Q3 2023 Milestone Scientific Inc Earnings Call
Yes.
Greetings and welcome to milestone Scientifics third quarter 2023 financial results and business update conference call.
At this time, all participants have been placed in a listen only mode and the floor will be opened for questions. Following the meeting.
In the presentation, if anyone should require operator assistance during the conference. Please press star zero on your phone keypad.
Note. This conference is being recorded.
Ill now turn the conference over to your House, Mr. David Waldman Investor Relations David over to you.
Thank you Jenny and good morning, everyone and thank you for joining milestone Scientifics third quarter 2023 financial results Conference call.
On the call with US today are orienting overhauls, Chief Executive Officer, and keeps you Harken controller of milestone scientific the company issued a press release today containing third quarter 2023 financial results, which is also posted on the company's website. If you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications.
That you want to 6711020.
Company's management will now provide prepared remarks, reviewing the financial and operational results for the third quarter ended September 32023, before we get started we would like to remind everyone that during this conference call. We may make forward looking statements regarding the timing and financial impact of milestones ability to implement its business plan expected revenues and fuel.
Your success.
Statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond milestones control.
Some of the important factors that could cause actual results to differ materially from those indicated by the forward looking statements are general economic conditions failure to achieve expected revenue growth 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.
Milestones periodic filings with the Securities and Exchange Commission, including without limitation milestones report on Form 10-K for the year ended December 31, 2022, and milestones report on Form 10-Q for the third quarter ended September 32023, and forward looking statements made during this call are based upon management's reasonable belief as of todays date.
November 15th 2000, Twenty's, great milestone undertakes no obligation to revise or publicly update any forward looking statements for any reason with that we'll now turn the call over to Oregon, Hobbyhorse Chief Executive Officer. Please go ahead Orient.
Thank you, David and thanks to everyone for joining us today.
We achieved revenues of $2 1 million for the third quarter of 2023. However, these results do not reflect the true underlying improvements in the business.
Most notably domestic dental sales increased by 45% due to the early success of our new online store for selling and shipping the S. T. A single tooth anesthesia system and.
Hand pieces directly to dental offices and dental groups within the United States.
We achieved these results while moving away from our former distributor of Henry Schein, and thus improve an important validation of our strategy.
Even more notably the new direct selling model has resulted in an increase in gross profit for the third quarter of 2023 in fact, our gross profit margins increased from 66% for the third quarter last year to 73% for the third quarter of this year.
We achieved growth in our domestic revenue and margins. Despite a small sales team, which shows the potential of our new business model.
And while we could spend more to bring on more sales representatives are focused for the time being is on maximizing profitability with a streamlined operating structure.
In addition to higher margins. This strategy has provided us a closer and more direct relationship with our customers, thereby increasing our stickiness with the dentists, allowing us to do a better job selling and improving customer service in other words based on the obtained cost.
Tamara identification and purchases patents, we can now focus on the basic principles of sales execution being new customer acquisition developing existing customers waking up so-called sleeping with Goldman customers and Upselling activities.
At the same time, we have engaged in more direct to consumer marketing. These activities have resulted in leads from dentists contacting us directly to order our instruments because patient requested them to do so.
We will continue to increase our marketing efforts with dedicated campaigns directly targeted at patients.
Given the domestic traction we are expanding our efforts to enter new international markets and deepen our penetration within existing international markets, while international sales declined.
It is important to note that orders from third party distributors can be lumpy due to the timing and the size of the oldest nevertheless.
Our international pipeline remains solid and we expect our international sales to resume growth.
We also look forward to announcing the addition of new International partners, which should support our global expansion strategy over the coming quarters.
It's also worth noting that our dental division continues to operate profitably.
In fact, the dental division generated over $458000 of operating income on a standalone basis, which is 48% increase over the same period last year.
So to summarize we believe that through our 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 as we continue to grow our revenues, we expect to benefit from economies of scale as well as the recurring nature on and high margins.
Well now disposables.
Turning to our medical Division, we have made significant progress rolling out our compute flow epidural system spin.
Specifically, we have added a new distributor and expanded adoption of the concrete flow technology and the prominent hospital system in pain management clinics.
Towards this end, we commenced sales of concrete flow epidural disposables until island ambulatory surgery Center in Brooklyn, New York.
Adoption of the technology by this clinic follows a successful evaluation process by its founder and medical director, Dr. Lee and Wrightsman, an intervention of pain medicine physician.
