Q2 2024 Nuwellis Inc Earnings Call
Speaker Change: Check out Find the Grinch!
Operator: Please stand by, your program is about to begin. If you need audio assistance during today's program, please press star zero. Good morning and welcome to Nuwellis' earnings conference call for the second quarter ended June 30, 2024.
Speaker Change: Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero.
Speaker Change: Good morning and welcome to New Wellness Earnings Conference Call for the second quarter ended June 30, 2024. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: To withdraw your question, please press star then 2.
Vivian Cervantes: Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A replay of the call will be available approximately one hour after the end of the call. I would now like to turn the conference over to Vivian Cervantes, Investor Relations for Gilmartin Group. Please go ahead ma'am.
A replay of the call will be available approximately one hour after the end of the call. I would now like to turn the conference over to Vivian Cervantes, Investor Relations for Gilmartin Group. Please go ahead, Miss Cervantes.
Speaker Change: Thank you, Operator. Good morning, everyone. Thank you for joining us in today's conference call to discuss New Wallace's corporate developments and financial results.
Vivian Cervantes: for the second quarter ended June 30, 2024. In addition to myself, with us today are Nestor Jaramillo, New Wellesley's president and CEO, as well as Rob Scott, CFO. We are also joined today by our chief medical officer, Dr. John Jefferies, who is available to take your questions.
Speaker Change: At 8 a.m. Eastern Time today, Noel has released financial results for the second quarter 2024.
Speaker Change: If you have not received New Wallace's earnings release, please visit the investors page on the company's website.
Speaker Change: During this conference call, the company will be making forward-looking statements.
Speaker Change: 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 your estimated results or performance are forward-looking statements.
Speaker Change: All forward-looking statements are based upon our current estimates and various assumptions.
Speaker Change: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.
Speaker Change: All forward-looking statements are based upon current available information, and the company assumes no obligation to update these statements.
Speaker Change: Accordingly, you should not place undue reliance on these statements.
Speaker Change: Please refer to the cautionary statements and discussion of risk in the company's filings with the SEC, including the latest 10-K.
Speaker Change: With that, I'd like to now turn the call over to Nestor.
Nestor: Thank you, Vivian, and good morning, everyone. Welcome to New Welles Second Quarter 2024 Earnings Conference Call.
Nestor: On today's call, I will provide an overview of our second quarter performance and give an update on our strategic initiatives.
Rob Scott: Our Chief Financial Officer, Rob Scott, will then provide detailed commentaries on our financial results before opening up the call for questions.
Rob Scott: followed by my closing remarks.
Rob Scott: New Welles generated $2.6 million in revenue for the second quarter of 2024, a 6% increase year-over-year, driven by a 30% increase in heart failure and critical care consumables utilization.
Rob Scott: which translates to an increase in the number of patients being treated with Aquadex.
Speaker Change: This growth in consumables is a strong indication of the broader use of the Aquadex therapy in patients with fluid overload and not necessarily only in heart failure patients.
Speaker Change: Pediatrics saw a 10% revenue decline in the quarter with an increase in consult sales offset by a decrease in consumables utilization.
Speaker Change: As a reminder, the utilization in consumables in the pediatric customer category is driven primarily by census, or the number of children born with kidney disease, which was soft this year, this quarter.
Speaker Change: However, our pediatric business continues to be strong with solid momentum as we expand aquadex to pediatric patients at one of the largest hospital networks in Florida in mid-May.
Speaker Change: Fueling the growth in consumables is the new data supporting the clinical and economic benefits of using aquadex that were presented at the Technology and Heart Failure Therapeutics Conference early this year.
Speaker Change: Now, turning to our recent commercial development and new product introductions.
Speaker Change: We are pleased, we were pleased to announce the first commercial sale of Qualimmune to Cincinnati Children's Hospital last month.
Speaker Change: This is a significant milestone as it allows us to further penetrate the pediatric market and significantly advance the standard of care in pediatric critical care.
Speaker Change: Kuala Mewn
Speaker Change: or the Selective Styroforetic Device for Pediatrics.
Speaker Change: represent a transformative solution for pediatric patients suffering from acute kidney injury due to sepsis or a septic condition on antibiotic therapy and who require kidney replacement therapy.
