Q2 2024 Milestone Scientific Inc Earnings Call
Speaker Change: Good morning and welcome to the Milestone Scientific second quarter 2024 financial results and business update conference call.
Speaker Change: At this time, all participants are in a listen-only mode and we will open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Mr David Waldman, Investor Relations of Crescendo Communications. David, the floor is yours.
Speaker Change: Thank you, Jenny. Good morning, and thank you for joining Milestone Scientific's second quarter 2024 financial results conference call. On the call with us today are Ariane Haverhals, Chief Executive Officer, and Keisha Harcum, Vice President of Finance at Milestone Scientific.
Speaker Change: The company issued a press release this morning containing second quarter 2024 financial results.
Speaker Change: 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 at 212-671-1020.
Speaker Change: The company's management will now provide prepared remarks reviewing the financial and operational results for the second quarter ended June 30, 2024.
Speaker Change: Before we get started, we'd like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenues, and future success. These 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 Milestone's control. Some of the important factors that could cause actual results to differ materially from those
Speaker Change: Indicated by the forward-looking statements or 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, and milestones, periodic filings of the Securities and Exchange Commission, including without limitation milestones report on Form 10-K for the year ended December 31st, 2023, and milestones report on Form 10-Q for the second quarter ended June 30th, 2024. These forward-looking statements made during this call are based upon management's reasonable belief as of today's date, August 15th,
Ariane Haverhals: 2024. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we'll now turn the call over to Ariane Haverhals, Chief Executive Officer. Please go ahead, Ariane.
Ariane Haverhals: Thank you, David, and thanks to everyone for joining us today. This has been a momentous year for the company as we recently achieved a major milestone with the grant of Medicare Part B Physician Payment Rate Assignment for our Com2Flow epidural system.
Speaker Change: As we have previously reported, our approach to reimbursement has been methodical and strategic.
Speaker Change: We've worked closely with clinicians to thoroughly document the medical necessity of our technology.
Speaker Change: and by engaging with Medicare jurisdictions we have been able to educate payers on the clinical utility, safety, predictability and efficacy of the CompuFlow system.
Speaker Change: ensuring that the jurisdictional Medicare administrative contractors, also known as JMACs, understand in full our technology prior to their pricing ruling.
Speaker Change: This favorable Medicare Price Assignment, granted across multiple JMAC regions,
Speaker Change: including key states.
Speaker Change: such as Florida, Texas, Pennsylvania, New Jersey, Maryland, Colorado, Oklahoma, Louisiana, Arkansas, Mississippi, New Mexico, the District of Columbia, and Delaware represents a significant achievement.
Speaker Change: An estimated 3 million epidural steroid injection procedures are performed each year across these three jurisdictions.
Speaker Change: accounting for approximately one-third of the total epidural steroid injection procedures conducted in the United States for chronic back pain treatment.
Speaker Change: With Medicare believed to account for up to 40% of this clinical practice volume, these regions represent an initial addressable market of approximately $250 million among Medicare patients alone.
Speaker Change: The positive outcome from these JMECs is not only a significant validation of the safety benefits of our technology, but also a major step forward in increasing penetration and adoption of our technology.
Speaker Change: We recognize there's still more work ahead to introduce our technology across these jurisdictions and throughout the rest of the country.
Speaker Change: However, this achievement marks a crucial turning point in our journey.
Speaker Change: I'm extremely proud of our entire team who have worked tirelessly to reach this milestone and we are committed to continuing our efforts targeted at additional JMACs in the U.S.
Speaker Change: In tandem with this progress, we are excited to announce our partnership with Actual Biologics, whose extensive experience and deep relationships within the pain management sector make them an ideal partner.
Speaker Change: This collaboration represents a strategic, laser-focused, and disciplined commercial approach to expanding our reach by leveraging Axial's established clinician relationships
Speaker Change: in the key states belonging to the JMEX of New Jersey, Texas, and Florida.
Speaker Change: By aligning with a specialized partner instead of a large distributor or building our own sales force, we can accelerate the penetration and adoption of the Compuflow Epidural System more effectively.
Speaker Change: This collaboration marks the next phase of our sales strategy, and we are confident that it will drive growth and enhance patient outcomes.
Speaker Change: We also believe there is a market opportunity for comfort flow within federal and other government agencies. As we have discussed in the past, we are advancing initiatives following SAM approval and working to secure approval within the FSS, the Federal Supply Schedule.