Sales to island ambulatory surgery center represent the company's first foray in the ambulatory surgery center market, an addressable market of more than 9000 incentives across the U S.
Doctor Wrightsman was one of a team of four doctors, who completed 18 cases, using the content flow epidural system in which they reported a 100% success.
The FDA evaluation included epidural injection procedures within the Lombard thoracic and cervical thoracic junction of the spine.
Additionally, we are working closely with a major hospital system to expand use of the country flow beyond labor and delivery to now include used with neuro stimulation spinal cord stimulator implantation procedures.
The <unk> epidural system has proven to be a tremendous assistance and performing spinal cord stimulator cases, specifically comfy flow helps to minimize post operative complications of spinal cord stimulator implementation.
These complications include intra operative cerebral fluid leakage and trauma to underlying nerve roots.
Cerebral fluid leakage requires a post operative blood patch as well as radical lettuce cases that require extended post operative admission and post operative steroid injections as a potential complication of this procedure.
It has also decreased operative time for the surgery by around 15 to 20 minutes per procedure.
Loading to the clinician feedback.
As more and more physicians and anesthesiologists perform procedures and submit for reimbursement. Our goal is to secure broad coverage for our technology as we continue to execute on our goal of establishing the comp with flow epidural system as the standard of care and Abdul analgesia.
During the third quarter, we reported an important milestone.
Reimbursement from commercial payers for patients who were involved in motor vehicle accidents.
We are now building on this success and making continued progress advancing.
Our reimbursement strategy.
Specifically, we are supporting clinicians utilization of the concrete slow epidural system across a variety of use cases, which is building support for the appropriate level of reimbursement from insurance providers.
<unk> physicians have reported back on claims activities for that payers and we are encouraged by the feedback from the insurance providers.
I would now like to take a moment to discuss our reimbursement strategy in more detail. As this is really critical to understanding our overall strategy and the outlook of our medical business.
Significant progress has been made in three important areas related to reimbursement one provider utilization the utilization of country slow secondly claim submissions for country slow and last but not least acceptance of the country flow New CPT code.
By health care payer systems for claim processing.
We have established advisory advisory sites across the U S. The direct actively utilizing content flow and submitting claims to payers across the country.
This is important in demonstrating widespread utilization of the technology.
To date physicians have submitted a total of 87 claims stood a respected payers using our tracking codes to identify the use of concrete flow technology when used with an epidural steroid injection primary procedure CPT code also called the primary codes for epidural.
Steroid injections.
If you recall the American Medical Association assigned this CPT code our code as an add on code to be used in conjunction with one of the eight existing epidural steroid injection clubs.
We are on target to meet our projection of over 100 claims submitted before the end of the year to payers across the country.
Claims are being submitted to Medicare as well as commercial Payors. Additionally, some clinicians have submitted claims for motor vehicle accident patients and Thats, where reported previously three commercial payers have responded to these claims submissions and paid for it.
I encourage that healthcare payer systems appear to have our code loaded into their systems and the code is accepted for claim processing versus a claim rejection because to code is not recognized.
Category III codes like ours are designed for tracking utilization of new and emerging technologies.
The submission of claims by our providers and recognition of the category III code by the payers is an important positive step along the journey to positive reimbursement for our carbon free flow, which will drive further commercialization of the comfy flow epidural system.
Our.
Pfizer is physicians are beginning to report back on claims activity from that players.
There is a wide range of responses and I'm very happy to report that the mix of responses has been exactly as anticipated.
Some of the payers are asking for more information about the comp refloat because it is new to them all of those are covering based on their established policies.
There have been denials reported rest assured all denied claims are being appealed through each space individual appeals process dinner.
Denials are expected as part of establishing utilization and payment for a new code.
Moreover, the high level of claim activity that is being generated by our advisory sites is providing an opportunity to engage with the payers to directly educate them on comp Refloat technology and the unmet patient need the technology serves.
So to summarize our reimbursement progress we are on target to deliver on our original plan to drive utilization by supporting our advisory clinicians in claims submissions with over 100 claims expected to be submitted by year end.
Additionally, we are providing support for each individual claim to have an appropriate response.
Finally, the increase in utilization provides milestone the opportunity to engage with payers to directly educate them on coffee flow technology.
Turning to the international front, we are expanding our network of distribution partners for comp will flow.
Most recently, we appointed a premier distributor in Spain, which we look forward to announcing in the near term.
<unk> represents an important market for us with a population in excess of 48 million people and a growing number of epidural procedures, each year and pain management in anesthesiology.
