BioStem Technologies Q3 2024 Earnings Report

BioStem Technologies EPS Results

• Actual EPS: $0.32
• Consensus EPS: $0.31
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

BioStem Technologies Revenue Results

• Actual Revenue: $82.56 million
• Expected Revenue: $78.22 million
• Beat/Miss: Beat by +$4.34 million
• YoY Revenue Growth: N/A

BioStem Technologies Announcement Details

• Quarter: Q3 2024
• Date: 11/12/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, November 12, 2024
• Conference Call Time: 4:30PM ET

BioStem Technologies (OTCMKTS:BSEM), a life sciences corporation, focuses on discovering, developing, and producing pharmaceutical and regenerative medicine products and services. It develops various biologic stem cell based alternative products, as a treatment for ailments, such as joint pain, tendon and ligament injuries, neurodegenerative, and autoimmune diseases. The company is also engages in the repackaging and distribution of active pharmaceutical ingredients and other pharmaceutical compounding supplies; and develops and markets nutraceutical products under the Dr. Dave's Best and Nesvik Organics brands, as well as other non-proprietary products in the United States and internationally. The company sells products through e-commerce platforms. BioStem Technologies, Inc. was incorporated in 2006 and is based in Pompano Beach, Florida.

BioStem Technologies Q3 2024 Earnings Call Transcript

Key Takeaways

• The company reported record Q3 financial results with $82.6 M in revenue, $9.9 M in adjusted EBITDA and a cash position of $14.6 M, marking its third consecutive quarter of record growth.
• Continued strong demand for Amniorap 2 powered by patented biorepane technology drove a robust 95% gross margin, highlighting operational efficiency.
• BioStim secured IRB approvals and began enrolling patients in two randomized controlled clinical trials for diabetic foot ulcers and is designing a venous leg ulcer study, with interim results expected by mid-2025 and final readouts in early 2026.
• The company is actively engaging with CMS, Congress and industry leaders to shape Medicare reimbursement policies amid concerns that a proposed Local Coverage Determination could restrict patient access to skin substitutes.
• BioStim filed a Form 10 with the SEC and applied for a NASDAQ uplisting, aiming to enhance visibility, broaden its investor base and transition to full reporting status.

Presentation

[Operator]

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioStem Technologies' Third Quarter Results webcast call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Adam Holdsworth, Managing Director of Investor Relations. Please go ahead.

[Adam Holdsworth, Managing Director of Investor Relations at BioStem Technologies Inc]

Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem Technologies third quarter 2024 financial results and corporate highlights. Leading the call today will be Jason Matuszewski, the company's Founder and Chief Executive Officer, and Mike Fortunato, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks today may contain forward-looking statements based on the current expectations of management, which involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated. These risks are described in the company's filings with the Over-the-Counter Markets. We're cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made and may change at any time. While we may update or revise these statements from time to time, the company undertakes no commitment to do so unless required by typical securities laws.

[Adam Holdsworth, Managing Director of Investor Relations at BioStem Technologies Inc]

This call also includes references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available in the company's press release on the investor relations section of BioStem's website. With that, I'm now pleased to turn the call over to Jason Matuszewski.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Thank you, Adam, and thank you all for joining us today. I'm pleased to report that BioStem Technologies has achieved another milestone, marking our third consecutive quarter of record-setting growth. In Q3 of 2024, we posted revenue of $82.6 million, adjusted EBITDA of $9.9 million, and our cash position improved to $14.6 million, establishing a new revenue high for the company and demonstrating our robust financial performance. For the first nine months of this year, we've generated $199 million in net revenue, highlighting our continued momentum and resilience in the market. Our success this quarter is a testament to the strength of our portfolio of skin substitutes, especially our AmnioWrap2 allograft, powered by our patented BioREtain technology. This innovative technology is driving strong commercial performance across a wide range of non-acute segments.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Our gross margin remains solid at 95%, reflecting our commitment to operational excellence and the efficiency of our manufacturing processes. I want to take this moment to recognize the dedication of the entire BioStem team. Your commitment to our vision and the honor you bring to the gifted donation are what drives these outstanding results. As part of our efforts to ensure patient access to high-quality, life-changing products, we've been actively engaging with CMS, congressional leaders, and industry partners to advocate for fair and effective Medicare reimbursement policies. We recognize that certain players have caused over-utilization within the Medicare reimbursement system, impacting policy and patient access. Our goal is to help shape a reimbursement landscape that not only supports ethical practices but also ensures that millions of Medicare beneficiaries have access to vital treatments.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

