NeuroOne Medical Technologies Corporation Q2 2023 Earnings Call

Speaker 1: And that.

Speaker 2: Ladies and gentlemen, thank you for standing by and welcome to the NeuroOne Medical Technologies Corporation's second quarter fiscal year 2023 financial results conference call.

Speaker 2: Today's call will be conducted by the company's Chief Executive Officer Dave Rosa and Chief Financial Officer Ron McClurg. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of the following.

Speaker 2: of U.S. federal security laws with respect to future operations, financial results, events, trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified dates.

Speaker 2: Forward-looking statements may involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements. See Nora One's corporate update press release and SEC filings for information regarding.

Speaker 2: specific risks and uncertainties that could cause actual results to differ.

Speaker 2: Except as required by law, we undertake no obligation to update such forward-looking statements. With that said, I'll turn the call over to Dave Rosa, CEO of Nuro One. Dave, the floor is yours. Thanks, operator. During our fiscal second quarter and through today,

Speaker 2: We continue to make progress towards the commercial launch for the Evo SEG product line.

Speaker 2: We announced the commercial release of the product line and the completion of initial training with Zimmer Biomet sales personnel for a limited launch.

Speaker 3: In addition, we also fulfilled five orders to Zimmer Biomed for the initial launch. The first clinical case was successfully performed at the Mayo Clinic by Dr. Jamie Van Gompel using a stereotactic frame system.

Speaker 3: An additional procedure using the EVO SEG electrode in robotic neurosurgery was performed at a different medical facility. This procedure was the first to utilize Neuro1's EVO SEG electrode with Zimmer Biomed's Rosa Onebrain, a robotic platform that assists surgeons in planning and performing complex

Speaker 3: yet minimally invasive neurosurgical procedures.

Speaker 3: Finally, we presented the complete EVO product line at the American Association of Neurological Surgeons Annual Meeting in the Zimmer Biomit booth.

Speaker 3: Today, we are excited with the physician's feedback and we'll provide future updates on our progress.

Speaker 3: Regarding our 1RF ablation system, we mentioned last quarter that we were planning to complete internal device verification and validation protocols for the final 1RF system.

Speaker 3: I am pleased to announce that we were able to complete these tasks as well as completing usability testing with 15 neurosurgeon thought leaders.

Speaker 3: We are waiting for additional testing to be completed along with other documentation from a few key suppliers, but remain on track for an FDA 510K submission in the second calendar quarter of 2023.

Speaker 3: During the quarter, we also continued discussions with a few strategic organizations regarding their interest in our technology. Next quarter, in addition to submitting a 510K for the 1RF system, we expect to transfer the project to production activities.

Speaker 3: We also have plans to complete an Envivo animal study with key neurosurgeons.

Speaker 3: Finally, we are scheduled to present results of a pre-clinical study at the neurological disorder summit in June .

Speaker 3: Next, I want to update you regarding our progress in the development of electrode to provide chronic stimulation and recording to treat chronic back pain due to multiple failed back surgeries.

Speaker 3: We successfully implanted a paddle electrode in an animal model via surgical means.

Speaker 3: Benchtop testing was also successfully completed on delivering a paddle lead percutaneously through a needle.

Speaker 3: Next quarter, we expect to complete percutaneous placement in a spinal cord model by one of our physician advisors, as well as complete an animal study designed to assess the electrode's biocompatibility.

Speaker 3: In the second fiscal quarter, we discussed the potential for our electrode technology to offer the ability to deliver gene therapy or drugs as well as record the drugs impact to the patient.

Speaker 3: I am pleased to report that we successfully completed feasibility bench top testing of our initial prototype and are planning on conducting additional testing in the small animal model.

Speaker 3: Position enthusiasm remains high regarding the system.

Speaker 3: During the second fiscal quarter, the company also strengthened our management team with the hire of Anthony Malar as vice president of Operations. Anthony has held similar senior level roles with large well-respected medical device organizations, such as Boston Scientific, Metronik, Miniatronics, and Great Batch, where he was involved with Electro technology that was in development.

Speaker 3: We also expanded our patent portfolio with a new US patent title, improved neural depth probes and related systems and methods regarding our thin film SEG electrode technology.

Speaker 3: Finally, we also delivered an oral presentation at the annual North American Neuromodulation Society meeting, also known as NANDS, titled, Electrochemical Characterization of the First FDA-Cleared Ten Film Electroads for Recording and Stimulation of Brain Activity.

Speaker 3: Thank you for your time and attention. I would now like to turn the call over to Ron McClure for a more in-depth review of our fiscal second quarter financial results. Ron. Thank you, Dave. Product revenue was 466,000 in the fiscal second quarter of 2023 compared to product revenue of just 37,000 in last year's second quarter.

Speaker 3: In the first six months of fiscal 23, product revenue was 581,000 compared to 70,000 for the same period in fiscal 2022.

Speaker 3: Collaboration revenue was 1.46 million in the first six months of Piscal 2023 compared to collaboration revenue of 6,000 in the first six months of Piscal 22. Collaboration revenue was derived from the Zimmer Development Agreement and it represents the portion of the exclusivity and milestone fee payments.

Speaker 3: that were eligible for revenue recognition during the respected periods.

