Q1 2023 Milestone Scientific Inc Earnings Call

Speaker 1: Good morning everyone and welcome to milestone scientific's first quarter 2023 financial results and business update conference call. At this time all participants are in a list-known mode. A question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your phone keypad.

Speaker 1: Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. David Wartman, Investor Relations. David, you may begin.

Speaker 2: Thank you, Jenny. Good morning and thank you for joining Milestone Scientific's first quarter, 2023 Financial Results Conference call. On the call with us today are Arian Hoverhall's Chief Executive Officer and Peter Milligan, Chief Financial Officer of Milestone Scientific. The company issued a press release today, May 11th, containing first quarter, 2023 financial

Speaker 2: and operational results for the first quarter ended March 31, 2023. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of milestones ability to implement its business plan, expected revenues, and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments.

Speaker 2: with respect to future economic competitive and market conditions and future business decisions, all of which are difficult to impossible to predict accurately and many of which are beyond milestones control. Some of the important factors that could cause actual results are different materially from those indicated by the forward-looking statements. Our general economic conditions failure to achieve expected revenue growth.

Speaker 2: changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and market requirements and standards, and the risk factors detailed from time to time in milestones, periodic filings of the Securities and Exchange Commission, including without limitation milestones report on Form 10-K for the year ended.

Speaker 2: December 31st, 2022, and milestones report on Form 10Q for the first quarter end of March 31st, 2023. The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, May 11th, 2023. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we'll now turn the call over to Arion Hoverhall, Chief Executive Officer.

Speaker 3: Please go ahead, Arjen. Thank you, David, and thanks to everyone for joining us today. I'm pleased to report we achieved revenue of more than $2.6 million, making it a solid quarter. Most notably, domestic dental sales increased 47% due in part to the early success of our new online store.

Speaker 3: for selling and shipping the SDA single-tooth and Esthesia system and hand pieces directly to dental offices and dental groups within the U.S. This strategy has provided us a closer and more direct relationship with our customers, which in turn resulted in improved growth margins.

Speaker 3: As a result, we recorded an increase of 12% in gross profit for the first quarter of 2023.

Speaker 3: We continue to bring on new strategic distribution and channel partners that sell through their respective networks of dental customers in the US.

Speaker 3: The launch of the online sales portal has also enabled us to directly serve several dental service organizations or DSOs.

Speaker 3: Our goal is to strengthen our position with these DSOs, does increasing the penetration of a dental offering with these customers. Our investment in direct to-patient marketing activities has resulted in several leads from dentists contacting us directly to order our instruments.

Speaker 3: because patients requested them to do so. We will continue to increase our marketing efforts with dedicated campaigns directly targeted at patients.

Speaker 3: We are also expanding our efforts to enter new international markets and deepen our penetration within existing international markets.

Speaker 3: Towards the event, early in the first quarter, we announced Technica Health Technologies as exclusive distributor of the STH system in Brazil. As mentioned during prior calls, the Brazilian dental market is one of the three largest markets in dentistry.

Speaker 3: We also recently appointed Sweden and Martina as our exclusive distributor in Italy, France, Spain and Portugal. We look forward to announcing additional international distribution agreements as we continue to build our global network.

Speaker 3: So to summarise, we believe that through a new sales strategy in combination with our increased marketing efforts, we aim to further grow the dental business at attractive margins in the coming quarters.

Speaker 3: It's also worth noting that our dental division continues to operate profitable. In fact, the dental division generated over $600,000 of operating income on a standalone basis, which is an 81% increase over the same period last year.

Speaker 3: Turning to our medical segment, we continue to advance our commercial efforts around the CompuFlow epidural system as we target hospitals, healthcare systems and pain management clinics.

Speaker 3: The fact that our technology was adopted by leading physicians and hospital systems.

Speaker 3: reinforces our confidence in the market potential for our instrument, particularly within pain management and labour and delivery market segments.

Speaker 3: Importantly, we have witnessed that the decision-making time or sales cycle is much shorter in the private pain clinics compared to the labour and delivery department at hospitals.

Speaker 3: In addition, the recent 510K FDA clearance of our instrument for use in the thoracic region of the spine, including the cervical thoracic junction, is also helping drive interest in our technology within a number of prominent pain management clinics, given the added complexity and risks associated with these procedures.

Speaker 3: Specifically, the incident rates of morbidity in the thoracic and cervical region of the spine are believed to be much higher than in the lumbar spine region at 17 and 30% respectively, due to the difficulties accessing the epidural space. We recently commenced a joint printer with Government of Australia. Health countries Border Web Alliance

Speaker 3: cells of Compiflow epidural disposables into the Regenerative Sports and Spine Center in Tualatin, Oregon.

