Q2 2023 Nuwellis Inc Earnings Call
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When you draw the line of conflict will begin shortly thank you for your patience.
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Good day and welcome to the New Olive Inc. Second quarter 2023 earnings Conference call.
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After todays presentation, there will be an opportunity to ask a question.
Ask the question My question Dara then one on you touched on fun.
So let's try your question please.
Thank you.
Please note that this event is being recorded.
I would now like to turn the conference call, but could maybe in preventive indefinitely.
Go ahead Mike.
Thank you Sherry. Thank you everyone. Good morning, and thank you for joining us to discuss Neurolysis corporate developments and financial results for the second quarter ended June 32023. In addition to myself with US today are Mr. Hunter Emilio you Wallace as President and CEO and Lynn Blake CFO , We also have Doctor John .
I'm Jeffrey Schnell wireless as Chief Medical Officer are joining us today at.
At 815, a M. Eastern today, the wireless released financial results for the quarter ended June 32023, if you have not received no Wallace its earnings release. Please visit the investors page on the company's website.
During this conference call the company will be making forward looking statements all.
All 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.
All forward looking statements are based upon our current estimates and various assumptions.
Statements involve material risks and uncertainties that could cause actual results.
For events to 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.
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 Lester.
Thank you Vivian and good morning, everyone welcome to the World The second quarter 2023 earnings Conference call.
I would like to begin today's call with a recap of the press release that we issued this morning announcing our CFO transition.
Effective September 1st lien Blake will step down from her role as CFO .
We sincerely thank Linda for her contribution to the wellness or positive impact would be felt long after her departure.
Lynn has agreed to consult with the company through March 31st 2024 to ensure a seamless transition.
Rob Scott our current senior finance director will be appointed at least successor.
Rob has been with the company over 10 years and have utmost confidence in his ability to lead the finance organization. So the company's next finance excuse me next phase of growth.
Rob has very deep knowledge of the business and I look forward to working with him on the leadership team.
In the same vein I would like to extend a warm welcome to our newest board member, Mike Mccormack, who joined <unk> in June .
He has extensive experience as an executive in the medical technology feel would be a great value to the bore me and our entire organization.
Welcome Mike.
Turning to our earnings agenda on today's call I will provide an overview of our second quarter performance and we'd give an update on our strategic initiatives.
I will also discuss our recently announced supply and collaboration agreement with Davita.
Dr. John Jefferies, Our Chief Medical Officer will add his perspective on the debuted a collaboration as well.
Our Chief Financial Officer, Lynn Blake will then provide detailed commentary on the financial results before opening the call up for questions followed by my closing remarks.
Turning to our second quarter, we sold in the second quarter of 2023, new well has generated $2.1 billion in revenue.
A 6% decline versus the second quarter of 2022, and a 14% increase over the prior quarter.
Utilization.
Or the number of circuits per console sold increased 14% over the same period last year.
Collecting an increase in the number of patients treated with the Aqua therapy.
Offset by a decrease in sales of consoles.
We have observed similar macroeconomics conditions with other med tech companies that have announced growth in treatment procedures, but lingering capital constraints in many hospital accounts.
By segment, we are pleased to report a rebound of our pediatric business in the second quarter with sales increasing 72% from the first quarter, reflecting an improvement from the loss census, we saw in Q1.
And continued momentum in our fair heart failure segment. So.
Ported by growing awareness of our clinical evidence.
Second quarter, 2023 revenue and heart failure increased 8% over the same period last year, while critical care and pediatric revenue declined 20% and 5% respectively.
In heart failure, the 8% revenue growth in Q2 follows year over year heart failure revenue growth of 21% in Q1 2023.
These strong results can be attributed to growing awareness of our clinical data and support for them from multiple peer reviewed publications over the past several months.
Early data in the clinical and economic benefits of <unk> therapy.
We continue to focus on driving awareness among clinicians and providers to help them understand that ultra fluctuation is the next logical step in the care pathway.
In other words patients for whom oral or intravenous diabetics are not effective should immediately move to ultrafiltration therapy, which is a mechanical fluid removal solution and as such is more controllable precise and predictable.
This is the message our field organization is now delivering and based on the hard for your segment revenue. We sold the past two quarters. The message is having a positive we sold we sold as demonstrated by increased sales of disposable circuits.
Now I would like to provide additional updates on our top strategic initiatives to help accelerate clinical adoption of our athletics ultrafiltration therapy.
On June 20th.
We announced we have entered into a supply and collaboration agreement with Davita to pilot Aqua tax ultrafiltration therapy to treat adult patients with congestive heart failure and related conditions in select U S markets.
Pairing the act with X system with diabetes care team could expand access to ultra fluctuation therapy to many of heart failure patients in the U S suffering from fluid overload and reduced related health care costs for providers and payers.
