NeuroOne Medical Technologies Q4 2023 Earnings Call Transcript

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December 14, 2023

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the NeuroOne Medical Technologies Corporation Fiscal 4th Quarter and Full Fiscal Year 2023 Financial Results Conference Call. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa and Chief Financial Officer, Ron McClard. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward looking statements within the meaning of the U. S.

Operator

Federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified dates. Forward looking statements may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. DNeuroOne's corporate update, press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. 2017. Except as required by law, we undertake no obligation to update such forward looking statements.

Operator

With that said, I'll turn the call over to Dave Roesel, CEO Clognero 1. Dave?

Speaker 1

Thanks, operator. And before I start, just a heads up for everyone that I'm trying to get over a cough and I apologize in advance if I start to cough it becomes a nuisance. I'll just have Ron finish the call. So, 1st and foremost, thanks for joining us this evening. During our fiscal Q4 and through today, 2018.

Speaker 1

The company continued to make significant strides in our objectives relating to commercial progress, product development and regulatory clearances. I would first like to discuss what I believe is the company's most significant accomplishment in our history and that is FDA clearance of our 1 RF ablation system, which is the 1st FDA cleared system that has obtained an indication for both recording electrical activity and ablation of nervous tissue utilizing the same device. I mentioned last quarter that we had submitted a 510 application to the FDA this past June. The FDA responded to the submission with questions that we responded to last month. We were confident in our responses to FDA and this past to date.

Speaker 1

Monday, we announced that the FDA provided a 510 clearance for the system for the creation of radio frequency lesions in nervous tissue for functional neurosurgical procedures. We anticipate a commercial launch in the first half of twenty twenty four. Currently we are waiting for hardware components for the RF generators. Once they are available, we will release the product for commercialization. 2.

Speaker 1

We remain in discussions with 2 strategic organizations regarding their interest in licensing the technology for these procedures and expect to reach a decision in the near future. We also remain open to commercializing the device directly excuse me, if we believe it presents the best option for the company. In addition, the company is exploring other applications for the system to treat pain. We believe there are additional market opportunities we may be able to take advantage of with the system and we'll provide further updates regarding this in the future. We are extremely excited with this major accomplishment and continue to demonstrate the company's ability to execute on our strategic plan.

Speaker 1

We believe that the addition of this system to our product offering positions us well to compete not only for the ablation business, but also for the SEEG electrode sales opportunity. I'd now like to provide an update regarding the expanded launch of our EVO SEG electrode product line with our commercialization partner Zimmer Biomet. In our 4th fiscal quarter, Zimmer continued to strategically open new centers. Feedback remains consistently positive regarding the device performance and we are seeing increasing usage in recent months. We expect to see a continued ramp in device sales and revenue as the launch expands further and believe that the clearance of our 1RF ablation system will also have an additional potential positive impact on the EVO SEEG sales.

Speaker 1

Moving on to our drug delivery program, you might recall that I discussed the potential for our SEG electro technology to offer the ability to deliver genes or drugs to the brain as well as record the therapy's impact. 2018. During the past quarter, we defined the product requirements for use in both clinical and research, developed prototypes for future studies and were granted a patent by the United States Patent and Trademark Office. We are currently in contract discussions with a biotech company regarding their interest in using our device and their upcoming clinical studies and have discussions scheduled with other potential partners as well. We are excited with the prospects of this technology and how it may assist the biopharma, biotech industry in their drug or gene therapy delivery development, but also its value clinically in current neurosurgical procedures.

Speaker 1

If we are able to reach an agreement with our existing contract negotiations, excuse me, the technology has the potential to add revenue later in calendar year 2024. Regarding our development efforts with our spinal cord stimulation program to treat chronic back pain, Members of our physician advisory board successfully placed a 9 millimeter paddle electrode. Paddle electrodes are very similar in concept to vertical or film electrodes, but they were able to place a 9 millimeter paddle electrode utilizing a percutaneous placement approach and a cadaver model. 2018. In addition, we completed a histological analysis of a 28 day implanted paddle electrode without any notable concerns.

Speaker 1

Excuse me, spinal cord stimulation and pain management remain a priority for the company given the market opportunity and potential competitive advantages of our technology. Thank you for your time. And now I'd like to turn it over to Ron for a more in-depth review 2019 financial results highlighting revenue gains, past financing and other key financial metrics. Ron?