Speaker 3: Adoption of the technology by this clinic follows a successful evaluation process by Dr. Jimmy Hubert, a regenerative sports and pain medicine physician and the owner of Regenerative Sports and Spine Center, which further validates the safety and efficacy of our technology. Dr. Hubert initially conducted several cases using the complicated introduction of our hospitalization screening lab, Conclusion of paused

Speaker 3: to implementation of the latest technologies to improve patients' outcomes and safety by helping them recover more efficiently from sports injuries.

Speaker 3: This follows similar evaluations earlier this year by Dr. Brad Sisson and Dr. DJ DeMesman, two other prominent thought leaders that have recently begun incorporating the CompuFlow epidural instrument into their practices.

Speaker 3: Collectively, the procedures by these pain management physicians mark the first in a series of epidural steroid injections.

Speaker 3: using the Compiflow Epidural System for artificial intelligence assistance analgesic needle placement in patients.

Speaker 3: Providers may consult the American Academy Association AMA CPT Changes 2023 regarding AI-assisted analgesic epidural needle placement in patients.

Speaker 3: This publication addresses AMAs, new technology specified level 3 CPT cold set which came into effect on January 1st, 2023.

Speaker 3: It describes technologies that integrate artificial intelligence to place an epidural needle. It's typically utilized during analgesic epidural needle placement in patients. It is real-time software to assist the physician by transmitting key data points. And we believe medical necessary...

Speaker 3: and compiliently documented use of this data may be eligible for reimbursement for the Complete Flow Historical Appe superior Assistanton.

Speaker 3: The clinicians mentioned before have been or are in the process of submitting their claims to healthcare insurance providers. The expectation is that they will receive the first responses by the providers within 30 days after submission. Depending on the response, item or information could be requested.

Speaker 3: by the insurance provider's to the clinicians, or an acceptance or denial could be obtained. In the case of an acceptance, this would potentially lead to payment to clinicians over reimbursement fee for epidural steroid injections using our technology.

Speaker 3: We are not allowed to reach out to clinicians or insurance providers directly on pricing.

Speaker 3: And we are following the strict rules and regulations and policies by the American Medical Association, thus doing our utmost to service the clinicians with all the documentation for?? ad-sub deixariciere such as emission in the high-quality professional way.

Speaker 3: which we believe will both preserve and further enhance our leadership in the market. We remain encouraged by the interest in our epidural instruments by anesthesiologists and pain management providers, especially for patients with complex anatomy and difficult cases that involve the thoracic and cervical thoracic junction. We believe that the efforts we are taking to seed the market with our technology among leading pain specialists will ultimately translate into increased adoption as we continue to execute on our goal of establishing the Comprehlow Epidural System.

Speaker 3: as standard of care in epidural and autisia. We also believe there is a market opportunity for a complete flow of epidural instrument within federal and other government agencies as our system can contribute to both improve patient outcomes as well as increased efficiencies.

Speaker 3: In addition, we are actively pursuing US Federal Supply Service approval for the Comprehlow Epidual Instrument which has granted Woodclothide Uniform Pricing of Crossed Government agencies. In addition to our Direct Sales Channel, we are also expanding our network of distribution partners to assist in further adoption of the Comprehlow Epidual System. Specifically, we are targeting independent distributors with existing relationships with in key global markets and proven track records introducing medical devices within their territories.

Speaker 3: We look forward to announcing additional international distributors as we advance our commercial rollout. At the same time, we continue to carefully manage our expenses while investing in sales, direct-to-patient marketing and product development. At this point, I'd like to turn the call over to a Peter Milligan, Chief Financial Officer, to go over the financials in detail. Please go ahead, Peter. Thank you, Aryan. Tell a revenue for the quarter. First quarter of 2023 was 2.6 million, verse 2.7 million for the same period last year. The decrease was driven by lower revenue from China of 360,000.

Speaker 3: a decrease in other international sales of 180 offset by increase in domestic dental revenue of $443,000. The increase in domestic dental revenue was primarily driven by the launch of a new online store for US dentists to order the FDA single tooth.

Speaker 3: System instruments and hand pieces as well as the reversal of the allowance for returns of 179,000, which was related to the distribution agreement that we terminated with Henry Schein at the end of 2022.

Speaker 3: Gross margins improved significantly, from 62% last year to 73% this quarter. This increase was largely driven by the company's change in its U.S. distribution, which Arian referenced earlier, is going extremely well. The operating loss for the three months ended March 31, 2023, decreased by 600,000.

Speaker 3: versus a $1.9 million loss for the first quarter of last year.