The planning phase of the pilot program is underway.
Well as and Davita are working together to actively explore sites for selection and developed treatment pathways.
Through the pilot ultrafiltration therapy, using accurate X would be available at certain Davita hospital customers and outpatient center locations with both companies collaborating on the rollout of the therapy.
Initial training and patient support.
At the conclusion of the pilot Davita has the option to extend the supply agreement with <unk> for continued prohibition of ultra filtration services for in patients.
Emergency rooms.
Observed <unk> units and outpatient facilities for up to 10 years.
Davita clinical infrastructure could potentially help accelerate clinical adoption of ultrafiltration when first line medical treatments are ineffective.
Our organization is the wheel and actively collaborating with the Davita team as we prepare to roll out the therapy.
Turning to our product development initiatives.
We continue to advance the development of our pediatric continuous renal replacement therapy device.
And anticipate.
I D E approval in first half of 'twenty 'twenty four.
This product addresses the unmet needs of the pediatric patient population and could significantly increase the quality of life for neonates any small children with kidney malfunction kidney issues or those born without kidneys.
All of whom suffer from life threatening renal dysfunction.
We along with many bid pediatric Nephrologist believe this product would be a game changer for these patient populations.
I would now like to turn the call over to our Chief Medical Officer, Dr. John Jefferies to further discuss our strategic collaboration with Davita.
John .
Thank you Mr. <unk> and good morning, we believe there are multiple benefits will be realized from our collaboration with Davita.
The collaboration will increase awareness of the growing number of heart failure patients in the United States.
Accordingly, this collaboration will improve recognition of a safe and effective therapeutic option.
The form of Aqua for office leases.
Although this therapy has been available for many years awareness and access continued to be opportunities that are not fully realized.
Our team continues to increase in the incidence and prevalence across all age spectrum's, although frequently targeted by industry to research and development.
The collective approach to the treatment of volume overload continues to center on the use of oral and intravenous diuretic therapy.
<unk> offers a more predictable and precise approach to treating this very difficult clinical phenotype.
With this collaboration and the opportunity to increase access will most likely result in more utilization of it there.
In addition, this pilot leverages expertise from cardiovascular medicine, and nephrology, which provides a powerful vehicle to enhance our understanding of cardio renal syndrome.
Thank you Doug Jeffries before turning the call over to Lynn I would like to reaffirm our business fundamentals financial discipline and commitment to organizational efficiency.
During the quarter, we streamlined our commercial operations to support increased productivity and utilization.
We believe our team is now well designed to continue to increase market penetration of our Aqua ex ultrafiltration therapy.
Now I would like to turn the call over to our Chief Financial Officer, Lynn Blake to discuss our Q2 financial results. Thank.
Thank you Nestor and good morning, everyone revenue for the second quarter of 2023 with $2 $1 million, representing a 14% increase over the first quarter of this year and a 6% decline versus the second quarter of 2022 by segment second quarter 2023 revenue and heart failure increased approximately 8%.
Over the same period last year, while critical care in pediatrics revenue declined approximately 20% and 5% respectively.
As noted earlier pediatrics revenue increased 72% over the first quarter of 2023 as we saw pediatric census rebound by the end of the second quarter and as Matthew mentioned, 14% more patients were treated with the aqueduct therapy than in the same period last year.
Gross margin for the quarter was 55, 3% of sales an increase of 730 basis points compared to gross margin of 48% in the prior quarter prior year quarter, driven by a combination of favorable sales mix as well as a 100000 dollar noncash inventory write off in the prior year period related to the desk.
Simulation of a distribution agreement.
Selling general and administrative expenses were $4 $7 million in the second quarter of 2023 compared to the second quarter of 2020 to SG&A.
We used by approximately $400000.
This increase primarily reflects increased legal audit and other professional fees in the current quarter.
Second quarter, R&D expense was $1 $5 million, an increase of $400000 compared to second quarter of 2022. This increase reflects higher spend on our new pediatric C. R. R. T device as we ramp up development in preparation for IV E submission in the first quarter of 2024.
Total operating expenses were $6 $2 million in the quarter, an increase of approximately 15% compared to the second quarter of 2022 sequentially total operating expenses decreased about 11%, primarily due to reduced professional fees and lower compensation expense versus the first quarter.
Net loss in the quarter was $4 $8 million or a loss of $3 65 per common share compared to a net loss of $4 $3 million or $40 67 per common share for the same period in 2022. The decrease in the net loss per share in the current year quarter is driven by the year over.
Your increase in our weighted average share count from a liquidity perspective, we ended the second quarter was approximately $9 million of cash cash equivalents and no debt on the balance sheet and we had approximately $1 9 million common shares outstanding at June 30 of.