Speaker Change: FSS approval would open up the sizable government market.
Speaker Change: Turning to the international front, we are expanding our network of distribution partners for CompreFlow.
Speaker Change: We are targeting independent distributors with existing relationships within key global markets and proven track records of introducing medical devices within their territories.
Speaker Change: I'm particularly pleased to announce that we have received regulatory approval from Brazil's National Health Surveillance Agency to market and sell the Compuflo epidural system in Brazil, covering the lumbar thoracic and the cervical thoracic junction of the spine.
Speaker Change: As the ninth largest economy globally, with over 200 million people, Brazil presents a significant opportunity for us.
Speaker Change: Ahead of this key approval, we've proactively established relationships with leading medical institutions and hospitals and commercial partners in Brazil, setting the stage for a successful product launch.
Speaker Change: Final negotiations are ongoing and we look forward to announcing the new cooperation in the near future.
Speaker Change: Brazil has over 2.8 million births each year and 21 million people suffering from chronic back pain. However, we're just 60% seeking treatment.
Speaker Change: Independent research estimates that four to five million epidural anesthesia procedures are performed annually in Brazil.
Speaker Change: We believe that with the right partners, we can expand the addressable market by offering a safer alternative to traditional epidural procedures, especially in rural areas with limited resources and training.
Speaker Change: This approval in Brazil is also a significant milestone in our global expansion strategy, providing an entry point into Latin and South America by building on our previous FDA approval in the United States.
Speaker Change: Lastly, we remain focused on increasing the value of our intellectual property and patent portfolio.
Speaker Change: We recently announced receipt of multiple notices of allowance for key patent applications in both the U.S. and Europe that broaden the IP protection around our injection and drug delivery systems.
Speaker Change: So, to summarize our progress as it relates to the medical division, we are advancing our nationwide reimbursement initiatives and executing a disciplined commercial rollout strategy, both in the U.S. and abroad.
Speaker Change: We look forward to providing further updates and continuing to build on this momentum, ensuring that more patients and practitioners benefit from the precision and safety of our technology.
Speaker Change: Turning to our dental division, U.S. e-commerce sales increased to 1.3 million in the second quarter of 2024, compared to 1.2 million during the same period last year.
Speaker Change: This growth is a direct result of our strategic decision to transition from our previous distributors and instead channel our sales through our own online platform.
Speaker Change: By bringing this process in-house, we've been able to create a more direct line of communication with our customers, enhancing our ability to respond to their needs and preferences.
Speaker Change: This shift has also led to a significant improvement in our gross margins, which increased to 76.1% in the second quarter of this year from 65% in the same quarter last year.
Speaker Change: This margin expansion reflects not only the cost efficiencies we have gained, but also the value that our customers place on the quality, reliability of our products, and more importantly, the provided after-sales service by our team.
Speaker Change: We believe that the foundation we have established will continue to support steady growth in domestic sales. Our renewed focus on e-commerce has been bolstered by targeted marketing campaigns designed to directly reach both customers and patients.
Speaker Change: Reinforcing the Benefits of Purchasing through our Online Portal.
Speaker Change: As we continue to refine and expand these efforts, we expect to see further traction and increased market shares in the U.S.
Speaker Change: On the international front, while we did encounter some temporary challenges due to issues with our distributors' freight forwarders, these have since been resolved, allowing us to stabilize and resume normal operations.
Speaker Change: Additionally, our proactive decision to pause sales in China based on a reassessment of our strategy in that market had an impact on our year-over-year comparisons.
Speaker Change: Nevertheless, we currently believe that international sales in the second half of this year will show improvement over both the second half of last year and first half of this year.
Speaker Change: Looking ahead, we are optimistic about the future of our dental business.
Speaker Change: The changes we have implemented have not only strengthened our current operations, but have also laid the foundation for a scalable high-margin business model that is designed to generate positive cash flow.
Speaker Change: We are confident that our approach will continue to yield strong results, driving growth, profitability, and customer satisfaction in the quarters and years to come.
Speaker Change: So, to wrap up, we are at a pivotal inflection point following the grant of the first Medicare Part B Physician Payment Rate Assignment for our CompuFlow epidural system, a milestone that underscores the value and safety of our technology.
Speaker Change: The combination of a reimbursement strategy
Speaker Change: Partnerships such as Actual Biologics, the start of commercialization, our expansion into key markets like Brazil, as well as our growing e-commerce platform for the dental division, provide us with the necessary ingredients for success.
