Nuwellis Q2 2024 Earnings Report

Nuwellis EPS Results

• Actual EPS: -$791.70
• Consensus EPS: -$398.58
• Beat/Miss: Missed by -$393.12
• One Year Ago EPS: N/A

Nuwellis Revenue Results

• Actual Revenue: $2.19 million
• Expected Revenue: $1.90 million
• Beat/Miss: Beat by +$290.00 thousand
• YoY Revenue Growth: N/A

Nuwellis Announcement Details

• Quarter: Q2 2024
• Date: 8/13/2024
• Time: N/A
• Conference Call Date: Tuesday, August 13, 2024
• Conference Call Time: 9:00AM ET

Nuwellis (NASDAQ:NUWE) (NASDAQ:NUWE) is a medical technology company focused on developing therapies and devices to manage fluid overload in patients with cardiorenal and cardiovascular conditions. The company’s core business revolves around designing, manufacturing and marketing the Aquadex™ FlexFlow® System, a gentle ultrafiltration device intended to remove excess fluid in patients with acute decompensated heart failure, cardiorenal syndrome and other fluid‐overload disorders. By providing an alternative to traditional diuretic therapy, Nuwellis aims to improve patient outcomes and reduce hospital stays.

The Aquadex FlexFlow System operates by drawing blood through a low‐shear filter and returning it to the patient, allowing precise control of fluid removal at the bedside outside of an intensive care setting. This technology is used in hospitals, specialty renal centers and other acute care facilities. The system’s design emphasizes ease of use for clinicians, with automated control features and real‐time monitoring that support individualized treatment plans and help mitigate the risks associated with rapid fluid shifts.

Originally founded as Renal Solutions in 2005, the company adopted the Nuwellis name in 2016 to reflect a broader commitment to advancing fluid management therapies. Headquartered in Plymouth, Minnesota, Nuwellis holds both FDA clearance in the United States and CE Mark approval for distribution across Europe. Its sales and distribution network serves acute care hospitals and renal clinics across North America and select international markets.

Nuwellis continues to invest in research and development aimed at expanding the clinical applications of its ultrafiltration technology. The company’s leadership team includes seasoned executives with extensive experience in medical devices and healthcare innovation. Ongoing efforts focus on regulatory approvals, commercial partnerships and clinical studies to validate new indications and broaden access to its therapies worldwide.

Nuwellis Q2 2024 Earnings Call Transcript

Key Takeaways

• Revenue grew 6% YoY to $2.2M in Q2 2024, driven by a 30% jump in heart failure and critical care consumables utilization.
• Pediatric revenue fell 10% in Q2, as lower census of children born with kidney disease offset increased console sales.
• Gross margin improved to 67.2% from 55.3% YoY, and SG&A and R&D cuts drove a 38% reduction in operating expenses.
• Achieved the first commercial sale of QualImmune under FDA’s HDE to Cincinnati Children’s Hospital, advancing pediatric critical care offerings.
• Closed a registered direct offering and concurrent warrants in July, raising approximately $2M to bolster cash reserves and support growth initiatives.

Presentation

[Operator]

Good morning, and welcome to Nuwellis Earnings Conference Call for the Second Quarter ended June 30th, 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. 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. 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.

[Vivian Cervantes, Head of Investor Relations at Gilmartin Group]

Thank you, operator. Good morning, everyone. Thank you for joining us in today's conference call to discuss Nuwellis's corporate developments and financial results for the second quarter ended June 30, 2024. In addition to myself, with us today are Nestor Jaramillo, Nuwellis'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. At 8 A.M. Eastern Time today, Nuwellis released financial results for the second quarter, 2024. If you have not received Nuwellis's earnings release, please visit the investors page on the company's website. During this conference call, the company will be making forward-looking statements. All forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

[Vivian Cervantes, Head of Investor Relations at Gilmartin Group]

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. All forward-looking statements are based upon our current estimates and various assumptions. 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. All forward-looking statements are based upon current available information, and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to the cautionary statements and discussion of risk in the company's filings with the SEC, including the latest 10-K. With that, I'd like to now turn the call over to Nestor.

