Nuwellis Inc. Q1 2023 Earnings Call
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Good morning, and welcome to the new well this first quarter 2023 conference call.
All participants will be in a listen only mode.
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Please note that this event is being recorded I would like now to turn the conference over to MS. Vivian Zhou Martin Investor Relations at Gilmartin Group. Please go ahead.
Thank you operator, thank you everyone for joining us for today's conference call to discuss new wireless as corporate developments and financial results for the first quarter ended March 31 2023.
Listen to myself with US today are Mr had a media neurologist President and CEO Lynn Blake CFO . We also have Doctor John Jefferies and the walls as Chief Medical Officer, and John <unk>, The company's senior Vice President of sales and marketing at eight o'clock Eastern today and the wireless released financial results for the quarter ended.
March 31st 2023.
<unk> received no Alex its earnings press release, please visit the investors page on the company's website.
During this call the company will be making forward looking statements.
Forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1995.
Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward looking statements.
Forward looking statements are based upon our current estimates and various assumptions. These.
These statements involve material risks and uncertainties that could cause actual results or events.
Materially differ from those anticipated.
Or implied by these forward looking statements.
All forward looking statements are based upon current available information and the company assumes no obligation to update these statements.
Accordingly, you should not place undue reliance on these statements.
Please refer to the cautionary statements and discussion of risk and the company's filings with the SEC, including the latest 10-K and subsequent reports.
With that I would now like to turn the call over to nurture.
Thank you Vivian and good morning, everyone welcome to the Willis first quarter 2023 earnings Conference call.
On today's call I will provide an overview of our first quarter performance and give an update on our strategic initiatives.
Our Chief Financial Officer, Lynn Blake will then provide detailed commentary on the financial results.
Before I open the call up for questions.
So by my closing remarks.
Dr. John Jefferies, Our Chief Medical Officer, and John Walsh, Our senior Vice President of sales and marketing are also on todays call and will be available during the question and answer section.
Turning to our first quarter, we sold in the first quarter of 2023, new wells generated one $8 million in revenue a decrease of 5% over the first quarter of 2022.
<unk> segment first quarter 2023 revenue heart failure increased 21% over the same period last year.
Pediatric and critical care revenue declined, 28% and 4% respectively.
In heart failure, which in the last six months has had a bolus of support from multiple peer reviewed publications the 21% revenue growth in Q1 follow similar strong year over year heart failure revenue growth of 47% in Q4 of 2022.
We attribute the growth in heart failure to the steady flow of positive peer review publications and clinical evidence bolstering the activities of the sales and marketing organization, which is now fully staffed in all territories.
We remain committed to driving market penetration not work ultrafiltration treatment earlier in the hospital admission cycle and across multiple hospital or specialty units.
Key to the execution is driving awareness among clinicians and providers to understand that all traffic ultrafiltration is the next logical step in the care pathway in other words patients for whom oral or intravenous de risks are not effective should immediately move to ultra.
Nutritional therapy, which is a mechanical fluid removal solution and that charge is more controllable precise.
This is the message that our field organization is now delivering and based on the heart failure segment results for the past two quarters. The message is having a positive effect.
In pediatrics, we remain well positioned and excited about our opportunities which include the expected approval of our new pediatric dedicated continuous renal replacement therapy device in the first quarter of 2024.
The softer than expected results in the first quarter were driven by lower patient census in key accounts with fewer hospitalisation of babies born with kidney disease.
Same store driven factors are not new to our business having seen this trend in the past with similar declines in the third quarter of 2021.
While changes in hospital census are difficult to predict we are confident that we have all the right measures in place to execute on our pediatric growth strategy, including increasing the use of athletics ultra filtration system to treat other pediatric conditions, such as heart failure and cardio thoracic.
Surgery.
Today, we have 30% more pediatric centers using <unk> that in the same quarter last year.
Overall, our Q1 revenue does not reflect the positive activities that make us excited about the future of Nols, which include number one developments indeed in a number of hospitals to use <unk> not only for treating heart failure critical care patients but.
Pending its use to other hospital specialty units, including liver disease that could trigger a six patients.
And number two steady product development progress in our pediatric goodbyes aimed right at saving lives and increasing the quality of life for neonates and its more children with kidney disease.
We believe this device would be a game changer you'd be outbreak kidney treatment.
Now I'd like to provide additional updates on our top strategic initiatives aimed at making <unk> the standard of care for fluid overload patients resistant to diuretics.
In the first quarter, we were pleased to announce a peer review publication advocating the use of ultrafiltration for heart failure patients with cystic did I read it.
