NeuroOne Medical Technologies Q2 2025 Earnings Call Transcript

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May 13, 2025

There are 5 speakers on the call.

Operator

Good day, ladies and gentlemen. Welcome to the Second Quarter of fiscal year two thousand twenty five financial results conference call for NeuroOne Medical Technologies Corporation. Today's call will be conducted by the company's chief executive officer, Dave Rosa, and Ron McClurg, the company's Chief Financial Officer. Chris Volker, the company's Chief Operating Officer, will also be in attendance. Before I turn the call over to Mr.

Operator

Rosa, I'd like to remind you that this conference call will include forward looking statements within the meaning of U. S. 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 date. Forward looking statements, including statements regarding our fiscal twenty twenty five guidance, 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. See NeuroOne's financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ.

Operator

Except as required by law, Nora One undertakes no obligation to update such forward looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.

Speaker 1

Thanks, operator. For those of you who may be new to NeuroOne, we are a medical technology company that is dedicated to transforming the diagnosis and treatment of neurological disorders, initially with epilepsy, where we have minimally invasive, high resolution solutions for EEG recording, brain stimulation, and ablation solutions for patients. Our patented and disruptive 1RF ablation system is the first and only FDA cleared RF ablation system for brain procedures using a single implant for both diagnostic and therapeutic applications, creating a unique competitive and first mover advantage. Today, it is commercially available and effectively treating patients suffering from seizures due to epilepsy. As we build awareness through our strategic distribution partner Zimmer Biomet, we believe more patients will seek our solution for epilepsy, given its ability to reduce the number of hospitalizations and procedures while also improving outcomes.

Speaker 1

We have made tremendous progress in the first half of fiscal twenty twenty five, with product revenue increasing 97% to $4,700,000 and product gross margins increasing to 57.9%, which is more than double our product gross margin in the first half of fiscal twenty twenty four. We have no debt, and we anticipate being fully funded through at least fiscal year twenty twenty six with the potential to get to cash flow breakeven if we achieve some of the key milestones currently in progress. The second quarter of fiscal twenty twenty five was highlighted by our significant operational progress with our commercial 1RF ablation system technology platform, which is increasingly being validated as a versatile and scalable platform across multiple applications. First and foremost, we continue to have clinical success with patients who are remaining seizure free following the 1RF ablation procedure. In fact, one patient has now been seizure free for almost an entire year, enabling them to enjoy a significant improvement in the quality of life.

Speaker 1

We are also pleased to report quality Not only are we seeing positive patient outcomes, but we are also reducing the number of hospitalizations. Typically, patients undergo two hospitalizations with multiple procedures that are a few months apart, whereas only one hospitalization is required with our system, allowing the neurosurgeon to use the same electrode for both diagnostic and ablation purposes. Outside of the improved patient outcomes, we are also having success due to the following: hospitals favoring an FDA cleared solution instead of off label alternatives Physicians are more inclined to use an FDA cleared system, reducing liability concerns. Patients are more trusting of FDA cleared technology similar to ours.

Speaker 1

How can we get this to mass adoption? First, by ensuring the sites we initially targeted at launch continue to use our technology as the go to device to treat eligible patients suffering from epilepsy. By fostering these relationships and building trust, our strategy has paid significant dividends, and we continue to see strong success at these locations. Second, by leveraging Zimmer

Speaker 1

of $3,000,000 and completing the initial stocking orders to Zimmer in the first quarter of fiscal twenty twenty five, we are now excited to expand to new centers. Leveraging the same ONE RF technology platform, we successfully filed our five ten submission with the FDA for the 1RF trigeminal nerve ablation system, which was well ahead of schedule. This application is designed to treat patients with debilitating facial pain, also known as trigeminal neuralgia. For those of you unfamiliar, the trigeminal nerve is located in the face with one set of nerves on each side of the face with trigeminal neuralgia causing chronic pain characterized by severe, sudden, and recurrent facial pain. Approximately one hundred and fifty thousand people are diagnosed with trigeminal neuralgia every year in The United States, according to the American Association of Neurological Surgeons.

Speaker 1

Trigeminal neuralgia is typically treated with medication or invasive procedures that are performed by the same neurosurgeons performing brain ablations to treat epilepsy. It was our Brain Ablation Advisory Board that encouraged us to pursue this application. Similar to our ONE RF Brain Ablation System, this product is also designed to reduce procedural time and improve patient comfort and safety by using a minimally invasive surgical procedure to destroy the trigeminal nerve to relieve severe chronic pain in the face. Published data has shown that RF ablation offers high initial pain relief rates and long term efficacy, especially with repeat treatments while maintaining a low complication rate. These characteristics make it a preferred option for patients who are not candidates for major surgery or who are also looking for less invasive approaches.