Speaker 2

Thank you, Dave. Product revenue was $742,000 in the Q4 of fiscal 2023 and $1,952,000 for the full year compared to a product revenue of about $69,000 in the Q4 of fiscal 'twenty two and $171,000 for the full fiscal year 2022. The company had no collaboration revenue in the Q4 of fiscal 2023 and $1,450,000 for the full fiscal year 2023 compared to collaboration revenue last year of $1,900,000 in the 4th quarter and just slightly below $1,950,000 for the full year of fiscal 2022. Collaboration revenue was derived from the Zimmer Development Agreement and represents the portion of the clusivity and milestone fee payments that were eligible for revenue recognition during the respective periods. 2017.

Speaker 2

Our total operating expenses in the Q4 of fiscal 'twenty three were $3,400,000 compared to $3,300,000 in the same period of the prior year. R and D expenses in the Q4 of fiscal 2023 were $1,800,000 compared to $1,400,000 in the same period of the prior to year. SG and A expenses in the Q4 of fiscal 'twenty three were $1,600,000 compared with $1,900,000 in the prior year period. Total operating expenses for the full fiscal year of 2023 were $13,900,000 compared with $11,900,000 in the prior fiscal year. R and D expenses for the full fiscal year of 2023 was $6,900,000 compared with $4,900,000 in fiscal 2022.

Speaker 2

SG and A expenses for the full fiscal year of 2023 were $6,900,000 compared with $7,000,000 in the prior fiscal year. 2018. Our net loss was $3,100,000 for the Q4 of fiscal 2023 compared to a net loss of $1,400,000 in the prior year period. For the full year, net loss was $11,900,000 for fiscal '23 compared to a net loss of $10,000,000 in fiscal 2022. On July 27 this year of 2023, the company consummated an underwritten public offering of its common stock were $6,000,000 in gross proceeds from which the company received $5,200,000 in net proceeds.

Speaker 2

In addition, the company sold common stock under the ATM program at an average price of $1.77 per share, from which the company received net proceeds of $2,500,000 As of September 30, 2023, the end of our fiscal year, the company had cash, cash equivalents and short term investments of $5,300,000 compared to $11,100,000 as of September 30, 2022. We had working capital of $5,500,000 at September 30, 2023 compared to working capital of $9,100,000 as of September 30, 2022. Company had no outstanding debt as of September 30, 2023 or 2022. With that, I will turn it back to Dave.

Speaker 1

Thanks, Ron. Operator, at this time, I think we can open up the call for questions.

Operator

Thank you. Our first question is from Ben Haynor with Alliance Global Partners. Please proceed with your question.

Speaker 3

Good afternoon, gentlemen. Thanks for taking the questions and congrats on the FDA clearance. First off for me, just regarding the commercialization, whether it's you guys or through a partner, I was just curious on how you have kind of scoped out What sort of sales force and activities that might be needed if you do choose to go out alone?

Speaker 1

Sure. I'll take that. Thanks for the question, Ben. Good to hear from you. What we see now is that When you look at the number of centers that are really doing the bulk of these procedures, it's about 50 centers on the upper end.

Speaker 1

And when you look at what's reasonable in terms of a sales rep or distributor in terms of how many accounts they could handle, Probably 5 and if you're pushing it 6. So this isn't a situation like many technologies where You have thousands of hospitals that are licensed to do the procedure in the U. S. It's only about 100, it's roughly about 190 And it's kind of the old eightytwenty rule, 80% of the procedures are being done at 20% of the centers. We think with a combination of distributors and we've already had distributors express interest in working with us to distribute this product and a handful of direct people that we could effectively call on those top 50 centers.

Speaker 1

And what we're going to do, Ben, as well as we would obviously focus on the centers that are already using the product that have already converted to the product and start there because those are kind of the low hanging to prove. They're already believers and adding the ablation procedure would really be a no brainer.

Speaker 3

Okay. That makes sense. And I imagine it won't be too huge number of people, but half a dozen sounds fairly reasonable. And then just curious on any feedback that you've received from folks, So clinicians and such, now that you're following the FDA clearance?

