NEXGEL Inc. Q1 2023 Earnings Call

In the first quarter of 2023 branded product revenue was 51, 6% versus 44, 4% for contract manufacturing revenue.

Gross loss for the first quarter of 2023 with 57000.

Third to 22000 for the same period in 2022.

Gross margin loss for the first quarter of 2023 with nine 2%.

Compared to a gross margin loss of five 6% for the first quarter of 2022.

The increase in the loss was mainly due to the increased manufacturing of promotional materials and customer product samples to support our new product line growth based on our projected revenue growth for Q2 2023, we expect significantly improved gross margin cost of revenues was 677.

For the quarter ended March 31, 2023, an increase of 62% compared to 418000 for the quarter ended March 31 2022.

Total operating expenses, including R&D and SG&A expenses increased to 826000 for the three months ended March 31 2023.

<unk> 790000 for the prior year period.

The year over year increase was primarily attributable to the factors I described earlier, including higher expenses related to new product line growth. Other factors included increased Amazon selling fees as well as an increase in advertising and marketing.

This was partially offset by lower investor and shareholder services expenses due to the initial fees, we incurred in 2022 related to our NASDAQ listing research and development expenses increased slightly by $5000 to 29000 for the three months ended March 31 2023.

From 2004 thousand for the three months ended March 31, 2022 net loss for the quarter ended March 31, 2023 improved to 850000 or 15 cents per basic and diluted share.

<unk> to a net loss of $1 8 million or <unk> 33 per basic and diluted share for the prior year period.

As of March 31, 2023 next gel consolidated had approximately $5 8 million of cash and cash equivalents and marketable securities.

Which includes an investment in treasuries of $5 million as of March 31, 2023 next gel had $5 million 614028 shares of common stock outstanding I will now open the call for questions operator.

Thank you, Sir ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone.

Again, that's star followed by the number one on your Touchtone phone if you would like to make a request. Please press star followed by the number too.

Please standby, while we compile the Q&A roster.

Your first question comes from the line of noise about mine from Maxim Group. Please go ahead.

Hi, everyone. Thanks for taking my questions and congrats on a great quarter other.

A few questions. If you don't mind I'll just start.

To start on your guidance could you kind of give us more color on what are the contributors to the $1 million.

What kind of gives you confidence or visibility that youll generate one mill and <unk> does it also include like any potentially preexisting contract.

D. G labs like any work there we planned on doing that was going to contribute to that.

So.

Good to hear from you again.

So we are very confident about it because we're already halfway through the quarter and we see trends both on Amazon as well as existing contracts and orders that have already come in for the quarter.

Our.

Sales with CG labs don't count towards our revenues anymore.

When you look at the $1 billion you have to you have to say okay. It includes sales of <unk> is going to make because we're consolidated it includes an increase in our sales of substantial increase in our sales based on what I'm already seeing halfway through the quarter, but then we have to back out the next gels case.

One of our two largest customers because those sales don't count for us anymore.

Got it understood and you guys have talked a little about your.

And gross margin improvement could you sort of give I guess more color on what do you think the cadence.

That improvement will be do you think there'll be more significant and like let's see the second half of fourth quarter or do you think this would be like continuous through from <unk>.

I think youll see I think youll see the Cogs improved dramatically.

Starting in Q2, but you'll really see it kick in in Q3 and Q4, one of the things that we discovered was that one of the best things. We can do when we launched a new product with giveaway samples and some of these samples are higher priced and we've given away a significant number of samples on amblyopia.

Two the doctor's offices to generate interest we've been giving them free samples for their patients to get the patients used to it so that combined with the giveaways that we've discovered work really well for feeding on Amazon in our in our branded product sales resulted in a manufacturing a lot of product in Q1, and some of that will be also reflected in Q2.

Or just strictly cost of goods, because we were not going to sell them, we're just going to give them away.

Got it and he asked you kind of brought up my next question.

It's actually been on the amblyopia patch.

Sort of early days, but what kind of feedback have you been receiving from ACP that use the product and also are you seeing that children are sort of sticking with your hydrogel path as opposed to the existing.

