Movano Inc. (NASDAQ:MOVE) Q3 2023 Earnings Call Transcript

Movano Inc. (NASDAQ:MOVE) Q3 2023 Earnings Call Transcript November 15, 2023

Operator: Hello and welcome to Movano Health Third Quarter 2023 Earnings Call. I’d like to remind everyone that this call is being recorded and a replay of the call will be available on Movano Health’s website, ir.movano.com. I would now like to hand the conference over to Jay Cogan, Movano Health’s Chief Financial Officer.

Jay Cogan: Thanks, operator. Good afternoon, everyone or good morning, everyone. Thank you for joining us today. Our CEO, John Mastrototaro, will open today’s call with prepared remarks about the progress we have made during the third quarter of 2023 and in recent weeks. Our Chief Marketing Officer, Tyler Bucher, will join us to give an update on the upcoming launch of the Evie Ring. And afterward, I will cover the highlights of our quarterly operating results and provide a perspective on our financial position. Finally, Movano Health’s Founder and Chief Technology Officer, Michael Leabman; and our Vice President of Product and Strategy, Stacy Salvi, will join John, Tyler and me for the Q&A. Movano Health issued two news releases earlier today detailing both our third quarter financial results and the results of the $3.6 million underwritten public offering of 4.2 million shares of the company’s common stock.

The news releases and today’s presentation are available on our website at movanohealth.com. Before we begin, I’d like to remind everyone that we will make forward-looking statements during today’s call based on our current expectations. Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risks and uncertainties and actual results maybe materially different from such statements. These risks and uncertainties are detailed in the Risk Factors section of our filings with the Securities and Exchange Commission, specifically in the company’s Forms 10-Q and 10-K. Except as otherwise required by federal securities laws, Movano Health disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere to reflect changes in expectations with regards to those events, conditions and circumstances.

Now, I’d like to turn the call over to our CEO, John Mastrototaro.

John Mastrototaro: Thanks, Jay. Welcome, everyone. Thank you for joining us for Movano Health third quarter earnings call. We are less than 1 week away from the launch of the Evie Ring, which is the culmination of more than 2 years of research, innovation and dedication. Our first product represents a major milestone in our company’s evolution, underscoring our commitment to empowering women to take ownership of their health journey through thoughtful product design, with accurate data and meaningful insights. During today’s call, we will share more about how we prepared to meet this moment and our strategic approach to marketing the Evie Ring to consumers through the holiday season and into the new year. In addition, we’ll update you on our FDA submission, which has the potential to unlock a significant enterprise opportunity with partners across healthcare.

And we will dive deeper into our blood pressure and glucose initiatives where we have made significant progress following our most recent blood pressure clinical trial. The Evie Ring and app have been fully developed and we have been focused on testing the complete solution to ensure the experience is smooth from the outset. The company’s manufacturing partner is online and production processes are in place. We believe we have set the stage for the successful introduction of Evie into the market and are excited to embark on this new phase of our journey as we shift from pre-revenue to a revenue generating company. The timing for such a product couldn’t be better, with increased interest in medical grade technologies for home use and a strong focus on women’s health and empowerment.

Beginning November 20, customers will be able to place an order for the Evie Ring exclusively through our website for $269 and no additional subscription fees. We will offer sizes 5 to 12 to accommodate most women’s fingers and customers can use our complimentary sizing kit to find the right fit. We expect to be again shipping rings to customers before the end of the year. The ring will initially be available to customers in the United States with the iOS devices. We are prioritizing the development of our Android app, which we plan to launch in early 2024. With its unique design and sticky app features, we believe the Evie Ring holds immense potential for our company, our shareholders and the health and wellness of our future customers. The Evie Ring provides trusted health information for every woman at every stage.

It combines comfort and portability of the ring, the design of beautiful jewelry, and a suite of advanced sensors. It uses a PPG sensor, a skin temperature sensor and an accelerometer. This sensor suite enables the tracking of key health and wellness metrics you would expect from a wearable, such as sleep stages, heart rate, heart rate variability, respiration rate, SpO2, and activity metrics, including steps, active minutes and calories burned. The companion app enables the logging and estimation of period and ovulation, menstrual symptoms, mood and workouts. Rather than scoring activity or fitness performance, Evie focuses on identifying trends. The Evie app lends passively collected body data with easily large moods, symptoms and circumstances and transforms it into actionable insights that are delivered into the apps’ notification center.