This concludes our prepared remarks, operator, we'd now like to open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchstone telephone.
On a speakerphone please pick up your handset before pressing the key okay. Anytime. Your question has been addressed and he would like to withdraw your question. Please press Star then two.
My first question is from Jeffrey Cohen of Ladenburg Thalmann.
Oh, Hi, good morning, how are you.
Good good morning, Joe.
So just a couple of questions for me I guess firstly.
Any commentary specific to the critical care division for.
For the quarter are down 20% year over year was at one time in nature, where any contributing factors that we should be aware of.
Yes, good question Jeff.
I believe that the.
The decline in critical care has a lot to do with our sales of consoles opening new accounts and also increasing while we called penetration in our current accounts as I mentioned before we're still seeing some of the lingering effects of the carpet.
Total expenditure of hospitals.
Got it Okay. That's helpful can you talk a little bit about the the commercial team now.
Now versus last quarter, you talked about some streamlining of bluestone could you elaborate a bit on the force. Thank you.
Yes of course, we consolidated three territories.
Because we felt that it was more efficient and more productive to consolidate these territories. They were close in proximity we had a very good sales reps and clinical specialists covering those.
After the consolidation and we feel that this is going to be a more efficient way for us to provide clinical support.
Through these territories.
Okay got it and then lastly for us Linda any commentary on margins certainly.
Other than last year, not quite to the level that we were expecting do you expect that to come back a little bit in your favor over the back half of the year or should we kind of meet our mesh estimates for the back half to match up with the phone yeah.
Yeah and so.
So the year over year improvement was roughly half driven by favorable mix with higher disposable sales and about half by the write off of the.
Write off I mentioned in the prior year quarter, which was about $100000 sequentially.
Sequentially, we would expect modest improvement in the second half of the year and along with improved volume and somewhat dependent however on next day disposal.
When Tom called because we also expect higher console sales in the second half of the year. So.
You know I would say modest improvement sequentially.
Okay got it that does across thanks for taking our questions.
Thank you Jeff.
The next question is from entity, then Niki Maxim group.
Thank you.
I ask a couple of questions about the Davita agreement.
Can we just talk about the I don't know if you give the number but.
How many <unk> systems were sold or reactivated this quarter.
We have activated.
Reactivated three accounts and we have opened two new accounts.
In our in the first half of this year.
Okay. So reactivate three opened two new okay.
And then.
Obviously, the definitive agreement.
<unk> definitely helped drive utilization is there anything else.
In the interim that the company.
<unk> is doing differently this year.
Versus last year due to drive increased utilization of the current systems that are installed.
Well in addition to the Davita, but we expect that to have a an important increase in the utilization we have the clinical data that has come.
Come out in the last seven months in peer reviewed journals that has driven driving a lot of the.
He utilization, especially in the heart failure segment, we expect a few more.
Publications are.
The second half of this year.
In critical care cardiac surgery specific.
And then we expect those publications to continue driving.
Utilization.
Okay, Great and then just a little more on the Davita agreement too.
Select markets that you are going to roll this out into.
Have those been identified and then.
Any any color on how.
Once it's been rolled out into those select markets.
Uh huh.
Whats the timeframe if there has been one established two to roll it out into other territories.
Yes, yes, we have identified a handful of centers, where we where davita has good presence and so do new wellness and this is the ideal accounts for all of them started to pilot.
We are right now in conversations with them.
There is a lot of steps before we.
Start having patients treated in the.
Multi treatment rooms in a beta as a hospital accounts.
And we expect to start treating patients in November of this year.
In November of this year, okay great.
And then just on the.
Just on the.
Cash burn in and.
Is there any.
I know I know, you've you've cut costs, but are there any other costs that you think can.
Can be cut to control the cash burn.
Or do you feel like at this point.
The company is.
Is lean and it is right sized as it could be at this point.
You know there is always ways to.
Cut more expensive, but we have to we're playing a balance between cutting expenses in our future we are investing.
If he can't dollars in our reverse trial multicenter randomized trial as well as in the development of the pediatric device.
We have also streamline our operations here in the home office, so with those changes and the consolidation of few of the territories. We believe that we are well positioned to have an efficient.
Organization as well as prolong our runway.
Anthony I'll just add we have it has had high professional fees in the first half of the year associated with a number of activities, including negotiation of the Davita agreement as you would expect so we would expect I expect lower professional fees overall in the second half of the year as well.
Okay, Great that's helpful.
Alright, thanks, Mr. Thanks Lynn.
Thank you Anthony.
The next question is from Brooks O'neil of Lake Street capital market.
Good morning, everyone. So I'll just follow on with it in these questions a little bit.
Strikes me I guess that the the opportunity is.