Overall, we are targeting independent distributors with existing relationships within key global markets and proven track records introducing medical devices within that territories, we look forward to announcing additional international distributors as we advance our commercial.
Rollout.
We also believe there is a market opportunity for our company slow epidural instrument within federal and other government agencies as our system can contribute to both improve patient outcomes as well as increased efficiencies.
As we have discussed in the past we are advancing initiatives following Sam approval and working to secure approval within FSS. The federal supply system. At this point, we believe we believe it's another question of if it's a question of when.
FSS approval would open up the sizeable government markets.
With this goal in mind, we are doubling down on our efforts to penetrate the D O D and government markets.
We were recently invited to present at the International Health Care Summit, which took place last week and key if Ukraine.
The event was an initiative by the U S Department of defense, and which they invited companies like ours that bring new technologies to collaborate with Ukrainian Ministry of health and hospitals.
We are advancing these initiatives with the Dod.
Whereby we could conduct trials into Ukraine, using our technology, which would be funded by the Dod.
In addition to the humanitarian aspect of our work. We believe this would be an ideal opportunity to fortify our relationship with the didi by highlighting the safety and efficiency of our technology.
So to summarize we are continuing our efforts to seed the market with our technology among key physicians, which we believe will ultimately translate into widespread adoption.
We remain committed to our goal of establishing the comp flow epidural instrument as the new standard of care and epidural anesthesia by providing patients with effective pain relief, while reducing the risk of complications.
At this point I'd like to turn the call over to Keisha Hawken controller to go over the financials in detail.
Please go ahead keisha.
Thank you <unk> revenue for the three months ended September 32023, and 2022 were approximately $2 1 million and $2 $2 million, respectively. Due to an increase in domestic revenue sales of 386000 offset by a decrease in international dental.
On a 579000.
Gross profit for the third quarter ended September 32020, Duane was $1 5 million or 73% of revenues versus $1 5 million or 60%, 66% of revenue for the third quarter ended September 32022, the increase in gross profit was due to the higher margin sales with that.
Of the new online portals.
Operating losses for the three months ended September 32023 was approximately $1 $5 million versus approximately $2 million from the third quarter ended September 32022 <unk>.
The reduction in operating losses reflects the increase of gross profit and the decrease of selling and general and administrative expenses.
Net loss was approximately one 5 million or <unk> <unk> per share for the three months in.
September 32023 versus net loss of $2 million or <unk> per.
Per share for the comparable period in 2022.
For the nine months ended September 30 in 2012 revenue increased 15% to approximately $7 6 million compared to $6 6 million for the same period last year, driven by an increase of domestic dental sales of $1 3 million, particularly offset by a decrease of international sales.
135000.
Gross profit for the nine months of 2023 was $5 3 million or 70% of revenues versus $3 8 million or 58% of revenue for the first nine months of 2022.
Operating losses for the first nine months of 2020 was approximately $5 1 million versus approximately $6 8 million for the first nine months of 2022 net loss.
First nine months of 2023 was <unk> 5 million or 7%.
Per share versus net loss of $6 8 million or <unk> <unk> per share for the comparable here as of September 32020, The company had cash and cash equivalence and short term securities of approximately $4 6 million and working capital of approximately $6 7 million at this point I'll turn the call back over to origin.
Hello.
Thank you Krish.
Through our new dental sales strategy, including our online store and our enhanced marketing efforts, we are increasing domestic sales at higher margins.
While our international sales pulled back this was largely a result of the timing of orders and our focus on the domestic market that said, we expect to resume solid international growth going forward and continue to add new distributors.
Dental business continues to generate positive cash flow on a standalone basis and as 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 believe we have developed a scalable platform to drive our dental instrument and Handpiece.
Sales in the coming years.
On the medical side, we remain encouraged by the outlook for the business given our sales pipeline. The addition of new hospitals and expansion in existing pain management clinics as well as expansion of our distribution partners.
Most importantly, we are now making progress advancing our reimbursement strategy around the comp you flow epidural system.
As I mentioned earlier, we expect to reach over 100 claims submitted by year end and these physicians have reported back on claims activities from the payers.
We are encouraged by feedback from the insurance providers to the clinicians and are engaging with the directly payers to educate them on the comp flow technology.
We are also advancing initiatives following our ICM approval and leading up to potential federal supply system approval, which would open up the sizeable government market.
So to wrap up we are witnessing growing interest in both our dental and medical instruments and we believe we are well positioned to take advantage of the opportunities available in the market the.