Speaker 1

If cleared by the FDA, we believe there is potential to generate revenues from trigeminal nerve ablation as soon as late calendar year 2025, which is not currently factored in our guidance. Based upon this momentum, we are currently in discussions with a number of other top tier strategic partners for other applications leveraging our platform technology, including spinal cord nerve ablation and spinal cord stimulation for back pain management and the SEEG based drug delivery program, which would benefit immensely from the multifunction capability that NeuroOne's technology can offer. Similar to Zimmer, these partnerships would be meaningful not only to further develop and commercialize these applications with expertise and potential upfront capital, but to drive mass adoption with robust sales and distribution networks. As you may recall, our strategic partnership with Zimmer includes exclusive distribution rights in The United States and certain additional countries for the 1RF ablation system. Therefore, we are advancing our internal efforts on distribution outside of The United States, which is currently an untapped market for us.

Speaker 1

To that end, we are initiating a process to secure ISO 13,485 certification, which is required to commercialize and obtain regulatory approvals internationally. Given we have not sold or commercialized any of our products in international markets to date, these efforts could represent significant revenue in the years to come. To execute on these opportunities, we've also bolstered our balance sheet and invested in our talent. Just yesterday, we welcomed Doctor. Parag Patel, a world renowned neurosurgeon, as our chief medical advisor, as well as Emily Johns, a partner at Hanigmann LLP, as general counsel and corporate secretary, who will be joining us on June.

Speaker 1

Collectively, these additions to our team will actually reduce costs by bringing critical functions in house and providing invaluable expertise and relationships to advance our technology. As we stand today, we currently have no debt and our balance sheet is rock solid on the heels of a successful capital raise with quality institutional investors. The financing was oversubscribed and added $8,200,000 in net proceeds to the company. More importantly, we believe this cash will fully fund NeuroOne through at least the end of fiscal twenty twenty six. And if we achieve some of the key milestones currently in progress, this capital could bring us to cash flow breakeven and support our long term growth plans with no need for additional dilutive financing.

Speaker 1

With this confidence, we are reiterating our fiscal year twenty twenty five guidance and expect product revenue to be in the range of 8,000,000 to $10,000,000 representing an increase of between 132190% over fiscal twenty twenty four, and product gross margin to be between forty seven percent and fifty one percent compared to 31% in fiscal twenty twenty four. Importantly, this guidance excludes our upfront license payment of $3,000,000 received from Zimmer in the fiscal first quarter of twenty twenty five. I would now like to turn the call over to Ron McClurg to provide additional review of our fiscal second quarter financial results. Ron?

Speaker 2

Thanks, Dave. Product revenue increased slightly to $1,400,000 in the second quarter of fiscal 'twenty five compared to product revenue of $1,400,000 in the second quarter of fiscal twenty twenty four. As we talked about on our last quarterly call, we expected product revenue to decline sequentially in the fiscal second quarter, given we completed the initial stocking order to Zimmer in December, which is our first quarter of fiscal twenty twenty five. We still expect revenues to ramp through the end of the fiscal year as the product launch expands. For the first six months of fiscal twenty twenty five, product revenue increased 97% to $4,700,000 compared to $2,400,000 for the same period of fiscal 'twenty four.

Speaker 2

We also recognized license revenue of 3,000,000 in the first six months of fiscal twenty five, which is not included in product revenue, compared to no license revenue in the first six months of fiscal twenty twenty four. License revenue in fiscal 'twenty five was derived from the expanded exclusive distribution agreement with Zimmer. Product gross profit increased significantly to $800,000 or 55.6% of revenue in the second quarter of fiscal twenty five compared to product gross profit of $400,000 or 28.3% of revenue in the second quarter of fiscal twenty twenty four. For the first six months of fiscal twenty twenty five, product gross profit increased over twofold to 2,700,000.0 or 57.9% of revenue compared to product gross profit of 700,000.0 or 27.9 percent of revenue in the first six months of fiscal twenty twenty four. Total operating expenses in the second quarter of fiscal twenty five were 3,500,000.0 compared with 3,300,000.0 in the second quarter of fiscal twenty four.