It's really substantial for you guys.
Assuming they get engaged in.
Really promoting the products. So what are your realistic expectations for for what.
What what impact the BD agreement can have.
And you said I think the Anthony that.
They're going to start selling in November .
Well, what's sort of the timeframe in which.
You you would expect some impact and are we thinking this could be a meaningful inflection for the revenues of the company or.
Are you are you would you put more eggs in the basket or the reverse trial or the pediatric device.
Well.
Let me see if I can unwind the three points that you were trying to make there.
First of all.
Yeah.
First of all I do believe that this is going to be an inflection point for us.
Their sales organization is four times the size of ours are they have a lot more accounts under contracts.
And so they have a very mature and extensive are clear.
Clinical team.
Regarding the expectation. So that's what we are doing the pilot we're going to learn a great deal during the pilot, which has already started as I mentioned before.
The pilot will last until May of next year as the time that we have given a pilot.
To be successful and also to learn a lot about why does the quantification of these potential collaborations.
Did I answer okay.
Yeah, you kind of do I know.
Because I was going to add as well so I'm thinking about it.
The uplift in revenue trajectory as Nestor said the pilot goes through most of the first half of next year I think the second half of next year could be a significant uplift once commercialization starts and a factor in that as you know we mentioned in the call. We're continuing to really see headwinds from hospital capital purchase.
Cycle, and we're not alone in that and it's not a we sell the product to Davita davita.
You have to sell the product, they're just offering a treatment across their Saturday says is division. So that will also be a really a tailwind.
Tailwind for us to have to be at around that capital cycle.
Sure.
I mean I'm not.
Not to beat a dead horse.
He asked about this over time, but every time I think about the situation I think.
And let's say.
Really don't understand the claw back to hospitals and other providers rollout relative to hospital readmissions.
We need this seems like a no brainer for a hospital, but dealing with heart failure patients could be dealing with them in an outpatient setting.
Eliminate or reduce.
Hospital Readmissions related to fluid overload.
And yet.
Even with all of the things you've been doing it it seems like getting traction.
It's hard.
I just would love any insight you can offer in terms of.
What.
You know preventing these hospitals from seed what what seemed fairly logical and the obvious to me.
Yes, no we totally agree with you Brooks.
The way that these technologies working have a significant clinical and economic impact to patients providers as well as hospitals.
We need to be patient because in med Tech as you know very well clinical evidence is very important and we have received a lot of publications in the last seven months, but the unequivocal data for us is going to be the reverse trial.
And that's why we continue to conduct that trial spent resources in the trial to get that information that we need.
And also in the same time, we continue to work on reimbursement.
And try to and work towards getting this therapy in the guidelines. So that's kind of the path that we are taking and we continue to be focused to make this therapy the standard of care.
Mhm.
All right, it's very easy I believe it should be.
Okay.
But I was just going to say that it is not easy to change the trajectory of medicine. When most of these patients as Dr. Jeffrey mentioned.
Been treated with oral and intravenous diuretic.
Despite the fact that he has been a lot of.
Technology available for more predictable.
Ways to remove fluid from patients that are suffering from fluid overload.
Yep.
I get that I mean, when I E.
The data is still the same that it was a few years ago that.
Heart failure and fluid overload.
Number one cause of our.
Of hospital Readmissions.
Across every.
The area of medicine today.
Yes, we believe that that is what the data is showing that of the malian right heart failure hospitalizations.
90% of them are due to the symptoms of fluid overload.
Right.
Wow and Brook, alright, or messages our message is working.
Increased the number of patients that are treated with <unk> by 14% over last second quarter of last year.
So we continue to increase the utilization.
The number of patients treated and that is because of the clinical data and that we have.
Provided to the physicians.
That's good.
Alright.
I continue to believe so.
Yes on working up yet continue believe in Brooks.
Right.
Yes.
Thank you.
Thank you Brad.
Are you.
This concludes our question and answer session I'd like to turn the conference back over to Mr.
Okay Mike.
Well. Thank you operator in conclusion I want to reiterate how excited I am about our future.
Our new collaboration with Davita, the growing body of clinical evidence and the pediatric product pipeline all supports our efforts to make the Equinix ultrafiltration therapy, the new standard of care and available to fluid overload patients resistant to diabetics, which today is the current standard of care.
On September 21st of next month, New wells will be participating in a fireside chat at the virtual Gilmartin group emerging growth showcase.
Live and archived access would be available on the investors section of our website.
As we conclude our call I would like to thank all our stakeholders well as employees stockholders physicians nurses patients and health care workers in the field without you we would not be able to achieve key advances in transforming the lives of patients suffering from fluid overload.
Thank you for your ongoing engagement and support.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.
Okay.
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