Speaker 3: This is driven by higher growth margin and lower operating costs, trends that we expect to see continue throughout the year.

Speaker 3: The net loss was two cents per share versus three cents per share for the comparable period in 2022.

Speaker 3: The company did use $2 million in cash in the first quarter, but it is important to highlight that the accounts receivable and prepaid expenses increased by $550,000. And we saw a significant reduction in current liabilities of over $650,000.

Speaker 3: We expect our cash used to decline each of the remaining quarters throughout 2023.

Speaker 3: At the end of the quarter, March 31, 2023, the company had cash and cash equivalents of $6.7 million, total current assets of $11.6 million, and working capital of $8.9 million, and has no long-term debt. At this point, I'd like to turn the call back over to Ariane. Ariane and Ariane F

Speaker 3: of the quarter, March 31, 2023, the company had cash and cash equivalents of $6.7 million, total current assets of $11.6 million, and working capital of $8.9 million, and has no long-term debt. At this point, I'd like to turn the call over back over to Arjen. Thank you, Peter. If you couldn't hear her tonight, we could see her again.

Speaker 3: Through our new sales strategy and our enhanced marketing efforts around the STA Cinbertooth anesthesia instrument, we believe we can accelerate the growth of our dental business at higher margins in the months ahead. We believe we have developed an efficient and scalable platform to help drive our dental instrument.

Speaker 3: and hand-pissed cells in the common years.

Speaker 3: Our dental business continues to generate positive cash flow on a standalone basis and we continue to grow our revenues. We expect to benefit from economies of scales due to the recurring nature and high margins on our disposables. We are witnessing growing interest in both our dental and medical instruments and we believe.

Speaker 3: by the safety considerations and cost savings.

Speaker 3: These factors coupled with our activities following the issuance of a tracking CPT code.

Speaker 3: should ultimately lead to increased cells and reimbursement of the complex flow system.

Speaker 3: We remain encouraged by the outlook for the business given ourselves by flying the addition of new hospitals and pain management clinics as well as expansion of our distribution partners and streamline operating structures.

Speaker 3: We are excited about the recent 510K FDA clearance for the use of Comprehlow Epidural System in the thoracic region of the spine, including the cervical thoracic junction. In addition, we are advancing a number of key initiatives following SAM approval and we are actively pursuing

Speaker 3: US Federal Supply Service approval for the Comprichloro Epidural Instrument, which potentially opens us up to decizable government market opportunities. We remain committed to driving shareholder value and look forward to providing further updates as developments unfold.

Speaker 1: I'd like to thank you for joining the call today and at this point we would like to open the call up to questions. Operator? Thank you, Aayan. I will now open the floor for questions. If you have any questions, please press star one on your phone keypad. A confirmation terminal indicate that your line is in the queue.

Speaker 1: You may press star two if you would like to remove your question from the queue. For participants using any speaker equipment it might be necessary to pick up the handset before you press the keys.

Speaker 1: Just pull a moment while we assemble our rotor. One second. Thank you. Your first question is coming from Anthony Vendetti of the Maxon Group. Anthony, your line is live. Thank you. Ari, I wanted to talk a little bit about the e-commerce site.

Speaker 3: How are you determining the effectiveness of the digital marketing? And then wanted to follow up with on the medical side, I know you've signed up some pain clinics, which is a large market opportunity.

Speaker 3: How are you driving utilization for those accounts that you're signing up?

Speaker 4: And then I'll have one other follow up. Thank you.

Speaker 4: one other follow up. Thank you. Okay.

Speaker 3: Good morning Anthony, thank you for your question. The first question, the combination of digital marketing and the success of the portal.

Speaker 3: A couple of comments from my side. First of all, we have in the first quarter of this year, on purpose invested heavily in not only digital marketing, but also partnering with leading.

Speaker 3: dental journals and organizations to make the people and the dentists aware about the launch of our portal. I was perhaps conservative in my target setting for the first quarter because

Speaker 3: We were not sure what could happen in the aftermath of the loans of the port, or because the distributor of which the agreement was ended by the end of last year had the opportunity and the right to return goods to us. That's one thing. But they also had the right to continue their...

Speaker 3: commercial activities for a 90-day period, so that would be until the end of March.

Speaker 3: As we mentioned during our earnings call 40 annual results about a month ago, we saw of course a negative impact in the fourth quarter last year as Henry Schein ordered less products than normally, but we were very pleased.

Speaker 3: that it was offset by an enhanced penetration in the current existing Herring-Shine customer-based or distributor-based during the first quarter and that has resulted in significantly...

