Full Year 2023 Tivic Health Systems Inc Earnings Call

Welcome to the two big Health systems, 2023 year end shareholder update conference call. All participants will be in a listen only mode. Please note that the conference is being recorded statements made during this conference contains forward looking statements about two weeks.

You.

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Now, let me hand over the call to Jennifer Ernst <unk> Health's, Chief Executive Officer.

Jennifer Ernst: Hello, everyone and thank you for joining us today.

Jennifer Ernst: I'm, Jennifer Ernst CEO of Tyvek.

Jennifer Ernst: And I'm joined today, not only by our interim CFO Kimberley bombard, but also by our Chief Scientific Officer Blake are fine.

Jennifer Ernst: So before it Kim goes over the details of the 'twenty to 'twenty three financial performance I'd like to go through a few of the business developments for the year.

And I'd like to have Blake verify and introduce the new area of vagus nerve research that we have been conducting with the Feinstein Institute for bio electronic medicine.

So, let's just start with looking at 2023.

Kim: Over the past year I have to say that our focus has been largely on the idea of stabilization and optimizing the efficiency.

Kim: No secret that 2021, and 2022 were turbulent years not only for us, but also for the industry as a whole and a major focus for us has been on the stabilization and optimization.

Kim: We started by stabilizing our supply chain. After these significant disruptions in price fluctuations that we saw in 2022.

Kim: We created a new supply chain partnerships and those have resulted in lower material costs or assembly cost and lower fulfillment costs.

Kim: Those new partnerships are a critical component of increasing gross profitability of the business as a whole.

Kim: In the first quarter of 2023, we also completed a 2000 person marketing segmentation and pricing study.

Kim: That study allowed us to take a very hard look at the areas where improvements are possible in the business.

Kim: So in Q2, we undertook a price increase.

Kim: That increase was nearly 15%.

Kim: And I have to admit that that change negatively impacted the unit volume and it did give us a temporary suppression in revenue.

Kim: However, it is an important step that allowed us to then greatly improve our gross profit for 2023.

Kim: Simultaneously, we reset and re launched our advertising programs.

Kim: Improving the efficiencies in our overall marketing spend.

Kim: We established new distribution agreements with industry giant like.

Kim: Like most recently Mckesson and their affiliates simply medical with Cardinal health.

Kim: So Cora what leaves formerly known as Amerisourcebergen.

Kim: Okay.

Kim: These distributors are targeting much less price sensitive market segments.

Kim: It's heavily on the health care industry, and we expect to see these relationships.

Kim: Start to unlock new potential sales opportunities for the clearer product.

Cora: Coming here.

Cora: We also towards the end of the year in collaboration with <unk> Paul.

Cora: Began to introduce declare up device over 2500 health care providers and their patients.

We saw particularly strong response interestingly among the general practitioners.

Cora: Keeping in line with this idea of streamlining and optimization, we did decrease our head count this year.

Cora: Better aligning the team size to the current scale of the <unk> business.

Cora: We streamlined operations with a very lean focus team to minimize excess operating expenses.

And like many other companies in the biotech and Microcap space.

Cora: We faced compliance issues with our NASDAQ listing this year that place tremendous pressure on the share price and forced the company into reverse stock split to regain compliance with the NASDAQ continued listing rules.

It was taken care of in Q3 and now as I look at 2023 I can tell you we took the painful but necessary action to bring our consumer health business to a point.

Cora: Where I believe we can anticipate cash being generated from the clear up product sales.

Cora: As I noted earlier, though we took a hard look at where the business has been.

Cora: And where we see the strongest opportunities.

Cora: To build incrementally new value for our shareholders.

Cora: In 2022, we conducted internal experimentation on a novel method of noninvasive vagus nerve stimulation.

Cora: The results indicated we could more precisely target and influence the activity of the vagus nerve and regulating biological function.

Cora: And what has thus far been demonstrated in the state of the art.

Cora: We saw that as an incredible opportunity for new value.

Cora: And with that lens in 2023, we started building out our patent portfolio in VNS.