Speaker Change: We remain committed to enhancing patient outcomes and driving value for our shareholders as we continue to build on this momentum.
Keisha Harcum: I'd like to turn the call over to Keisha Harcum, Vice President Finance, to go over the financials in detail. Please go ahead, Keisha.
Keisha Harcum: Thank you, Arjun. Revenue for the three months ending June 30, 2024 and 2023 was approximately $1.9 million and $2.9 million, respectively.
Speaker Change: The U.S. e-commerce revenue for the three months ended June 30, 2024 was approximately $1.3 million compared to $1.2 million for the three months ended June 30, 2023.
Speaker Change: For the three months ended June 30, 2024, international revenue was approximately $400 million.
Speaker Change: a decrease of 710,000 compared to June 30, 2023. International sales decreased due to issues with freight forwarder carriers during the quarter.
Speaker Change: The company recorded no revenue for China for the three months ended June 30, 2024, compared to approximately $270,000 for the three months ended June 30, 2023.
Speaker Change: The gross profit for the second quarter ended June 30, 2024 was $1.4 million, or 76% of revenue, versus $1.9 million, or 65% of revenue, for the second quarter ended June 30, 2023.
Speaker Change: The decrease in gross profit was due to higher margins in sales associated with the launch of the e-commerce platform offset by a decrease in international sales
Speaker Change: Operating losses for the three months ending June 30, 2024 was approximately $1.8 million versus $2.3 million for the second quarter ended June 30, 2023. The reduction in the operating loss reflects a decrease in the selling and general administrative expenses by $1.1 million.
Speaker Change: Net income was approximately $0.2 million or
Speaker Change: 0% per share for three months ended June 30, 2024, versus a loss of $1.3 million, or $0.02 per share, for the comparable period in 2023.
Speaker Change: Net income for the three months ended June 30, 2024 included approximately $2 million net expenses for sales of the New Jersey Net Operating Office.
Speaker Change: For the six months ending June 30, 2024 and 2003, revenue was approximately $4.1 million and $5.5 million, respectively.
Speaker Change: The U.S.
Speaker Change: e-commerce and dental service revenue for the six months ending June 30th was approximately 2.7 million compared to 2.2 million.
Speaker Change: at June 30th, 2023.
Speaker Change: For the six months ending June 30th, 2024, international revenue was approximately $1.4 million, a decrease of $1 million compared to June 30th, 2023.
Speaker Change: International sales decreased due to issues with freight forwarder cabinets during the six months. The company recorded no revenue for China for the six months ending June 30, 2024, compared to approximately $270,000 for the six months ending June 30, 2023.
Speaker Change: Gross profit for the first six months of 2024 was $3.1 million, or 75% of revenue, versus $3.8 million, or 69% of revenue for the six-month ending.
Speaker Change: for the first 6 months of 2023. Operating losses for the first 6 months of 2024 was approximately $3.2 million versus $3.6 million for the first 6 months of 2023.
Speaker Change: Net loss for the first six months of 2024 was $1.2 million, or $0.02 per share, versus a net loss of $3.5 million, or $0.05 per share, for the comparative period in 2023.
Speaker Change: Now I would like to turn your attention to the Liquidity and the Capital Resource.
Speaker Change: We continue to carefully manage expenses.
Speaker Change: to have maintained a solid balance sheet. On June 30, 2024, the company had cash-to-cash equivalents of approximately $5.8 million in working capital of $7.7 million and no long-term debt. At this point, I will turn the call back over to Arden Haverhals.
Arden Haverhals: Thank you. And as Keisha mentioned, we continue to maintain a strong balance sheet with approximately 5.8 million dollars of cash and cash equivalents at hand as of June 30th 2024.
Speaker Change: which we believe provides us sufficient resources supporting our growth within both the dental and medical divisions without the need for additional outside capital.
Speaker Change: In addition to our improved growth margins, we have taken steps to further streamline operations across the organization. Most notably, we reduced selling, general and administrative expenses by over 1.1 million dollars compared to the same period last year.
Speaker Change: further aligning us with our goal of achieving positive cash flow company-wide.
Speaker Change: I think it's a good idea.
Speaker Change: Overall, we believe we have developed an efficient and scalable platform to help drive high-margin recurring sales in the coming years and look forward to reporting further developments in our medical division as we advance initiatives on both the e-commercial and reimbursement fronts.
Speaker Change: 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.
Speaker Change: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now.
Speaker Change: A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions.