The publication titled Extracorporeal Ultra fluctuation for acute heart failure was featured in the cardio renal Medicine journal and author by Dr. Amir Cursory and contributing.
Nephrologist positions.
The publication includes a review of the pooled data from seven randomized controlled trials of ultrafiltration with a total of 771 patient participants.
First the authors outlined the scale of the clinical burden of heart failure.
Approximately $6 5 million adults in the United States have heart failure and warm in eight death include heart failure as a contributing cause of mortality.
Nearly 40% to 45% of patients who develop heart failure die within five years of diagnosis.
Heart failure has the highest re hospitalization rate among all medical conditions with 25, 24% patients readmitted within 30 days and 50% of patients readmitted within six months.
And the annual cost of care for patients with heart failure is estimated at $60 billion in the U S. With the hospital related expenses accounting for almost 70% of the total cost.
The authors highlighted the clinical application and value of ultrafiltration.
The most important findings were as follows.
Victor Bull adjustable at more efficient fluid removal with ultra filtration compared to direct without clinical adverse impact on renal function, which leads to a reduction in hospital readmissions and related health care expenses.
I believe applicability of ultrafiltration therapy in other clinical studies, such as cardiac surgery burn and other specialty units were active prompt fluid volume management is of utmost importance.
And expanding the use of ultrafiltration aimed to outpatient centers and other ambulatory settings to treat patients before their symptoms become severe and require hospital admissions.
We have been and plan to continue using this peer reviewed study to further expand our airports and grow the heart failure segment of our business.
We also continued to make progress in that would reverse heart failure trial.
With 11 sites activated and a two fold increase in the number of enrolled patients since last quarter.
As a reminder, the primary effectiveness endpoint there'll be reverse heart failure trial will evaluate mortality in heart failure events within 90 days as a comparison between <unk> ultrafiltration therapy and intravenous Luke diabetics.
We look forward to updating you on that additional clinical data supporting the use of ultrafiltration using aqua Aston mechanical fluid removal therapy to treat new indications, including liver disease and left ventricle Dubai assist device implementation.
Turning to our product development initiatives, we remain on track with the development of what would be gastric continuous renal replacement therapy device.
And we continue to anticipate <unk> approval in the first quarter of 2024.
We along with decisions, namely pediatric Nephrologist are beyond excited about this product.
Eat addresses the unmet needs of the pediatric patient population and could significantly increase the quality of life for neonates and small children with kidney malfunctioning kidney issues or those born without kidding.
All of them sulfur from life threatening fluid overload.
As I mentioned earlier, we believe the device would be a game changer in pediatric treatment.
In conclusion, our team remains focused on leveraging our clinical data to steadily build awareness and drive market penetration of our Aqua next ultrafiltration system to tweak fluid overload patients resistant today Red X weave.
Addressing the two plus billion dollar market with opportunities across multiple inpatient specialty units and outpatient surgery centers.
Our team is highly engaged in executing on our growth agenda as we continue to improve the lives of patients and support caregivers in clinic clinicians who are battling day in and day out the limitations of diabetics, which is the current standard of care.
For fluid overloaded patients resistant to direct we are confident that a mechanical fluid removal alternative using the <unk> ultra nutritional system is the solution.
Now I would like to turn the call over to our Chief Financial Officer, Lynn Blake to discuss our Q1 financial results.
Thank you Nestor and good morning, everyone revenue for the first quarter of 2023 was $1 8 million.
A 5% decline year over year.
Segment first quarter, 2023 revenue and heart failure increased approximately 21% over the same period last year, while pediatrics and critical care declined approximately 28% and 4% respectively. In pediatrics as Mr. <unk> mentioned, the decline was driven primarily by lower patient census.
With lower than expected Neonate hospital admission.
Gross margin was 58, 4% of sales for the fourth quarter, an increase of 120 basis points compared to gross margin of 57, 2% in the prior year quarter, driven by an increase in certain asp's and to a lesser extent favorable product and geographic sales mix.
Selling general and administrative expenses were $5 $5 million in the first part of 2023 compared to the first quarter last year SG&A expenses increased by approximately one $1 million or 24%.
This increase reflects increased staffing expenses and seasonally higher year end related public company expenses, which were increased this year due to additional year end audit and legal work associated with our October 2022 financing and related stockholder meeting. Additionally, we incurred incremental professional fees associated with it.
Consulting related to our strategic initiatives in the quarter.
First quarter research and development expense was $1 $4 million, an increase of approximately $300000 or 29% compared to the first quarter last year.