BioStem remains at the forefront of this conversation, collaborating with government and industry leaders to support responsible, patient-centered policy solutions. Turning to partnerships, I would like to extend my gratitude to our commercialization partner, Venture Medical. Their role has been instrumental in our growth journey, as they led the nationwide launch of AmnioWrap2 in Q4 of 2023 and are now preparing for Vendaje AC's launch in Q4 of 2024. Venture Medical is a key commercialization and marketing partner, and we're thrilled to work side by side with them once again with Vendaje AC, which recently had a national ASP published for Q4 of 2024, allowing reimbursement across all MAC regions. Earlier in the quarter, we received IRB Approval for two major clinical studies on non-healing diabetic foot ulcers. These approvals are essential milestones in our clinical journey and support our commitment to rigorous, impactful research.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

We recently enrolled our first patients in two randomized controlled clinical trials this quarter, evaluating our BioREtain allografts. We anticipate an early readout of these results from these studies by mid-2025 and final results in early 2026, providing us with clinical data that will strengthen our clinical approach, broaden our payer coverage base, and support expanded access to our innovative products. Additionally, we're in the final stages of designing a study protocol for venous leg ulcers, with timelines to be communicated once finalized. We recently reported positive results from a retrospective data study comparing our BioREtain allografts to the standard of care for diabetic foot ulcers, underscoring our commitment to advancing clinical data on our products. In October, these findings were published in the International Wound Journal, providing valuable peer-reviewed validation of our technology's effectiveness. This achievement further reinforces BioStem's standing as a leader in research-backed innovation.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

In support of our equity capital market strategy, we filed our Form 10 on September 27th with the SEC and submitted an application for uplisting to Nasdaq at the same time. We are currently working through our initial SEC review comments and expect to submit a formal response in Q4, along with amended Form 10. Uplisting to a national exchange and becoming fully reporting with the SEC is a strategic commitment to enhance BioStem's visibility and provide wider accessibility to a broader investor base. As we look to the remainder of 2024 and beyond, BioStem is well-positioned for continued growth and innovation. Despite industry challenges, our strong foundation, evidenced by our robust portfolio and effective partnerships, positions us to adapt and grow. We are confident that our strategic initiatives, groundbreaking products, and dedicated team provide a solid foundation for future success.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Looking ahead, we are optimistic about our upcoming clinical trial results and the potential for broadening our market access, which could provide further clinical validation of our products, superiority, and drive broader payer coverage and adoption of BioStem's allografts. These initiatives have the potential to diversify and expand our product offerings, positioning us on a strong trajectory to deliver value for our shareholders, expand our market presence, and improve patient outcomes with our innovative solutions. Thank you to our shareholders, Venture Medical, and our team members for their ongoing trust, dedication, and support as we work to bring transformative solutions across the continuum of care to patients and providers. With that, I'll now hand the call over to Mike Fortunato, who will provide a detailed review of our financial results for Q3 2024.

[Michael Fortunato, CFO at BioStem Technologies Inc]

Thank you, Jason, and good afternoon to everyone. We appreciate you being here with us today. I am pleased to share BioStem's Q3 2024 financial results, which highlight continued strong growth and significant milestones for the company. 2024 has been a transformative year for BioStem. When we compare this quarter to the same period last year, the progress we've made is significant, and we're excited to share the results. For the third quarter of 2024, net revenue reached a record $82.6 million, reflecting an increase of $79 million compared to the same period in 2023. This growth is primarily driven by continued strong demand for AmnioWrap2, which has been performing exceptionally well across a range of patient applications. Our gross profit for Q3 was $78.3 million, or 95% of net revenue, compared to $3.2 million, or 91% of net revenue in the prior year, same period.