[Nestor Jaramillo, President and CEO at Nuwellis]

Thank you, Vivian, and good morning, everyone. Welcome to Nuwellis's second quarter 2024 earnings conference call. On today's call, I will provide an overview of our second quarter performance and give an update on our strategic initiatives. Our Chief Financial Officer, Rob Scott, will then provide detailed commentaries on our financial results before opening up the call for questions, followed by my closing remarks. Nuwellis has generated $2.2 billion 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, which translates to an increase in the number of patients being treated with Aquadex. 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.

[Nestor Jaramillo, President and CEO at Nuwellis]

Pediatrics saw a 10% revenue decline in the quarter, with an increase in console sales offset by a decrease in consumables utilization. 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. However, our pediatric business continued 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. 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. Now, turning to our recent commercial developments and new product introductions. We are pleased-- we were pleased to announce the first commercial sale of Quelimmune to Cincinnati Children's Hospital last month.

[Nestor Jaramillo, President and CEO at Nuwellis]

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. Quelimmune, or the selective cytopheretic device for pediatrics, 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. Early clinical data suggest a 77% survival rate for patients treated with this new therapy. As a reminder, Nuwellis has an exclusive U.S. license and distribution agreement for pediatric hospitals with SeaStar Medical. This therapy is now accessible under the Humanitarian Device Exemption from the FDA to medical institutions like Cincinnati Children's, giving nephrologists and intensive care physicians a novel option to address the needs of these critically ill pediatric patients.

[Nestor Jaramillo, President and CEO at Nuwellis]

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. We continue to be excited about our pediatric continuous kidney replacement therapy device, branded Vivian, which we are developing currently. 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, small children with limited or no kidney function, kidney issues, or those born without kidneys. This device is complementary to the Quelimmune 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. I'd like to now turn to Rob to discuss our second quarter financial results.

[Rob Scott, CFO at Nuwellis]

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 US console ASPs. 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 Aquadex. Pediatric results were down were down 10% year over year, primarily due to a decrease in consumables utilization. As Nestor mentioned, our pediatric business depends primarily on census. Gross margin was 67.2% for the second quarter, compared to gross margin of 55.3% in the prior year quarter.

[Rob Scott, CFO at Nuwellis]

The margin improvement was primarily driven by higher manufacturing volumes of consumables and lower fixed overhead manufacturing expenses. 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. The decrease in SG&A was primarily realized through efficiency initiatives enacted in the second half of 2023. Second quarter research and development expense was $558,000, compared to $1.5 million in the prior year period. The decrease in R&D expense was primarily due to reduced consulting fees and compensation-related expenses.

[Rob Scott, CFO at Nuwellis]

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, as we continue to realize savings from operating efficiency initiatives enacted in the second half of 2023. Operating loss in the second quarter was $2.3 million, compared to an operating loss of $5 million in the prior year period, resulting in a $2.7 million period-over-period improvement.

[Rob Scott, CFO at Nuwellis]

Net loss attributable to common shareholders in the second quarter was $7.7 million, or a loss of $18.85 per share, compared to a net loss attributable to common shareholders of $4.8 million, or $127.65 per share for the same period in 2023. We ended the second quarter with $1 million in cash and cash equivalents and with no debt on the balance sheet. On July 25, Nuwellis 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. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

[Operator]

Thank you. At this time, if you would like to ask a question, please press the star one on your telephone keypads. Again, you may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We'll pause for a moment to allow the questions to enter the queue. While we wait, we'll take our first question from Jonathan Aschoff from Roth.

[Jonathan Aschoff, Managing Director at ROTH]

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?

[Rob Scott, CFO at Nuwellis]

That's a great question, Jonathan. Yeah, just to speak to that, that trend, we do anticipate the spend to continue, maybe consistent with where it is, it's at, in Q2. However, you know, going forward, we will be continuing development of Vivian, our pediatric continuous renal, continuous renal replacement device. You know, the long hole in the tent is some software development. We anticipate ramping that up here in the very near future. So yeah, I anticipate some pickup in R&D expenditures, maybe not right away here in Q3. Correct.