The medical segment represents a large addressable market and we remain confident in our belief that comfy flow will ultimately become the standard of care given both the safety advantages as well as cost savings to the providers and Payors.
These factors coupled with our reimbursement strategy should ultimately lead to increased sales and adoption of the <unk> system.
At the same time, we continue to maintain a lean operating structure and we are laser focused on driving shareholder value. We look forward to providing further updates as developments unfold.
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 very much.
We will be conducting a question and answer session. If you would like to ask a question. Please press star one on your phone keypad now.
A confirmation tone will indicate that your line is Nikki and you May press star two if you would like to remove your question from Nicky So anyone using speaker equipment. It may be necessary to pick up your handset before pressing the keys. Please wait a moment while steep call for questions.
Your first question is coming from Anthony Vendetti from the Maxim Great. Anthony Your line is live.
Thank you and good morning. This is actually Jeremy on the line for Anthony So just a just a general question overall macroeconomic conditions in a lot of other companies were following they are being affected by higher interest rates.
Over the last couple of months here have you seen any of that affecting your business at all or what was the softer sales than we had expected no more just like you'd like you'd Matt. Thank you mentioned on the call and the earnings is just the Lumpiness of international.
No I have not seen let's say any effect on interest.
Or macro economic environment changes that affect that affect our business and on the contrary.
We have announced a price increase in this in the fourth quarter, we have to do that because we didn't have to give our international business partners.
Days.
To say pre warning of price increases.
Also during the months.
July we increased our prices on the hand pieces by 10%.
We have not received any further.
Firm complains about costumers.
About pricing.
Sure.
<unk>.
The availability to pay for these components for our products. So the answer to the first part of your question is no.
Okay. The second liens.
Secondly, you asked the question about Lumpiness I think we there's always a story behind the numbers right.
<unk>.
Seasonality is mainly in the international markets in Europe.
Where we are coming from and I want to refresh everybody. If we look in the second quarter last year and the third quarter last year, our business was dramatically hit by the Ukrainian and Russian Moor.
That was a result of $1 6 million in the second quarter, a net revenues in last year. If you compare this.
<unk>, if you compare our current second quarter results and you combine the second quarter and third quarter results.
Surpass and close that gap over the loss in the second quarter.
And the third quarter of this year so in other words over the nine months.
We are trading about 1 million comp.
Compared to last year, which is a 15% growth so.
We should not just look at seasonality or Lumpiness. There. Some reason why things are happening some of the markets like for example in last year.
We want a big tender business in Qatar one time.
One time events, which is about.
$100000.
And.
Those onetime events will definitely.
Influenza Youll further revenues as well.
Another distributor that we signed up a year ago during the first year. They they bought it for about $500000. This year they will buy for two out of 10.
So it's not a matter of.
Of the business are lagging behind its a matter of adding new distributors as we continuously doing they stock up their inventory and in the second year, they purchased less than in the first year.
Nevertheless of course, what is key for the company.
Is to enter new markets, where we currently are not present I mentioned in previous call, Brazil, the ramp up.
A slow but the investment of this company. They go from two salespeople to six salespeople. So it is a matter of time, when we really can harvest.
Efforts of these distributors based on debt investments and there are other markets, where we have already been given presentations for larger dental service organizations and.
In particular in countries and I can mention that.
We have to be seen with the <unk> agreement is going to be signed but there are a couple of countries in Latin America. We recently have been also in Lithuania, which is an important market within dentistry. So it is not that nothing is happening on the execution side on the contrary increased activities.
Do not see them, yet, but I'm, 100% convinced that into future. We will see the results of these activities.
And then of course.
People I believe that the portal is simple and easy to establish and the customers will call up automatically that's.
That's not always the case, we have to make an effort to reach out to these customers as we have been doing to the third quarter and we have been able to.
To get Upselling activities, and wake up sleeping customers and has changed.
Current instrumentation from the old instrumentation. So there is a heck of a lot of activities going on in the background.
Of which I believe that we will see the results moving forward sorry for my little bit lengthy reply.
Wasn't that everybody understands this.
Yeah no. It was really good information data and then switching to the medical side. One question. There. Greg you had you said you had 80 787 claims submitted using your tracking code you expect to have 100 by the end of 2023. So just trying to figure what is the how many claims that didn't need to be submitted how much data do you need to collect before you think youll.
You'll really be able to approach payers and are really just across the board youll get the broad coverage that we're looking for that would really help snowball that the adoption of the <unk>.