[Michael Fortunato, CFO at BioStem Technologies Inc]

This represents an increase of $75.1 million, driven by robust sales growth of AmnioWrap2, and highlights our manufacturing and operational efficiencies. Operating expenses for Q3 2024 were $69 million, up from $4.5 million in the same period last year, an increase of $64.5 million. This increase was largely due to workforce expansion, higher bona fide service fees associated with our distributor agreements for AmnioWrap2, and increased share-based compensation as we continue to scale our operations. For the nine-month period ended September 30th, 2024, we reported net revenue of $199 million, an increase of approximately $194 million compared to the same period in 2023. The majority of this growth was driven by AmnioWrap2, which continues to experience strong market demand.

[Michael Fortunato, CFO at BioStem Technologies Inc]

Our gross profit for the first nine months was $188.7 million, or 95% of net revenue, compared to $4.5 million, or 88% of net revenue for the same period last year. This increase of $184.2 million reflects higher sales volumes of AmnioWrap2 and improved manufacturing and operational efficiencies. Operating expenses for the first nine months of 2024 were $166 million, an increase of $154 million from the same period last year. This increase was driven by continued investments in scaling our operations, including workforce growth, higher bona fide service fees related to AmnioWrap2 distribution, and increases in share-based compensation. We are pleased to report that we have achieved positive GAAP net income for the third consecutive quarter. Net income and Adjusted EBITDA for the quarter was $6.8 million and $9.9 million, respectively.

[Michael Fortunato, CFO at BioStem Technologies Inc]

These results demonstrate our ability to continue to scale the business to meet strong revenue growth while remaining profitable. In addition, our cash balance has increased from $6.8 million from the previous quarter to $14.6 million in the current quarter, an increase of $7.8 million. Regarding income taxes payable on the balance sheet, management has estimated an income tax expense of $2.3 million for the third quarter and $5.8 million year-to-date September 30th, 2024, pending the completion of the Internal Revenue Code Section 382 study currently underway. This study will determine if there are any limitations on the timing of using previously generated net operating losses to offset current year taxable income. Although these amounts are recorded as income tax payable, management expects that most, if not all, of this estimate will be offset by the NOLs by December 31, 2024.

[Michael Fortunato, CFO at BioStem Technologies Inc]

As we look to the remainder of 2024, we are confident that these strong financial results, paired with the successful execution of our strategic initiatives, position BioStem for continued success. We will continue to drive growth, enhance profitability, and maximize value for our shareholders. I'll now turn it over to the call to Jason for closing remarks.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Thank you, Mike. As you just outlined, this quarter marked several significant milestones that have driven BioStem's growth and demonstrated exceptional financial performance, with Q3 revenue reaching a new high of $82.6 million and an Adjusted EBITDA of $9.9 million and a strengthened cash position of $14.6 million. Our results underscore the effectiveness of our strategy and the resilience of our team. I'd like to address some updates on coverage and payment policies for skin substitutes, specifically for our products. Last Friday, the Centers for Medicare and Medicaid Services, CMS, finalized their pricing methodology for skin substitutes in the physician office space, or non-acute segment, for 2025. CMS confirmed they will continue with ASP plus 6% as the pricing model. This decision bolsters our confidence in pricing stability for the coming year and ensures that BioStem can maintain its current pricing and commercial strategy as we continue to scale our business.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Now, regarding the coverage policy, we're actively engaging with CMS, Congress, the MACs, and industry leaders to address the proposed LCD. This proposal could impact hundreds of essential products, including ours, potentially limiting access for Medicare beneficiaries who rely on these treatments. Our goal is to advocate for a well-founded and equitable coverage policy that balances ethical practice with patient safety. While we acknowledge over-utilization by some parties in the market, we believe a more rigorous approach is needed, one that doesn't place patient access at risk. BioStem remains at the forefront of this effort, collaborating closely with government and industry stakeholders to support policies that responsibly expand patient access to life-changing products. Our efforts, which include engaging closely with Capitol Hill leaders, aim to secure better, more equitable coverage for skin substitutes, benefiting both the Medicare beneficiaries and BioStem.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