Speaker 3: medical site, what we are doing to enhance the utility and usage of our consumables and of the Comfort Flow Epidural System. It is important that we identify those clinicians.

Speaker 3: that are evaluating, as we have reported now, three clinics, I think, in the recent media releases, that assist us and are also interested in sending in, you know, the billing and coding materials to the healthcare insurance providers.

Speaker 3: them the right documentation on our product so that they have everything available to submit that.

Speaker 3: That is important and also based on their enthusiastic reactions and 100% success rates. I know a couple of them automatically are extending their number of procedures based on the initial results that they have obtained and they are very enthusiastic about that technology. Of course, one and when healthcare insurance providers...

Speaker 4: Yes, I think just on the medical side though, or maybe just a little more color. You know, you...

Speaker 4: I think Milestone has a history of managing cash very well, keeping expenses down.

Speaker 4: You know as you roll the as you roll this out into these pain clinics what resources are you putting behind?

Speaker 4: So the rollout to ensure, I mean, you can't obviously, you know, tell a physician exactly what to do, but how do you help drive that utilization? Are there any clinical specialists that you have that are working?

Speaker 3: at least initially hand in glove with the physicians to get them comfortable using it. Yeah, absolutely. So, and thank you for asking that question because it's a good one because based in the environment that we are living in and the focus on giving the support.

Speaker 3: there is also a business aspect and an opportunity to make money for them. That's where all the large companies active in this field are working in, right? So to your point, we have our three salespeople that we still have and that are sales slash.

Speaker 3: clinical specialist, every case that is performed in the beginning for these clinicians that we have reported is with the assistant, Indio R Room of our clinical specialist.

Speaker 3: and that is also a service that we have to provide to clinicians. If you look for example, companies that are doing spinal cord stimulators, it is seldom that the clinician is alone with his nurse or his staff in the operatory room. He always has a clinical specialist from companies that are active and that have these products in their portfolios.

Speaker 3: clinical support during these procedures.

Speaker 4: Excellent. And last question, Ari, and then I'll hop back in the queue, is what conferences, what medical conferences is Milestone attending, you know, where the KOLs are there? And are there any KOLs that

Speaker 4: You feel you need to maybe, I don't know, sign up, get on a medical advisory board to help spread the word. Maybe just give us a little color on that. Thank you.

Speaker 4: feel you need to maybe, I don't know, sign up, get on a medical advisory board to help spread the word. Maybe just give us a little color on that. Thank you. No, absolutely.

Speaker 3: I always say, you know, KOLs for me, the typical KOL is the person that has done, or primarily is interested in scientific clinical research and publications. I do strongly believe that we have done our homework on the clinical side.

Speaker 3: but I always call the KOL the key opinion leader more slash the ambassador. Now to your point, you know, physicians that we have been working with and are still working with, I mentioned, for example, the president of the position.

Speaker 3: pain physicians in Florida, he is on our advisory board. And as we speak, you know, the latest...

Speaker 3: developments with the other clinicians, what we have done as well is we have called for a special advisory board for a number of clinicians that are, you know, when they are interested in working with us, that are doing a number of cases of which we then later can do a white paper publication out of that.

Speaker 3: in the process of the adoption of our technology and the use of our system. So, you know, I never call that out because it's sort of common practice within the medical field, but absolutely, we are signing our clinicians on an advisory board, in particular in these early stages and early.

Speaker 3: brainer to use it in that area due to the high mobility rates.

Speaker 1: Just as a reminder, ladies and gentlemen, if you still have any questions, please press star one on your phone keypad now.

Speaker 1: Okay, we have a question from Richard Durando, who's a private investor. Richard, your line is live.

Speaker 3: Good morning, Arwin. Good morning, Richard. How are you? I'm doing well, Arwin.

Speaker 5: Good, I'm on the West Coast. I got into the call late so I missed most of your preamble.

Speaker 5: I got into the call late so I missed most of your preamble. Oh, thank you. Thank you.

Speaker 5: question is how close are is the company to really starting to

Speaker 5: And it's how close are, is the company to really starting to sell product.

Speaker 5: I'm a dentist. I've been using your device for 20 years and just a fantastic device. And I just saw the intuition to use it right away. And then in the medical side, obviously, it's a little bit more complicated, but is there some...

Speaker 5: Is there some clarity or you can with some sense of confidence say that this thing is going to be adopted commercially by the vast majority of positions?

Speaker 3: Yeah, so that's a very good question. Well, first of all, seriously, we are selling products every day, right? That's the reason why we have the revenues that we are reporting this quarter, but that's, as you say, it's of course primarily in the dental business.