Speaker Change: Thank you. Your first question is coming from Anthony Vendetti of The Maxim Group. Anthony, your line is live.
Anthony Vendetti: Thank you. Good morning.
Anthony Vendetti: I agree to Arian's great milestone.
Speaker Change: to have the max coverage starting in Florida.
Anthony Vendetti: Can you talk about, you know, the...
Speaker Change: potential for broadening adoption,
Speaker Change: Are you in discussions with other MACs at this point and then, you know, what this means?
Speaker Change: in terms of the price assignment and what your internal plans are to expand the sales force and drive adoption. I know there's a lot in there, but...
Speaker Change: Good morning, Anthony. Thank you for asking the question.
Speaker Change: Just let me make a small slight correction, the JMEC is not only in Florida, it's the JMECs in Florida, New Jersey, and Texas, right? So, like we stated always,
Speaker Change: That is gigantic for the company. It's a third of the of the total
Speaker Change: Epidural Injection Procedures in the United States performed annually. So, following your questions, the pricing, the sales, expansion, and the rollout. So...
Speaker Change: On purpose, you know, as we are restricted by rules and regulations, we cannot...
Speaker Change: in writing, you know, share what the pricing is, but it is publicly available and we are allowed to share with the investment community what the reimbursement
Speaker Change: price when clinicians send in the claims.
Speaker Change: and Show Medical Necessities. So then these Medicare jurisdictions, all three Medicare jurisdictions,
Speaker Change: have granted payment as part of the physician payment rate of $325 in addition to the primary code which is roughly about $280. So that is the fee.
Speaker Change: that has been granted by these jurisdictions for ESI procedures when our technology is used after sending in the claims and the necessary documents.
Speaker Change: So...
Speaker Change: Your question about Salesforce expansion and what it would mean for the company, so You know what we have been doing and I keep everybody in mind
Speaker Change: You know, our focus is strong execution, so if I look at the timeline, I'm pretty proud of what the team, including myself, have been able to perform.
Speaker Change: You know on July 10th, we had the first Florida release on July the 23rd. We had New Jersey and Texas
Speaker Change: We got on July 30th the patent release on August 7th.
Speaker Change: We have been able to finally negotiate and announce the relationship with Actual Biologics. So everything in three weeks' time, we have been able to make a tremendous step forward.
Speaker Change: in preparing for the commercialization. In addition, what we have been doing is we have expanded our team towards...
Speaker Change: three clinical surface specialists, and why clinical surface specialists? Because...
Speaker Change: We own and we know and we have the inside know-how about our technology.
Speaker Change: that means that we can train commercial partners so at the same time we have trained
Speaker Change: the representatives of Actual Biologics, we have been in contact with lawyers to set up the right sales agreement, and the sales approach is really
Speaker Change: that we are focusing what I call, quote unquote, the sort of the big fish strategy, meaning that...
Speaker Change: We are focusing on larger institutions, larger clinicians.
Speaker Change: that do not have a problem, so to say, to commit to a reasonable number of consumables per year, and that is in the range of 100 to 200.
Speaker Change: 200 consumables a year as a minimum in return we will not sell the instrument at a high price, so it is actually a sort of a pay back on the instrument or the capital equipment cost.
Speaker Change: for the clinicians and then taking into account that these clinicians, of course,
Speaker Change: Need to have a price.
Speaker Change: below that $325 because
Speaker Change: Otherwise, there would not be an interest to purchase the product, so there is a hole.
Speaker Change: I call it a discount percentage scheme, dependent on the volume that the clinicians are able and willing to purchase our products. That will trigger then a scale of pricing for these clinicians.
Speaker Change: Now what it means for revenues
Speaker Change: Look, it is very simple. On purpose, we are focusing on the business part of it, what I say, bring a book of business.
Speaker Change: They know
Speaker Change: the pain market, they know the players, they know the larger chains, they know the physicians, you know, I would almost say inside out, they have more than 20 years of experience in this field.
Speaker Change: And in all fairness, that is not what our company is having. So that's the reason why we are liaising and engaging with Actio Biologic, because they bring the know-how, the customer and the client know-how, and the client base that we are currently not having.
Speaker Change: So, actually, this week we started with the official rollout. We have a list of institutions that we are targeting at and, like I said, it's a disciplined commercial launch.
Speaker Change: I'm very positive and confident that we will be able to get also clinicians that already have used the technology to get them over on that longer term commitment.