Existing patents.

So the response so far from the Doctor's offices has been phenomenal. So it's been really great. Thanks. So much they've requested more samples are telling us their patients really like them. It's a little early for us nor do we have the kind of feedback for me to say, yes trials using our patch more and sticking with that compared to something else, we don't have that sort of feedback yet.

But the feedback from the actual practitioners has been overwhelmingly positive.

Got it and other practitioners themselves can you sort of talk about I guess the breadth of the customer is at right now it's like a small segment for a small part of our practitioners prescribing most of the product or are you finding that it's per relatively diverse in terms of your.

Customer base.

And I guess, just getting I know you mentioned there are requesting more samples, but have you also guide request or I guess larger bulk orders for the product. Yes. So so we have depending on the size of the practices, we've gotten preorders ranging from five boxes to try it out to 100 boxes to 200 boxes, so really depends on how many.

Pediatric ophthalmologists are in the practice like like anything else it varies widely.

I'm sorry, not for the first part of your question again.

Yeah I was also asking about like the breadth of customers are you just seeing like I guess, a few practices writing a lot of.

Scripts or is it like large diverse group of practices writing.

So right now we're focused on the pediatric ophthalmologists they are the ones that the frontline who understand what the kids are going through they are the ones that have a choice of directing them to the.

The traditional pirate patch glasses patch put this pattern your eyes. They are the ones that can speak to them about.

This is an alternative and one of the things that we noted when we went to the <unk> conference back in March was I would say a very high percentage, 20%, 30% of the doctors came up and said Oh My God. This is exactly what we need because we're even using like milk of magnesia to try to relieve the irritation in the pain that these kids are suffering.

We're talking about Milka magnesia around their eye and then put the patch over that so this will be a godsend for that and Thats basically the feedback we've gotten so right now those are our kols as well as our distribution network and we're very focused about getting the product out to them getting them to try the product and then taking preorders from them. So we've taken preorders from quite a number of practices already at this point.

In anticipation of our June launch.

Got it and in terms of the practices themselves are you finding that there's any geographical areas that you see strong order flow from or is it like relatively I guess distributor across the country.

Yes, it's distributed across the country based on who we actually met at a positive first targets that we're going forward. We came back with about 150 different practices that gave us strong indications of interest that we had to follow up with now of that number some of them are internationally. There were some international doctors there we've got a lot of interest from Israel and from Italy, and a few other.

Places, but right now we're focused on the U S first.

And it's spread out everywhere, we've got Midwest, We've got some on the West Coast, We got a lot in the northeast. It's really we haven't got enough of a pattern yet to say geographically were strongest.

Got it and then just.

I guess one last question then just that tomorrow at all Joe.

You guys, obviously got a lot of traction and that brand aligned.

At this point.

Just a couple of years past launch.

Hum.

Have you given any consideration or are you thinking about potentially.

I'm going to like physical retail spaces.

Pharmacies or other types of outlets.

Yes, that's a great question and that's exactly what we're doing now we're currently talking to folks about distribution deals potential branded deals with some of the some of the larger pharmacies. We're in discussions with a few foreign companies about possibly distributing us.

In Europe and beyond so that is the next logical step. We now look I was very very cautious about going to retail I've said it a million times that you know if you go to retail too soon you don't understand your product you don't have the product viable they'll take the product they'll charge, you arm and a leg for it they'll tell you need an expensive and cap it will sit on the shelf.

We will not sell that will return at all and they won't pay you and the product is needed forever. So we didn't we held back on purpose, but now we've reached a point and by the way the people that we're talking to them for distribution are very pleased that the product's never been shown before.

We're now reached a point, where we have three hero.

Titles are three hero Skus that are absolutely deserving of going to retail and thats going to be our next focus.

Got it thanks for taking my questions and once again congrats on the quarter.

Thanks, Dan.

Thank you.

This concludes the question and answer session.

This concludes today's conference call you may disconnect your lines and thank you for participating have a pleasant day.

Yeah.