October marked the kickoff of a pivotal clinical trial on diabetic foot ulcers, comparing our treatments to the standard of care. This study, involving 60 patients across 10 sites, is essential to building evidence of the clinical superiority of BioStem's products. Alongside an upcoming study focused on venous leg ulcers, these trials are key to demonstrating BioStem's value in expanding payer coverage across commercial plans, Medicare Advantage, and Medicaid. In addition, we announced groundbreaking results in October from a retrospective study on diabetic foot ulcer wound closure, underscoring the clinical superiority of our BioREtain processed placental membrane over the standard of care, published in the International Wound Journal. These results highlight the potential for BioREtain to address significant gaps in the DFU market, often involving challenging treatment-resistant wounds.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

This publication strengthens BioStem's clinical credibility and supports our strategy to expand payer coverage and commercial traction across Medicare, Medicare Advantage, and Medicaid, and other payer channels. We are excited about the strategic value this study brings as it reinforces BioStem's position as a leader in providing effective, evidence-based solutions for chronic wound care. We remain optimistic that the current proposed LCD will not get implemented in 2025 without amendments being implemented, which could favor BioStem. Looking forward, we're confident that these trials will provide additional clinical validation for our commercial products, efficacy, driving expanded payer coverage, and broader adoption of BioStem's allografts. Pivoting to the equity capital markets front, we made a significant advancement in September by filing a Form 10 with the SEC on the 27th and simultaneously submitting our Nasdaq uplisting application.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

We are now working through our initial SEC review comments and plan to submit a formal response along with an amended Form 10 in Q4. This uplisting to a national exchange and transition to fully reporting status are key milestones in BioStem's strategy aimed at enhancing our credibility, broadening our investor reach, and increasing access to capital, essential drivers of a long-term shareholder value as we continue to execute on our growth initiatives. In closing, as we enter the fourth quarter, we remain optimistic about BioStem's continued growth and the significant milestones on the horizon. With the recent nationwide launch of Vendaje AC and established reimbursement across all MAC regions, we're well-positioned to see strong revenue contributions from this product. This quarter marks our third consecutive record of growth, and we're excited about the initiatives underway that have the potential to diversify and expand our product offerings.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

As we continue to advance our strategic priorities, we're confident that BioStem is on a strong trajectory to deliver value to our shareholders, expand our market presence, and improve patient outcomes with innovative solutions. We look forward to keeping you up to date on our progress, and I appreciate your continued support as we work towards greater success. Thank you, and we'll now open the call for questions.

[Operator]

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Kevin Bennett, an individual investor.

[Operator]

Good evening, guys. Good job on the quarter there. Just had a few questions, I guess. The distribution cost maybe is like my biggest thing that I have. I don't know if we could restructure that, maybe give them like an exclusive deal with us or something, maybe more profit for us, you know, and then give them a security of having all of our business. Second question is the, I'm assuming this is like a cream that you put on diabetic wounds.

[Operator]

Is it actually possible to have this like an airbrush, like spray thing, like burn victims? Would that actually work on a product like that? And then my third question is, on the uplisting, the share structure, what will happen with the share structure? I know we're like at about $16 million and $11 million out and $5 million restricted. Just curious what will happen with that. Like I say, that's all the questions I have. I appreciate y'all's work.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Thanks, Kevin, for being a long-term shareholder, and really appreciate the questions. First and foremost, on the distribution side with Venture Medical, right now we're continuing to kind of work through that team, and they've done an amazing job of expanding access to our product across all of the MAC regions. I think right now we're looking at continuing that type of relationship in the near term, and to kind of compare it to, I guess, maybe competitors, if we were to internalize this type of sales force from a W-2 perspective, I think we would see similar costs associated with this marketplace in getting product out into the marketplace. On the second question in regards to a cream, actually, our products are considered what they call tissue allografts. So we actually harvest a piece of tissue off of the placenta.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

It's like a sheet-like format that's laid into the wound bed across the wound, and it acts as a barrier or cover for these chronic-type wounds, so diabetic foot ulcers, pressure ulcers, and venous leg ulcers. Then third, in regards to the capital structure, excuse me, the equity capital structure, right now I believe there's about 16 or so million shares outstanding in common stock. That would be kind of ultimately move from OTC up to NASDAQ, and then any of the warrants and options that are outstanding would also move up to NASDAQ. Currently, that's kind of the plan with the direct listing.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Okay, thanks a lot.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

No problem, sir.