Once a quarter basis, R&D cost increased $227000 or 19%. These increases were driven by increased product development expenses associated with the ongoing development of our pediatric dedicated device.
Total operating expenses were $6 $9 million in the quarter, an increase of approximately $1 4 million as compared to $5 $5 million last year, given the factors assessed.
The net loss in the first quarter was $6 $5 million or a loss of $5.76 per basic and diluted common share compared to a net loss of $45 million or $42.45 per basic and diluted common share for the same period in 2022 that losses.
Adjusted for our December 2022 reverse stock split.
The current quarter's net loss includes a nonrecurring noncash expense of approximately $750000 associated with the revaluation of the warrants issued in conjunction with our October financing.
That expense was recorded in other expense on the income statement from a liquidity perspective, we ended the first quarter with $12 $1 million in cash cash equivalents and marketable securities and no debt on the balance sheet, we had approximately $1 2 million common shares outstanding at the end of the quarter.
This concludes our prepared remarks, operator, we'd like to open the call to questions now please.
Thank you.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing gucci to.
To withdraw your question. Please press Star then two at this time, well pause momentarily to collect the questions.
The first question comes with Jeffrey Cohen with Ladenburg Thalmann.
Please go ahead.
So a few questions from Aaron I guess firstly.
Could you talk about pediatrics that that came in light and talk about.
It sounded like the R. The census was lower for candidates for therapy to talk about that.
And also could you give us a frame of reference as far as percent of revenue for the quarter that pediatrics was.
Okay. Good morning, Jeff. Thank you for your question the Peds shortfall was mainly in our large legacy accounts.
In these accounts, we have experience much lower senses that we expected.
And many of those patients that qualify for our therapy needs being admitted.
I'm also needing critical care is you remember.
Most of these patients are treated with the Aqua X ultra filtration system are off label.
Our indication is 20 kilograms and above.
Ah we're still.
Increasing our focus.
And pediatrics on other indications such as cardiac surgery heart failure to compensate for the lower expenses that we are seeing right now.
And Lynn do you want to provide the answer on the percentage of.
Revenue that was attributed sure Catharine.
Sure Hi, Jeff the Q1 revenue was at 23% pediatrics.
Thanks papers that total and acquire.
Perfect Okay got it.
Jumping over to while we're on pediatrics your answer you're you're anticipating an idea approval in the first quarter 'twenty four is that correct.
That's correct Jeff.
Okay, and then could you talk about the reverse heart failure trial, a little bit 11 centers.
What percent of enrollment or you're out I think I heard a number but.
What's your total enrollment number that youre trying to get to and what percent are you there and when might that concludes.
Jeff the total number that we anticipate to have somewhere around 372 patients.
However, we are redoing, our statistical analysis that perhaps that may change in favor of a lower number a sample size, but we're not completely done with all the statistical analysis that needs to be done.
We are about if I use the 370, we are about a little bit over 10, 15% of total enrollment.
But we anticipate to finish enrolling patients in 2024, that's not where target that we have discussed with all of our principal investigators and we believe that that is achievable.
Got it Okay and then.
Jumping over to heart failure, and now that you're fully staffed on your.
Territories, where would you anticipate to be the impact on the top line.
For the balance of this year.
We will continue to see.
Double digit growth in heart failure.
Yeah.
And we will continue to execute on all the clinical data that we have obtained to drive awareness among clinicians.
Okay got it and.
You talked about some other areas.
It shows a liver and all of that could you talk about.
And what segment of the hospital in a typical population so you're seeing some utilization there hum.
Yes. Good question, Jeff recently in my visits with visit in our calendar has been a good account for was how to use it for a number of years.
They mentioned to us that they have but quite a few L that patients that have been treated with <unk> immediately after transplant and.
Later Paolo ops.
Can deliver we have a very important center in New York City, who has been using it for liver. They have submitted a publication that we are waiting for that publication to be Oh Wow.
Published in a journal.
But that the liver is usually in the liver.
Department of Unity, a unit of the hospital.
Got it Okay, I think that those are for us thanks for taking the questions.
Thank you Jeff.
Yeah.
Thank you. The next question comes with Anthony Vendetti with Maxim Group. Please go ahead.
Thanks.
Maybe just a follow up on the.
Reverse Hs trial.
Did you say all the sites.
Our activated at this point.
No Jeff.
Excuse me Anthony we have a target of 20.
Sites to be participating we have now 11 activate it.
And the rest of them are in the process of getting activated.
