Q2 2023 NeuroMetrix Inc Earnings Call
Yeah.
Good morning, and welcome to then your metrics second quarter 2023 business and financial highlights update my name is Mikey and I will be your moderator on the call on this call. The company May make statements, which are not historical facts and are considered forward looking within the meaning of the.
Divot Securities Litigation Reform Act of 1995 statements that are predictive in nature that depend upon or deferred to future events or conditions are forward looking statements any forward looking statements reflect current views of your metrics about future results of operations and other forward looking information.
And you should not rely on forward looking statements because actual results may differ materially as a result of a number of important factors, including those set forth in the earnings release issued earlier today.
Please refer to the risks and uncertainties, including the factors described under the heading risk factors in the company's sporadic filings with the S. E C available on the company's Investor Relations website at your metrics Dot com and on the S. E. C website that S E T Dot Gov.
Our metrics does not intend and undertakes no duty to update the information disclosed on this conference call.
I would like to introduce it in your metrics senior Vice President and Chief Financial Officer, Mr. Thomas Higgins.
Thank you, Mike and welcome to all of you who are joining Dr. <unk> and myself for today's Q2 2023 update.
By way of background, we are a commercial stage medical device company.
Addressing unmet needs in chronic pain and in diabetes.
Our products for invasive I have no direct competition and offer a worldwide opportunity.
Our business is based on a razor razor blade model with aftermarket revenue is the primary financial objective.
Our principal technologies, our quell wearable neuromodulation platform that has transitioned from over the counter to prescription.
And TPN shack, a legacy screening technology for peripheral neuropathy, particularly diabetes related neuropathy.
We maintain a strong balance sheet with about $19 6 million in liquid assets those are cash and securities.
Our capital structure is simple and debt free.
There are approximately $8 6 million common shares outstanding.
Today, we reported Q2 revenue of $1 7 million compared with $2 1 million in Q2 of last year.
The reduction in revenue reflects uncertainty in the Medicare advantage market.
Among health care insurers and providers caused by recent CMS changes in patient risk assessment rules.
Our TPN check business, which sells into that market experienced a net 16% drop from Q2 of last year.
However, within that dropped there was a 30% gain in sales for China, and Japan year on year.
Other factors affecting the Q2 reduction in revenue, whereas the quell transitioned to a prescription indication.
We're in growing fibromyalgia sales, partially offset the drop in over the counter.
And also the natural erosion of our legacy advance electrodes sales, where we continue to support our existing users, but do not promote the product and manage it towards cash flow benefits.
Aftermarket sales across all products constituted 75% of revenue in the second quarter.
Our gross profit was $1 1 million compared with $1 5 million in Q2 last year and the drop in gross profit links directly to the lower revenues.
Importantly, our gross margin rate of 68% was consistent with Q2 of 2022.
Operating expenses totaled $2 7 million virtually unchanged from the prior year quarter.
The small increase in Opex of 80000 or about 3% reflected increased personnel costs offset by reduced spending on professional services.
Our net loss was $1 $5 million in the quarter or <unk> 19, a share versus $1 2 million or <unk> 17 per share in Q2 of 2022.
Operating cash usage in the quarter was approximately $1 5 million.
Our $19 $6 million in liquid resources are projected to be adequate to support the next phase of our quell and TPN check growth initiatives and now for a doctor goes on his comments.
Thank you Tom.
Our growth strategy is primarily built on three core efforts.
First is to establish and grow the quell fibromyalgia indication in the U S market.
The second is to advance the quell neuro Therapeutics program, which may lead to additional indications and an expanded addressable market.
The third is organic growth on the DPM check Medicare advantage business.
I'll now comment on each of these activities.
First with respect to our qual fibromyalgia business.
<unk> is our wearable nerve neuromodulation platform. It is based on our proprietary adaptive transfer your chance to electrical nerve stimulation technology and.
And is the only daily multi hour wearable treatment for chronic pain syndromes.
It is FDA cleared for relief of lower extremity chronic pain and last year received FDA de Novo authorization as the first and only neuromodulation device indicated to help reduce the symptoms of fibromyalgia.
This latter indication.
Prescription.
At this time, our commercial commercialization efforts are exclusively focus on fibromyalgia indication.
Fibromyalgia is a complex chronic pain syndrome that affects up to 15 million people in the U S.