[Operator]

Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Paige Taggart with APT Capital.

[Paige Taggart, Analyst at APT Capital]

Hey, Jason, congrats on another record quarter. Just a quick question, if you could provide some more color around the distribution channel with Venture Medical, I guess specifically the sales cycle would be helpful for me. Thanks.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Yeah, thanks, Paige. So just kind of get a little bit more color to kind of how we fulfill and manage the pipeline with Venture Medical. So Venture Medical, on a daily basis, is ordering product from us, and we are shipping it out on a daily basis. It's a very lean and FIFO-type arrangement with that organization. And then secondly, they're continuing to have weekly conversations with us about what is the demand pipeline looking like. And we're continuing to kind of monitor, from a manufacturing perspective, how quickly we need to increase production in specific sizes. And that's associated with their robust platform called Venture OneView that they utilize with their downstream customers to ultimately kind of see where these types of wounds are going.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

In this process, typically these wounds or these providers ultimately run what's called an IVR, Insurance Verification Request, and they can see kind of where and what size the wound is and can kind of get an idea of, okay, where is the wound going from an initial size and then kind of as the wound gets closer to closure. So that allows us to have a little bit more insight on product needs and kind of product production. So thanks for your question.

[Paige Taggart, Analyst at APT Capital]

Thank you.

[Operator]

Your next question comes from the line of Ernest Watts with Watts Associates.

[Ernest Watts, Analyst at Watts Associates]

I appreciate the progress that you're showing and the comments that you made today. You mentioned in the release that buildup costs were significant and apparently much more significant than the second quarter. Could you give a comment on roughly what they were in each of the two quarters, please?

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Ernest, could you clarify your question a little bit? When you say buildup costs, what do you mean?

[Ernest Watts, Analyst at Watts Associates]

It costs money to get your product out into the field, and you have to have people to do that. Those people are hired before the actual revenues come in. So I'm referring to costs that precede revenues.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Got it. So yeah, as mentioned on the income statement, notice there's obviously elements of the SG&A. Obviously, the biggest one is bona fide services. Those services are specific to Venture Medical being out into the field and commercializing our product. And those are a direct correlation to the revenue, top-line revenue specifically. So as top-line revenue increases, those specific bona fide services, which make up a large portion of the SG&A, kind of incrementally shift in that direction.

[Ernest Watts, Analyst at Watts Associates]

Could you give a rough figure for each of the two quarters?

[Michael Fortunato, CFO at BioStem Technologies Inc]

I can actually.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Go ahead, Mike.

[Michael Fortunato, CFO at BioStem Technologies Inc]

I can help with that. I can help with that, Jason, if you want. So yeah, so sales and marketing, so bona fide services are included in sales and marketing expenses for Q3. They were $65.1 million for three months. And for the previous quarter, I want to say they were around 50, around mid-50s, 50-something million. And again, it's a direct, those costs go up or down in relation to revenue. So as revenue increases, you can expect those bona fide service fees and sales and marketing expenses to go up. Does that help?

[Ernest Watts, Analyst at Watts Associates]

That's it.

[Michael Fortunato, CFO at BioStem Technologies Inc]

Okay. Thank you for your question.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Thanks, Ernest.

[Operator]

I will now turn the call back over to Jason Matuszewski for closing remarks.

[Jason Matuszewski, Chairman and CEO at BioStem Technologies Inc]

Well, thanks everyone for joining the call today. We had an amazing Q3 result, and I want to thank everybody, specifically all of the BioStem team members as well as the folks at Venture Medical for all the amazing success that we've had in Q3 of this year, and looking forward to sharing our results for the end of the year and Q4 results with you all in the near term. Thank you, everyone. Have a great night.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Michael Fortunato, CFO
• Adam Holdsworth, Managing Director of Investor Relations
• Jason Matuszewski, Chairman and CEO

Analysts

• Paige Taggart, Analyst at APT Capital
• Analyst
• Ernest Watts, Analyst at Watts Associates