[Jonathan Aschoff, Managing Director at ROTH]

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 percent of revenue, you know, the growth with that and how, you know, things might be going on with that Florida pediatric hospital?

[Nestor Jaramillo, President and CEO at Nuwellis]

Yeah. Yep. Jonathan, this is Néstor. Thank you for joining. Our pediatric business represent 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 babies and small children born with kidney or renal failure. So this quarter, while we saw an increase in the console sales because we opened new accounts, we also saw a decrease in the census, which means there wasn't that many small children or babies born with kidney disease. And that is the primary driver for our pediatric utilization of consumables.

[Jonathan Aschoff, Managing Director at ROTH]

Okay. Did you speak to any sort of guidance you might have for Quelimmune, given that that's, you know, A, started and B, actually in patients, you know, being used with patients already?

[Nestor Jaramillo, President and CEO at Nuwellis]

Right. Jonathan, it's hard to give guidance on Quelimmune, and the reason for that is that this is an HDE-approved device. HDE requirements are that hospitals needs to have IRBs, Institutional Review Board approval, by every hospital, one at a time. So we need to get the IRB approvals in the hospitals before they can issue a purchase order. So right now, a lot depends on the IRBs, on the hospitals, when do they meet, 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.

[Jonathan Aschoff, Managing Director at ROTH]

That's actually more than the first patient that you had announced earlier, or is it still one patient treated?

[Nestor Jaramillo, President and CEO at Nuwellis]

No, there's been more than one patient treated in the same, in one hospital, in Cincinnati Children's.

[Jonathan Aschoff, Managing Director at ROTH]

Okay.

[Nestor Jaramillo, President and CEO at Nuwellis]

I believe there has been about three or three patients. Don't quote me on that number, but I think it was about three patients that have been treated. I last talked to a nurse about a week and a half ago, and that was what the information that she provided.

[Jonathan Aschoff, Managing Director at ROTH]

You know, what did you give any update on the progress with the trial with DaVita? The pilot.

[Nestor Jaramillo, President and CEO at Nuwellis]

The trial with DaVita, we have not... Oh, the pilot with DaVita. We have not finished-

[Jonathan Aschoff, Managing Director at ROTH]

No, no, the pilot with DaVita. The pilot with DaVita.

[Nestor Jaramillo, President and CEO at Nuwellis]

Oh, DaVita. Okay.

[Jonathan Aschoff, Managing Director at ROTH]

In their specific hospital room.

[Nestor Jaramillo, President and CEO at Nuwellis]

Yeah. Jonathan, that is a good question and difficult to answer because, frankly speaking, we have not seen that much progress from last quarter. 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 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. So, what we've seen is a more intense interaction between hospitals and DaVita and us than expected.

[Jonathan Aschoff, Managing Director at ROTH]

I mean, wouldn't they be the easiest group to treat? You know, I mean, they, I mean, the easiest people to train. I mean, these guys, you know, spend all day, you know, sticking straws into people and, I mean, wouldn't they kind of be the easiest folks to get to use Aquadex efficiently?

[Nestor Jaramillo, President and CEO at Nuwellis]

Totally. Absolutely. Absolutely. But training is not the issue. Training DaVita personnel is not the issue. The issue is that DaVita has contract with hospitals, and they need to amend that contract, issue letters of understanding, and also creating a new protocol within the hospitals to transfer patients or to have patients treated with DaVita personnel for heart failure patients suffering from fluid overload. That's the main issue.

[Jonathan Aschoff, Managing Director at ROTH]

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?

[Nestor Jaramillo, President and CEO at Nuwellis]

Yeah, we're getting good traction in that network. It is a network that has been using the adult devices in adults, so they are very familiar. The hospital administration is very familiar with Nuwellis, and now using it in pediatric hospitals is gonna be a very positive event for us.

