, there.
I've, often said Marty I know is.
A real commodity.
But you would think after time.
Which gets somewhat.
Got it.
What.
I think the stock is.
Plus why adventure.
Virtually and I agree.
But it's also pretty important.
Got it.
Sure.
And stock and you might say well, we need to monitor how research you understand that but the secondary.
Thanks, Ed.
I don't know whether that was a retail which I suspect where it didn't go up.
The sellers start strong hands, but I missed it.
The action on the stock.
We're not seeing the stock and this is before anybody on this slide noticed when I was running upfront.
It's gone from $607 to $37.
In less than two weeks now because of shorts.
Trying to cover.
Yes.
Somewhat really believe now was well before any other new technologies that you.
We are too.
From a man.
Sure Tom.
So I'm really sorry.
<unk> you might have had on this one.
As I've said, we know this is a great.
A great deal of the Cogs, but this can also be.
A part of us being able to accumulate stock so having a new low.
It's something that again for a lot of encouragement I think Gary you spoke about.
As Jim.
Lastly, I wanted to ask you had mentioned at one point I believe and please correct me that.
Hanmi.
Sure.
About <unk> I think that was the number.
The portable.
BVA devices.
Just to start.
Great arithmetic.
2000, okay.
Issues or not.
Not so sure, but just wondering from the army.
What are we talking about gross dollars.
Okay. So so you've touched on a few things so let me start at the top so.
As it regards to share price management controls, what we do as a company.
On Wall Street, and buyers and sellers decide what part stock is worth.
I can tell you that our stock has and you are correct. Our stock is very closely held by management on one of the largest shareholders of the company personally.
Most of our shareholders know that it'd take a de minimis annual salary.
From the company because I believe so strongly in our long term prospects and management is hyper focused on creating shareholder value.
Now obviously.
The price at which the stock trades in any particular moment is a function of the perception of the value of the company along with the macro environment as well I don't think its a secret that as the fed has tightened and as interest rates have gone up.
Growth in technology companies have struggled in the midst of it in terms of valuations, but also theres a lot of volatility.
So do I personally am I right to think about the share price.
I don't think about the share price the way that a tradeoff I think about the share price I think about the share price and then what do we as a company need to do to create substantial value because I believe from a very fundamental Graham and Dodd way of thinking about saying that the share price will reflect the intrinsic value of the stock I know that sometimes shareholders actually don't.
We have the visibility into the operating company that we wish that they could have because of our of our reporting status.
But that being said, yes, our stock has has range traded.
<unk>.
I don't know eight and a half in.
15, or something like that over the last 18 months something like that.
But really the question is what are we doing as a company that is going to garner substantial value going forward and I think executing on all of the things that we've outlined is the way for us to create that kind of value and of course to capture those substantial earnings.
I do take some comfort from the fact that I look at Tesla.
One must Graham from 2012 to 2017 and the stock was essentially flat over a five year time period, but while that was going on Tesla as a company underneath it was doing profoundly substantially important things to create value. They were innovating their battery technology in our manufacturing process and Theyre designed in.
Theyre navigation systems that put them 10 years in front of all of their competitors, but wall Street didn't really reward the stock for that Wall Street doesn't always reward the company for doing the important technological breakthrough what Wall Street awards as the revenues and the growth that come from the implementation and adoption of that technology. So towards that end management feels very strongly that we are creating the most valley.
Medium and long term for our shareholders.
By doing the things that we've outlined here that need for next generation analyzers, the clinical outcomes. The increase in commercialization adoption sharpening ourselves force driving forward in terms of revenue growth et cetera, and the share price is going to reflect what it does if you don't believe in that then you shouldnt own our stock. If you do believe in that and if you do believe in the outline of.
What we're doing if you do think that our company is valued at a relatively paltry amount compared to our prospects our technology, our clinical outcomes are addressable market than our low share price should mean that it's essentially a buying opportunity for you. It's a chance to own a company with a stock that has <unk>.
FDA approval around this technology.
Terrific.
<unk>.
Excellent evidence clinical outcomes growing partnerships with the U S military with the NIH.
With various different society in flight.