Speaker Change: Early clinical data suggests a 7.87% survival rate for patients treated with this new therapy.
Speaker Change: As a reminder, New Wellesley has an exclusive U.S. license and distribution agreement for pediatric hospitals with Seastar Medical.
Speaker Change: This therapy is now accessible under the humanitarian device exemption from the FDA to medical institutions like Cincinnati Children's, given nephrologists and intensive care physicians.
Speaker Change: a novel option to address the needs of these critically ill pediatric patients.
Speaker Change: We believe this product will have a positive impact on the patient population it serves, and we look forward to providing continued updates as we continue to roll out more devices around the country.
Speaker Change: We continue to be excited about our Pediatric Continuous Kidney Replacement Therapy device, branded Vivian.
Speaker Change: which we are developing currently.
Speaker Change: We, along with many pediatric nephrologists, believe this product will have a positive impact on survival and improve the quality of life of neonates and small children with limited or no kidney function.
Speaker Change: Kidney issues or those born without kidneys.
Speaker Change: This device is complementary to the Equal Immune Device, and we believe these two products together will add meaningful value to our growing portfolio of products for pediatric patients with fluid overload and renal disease.
Speaker Change: I'd like to now turn to Rob to discuss our second quarter financial results.
Rob Scott: Thank you, Nestor, and good morning, everyone. Turning to the Q2 financial results, revenue for the second quarter was $2.2 million, representing a 6% growth over the prior year period, driven by a 9% increase in consumables utilization and strong U.S. console ASPs.
Speaker Change: Our critical care customer category led the way with 28% growth followed by heart failure with 9% growth year-over-year. These customer categories were up primarily due to consumables utilization and more patients being treated with Aqueducts.
Speaker Change: Pediatric results were down 10% year-over-year, primarily due to a decrease in consumables utilization. As Nestor mentioned, our pediatric business depends primarily on census.
Nestor: Gross margin was 67.2% for the second quarter compared to gross margin of 55.3% in the prior year quarter.
Nestor: The margin improvement was primarily driven by higher manufacturing volumes of consumables and lower fixed overhead manufacturing expenses.
Nestor: Selling general and administrative expenses were $3.2 million in the second quarter, a decrease of approximately 31% as compared to $4.7 million in the second quarter of 2023.
Nestor: The decrease in SG&A was primarily realized through efficiency initiatives enacted in the second half of 2023.
Nestor: Second quarter research and development expense was $558,000 compared to $1.5 million in the prior year period.
Nestor: The decrease in R&D expense was primarily due to reduced consulting fees and compensation-related expenses.
Nestor: Total operating expenses were $3.8 million in the quarter, a decrease of approximately $2.4 million, or 38%, as compared to the second quarter of 2023.
Nestor: as we continue to realize savings from operating efficiency initiatives enacted in the second half of 2023.
Nestor: Operating loss in the second quarter was 2.3 million dollars compared to an operating loss of five million dollars in the prior year period, resulting in a 2.7 million dollar period-over-period improvement.
Nestor: Net loss attributable to common shareholders in the second quarter was 7.7 million dollars or a loss of 18 dollars and 85 cents per share compared to a net loss attributable to common shareholders of 4.8 million dollars.
Nestor: for $127.65 per share for the same period in 2023.
Nestor: We ended the second quarter with $1 million in cash equivalents and with no debt on the balance sheet.
Nestor: On July 25th, Newellis closed a registered direct offering of common stock and concurrent private placement of warrants to purchase common stock with gross proceeds of approximately $2 million before deducting placement, agent fees, and other offering expenses.
Nestor: This concludes our prepared remarks.
Speaker Change: Operator, we would now like to open the call to questions.
Speaker Change: Thank you, and at this time if you would like to ask a question, please press the star 1 on your telephone keypads. Again, you may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We'll pause for a moment to allow the questions to enter the queue.
Speaker Change: And while we wait, we'll take our first question from Jonathan Ashkoff from Roth.
Jonathan Ashkoff: Thank you very much. Good morning guys. I was wondering, can you help us on the R&D trend guidance? You know, that drop, is that reflective, you know, kind of representative of what's going on going forward or is that going to pop back up a little?