[Jonathan Aschoff, Managing Director at ROTH]

All right. Thank you very much, guys.

[Operator]

Thank you.

[Nestor Jaramillo, President and CEO at Nuwellis]

Thank you.

[Operator]

And next, we'll go to Anthony Vendetti with Maxim Group.

[Anthony Vendetti, Managing Director at Maxim Group]

Thank you. On the pediatrics, I know, Néstor, it's about 30% of revenues. Can you talk to how many accounts were added this quarter and what your current total's at? And then I have a follow-up. Thanks.

[Nestor Jaramillo, President and CEO at Nuwellis]

Okay. Yeah. We opened one account, one pediatric account, this quarter and total of 41 accounts using the Aquadex for pediatric patients. 41 accounts.

[Anthony Vendetti, Managing Director at Maxim Group]

41. Okay, great. And then, the REVERSE-HF trial, is that still on track to complete site enrollment by the end of 2024 and patient enrollment by the end of 3Q2025?

[Nestor Jaramillo, President and CEO at Nuwellis]

We're 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 months. But, in general, it's going well. We are over a third of the patients required to be enrolled in this study.

[Anthony Vendetti, Managing Director at Maxim Group]

Okay. And then at last on the SeaStar partnership, and I know you need an IRB for each hospital, but can you talk about, you know, how that partnership has been set up? You know, from what I understand, your sales force was trained on it. How that works, financially, for Nuwellis, and then, you know, what the sales process looks like, understanding that, you know, each hospital has to go through the IRB process.

[Nestor Jaramillo, President and CEO at Nuwellis]

Yeah. Good question. Anthony, the SeaStar, by the requirements of the HDE, they are responsible for obtaining the IRB approvals in each hospital. Also, there is a requirement to do a registry. So every patient for the first 300 patients needs to be in a registry, and that is by requirements of the HDE. So SeaStar is responsible for the IRB and running the registry. We do everything else. We participate in the training of the hospital, and that is a collaboration between SeaStar and Nuwellis. 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, and then assisting in the hospitals with our clinical specialists.

[Anthony Vendetti, Managing Director at Maxim Group]

Okay. Yeah, that's helpful. Yeah, so it's quite a process, and it sounds like it's a shared responsibility.

[Nestor Jaramillo, President and CEO at Nuwellis]

Right. But I also would like to add, Anthony, if I may, since this is an HDE device and is new to the world, we, meaning SeaStar and us, we made a conscious decisions to do a controlled, limited launch of the product. That includes 5, 5 hospitals that we targeted to get them established and treating patients. And after that 5, we're gonna do another 5, and we hope that we can get to those 10 hospitals by the end of the year.

[Anthony Vendetti, Managing Director at Maxim Group]

Okay.

[Nestor Jaramillo, President and CEO at Nuwellis]

But it was, it is a controlled, limited launch.

[Anthony Vendetti, Managing Director at Maxim Group]

Okay, that's very helpful. Thanks for that color, Nestor. I'll hop, I'll hop back in the queue. Appreciate it.

[Nestor Jaramillo, President and CEO at Nuwellis]

All right. Thank you.

[Operator]

Thank you. As a reminder, ladies and gentlemen, that is star one for a question. We'll pause for a moment. At this time, we have no further questions. I'd like to turn the call back over to Mr. Jaramillo for any closing remarks.

[Nestor Jaramillo, President and CEO at Nuwellis]

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, helped further by new pediatric accounts and as we added revenue from Quelimmune sales. I want to thank all the our stakeholders, Nuwellis 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. Thank you for your participation and support, and we look forward to a productive second half of 2024.

[Operator]

Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.

Participants

Executives

• Nestor Jaramillo, President and CEO
• Rob Scott, CFO

Analysts

• Anthony Vendetti, Managing Director at Maxim Group
• Jonathan Aschoff, Managing Director at ROTH
• Vivian Cervantes, Head of Investor Relations at Gilmartin Group