The only FDA approved drugs or Pregabalin, <unk>, which can have substantial side effects. There is a critical unmet need for additional safe treatments.
The second quarter of this year was the second quarter of the commercial launch of club fibromyalgia and followed the small amount of activity in December .
This initial phase of the strategic and intended to optimize the effectiveness of our prescription processing solution to refine the clinical and marketing messaging and to collect key performance indicators.
Our commercial team has consisted of a single dedicated head count, which certain national director of sales.
We have partnered with a national online pharmacy to fulfill both initial prescriptions and refills.
At this time, Paul Fibromyalgia is only available on a cash pay basis.
There were 123 unique prescribers during the second quarter compared to <unk> 92 in the first quarter.
Most of it in our most current prescribers, a rheumatologist pain medicine specialists and neurologists.
The cumulative number of quell fibromyalgia prescriptions that have been written increased to 490 in the second quarter from 234 in Q1.
With approximately 60% of written prescriptions being filled by patients.
The cumulative number of month refills increased to 348 in the second quarter from 141 in the first quarter.
Okay.
As recently announced we have expanded our sales force to drive further adoption.
As of the commercialization process will focus on the Texas, California, and Florida markets.
And then we expect to decide on our next expansion in the first half of next year.
Okay.
The second element of our growth strategy is to develop the quell neuro therapeutics pipeline beyond the initial fibromyalgia application.
The program is to <unk>.
So long as the treatment of chronic chemotherapy induced peripheral neuropathy or cips.
Which affects as many as 30% of the approximately 1 million people in the U S who received chemotherapy every year.
A chronic and debilitating side effect of cancer treatment and there are no FDA approved treatments for Cps CIP.
<unk> received FDA breakthrough designation for treating moderate to severe cips in January of 2022 based on our pilot study conducted at the University of Rochester.
Hey, NIH funded multicenter double blinded sham controlled trial completed enrollment in the third quarter of last year and we have now had an opportunity to review the results and have determined that they support.
<unk> 10-K filing for a quote CIP, an indication, which we expect to make in the fourth quarter of this year.
Depending on the FDA review timeline and ultimate clearance clearance decision, we believe that we should be in position to initiate commercialization in the second half of next year.
Moving to the VPN check.
Okay.
<unk> is a rapid point of care test for peripheral neuropathy, such as diabetic peripheral neuropathy or <unk>, which is the most common long term complication of diabetes.
<unk> is the only point of care peripheral neuropathy tests based on both standard nerve conduction studies technology.
Our <unk> businesses comprised primarily of <unk> sales into the U S. Medicare advantage market and international sales in China, and Japan through distribution partners about 80% of par <unk> revenues come through domestic sales.
This business has been growing for the past several years. However in the past six months substantial uncertainty was injected into the Medicare advantage sector due to policy changes announced by the centers for Medicare and Medicaid services.
We believe this uncertainty and other related factors led to our largest Medicare advanced customer and several smaller customers suspending their medical screening programs, which included <unk> and check them out of the other tests.
At this time, we did not know if this is a temporary or permanent decision.
These Medicare advantage changes are putting material downward pressure on <unk> revenues, although it is too early to determine the magnitude direction of the impacts. However, we expect that the <unk> business line will continue to generate positive cash flow by virtue of its attractive operating margins. We also believe there is a potential for resumed growth once we get through this period of uncertainty.
And that represents our prepared comments and we'd be happy to take questions at this point.
Thank you.
A reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.
Okay.
Once again to ask a question. Please press star one on your telephone.
Your first question comes from the line of William Church from <unk> Capital Management. Your line is open.
Hi, good morning.
He was reading up Scott.
University of.
Oxford, Chris December 2022, talking about title was using artificial intelligence to improve pain assessment and pain management.
Dave mentioned some of the numbers you do in terms of Americans experiencing pain.
Let me conclude a doubt quadric collective studies mentioned have demonstrated that AI has advanced understanding in multiple areas of clinical care.
One has fully discussed the application of AI based intervention and their assessment.
That was a statement or a question because I'm.
Thinking about pain.
Electric signals.
The bodies.
Networking quell device alleviate those.
It just seems that with the history you have are gathering youre really at the front line in terms of.
Just trying to.
Right.
Less non invasive solution.
Okay.
But it just seems to me like the data that you have in all of the FDA.