Speaker Change: Great question, Jonathan.
Speaker Change: Yeah, just to speak to that, that that trend, we do anticipate
Speaker Change: the spend to continue may be consistent with where it is it's at in Q2. However, you know, going forward, we will be.
Speaker Change: Continuing development of Vivian, our pediatric continuous renal replacement device. The long pole in the tent is, you know,
Speaker Change: software development. We anticipate ramping that up here in the very near future.
Speaker Change: So yeah, I anticipate some pick up in R&D expenditures, maybe not right away here in Q3, correct?
Speaker Change: Okay, I was, I'm juggling about three calls here and can you, so I don't know what you said earlier, but can you talk about your pediatric
Speaker Change: percent of your revenue you know the growth with that and how you know things might be going on with that Florida pediatric hospital. Yeah.
Speaker Change: Jonathan, this is Nestor. Thank you for joining.
Nestor: Our pediatric business represents about 30% of the total revenue and it's primarily driven by two factors. One is opening new accounts and the other one is census or
Nestor: Babies and small children born with kidney or renal failure.
Speaker Change: So, this quarter, while we saw an increase in the console sales because we opened new accounts.
Speaker Change: We also saw a decrease in the census.
Speaker Change: which means there wasn't that many small children or babies born with kidney disease.
Speaker Change: And that is the primary driver for our pediatric utilization of consumables.
Speaker Change: Okay. Did you speak to any sort of guidance you might have for Quell Immune, given that that's, you know, A, started and B, actually in patients, you know, being used with patients already?
Speaker Change: Right, Jonathan, it's hard to give guidance on Qualimmune and the reason for that is that this is an HDE approved device.
Speaker Change: And HDE requirements are that hospitals need to have IRBs, internal review board approval, by every hospital.
Speaker Change: one at a time. So we need to get the IRB approvals in the hospitals before they can issue a purchase order.
Speaker Change: So right now, a lot depends on the IRBs, on the hospitals, when do they need, what kind of questions they have. So so far we only have one hospital that have gone through the whole process of IRB and then purchase orders submission.
Speaker Change: And that's actually more than the first patient that you had announced earlier or is it still one patient treated?
Speaker Change: Oh, there's been more than one patient treated in the same in one hospital in Cincinnati Children's.
Speaker Change: Okay. I believe there have been about three or three patients, don't call me that number, but I think it was about three patients that have been treated.
Speaker Change: I last talked to a nurse about a week and a half ago, and that was the information that she provided.
Speaker Change: And, you know, what, did you give any update on the progress with the trial with DaVita?
Speaker Change: The trial would be, if we have not...
Speaker Change: All of you.
Speaker Change: the pilot with Vivian. We have not finished. No, no, the pilot with DeVita, the pilot with DeVita in their specific hospital room. Yeah.
Speaker Change: Jonathan, that is a good question and difficult to answer because, frankly speaking, we have not seen that much progress from last quarter.
Speaker Change: It's been slower than anticipated, it has required a lot more interaction with the hospitals than we anticipated. And just as a reminder, this pilot
Speaker Change: was new, or the utilization of Aquadex in a hospital by the DaVita personnel is new to DaVita, is new to us, and is new to the hospital. They have never been done ultrafiltration by a third party in a hospital.
Speaker Change: So.
Speaker Change: what we have anticipated or is...
Speaker Change: What we've seen is a more intense interaction between hospitals and La Vida and us than expected. I mean, wouldn't they be the easiest group to treat, you know, I mean, the easiest people to train? I mean, these guys, you know, spend all day, you know, sticking straws into people and uh...
Speaker Change: I mean, wouldn't it kind of be the easiest folks to...
Speaker Change: to get to use Aquadex.
Speaker Change: efficiently, orally. Absolutely, absolutely. But training is not the issue.
Speaker Change: Training DaVita personnel is not the issue. The issue is that DaVita has contracts with hospitals and they need to amend that contract, issue letters of understanding, and also creating a new protocol within the hospitals.
Speaker Change: to transfer patients or to have patients treated with AVIDA personnel for heart failure patients suffering from fluid overload. That has been the main issue.
Speaker Change: Okay, so the very last question is, can you speak to any traction that you're getting with that 50 hospital network relevant to Aquadex?