Speaker 3: What I have to say, of course, is that we should not forget that the dental business is still a rather under penetrated market and I strongly believe there is a huge potential and I do foresee the trend moving forward that we can continue to grow the dental business.

Now, on the medical sales side, yes, I do believe, depending on all the activities that we have undertaken, FDA, helping the clinicians, the tracking of the tracking code, a lot of direct-reportation marketing, a lot of digital marketing.

believe that the two major, event or major issues that could definitely further drive growth. One is, you know, whether there is overtime.

acceptance of a reimbursement code in terms of insurance providers willing to include our technology in their payment in addition to already the primary code for epidural spinal injections. Secondly, I do believe that it is important to also include our technology in our payment.

business so to say, because one of those two elements, if they are running pretty well and there's positive feedback, that will definitely drive growth. Now to your question, is that happening today or tomorrow? We have to continue doing what we know we are doing well and that's what we have to do.

project as such, where we have to follow all the strict guidelines and rules associated with those, is completely dependent on the clinicians sending in the billing and the coding material and documentation.

If you do 100 patients or 200 or 500 patients, there's no guarantee success or whatsoever for obtaining reimbursement, right? But we are making very good headlines in getting more and more patients enrolled in this program, as a matter of fact, today and tomorrow we do.

In this call, it's in a way out of our control. The only thing that we can do is providing clinicians with high quality and professional services. But I'm very positive about that. But like you said, it's a matter of time, but it can happen any day.

approval by the FDA, which titled

contingent, correct? Am I correct in saying that? It's a contingent. The FDA approval allows to use the products in the thoracic and the cervical spine.

Right, I think the wording was continuous at one point in time and that and that the reality is they they really wanted to have at some point in time, remember number of 25,000 injections given. Can you can you give us a number of how many injections?

when people said that you want to obtain a code or a reimbursement code, you have to perform 25,000 injections. That is not true. That's not correct. And that's five, six years ago, and the rules and regulations have changed. That has also made it possible for us as a company.

that the American Medical Association is publishing technologies that are illegitble for a code, but they don't decide on pricing. That is what clinicians have to mobilize themselves.

can do. That's not what the company can do. The clinicians are responsible for that. That's my point that we have to support those clinicians and identify a pool of clinicians as part of an advisory board that are willing to help and support us in making that work. That's the environment out there.

So, can you give me a number or give us a number of how many successful procedures have been done? Yeah, I can get you a number, but at the same time, if I give a number, the next question is what are the probability that we're getting? It's just, it is a little bit gassing to that extent and it is...

It's the same for example with an FDA submission. It doesn't make sense to make a lot of hype on submitting an FDA submission if you don't know whether it's going to be approved. That's the same approach that we are taking here.

every information I share, and that is a little bit more than what's quote unquote is normally allowed, including the number of procedures that we have submitted, that can result in a penalty from the AMA or for future work that we...

would submit to them that way they would neglect it. So I'm not willing to take that risk. I'm not asking you to do anything illicit. I just wanted to know if we have this concept of, in finance, visibility. That you have visibility that you, at some point in time, and I know you're dying to say this, but you can't as you stated.

visibility that, you know, in six months the way the kinetic energy is working that all these hospitals that over the last two to three years you've announced that they are trialing the system.

at some point in time, they're going to go to their people and say, we want you to push the envelope and get something going because we want to use this thing on everybody. We don't want to take a risk of having a puncture, epidural puncture. And so that would be something that...

I'm not asking you to tell me that today, but tell anybody in the call, or the rest of the world, but you know your diet. No, I think it's true. Of course, you know, we have our plans and our budget, and we have our financial models and financial visibility, absolutely. What is important is, of course, also with the activities that we are undertaking, is we are focusing in first instance.

is primarily to the pain clinics and the ambulatory surgical centers, because as you know, in labor and delivery, the costs of the consumables, they are absorbed by the overall cost for a labor and delivery procedure at the hospital. So, you know, I do believe that we are on a good track. We have undertaken the right activities, and, er...

we will share with you and other shareholders and investors at the time that we are obliged and allowed to do so. Thank you very much, sir. Thank you very much. Thank you. That does appear to be the last question. I'm now going to hand back over to Arianne for any closing remarks.

Yes, well thank you for your time and thank you for joining us on this call. As you, in summary, we are pleased, happy with the strong first quarter. We do believe that we are well equipped and well positioned to be able to do this.

to continue our journey and to make, and to tap on the potential in the medical market segment. And we will continue to hopefully share additional information when available based on the activities undertaken. So thank you again for your time. Stay safe and have a good day.

Thank you very much. This does conclude today's conference. You may disconnect your phone line at this time and have a wonderful day. Thank you for your participation.