Trials.
Put your company in a pretty favorable position.
Yes, as I said I'll put the statement or a question, but thanks.
Thank you.
Yes. Thank you. Thank you bill.
So.
We view <unk> as a tool.
To leverage the datasets that we're collecting by virtue of having our device on so many patients. So we have very rich data sets. We have used have used basic AI techniques machine learning in the past.
<unk> continue to utilize that tool to improve.
The.
Performance of our devices as well as as the delivery of our solution to patients. So I think it's a good statement and I think it sort of more.
Flex the fact that I think that is a powerful.
Utility that I think all medical device companies should be it should be looking at.
Among those.
Yeah.
Okay. Thank you congratulations on the on the rollout of the product.
It looks exciting thank you.
Thank you Bill.
Okay.
Your next question is from the line of Jared Cohen from JM Cohen <unk> Company. Your line is open.
Okay.
Just a broad based question because now I've seen a lot of just on television and then just on the Internet.
A lot of.
Other pain management devices.
Lot of them.
Working ones advertise now on PV.
Some lower some higher than what they used to be advertised our mine.
Hi.
For over the counter I am saying.
And then.
I just wanted to see if you've seen those.
Because that was obviously, yes.
Problem, you've got I think.
Back then it was always overpriced.
The price point was over too much which I never thought this was when it was priced at $2 50 in the electronic version.
$30 each rollout over depending on how much you use them for a month or less.
And I just wanted to get your feedback because I always thought it's a great device.
Correctly.
Either worked for for the person or not correctly, there those side effects.
Yes. Thank you. Thank you Darren so are there is a lot of noise in the pain management.
Pain relief space, I think what youre seeing on TV and other.
Yes.
Digital media it reflects that.
That largely speaks to why we've taken.
Over that we've transitioned over the last several years from over the counter focus too.
Our car prescription to our therapeutics effort, where we are focusing on specific.
Disease States.
Where we have a compelling clinical trial data such as fibromyalgia, such as that's emerging for Cips, where we can.
Well, we can work with.
And generally I would say convince physicians that this is a useful useful tool for them and their patients with those specific conditions. So.
Really kind of reflecting your comment.
That's the reason we've gone away from that generalized pain management space to focusing on specific disease indications.
And also why we're going through physicians as opposed to trying to compete in the broad.
Brought kind of broad Easter.
Over the counter pain pain relief, which I think is just.
Very noisy and very difficult to to rise above that.
Above that noise. So we feel based on our initial traction that we've experienced that this is this is going to be a positive strategy to get into the hands of patients.
Okay.
The next question because going through physicians.
You know quickly.
Quickly creates fibromyalgia they.
Hey that neuro neurologist or I've never been sure or is it just a <unk>.
Ooh, which type of Doctor treats.
Yes.
So historically fibromyalgia has been within rheumatology.
Now understood to be a neurological condition. So you find rheumatol I would say the top three of Rheumatologists pain physicians for the obvious reason that just a lot of pain associated with it and neurologists.
Hey.
Okay and then.
Okay.
And then as the prescription type wardens.
Award as the prescription come further well come from does it come from Macquarie Mercy or does the doctor give it to the patients themselves.
The prescription is sent to our pharmacy partner, okay directly or indirectly from the physician either <unk> or <unk>.
The effects and then the pharmacy context, the patient and completes the prescriptions fulfilled.
They ship the product to the patient.
And is it and then it's built it's built through the patient's insurance company.
At this point.
We're not working through insurance.
Maybe something we do in the future right now.
Any.
Most online pharmacies, it's cash pay.
Okay. So it's still cash today, but FSA reimbursable I assume.
FSA and HSA Reimbursable. It yes, Okay, Alright, and then I wanted to ask alright.
I guess the last did.
The more common sense of chronic pain, so large market, but don't have a good <unk>.
Dollar number to give you at this point because of the change in the market because related to <unk> to the fact that the drugs became generic.
Okay, Alright, thank you very much.
Sure thing Sir.
Once again to ask a question. Please press star one one on your telephone.
There are no further questions at this time I would now like to turn the conference back the Doctor <unk> for closing remarks.
Thank you for joining us today on the conference call and we look forward to keeping you updated over the balance of the year.
This concludes today's conference call. Thank you for participating you may I'll disconnect have a great day.
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