Speaker Change: Yeah, we're getting good traction in that network.
Speaker Change: It is a network that has been using devices in adults.
Speaker Change: So they are very familiar, the hospital administration is very familiar with Newell's.
Speaker Change: And now, using it in pediatric hospitals is going to be a very positive event for us.
Speaker Change: Thank you very much, guys.
Speaker Change: Thank you and next we'll go to...
Speaker Change: Next we'll go to Anthony Vendetti with Maxim Group.
Anthony Vendetti: Thank you. On the pediatrics, I know, Nestor, it's about 30% of revenues.
Anthony Vendetti: Can you talk to how many accounts were added this quarter and what your current total is at? And then I have a follow-up. Thanks.
Speaker Change: Okay, yeah, we opened one pediatric account this quarter and total of 41.
Speaker Change: accounts using the aquadex for pediatric patients, 41 accounts.
Speaker Change: Forty-one. Okay, great. And then the reverse HF trial, is that still on track to complete site enrollment by the end of 24 and patient enrollment by the end of 3Q25?
Speaker Change: the
Speaker Change: Thank you.
Speaker Change: Completing patient enrollment in Q3 2025. Yes, we believe that we're on track of that. We have seen it slow in enrollment. I believe that is due to the summer month.
Speaker Change: But in general it's going well. We are over a third of the patients required to be enrolled in this study.
Speaker Change: Okay, and then last on the C-STAR partnership.
Speaker Change: And I know you need an IRB for each hospital, but can you talk about, you know, how that partnership has been set up?
Speaker Change: From what I understand, your sales force was trained on it.
Speaker Change: how that works.
Speaker Change: Financially, for New Ellis, and then
Speaker Change: what the sales process looks like, understanding that each hospital has to go through the IRB process.
Anthony Vendetti: Good question. Anthony, the...
Anthony Vendetti: CSTAR, by the requirements of the HDE, they are responsible for obtaining the IRB approvals in each hospital.
Anthony Vendetti: and also there is a requirement to do a registry.
Speaker Change: So, every patient for the first 300 patients needs to be in a registry and that is by requirements of the HDE. So, CSTAR is responsible for the IRB and running the registry. We do everything else.
Speaker Change: We participate in the training of the hospital,
Speaker Change: And then after that, we take care of everything that has to do with the value analysis committee, getting the purchase order, delivering the product, and shipping the product.
Speaker Change: and then assisting in the hospitals with our clinical specialists.
Speaker Change: Okay, yeah, that's helpful. Yeah, so it's quite a process and it sounds like it's a shared responsibility.
Speaker Change: But I also would like to add, Anthony, if I may,
Speaker Change: Since this is an HTE device and is new to the world,
Anthony Vendetti: We, meaning CSTAR and us, we made conscious decisions to do a controlled, limited launch of the product.
Anthony Vendetti: that includes five hospitals that we targeted to get them established and treating patients. And after that five, we're gonna do another five. And we hope that we can get to those 10 hospitals by the end of the year.
Anthony Vendetti: but it is a control limited launch.
Speaker Change: Okay, that's very helpful. Thanks for that color, Nestor. I'll hop back into Qt. Appreciate it.
Speaker Change: All right, thank you.
Speaker Change: Thank you. And as a reminder, ladies and gentlemen, that is star one for a question. We'll pause for a moment.
Speaker Change: At this time we have no further questions. I'd like to turn the call back over to Mr. Jaramillo for any closing remarks.
Mr. Jaramillo: Thank you, Operator. We continue to see positive momentum in 2024, led by a broadening awareness of the efficacy of Aquadex, thus driving increased consumables utilization and therapy adoption.
Speaker Change: helped further by new pediatric accounts and as we added revenue from quality immune cells.
Speaker Change: I want to thank all of our stakeholders, as well as employees, stockholders, physicians, nurses, patients, and healthcare workers in the field. Without your support, we would not be able to achieve key advances in transforming the lives of patients suffering from fluid overload.
Speaker Change: Thank you for your participation and support, and we look forward to a productive second half of 2024.
Speaker Change: Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.
Speaker Change: [music]
Operator: John Jefferies, Anthony Vendetti, Jeffrey Cohen, and Nestor