Cora: Where our prior patents and our current products are focused on the trigeminal nerve and sympathetic nerve structures.

Cora: The new filing addressed as a novel approach for noninvasive vagus nerve stimulation.

Cora: Often this called DNS or N VNS.

Cora: Our patent pending includes a new circuit design for more precise targeting of the signals that are carried by the vagus nerve.

Cora: With the potential to offer superior efficacy to the alternative DNS approaches in market today.

Cora: In Q3, we announced and began enrolling the first patient in our paid study at the Feinstein Institute.

Cora: For medical research, we have recently announced the completion of patient enrollment.

Cora: And I am very much looking forward and I expect them to be reporting out the results of that study in early Q2.

Cora: So does that the context for those results and for what we have forthcoming I've invited Blake Griffin, our chief Scientific officer.

US today in order to provide some additional context for this particular area of investment.

Blake Griffin: With that let me hand, this over to Blake.

Thank you Jennifer My name is Blake are fine and I'm the CFO for Tenneco.

Blake Griffin: They have not previously presented on these calls I will share some of my professional background.

Blake Griffin: <unk> scientists and immunologist and maintain an appointment as adjunct faculty in the department of Neurosurgery at UC San Francisco.

Blake Griffin: My work in the industry has focused on developing noninvasive neurotechnology to stimulate the brain in peripheral nerves to treat a variety of conditions with limited therapeutic options. The <unk> device was one of the technologies I had the privilege to help develop.

As Jennifer mentioned moving into the development of vagus nerve stimulation technology is very exciting and a promising direction for tyvek.

Blake Griffin: The vagus nerve is an important target for clinical development, because it's a key component of the autonomic nervous system, which controls cardiovascular activity respiration digestion and many other critical functions in the body.

Blake Griffin: Clinical use of vagus nerve stimulation has frequently employed implantable devices that require surgery.

Blake Griffin: Vagus nerve stimulation has been proven effective for conditions, including treatment resistant depression, epilepsy, and migraine headache, and is currently being investigated to treat inflammatory diseases like rheumatoid arthritis and multiple sclerosis.

Blake Griffin: There is a significant opportunity to develop safe and effective vagus nerve devices that can be applied non invasive way.

Blake Griffin: <unk> has developed a proprietary noninvasive approach through vagus nerve stimulation based on our experience building evidence based buyer electronic therapies.

Blake Griffin: One of the key goals of this work is to more precisely target stimulation of the vagus nerve and more carefully control the types of physiologic effects that result from the stimulation.

Blake Griffin: In collaboration with the Feinstein Institute for Medical Research a leader in vagus nerve research. We recently completed enrollment for a 20 person study evaluating the biological effects of our proprietary approach to vagus nerve stimulation.

Blake Griffin: Analysis of the magnitude of the treatment effects and how they compare to clinically meaningful biological changes is an important stepping stone as we accelerate this program toward product development, where large market critical use cases.

Blake Griffin: I personally I'm looking forward to completing the study and sharing the results in the coming weeks.

Blake Griffin: Now, let me hand, the call over to Ken to go over the 2023 financial results.

Ken: Thanks, Blake and good afternoon, everyone I'm pleased to report the financial results for the year ending December 31st 2023.

Ken: Revenue net of returns for the year ended December 31, 2023 was $1 2 million compared to $1 8 million for the year ended December 31, 2022.

Ken: The decrease of 664000 or 36% was due to a 52% decrease in clear up unit sales offset by 46% higher average selling price per unit.

Ken: Greater than 90% of our sales were a direct to consumer in 2023.

Ken: Returns as a percentage of product revenue was approximately 12% for the year ended December 31, 2023, and 10% for the year ended December 31 22.

Ken: We expect with the improved battery circuitry unclear up to point out that returns will decline.

Ken: Cost of sales for the year ended December 31, 2023, with 889000 compared to one 5 million for the year ended December 31 2022 a.

Ken: A decrease of 652000 or 42%.