Yes, no thats a very good question and if somebody would be able to give me that answer I'm all ears, because there's no rule of thumb, but theres no golden rule.
Of how many claims do you have to submit I think it is of extremely importance that like I've always said you cannot reach out to insurance providers. If you have not submitted claims and if you are not within the process and this is what I meant with my statement that I would like to repeat that again.
The fact that our code is uploaded in the insurance systems.
That is that is fantastic because.
What other people tell me what other companies have been.
<unk> seen in the past is that if insurance providers wouldn't.
Not be interested in a new technology like ours, you will get a denial within two weeks.
On the contrary we are uploaded in the in their system. They look at it day evaluated they gave a response some denial some payers some.
Motor vehicle as we as we have reported previously but the opportunity for US is now that we finally can help the clinicians to educate directly and ask for meeting with health care insurance providers that we are active in the region to explain in detail not only the technical and clinical bench.
But why it is a no brainer that healthcare insurance providers should adopt our technology and should allow for the payments to dish Tunis clinicians in particular for Medicare.
Right No I understood and then so just and then maybe just last question how are you finding a balance between.
Over the last.
Many months, even over a year, you're always putting out the news, it's great you're signing up new pain clinics, New hospital centers.
Sterling that.
Copy flow, but how are you finding the balance between our focus on this advisory Board advisory positions, who are leading the pack when it comes to submitting the claims and trying to get that you said, that's what's going to be needed to get that broad adoption and also just signing up new new centers, new hospitals, where how you split your.
You said youre limiting youre trying to keep your costs limiting your resources your sales.
Pin down where are you finding that balance between signing up new customers and also focus being laser focused on getting that broad coverage, which will hopefully lead to just wider adoption across the board.
So that goes hand in hand.
Of course for me and for the company personally. It goes back to your question is there are a number of 100 or 200 or 500, what we need to do is I need to drive utilization and it goes hand in hand.
First of all yes, we will.
<unk> further because I would like to add additional clinics that drive that volume, but also existing customers that we're joining us, let's say a year ago.
We're also willing to do to do these cases and in particularly fueled by the Soares again to cervical thoracic junction approval by the FDA right now what is important to understand of course, the existing customer base, we are in continuous contact.
And the simple facts.
And I want to allude on that a little bit more this hospital that I alluded on four.
Spinal cord stimulator procedures.
I can share with you that that's a major breakthrough for the company.
The breakthrough is that it is an existing hospital in.
That we have been working with in the last one to two years and the neurosurgery department. They have used the system for spinal cord stimulators at a price level, which is three times the price level that we did two years ago with two and half years ago. When I started with this company driving the margins.
To almost 99 zero percent for these procedures.
So what we are doing is we are.
Establishing a pricing that is important photo reimbursement and also of what we believe is.
Is derived balance on the price you scale, so to say perceived value to us versus what the company what the customers.
Customers willing to pay for that and in this case, we followed the entire process within the hospital, having meetings with the financing departments and with the value Assessment Committee Department and it went through so that's the reason why I am very encouraged also that we get access and that we increased at Penn.
<unk> in these type of hospitals for these type of procedures, which is important so the balance is really we take whatever opportunity. There is even in the aftermath of the motor vehicle <unk>.
Reimbursement that was obtained.
That clinician in question has increased the number of these patients and the number of these cases it has enjoyed.
An increase in coverage for these patients but in the aftermath of that it also opens up other clinicians and other clinics that we are talking to now the reason.
I only release clinics when there is real news and buy meaning that that I released in use on these clinics. When we have signed them up when they have ordered the products when they have paid for their products and when they have done 18 to 20 patients because it also gives us the opportunity to.
You get a quotation and get the feedback by the clinician I'm not going to you know hindsight and say okay. It might come in a couple of weeks note. This is the real world and this is the transparency ended directness.
We provide with our company.
Okay, Great. That's great. Thanks for all that additional information I'll rejoin the queue.
Okay. Thanks, a lot.
Thank you very much.
Appear to have reached.
Our final question answer session I will now.
Thank you.
Closing comments.
Yes, well. Thank you. Thank you all for joining this call.
Again, I would like to confirm.
And repeat that.
There is increased level of activities, we create a solid baseline.
A lot of activities going on of which we believe that the.
Company and the shareholders will benefit from in the future.
I wish you a good day stay safe and we.
We will keep you updated and reach out to you with any food and use that we can provide in due time. Thank you for your time and have a good day bye bye.
Thank you very much everybody. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Okay.