Speaker 1

Yes, the feedback is when can we get a system, which is a nice problem to have. So There's been really for the last since we submitted to FDA, building enthusiasm from the field. And what's been happening is in the cases that we've been supporting with our Zimmer partners, Physicians will bring up the fact that they're very interested in using the device for ablations and when will the device be available and what's the rollout plan and things like that. So and now that it's Gotten cleared. I mean, literally, on Monday, the day we put out the announcement, I had emails from physicians from our advisory board neurosurgeons Who were already wondering when they were going to be able to get the system.

Speaker 1

So it's exciting for me because This obviously has been in the works for a while and to kind of see the interest and the momentum build, I'm pretty excited to get this product out into the field. I think it's going to do very well.

Speaker 3

Okay. That's helpful. And so what have you been telling them on when they can get that system? Any Better color than first half, is it March, is it April, May, February?

Speaker 1

The problem is whenever you make a whenever you throw a date out to physicians, well, really to anybody, Then that becomes the expectation. And when that doesn't happen, there's a lot of people disappointed. So what we've told physicians is that we're waiting for parts to come in for the generators. Those parts from a schedule perspective are due in March, but these are parts that had about a 10 to 12 month lead time. So we ordered these quite a while ago and we're completely dependent on the vendor to get those parts in.

Speaker 1

And as we all know, the reliability of some vendors is not just during COVID, but after Has been challenging. Now the good news is this company has been pretty consistent on when they feel they can deliver, But until our vendor that's making the boxes for us has those parts in hand, we're going to continue to say in the first half of the year, we're confident doing that. But if we can expedite those timelines by 3 months, 4 months. When those units first become available, the product will be available for commercialization. We will not delay.

Speaker 1

So I'm hopeful we get them in when they say, but we've certainly all been burned before on commitments from vendors when parts are coming in and that is 100%. So the devices that we're actually manufacturing ourselves, the assemblies, the electrodes, we have full confidence in that we can launch this in January, February, but it's just the generator parts, a few of them that we're waiting on.

Speaker 3

Okay. That's understandable and fair enough. And then lastly for me just on drug delivery. What sort of the clinical trials that the firm that you're in contact with now, I would presume they're earlier stage trials. I mean, is that accurate?

Speaker 3

And then with the folks that you're scheduled to talk to or Talking to you at some point, what's kind of the right way to think about what sort of Stage these trials might be at?

Speaker 1

Yes. So it's, it would be very difficult for a company that has done a Phase 1, Phase 2 without our device to then kind of incorporate that in. That would be in my mind a significant change to their protocol. So it would be very, very unlikely that any of those companies would want to change their protocol because it brings added risk to the FDA. I've had this happen personally in other companies where If something goes wrong, then the FDA, the question is, is it your product or is it this new technology that you introduced?

Speaker 1

So these would all be Phase 1 studies that we're talking about. So they haven't started yet. The protocols are being developed, but the studies with the company that we're talking to are expected to start Late Q3, early Q4. And the areas that they're looking to evaluate with our technology and this has been really consistent with other companies that we're speaking to now. It's been for epilepsy, which It's kind of a slam dunk given that that's where our procedures are being done today.

Speaker 1

Parkinson's is another one. And then one that was a little bit surprising to me was ALS, so Lou Gehrig's disease. So that one we still need to learn a little bit more about how they would want to use our device and it may be the cortical or the strip electrodes versus the SEG for that type of procedure.

Speaker 3

2. Okay. That's helpful. That's all I had, gentlemen. Thanks for taking the questions.

Speaker 1

Thanks a lot, Ben.

Operator

Q3. Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Speaker 1

Yes. Thanks, operator. I just wanted to close with that we really believe the company has made extraordinary progress towards the goals that we actually set for fiscal 2023. And just to remind everyone of just a handful of these, we received FDA clearance actually on our SEEG electrode during fiscal 2023. We commercially launched that line in May with Zimmer Biomet, our distribution partner.

Speaker 1

We submitted for FDA clearance on our 1RF ablation system, obviously subsequently received FDA clearance for that product as well. In addition, we did raise capital with existing and for me even more importantly new institutional investors without including warrants, we launched a drug delivery program and continued to make progress regarding our implantable electrode intended to treat back pain. I also believe the company has the potential to add revenue in 2024 beyond SEEG sales with contributions coming from our ablation system and potentially our drug delivery partnership or partnerships. In closing, I hope you all continue to follow our exciting progress. Thank you and have a good evening.

Operator

2018. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
NeuroOne Medical Technologies Q4 2023
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