Getting approvals for the IRB is contracts et cetera.
Okay.
Thanks for clarifying that and then just in terms of this is you have more salespeople.
Can you talk about.
The messaging for the Aqua tax I mean, clearly as you stated masters, it's a huge market opportunity.
Do you feel that the that the message is on point.
How are you.
I guess whats the.
Goal in terms of trying to.
Convince other sites.
This is.
Is this something that you should the awkward back to something you should have multiple and depending on the size of the hospital, but multiple units in the hospital.
To treat fluid overload.
Yes.
Anthony that's a very good question I'm going to let John called Wild pick our VP senior VP of sales and marketing to answer that question, but before I turn it over to him fluid overload is everywhere in the hospital. It is in the ICU ease in the burn unit. It is in the heart failure and the step down in the emergency room, So our target.
Is to create awareness among physicians.
And soon you will hear more.
Marketing strategy, we are implementing to go after the patients awareness, but let me turn it over to John for him to tell you about the messages that we are.
Obey into our sales organization for them to deliver to our.
Our customers John .
Thank you Nestor and good morning, Anthony So the message is really that says as Nestor indicated fluid overload is everywhere and it's supported by the data as a matter of fact.
40% of the patients that are admitted to the hospital will be experiencing some degree of diuretic resistance.
Or sub optimal results and so our messaging based on the published data is to identify those patients earlier in.
In the process by identifying those patients earlier and using our clinical data like <unk> and other published.
Documents to include Dr. Heartless.
Abington 10 year real world experience.
We're educating physicians to say use a mechanical fluid removal system awkward ex earlier.
And by doing so the message that is supported by the clinical data that says, we potentially can alleviate or minimize downstream sequela that occur with multiple medications being given over time that contribute to potentially Hai, which then leads ultimately.
Two more aggressive forms of clearance like CRT <unk> dialysis.
Through that process that then extends the length of stay for the patient, which then incurs not only.
Or less.
[noise] advantageous results for the patient, but also drives up the cost.
Of what the hospital needs to occur. So those are our messages and it's based on the published data and the physicians are now responding to this pretty well.
Okay. Great. So this is the data is presented to them.
And when youre dealing with the actual.
Sale process.
Is it is it the.
Is it one of the key executives at the hospital is it the physician is it a combination how does that how does that work and then and then lastly on the conference side getting the Kols.
Are there specific upcoming conferences that youll tend to get the message out there broadly.
Uh-huh. Good question, Anthony Let me turn it over to Dr. John Jefferies, who joined the company as a chief Medical Officer and he is a practicing clinician that has used up with therapy and I believe that he would be the best person to answer your question as to how how is the process in the hospital to determine.
To use John .
Sure. Thank you thanks for the question.
No I think every hospital is unique.
But most of the time to get the messaging it really needs to be sort of a dyad approach I mean, you need to speak with the clinicians and part of the commission discussion is about having data right. How can we support the use of your science, obviously, you've been hearing about reverse Hs that's exactly what that is intended to do is provide contemporary data.
The other piece, though obviously is on the administrative side just because of physician wants a technology doesn't mean that it just happens has to go through budget and approval and lots of other different committees before those things happen.
So.
What I've been trying to do whenever we approach accounts or I think it's collectively it's true.
Is it we're trying to keep that in mind and that we want to message the value proposition to the hospital the administration, but obviously to the physicians and clinicians provide the data that support the use of the technology, which at this point or are very substantial.
So I think this is just a matter of continuing to build momentum which will happen.
With the data that you heard from nest or about the different sort of phenotypes that we can use the technology or very successfully I think that's going to expand the number of touch points. We would have in any one hospital. So not just a cardiologist now you could talk to a herpetologist delivered transplant surgeon, the cardio thoracic surgeon and Intensivist pediatrician.
Dr Trick Nephrologist. So all of these different sorts of opportunities you're only going to continue to grow.
Thank you John .
Okay.
Okay.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Mr and Mr. Neil for any closing remarks. Please go ahead.
Yes, as we conclude this call I hope that we were able to convey to you. The optimism that we have and also our execution on our growth strategy from heart failure.
<unk>.
Indications such as labor.
L that pediatric our pediatric dedicated device as well as our unique.
A therapy device that we're building and also the heart failure clinical trials.
With that I would like to thank all our stakeholders our employees our shareholders, our physicians and clinicians as well as all the medical health care staff. Thank you very much for your support with all of your help we will not be able to help transform the lives of patients suffering from fluid overload.
Thank you very much for your participation.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Have a good day.
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