Speaker 3: Our total operating expenses in fiscal second quarter of 2023 were 3.5 million compared with 3.0 million in the same period of the prior fiscal year.

Speaker 3: R&D expenses in the fiscal second quarter of 2023 were 1.7 million compared with 1.2 million in the same period of fiscal 22.

Speaker 3: SGNA expense or selling general and administrative expense in the fiscal second quarter of 2023 was 1.8 million compared to the same 1.8 million in the prior year period.

Speaker 3: For the first six months of fiscal 23, total operating expenses were 6.8 million compared with 5.8 million in the same period of the prior year.

Speaker 3: 3.3 million for the first six months of fiscal 2023 compared to 2.3 million in the same period of fiscal 2022. SGA and A experiences in the first six months of fiscal 2023 were 3.5 million compared to 3.6 million in the prior year period. Our net loss was 3.5 million for the fiscal second quarter of 2023 compared to a net loss of 3.1 million in the prior year period.

Speaker 3: Net loss for the first six months of 2023 was $5.3 million, compared with $5.9 million in the same period of fiscal 2022.

Speaker 3: The stocking situation at Zimmer, I mean, do you expect additional shipments during the cutting quarter? Are they pretty good for the time being? How would you characterize the situation at the moment?

Speaker 3: Yeah, so thanks then, by the way, thanks for joining. So as we said earlier, we've fulfilled so far five orders. I think that probably ideally we all would have liked to maybe have.

Speaker 3: done a much broader launch initially, but I think both of us have been through this enough times to know that you always want to make sure that everything that you've seen and benched top animal preclinical, cadaver testing and even the handful of...

Speaker 3: clinical cases that we have, we want to make sure that there aren't any surprises. So, with the inventory that we have now, and that XMR has now, we feel that it's adequate for at least the initial launch.

Speaker 3: But the company is very confident, especially what we've witnessed, say, over the last six months, in the ability of our suppliers to meet the increased demand that we'll have.

Speaker 3: So, so far, we feel pretty good, but we do expect that there'll be additional orders coming in as we begin to expand the launch.

Speaker 4: Okay, that's helpful. And then, but you mentioned there's been a handful of cases now, but any kind of feedback that you can share all those cases have gone.

Speaker 4: and then you mentioned there's been a handful of cases now, but any kind of feedback that you can share all those cases have gone. Yeah.

Speaker 3: So what's neat is that we had one done using just stereotactic frame and then one done using the Zimmer Rosa one robot, which I think we'll see the majority of cases being done using the robot. But in the case of so far the feedback's been...

Speaker 3: Pretty much what we expected, given the amount of feedback that we had prior to this. And maybe with some specifics. In particular, the handling of the electrode, we've had positive comments on that, meaning just the tactile feel when you're placing it.

Speaker 3: The resolution, there's been comments, positive comments about the clarity regarding the waveforms. One thing that we weren't necessarily sure of, but we're happy to hear is that you don't see much distortion, much artifact on a CT scan.

Speaker 3: when there's an image taken of it, which is one of the challenges with some of the other devices today. So, get too much artifact. It's difficult for a physician to really assess what's going on in the brain. So far, that hasn't been the case with this device. Comments on accessories, positive comments on that, in particular, you know, are anchor bowl.

Speaker 3: Again, very good stability with respect to the anchor bolt. And, you know, one of the cases, the most devices that were tested in one of the cases was 18.

Speaker 3: So, and we haven't had any device performance issues. It's still early, but, you know, it's encouraging, and it's really what we expected out of the device.

Speaker 4: Okay, that's good color. And then, on the upcoming milestone, that you mentioned in the Buster Leaves, the expanded sales training for the FEG product line of the Zimmer sales board, how broad does that go? I mean, is that basically just to the folks that are sawing the robots, or does it go beyond that?

Speaker 3: So there's really two groups involved at Zimmer in selling the devices. The robotics group is involved. They were not involved in the sale of the cortical electrodes because obviously the cortical electrodes aren't used.

Speaker 3: in conjunction with the robot, but the existing sales force that was selling cortical remains the primary contact for these devices, but they're also receiving assistance and participation from the Zimmer robot group as well.

Speaker 4: And so the training that's going to take place is that for both groups or...

Speaker 4: Yes, and it will be the full sales force. Obviously, initially, we're really focusing on the sites that were targeted for the initial launch. We will have to do broader sales training as we expand the launch of the product. Okay, got it. Lastly, for me, and I'll jump back in queue, but the one on the one on that testing with the 15 neurosurgeons, we're looking for the feedback that you've gotten there. I mean, were the comments fairly similar between the neurosurgeons that were testing it out and then what do you have?

Speaker 4: kind of left to do there. I know there's I think you're going to do some more testing there with a half of insertion. There's something. Can you talk more about that?

Speaker 4: Sure, so probably the proper terminology to use for the testing I was referring to when I said usability. It's called summative testing, which is included with your submission to the FDA. Basically what it is is that a surgeon...

Speaker 4: manual in front of them.

Speaker 4: test reports being written up. We're really at the final stages of this, but it's a lot of paperwork. So we just need to get this additional documentation from our key vendors so that we can put it into the 510K and get this submitted. Okay, got it. That's all I have for the moment. Thank you very much for taking the questions, guys. Thanks, Ben.