That axiom partners through the ACC or the heart failure society of Tetra.
I think investors have to look fundamentally at what we're doing and try to forecast from there whether or not we're doing the things thats going to create the creation.
As the CEO of the company I'm not interested in the stock going from <unk> to.
2016, because that only represents an increase in the company's value from $40 million to $80 million or whatever the exact number is et cetera, I think the prospects for our company are orders of magnitude at least at least an order of magnitude greater than that so I'm focused with the rest of my management team on executing on that and creating the value there.
It comes from from that now as far as the second part of your question the assertion around the army et cetera, we received contract funding from the <unk> to create a portable rapid ruggedized.
Battery powered analyzer Thats, what we have right now that we've successfully completed that we're submitting to the FDA for approval.
Also we see contract funding from the Air force to create an innovative <unk>.
Non ico topic question Mark for you.
In the airports chain potentially combat casualty care now that.
We've completed phase two work on that for the Army and then that opens up phase III, which is which is paid to pension in phase III and phase III is generally contracting award.
Cannot comment.
What the potential.
Army order would be.
Were they to give us one for phase III Award that information, that's not public I don't believe I've ever commented on the total addressable market size by the army in the past.
And we will make.
The <unk>.
Plans of the Dod.
Available to shareholders as soon as they are within the public data.
Well, thank you for your questions.
Question.
Thank you we'll take our next question from Evan Greenberg with legend cap opportunity fund.
But.
Hey, How're you doing.
Does everything Mike Kevin I'm.
Im sorry, Im on speaker, but.
Some reason they can't get off the speaker anyway.
I wanted to get an idea in terms of pricing of the kits. You said you had was that the first price increase in years to traditionally been around $325 or has it been creeping up over the past couple of years.
I wanted to know if there should be pricing elasticity, it's a very reasonably priced test.
So do you have room to go more if need be.
So great question. So yes, our price was at $325 for a number of years and then.
We looked at the elasticity and we realized that we were really under pricing of our product.
And so we increase our price from 325 to $3 55 last year and what we found was actually our kit sales increased substantially over that time period, not because of the price increase but I will say despite the price increase and that reflects the fact that we didn't lose a single account over that price difference you didn't hear anything from any of our customers because prices have generally been rising.
And our prices have been extremely cheap for years, we've just announced them sent out a letter to our customers informing them that we're increasing the price again this year.
$55 to $3 85 or so.
So we will have increased our price of our products by $60.
Over which is I don't know about 18% or so over a two year period and again, we're not seeing any pushback from our customers who've received those letters around the new pricing level.
I think there is substantial value here and.
<unk>.
I think there is substantial room for us to grow our pricing judiciously over time.
Because what we're showing is the value of the product if you can show.
An administrator and I sort of clinicians that you can lower their length of stay by two update.
And save thousands of dollars and that they don't have to use existing.
Agnostic that are less accurate than ours. So for a substitution cost remember don't do the the DMT Pro BNP measurement instead, you run the BVA tax for example, then.
Really there is there is a lot of value to be unlocked there and also on the reimbursement side, our reimbursement has been increasing because our pricing has gone up and thats, how Medicare to terminate that so we've been able to get.
Good movement on the pricing, which has helped to improve our margins and to cover some of the inflationary pressures that we've been facing so that's what those are nice questions.
Thank you. Thank you Mike I, just I think anything sub $500.
<unk> is a no brainer.
Mhm, Yeah, our market research certainly bears out that Theres a lot of value. There I know you don't want to you don't want to give people a price shock right you don't want to double the price of what you have overnight, but there certainly has been good responses to our price increases and again that is helping us to drive revenue.
Okay. Thanks.
Thank you.
And I'm showing we have no more questions in the queue. At this time I will now turn the call over to Michael Hill Chip for any closing remarks.
Alright, well I will say that I appreciate everyone's participation in this conference call.
<unk> will continue to keep shareholders apprised of our updates I would refer people to our filing for my Investor letter, which is attached to the <unk>, which contains more detailed with any of the topics that you touched on today. Thank you very much and this concludes our call.
That concludes today's teleconference. Thank you for your participation you may now disconnect.
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