Speaker Change: The question will come up about revenues. You all know my style. I will not make any forward-looking statements.
Speaker Change: Of course, for me, I sincerely hope that we can, and that's what we are working on, that we will be able to have revenues in the third and the fourth quarter this year.
Speaker Change: I think it's a little bit tricky to say what that revenue is going to be because it depends on the first sales calls feedback and it depends on the institutional and the clinician's feedback. But I do foresee that.
Speaker Change: that we will get contributions this year. That's the goal. And I think we're in good shape. We've done our homework.
Speaker Change: We're making long hours as always, but we are positive, enthusiastic, and comfortable with where we are.
Speaker Change: You know, let's start selling the inventory that we have at hand and then in the next call we can share more in detail, I would say, what the projections will be, but I think it is fair.
Speaker Change: ask and comment to make that let's first do our work, let's first be in the marketplace, get the first feedback. Might be that we have to adjust the pricing if that is needed. That's the phase we are currently in. Does that answer your question, Anthony?
Anthony Vendetti: Yes, Aryan. So maybe it's a little early, but have any claims been submitted yet? And if so, what does that look like so far?
Speaker Change: I know, we have submitted more than or close to 200 claims since the start. Now it is of course different, right, like I said.
Speaker Change: The clinicians now, we don't have an advisory side in these jurisdictions, now it is to get these clinicians over with the sales agreement, with the new pricing, like I said, that we have launched this week.
Speaker Change: to start doing patient cases and get payment. We are in the midst of that process, Anthony.
Anthony Vendetti: That's right. Okay, I knew it was early, but it sounds like you'll give us an update following the third quarter results. Just shifting gears, one question on the dental business.
Speaker Change: has been resolved. Was there lost revenue this quarter that you believe will be recovered in 3Q24, or shifted to 3Q24, or is it just...
Speaker Change: lost revenue. We shouldn't expect any revenue to shift over into the third quarter that was potentially lost in the second quarter.
Speaker Change: What I meant also in this call, I'm not concerned at all about...
Speaker Change: Let's say the dental revenues this year.
Speaker Change: I know what the internal planning has always been in the first quarter and the second quarter this year.
Speaker Change: We had foreseen, let's say, lower sales than what we anticipate in the second half of the year. Several reasons, seasonality, second quarter.
Speaker Change: seasonality feedback from the distributors that we actively reached out to. Well it is fair to say that of course the second quarter results were a little bit lower than we anticipated.
Speaker Change: But just for everybody to understand what we mean by freight for water issues
Speaker Change: Those are issues that are, in a way, out of our control. Just to give you a flavor, by the end of the second quarter, we had about $250,000.
Speaker Change: of products that were finally packed, that were on the dock, that were believed or planned to be picked up by the freight forwarder that is directed by the distributor. So
Speaker Change: In the last five days of the month back and forth back and forth the distributor was not able to get
Speaker Change: and his or her specific trade forwarder to get to the dock and to pick up the shipments or to pick up the packages and the products that were already packed.
Speaker Change: So, in other words, if that would come in, then we would be, quote-unquote, on fire at the initial plans that we had for the second quarter.
Speaker Change: I can share with you that we had a very strong month of July.
Speaker Change: And therefore, I'm also making that statement that
Speaker Change: you know, are sales international, both international and domestic.
Speaker Change: will and has to be improved by the third quarter or in the third quarter and the fourth quarter this year.
Speaker Change: So, we are on a good trajectory there.
Speaker Change: Okay, I appreciate all that, Kala, Arian. I will hop back into Q, thank you.
Speaker Change: You're welcome, I think.
Speaker Change: Thank you very much. Well, there appear to be no further questions in the queue. I can now hand back over to Arjen for any further comments.
Arjen: First of all, thank you for your time today, like we have said, and I will repeat what we have stated before.
Arjen: We as management of the company, we...
Arjen: We are still in that period that we have celebrated the success internally.
Arjen: on the reimbursement news.
Arjen: We are 100% aware that the expectations have been created to roll this out further commercially.
Speaker Change: Full focus, full attention.
Speaker Change: Full support and full energy on that, and we absolutely will keep you posted in the next couple of months about any news.
Speaker Change: that we will and are able to share with you and thank you for your time today.
Speaker Change: In case you have any questions, you always can reach out to me directly, I'm easy, accessible, and stay safe, and looking forward to seeing you or hearing you soon. Have a great day. Thank you.
Speaker Change: Thank you very much. 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.