Speaker 2

R and D expense in the second quarter of fiscal twenty five was 1,500,000.0 compared to $1,300,000 in the same period of fiscal 'twenty four. SG and A expense in the second quarter of fiscal 'twenty five decreased to $1,900,000 compared to $2,000,000 in the second quarter of fiscal 'twenty four. For the first six months of fiscal 'twenty five, total operating expenses decreased 4% to $6,700,000 compared to $6,900,000 in the same period of fiscal twenty twenty four. R and D expense in the first six months of fiscal 'twenty five decreased 3% to $2,700,000 compared to $2,800,000 in the same period of fiscal 'twenty four. SG and A expense in the first six months of fiscal 'twenty five decreased 5% to $4,000,000 compared to $4,200,000 in the prior year period.

Speaker 2

Net loss in the second quarter of fiscal 'twenty five improved to a loss of $2,300,000 or $07 per share compared to a net loss of $2,900,000 or $0.11 per share in the same quarter of the prior fiscal year. Net loss for the first six months of fiscal 'twenty five improved significantly to 500,000.0 or $02 per share compared with a net loss of $6,200,000 or $0.25 per share in the same period of fiscal twenty four. As of March thirty one of twenty twenty five, the company had cash and cash equivalents of 1,300,000.0 compared to 1,400,000.0 as of 09/30/2024, the end of our prior fiscal year. The company had working capital of 2,000,000 as of 03/31/2025, compared to working capital of $2,400,000 as of September 3024. The company had no debt outstanding as of 03/31/2025.

Speaker 2

Lastly, as Dave noted earlier, we recently bolstered our balance sheet with 8,500,000.0 in net cash by selling common stock under the ATM program at an average price of $1.16 per share, generating net proceeds of 300,000 and completing an oversubscribed capital raise with institutional investors in April, totaling 8,200,000.0 in net proceeds. There is no current availability under our ATM program, and we believe we are now fully funded through at least fiscal twenty twenty six, potentially longer if key milestones are hit. Operator, at this time, I think we can open up for questions.

Operator

Certainly. At this time, we will be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Operator

Your first question for today is from Jeffrey Cohen with Ladenburg Thalmann.

Speaker 3

Hi, Dave, Ron, and Chris. Just a couple questions from Aaron. So on the guide, you're talking about eight to ten, and that's excluding the 3 mil from the first quarter. Correct?

Speaker 4

Ron, do you want to handle the financial or do you want me to handle that?

Speaker 2

Yes, Jeff, that is correct. That does exclude the licensing fee that we received in the first quarter.

Speaker 3

Okay. Got it. And can you give us a sense for full year, do you expect any revenue to be outside of the deal with Zimmer Biomet on the top line for this current year? Or would you expect it all to be from Zimmer Biomet?

Speaker 2

It is almost entirely from Zimmer Biomet. For the first half of the year,

Speaker 4

we had

Speaker 2

about 6% of our revenue was from some of the early centers that we went to. But otherwise, going forward, we expect all of our revenue to be from the Zimmer agreement.

Speaker 3

Got it. You give us a sense of pro form a cash now, please?

Speaker 2

Yes. At the April, we had 9,400,000.0, which was the cash on hand that included the financing that we did with Ladenburg.

Speaker 3

Okay, got it. And then lastly, could you talk about adding a chief medical advisor this week? Congrats on that and why now and what you anticipate to achieve from that for the company?

Speaker 4

Sure. I'll take that Ron. So, we feel really fortunate to be able to get doctor Patel, to work with us this closely. When you look at really his clinical background, and experience, it fits perfectly into the areas, the clinical areas that we're either already in or looking to move into. So whether that be helping with product development, which he also has a background in, just the clinical requirements for technologies and the areas that we're going in.

Speaker 4

He's just really a perfect fit for us. And I think one of the first things that we also want to move forward to that we've talked about in the past is really getting together a registry to track all the patient outcomes that have been treated with our ablation system. We're gonna be coming up on a year for the first patient that will be one year seizure free, that'll occur next month. So gathering that information and then being able potentially get a publication out of something like that, Doctor. Patel will be very, very helpful with.

Speaker 4

So we're really excited to have him and like I said, couldn't be a greater fit for what we're doing.

Speaker 3

Super. Okay. Thanks for taking our questions. Nice quarter.

Speaker 4

Thanks, Jeff.

Operator

Thank you. That appears to be the last question at this time. I would like to turn the floor back to Dave Rosa for any closing remarks.

Speaker 4

Thank you, operator. Today, we stand as a larger, more mature company than ever before as we focus on significantly ramping revenues and expanding our product margins. We have a world class strategic partner, the necessary capital to execute on our strategic growth initiatives and several upcoming milestones that present significant opportunities to increase shareholder value. I would like to again thank everyone for attending the call this morning and we look forward to connecting with the investor community throughout the quarter.

Operator

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.

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Earnings Conference Call
NeuroOne Medical Technologies Q2 2025
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