Ken: Decrease was due to the 52% decrease in overall unit sales offset by a 172000 of costs related to the write off or reserves on old inventory and components, primarily related to our clear up 1.1 unit.

Ken: As the clear up 2.1 unit began shipping in December of 2023 we do not expect to incur similar costs in 2024.

Ken: Therefore, our gross profit for the year ended December 31, 2023 was 287000 compared to a gross profit of 299000 for the year ended December 31 2022.

Ken: Research and development expenses were $1 7 million for the year ended December 31, 2023, and December 31 2022.

Ken: Emphasis of our research and development activities in 2023 was primarily related to our work with the Feinstein Institute.

Ken: Activities in 2022 we're primarily focused on product research and design and the migraine therapeutic area initiation of a double blind randomized controlled trial for post operative pain relief following sinus surgery and enhancement of our intellectual property protection.

Ken: Sales and marketing expenses decreased to $2 1 million for the year ended December 31, 2023, compared to $2 8 million for the year ended December 31, 2022 the.

Ken: The decrease was primarily due to the reduction of advertising and agency expenses.

Ken: General and administrative expenses decreased to $4 8 million for the year ended December 31, 2023, compared to $5 9 million for the year ended December 31 22.

Ken: The decrease is primarily due to a reduction in legal and professional fees and other corporate expenses as the company worked to reduce overhead costs.

Ken: As a result, our 2023 full year net loss was $8 2 million compared to $10 1 million in 2022.

Regarding financing activity on February 13th 2023, we sold shares of common stock, resulting in net proceeds of approximately $3 6 million.

Ken: Further from July 11th 2023 to August night, we sold shares of common stock, resulting in a further aggregate net proceeds to the company of approximately $4 3 million.

Ken: As of December 31, 2023, the company had $3 4 million of cash and cash equivalents and we continue to maintain no debt balance sheets.

Ken: Further on August 23rd as Jennifer mentioned, we implemented a one for 100 reverse stock split and on September 15th we received confirmation from NASDAQ on are regaining compliance with the minimum bid price requirement.

I will now hand, the call back to Jennifer for ending remarks.

Jennifer Ernst: Thank you Kim Thank you Blake both for sharing your insights with our Investor community.

So this year I think everyone is hearing is one of resetting rebuilding and recovery.

Jennifer Ernst: As part of our commitment to fiscal responsibility, we decreased our expenses, we've reduced internal head count.

Jennifer Ernst: Focus the team on profitably building a clearer product line.

Jennifer Ernst: At the same time, enhancing our R&D efforts to build new value for our shareholders.

We revamped the administrative cost structure of the business.

Jennifer Ernst: We reduced our overhead expenses, we've undertaken a more focused marketing strategy and we continue to see improvements in both gross and contribution margins.

Jennifer Ernst: And as you've heard from me before we continue to evaluate business combinations licensing opportunities, both inbound outbound and M&A.

Jennifer Ernst: That may help to enrich our product portfolio with complementary offerings.

Jennifer Ernst: We recognize though that those type of initiatives must be taken a must be the right opportunity at the right time. So we remain vigilant in assessing the opportunities may provide significant disproportionate benefit to our shareholders.

Jennifer Ernst: Our research pipeline is beginning to mature and it's becoming an even more important part of our strategy to build shareholder value.

Jennifer Ernst: We believe that the VNS opportunity as well as the medical extensions of our trigeminal nerve stimulation.

Jennifer Ernst: Have the potential to be a great significance to the company.

Jennifer Ernst: So 2023 involved hard decisions.

Jennifer Ernst: And very strict prioritization of spending.

Jennifer Ernst: I am appreciative of our team and of the measures they have undertaken to control costs, while continuing to improve the business performance.

Jennifer Ernst: Now with that I. Thank all of you for taking the time with US today look forward to speaking with you more as we make progress through the year and continue to report out on both the financial and research programs that you've heard about today.

Speaker Change: Thank you to everyone and we look forward to speaking with you at the next quarterly earnings call. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.