The longer the user wears the ring and engages with the app, the more meaningful our health insights become. This goes beyond a quantitative improvement. It includes a qualitative understanding of their body that helps users modify their behavior and/or equip them with context here with their doctors. We know a good day looks different for everyone. And people have varying health goals. So, the center of gravity in the app called Daily Summary is a personalized view of house steps, active minutes, calories burned, sleep, mood and menstrual symptoms, logging come together to complete a healthy day based on the user’s unique goals. The app has a spot check feature enabling users to perform live on-demand reviews of heart rate and SpO2 levels at any time to provide a baseline understanding of their health.

As you know, we submitted a 510(k) application to the FDA for the Evie Ring’s Pulse Oximetry feature earlier this year. We have since received a letter from the FDA asking us to respond to questions and provide additional information in a few different areas. Their requests are in line with our expectations and we don’t believe there is anything preventing us from continuing to pursue FDA clearance. The FDA has been very collaborative throughout the process and we continue to dialogue with the agency to ensure we are in sync. We are aiming to formally reply to their letter in Q1 of 2024 and we will communicate next steps from there. With respect to B2B partnership opportunities, we are in the midst of a multi-week testing program with a major health insurer and a leading remote patient monitoring company.

We continue to explore new channels and partnerships to expand our reach and drive continued growth. We expect B2B partnership opportunities to ramp up now that our final ring and app solution is developed. Our product launch will be accompanied by a comprehensive marketing campaign that emphasizes Evie’s unique value proposition. We believe this will be instrumental in our successful market entry. I will turn the call over to our CMO, Tyler Bucher to update you on the marketing plans for our launch.

Tyler Bucher: Thanks, John. It’s an exciting time over here on the marketing side of the business as we are just days away from launch. Over the last quarter, we have continued to grow our highly engaged community and build anticipation for the ring. We are currently in the pre-launch phase of our marketing campaign where the goals are to educate consumers across our key segments about what and who we are, drive awareness and build excitement for the brand. We announced our order date at the end of October which was very well received across all our channels, with consumers responding at a high rate to our e-mail and social posts, the majority asking how they could purchase the ring. We also launched our new commercial website on November 6, which was in development for many months and offers a detailed look at the female first features and benefits of Evie solutions.

It also gives customers an interactive way to engage in the experience prior to purchase. I encourage you to take a look after the call at eviering.com. We’ve received over 200,000 site visits since we launched our website. And we expect this number to grow significantly once we open orders next week. Our teaser campaign is now live across paid and organic channels designed to drive curiosity and top of funnel site traffic. We have targeted static and video creative assets that showcase the ranks and highlight the benefits reminding you to order soon if you’re already aware and giving you a clear introductory message if this is your first impression of the brand. Once orders open on November 20, we will enter the Phase 2 of our marketing campaign, which is where we harvest our engaged leads list of over 120,000 consumers and drive new conversion traffic to the site throughout the Q4 holiday shopping period.

During this phase, we’ll launch our full brand campaigns and introduce new creative to each of our segments as well as add new channels, product reviews, and influencer content. Post-launch, we will be laser focused on customer data and performance analytics. We will be constantly testing our messaging and creative to gain a better understanding of our target segments. We’ll be looking to drive efficiency with our marketing dollars and improve our conversion rates. This data driven approach will allow us to make real time adjustments and optimize our campaigns for maximum reach and engagement. In addition to our marketing campaign, we are continuing to release content for our communities from a variety of contributors, including our first white paper, written by [indiscernible], PhD, entitled Women and Biometrics: Harnessing the Potential of Gender-Specific Health & Wellness Data.

This focuses on the impact of gender differences on health and wellness and not only establishes us as a thought leader in the wearable space, but also substantiates the need for a women first wearable. We have very strong open rate of the paper of over 30% and over 3,000 members of our community click through, which is a solid indicator of interest for what we are creating and sharing. We are also deep into preparations for our first exhibition at this year’s Consumer Electronics Show. We will be on the floor at the Las Vegas Convention Center in January with our first real physical showcase of the full Evie solution. We’ll be giving media, potential partners and other attendees the opportunity to size, try on and purchase the Evie Ring.

And we will be announcing new features planned for 2024. We will also be participating at CES Unveiled, the official media event of CES to increase our exposure and opportunity for media coverage. And finally, I want to touch on our customer service plans. Because of this all direct-to-consumer businesses, this is the first touch point for our users and is key to building brand loyalty and advocacy. We are taking a customer-centric approach to all our communications and excellent customer service will be instrumental in driving brand loyalty. Customer feedback will be invaluable to our marketing efforts as we continue to evolve and will actively engage with our customers, listen to their experiences and use this information to fine-tune our messaging and our content planning.

There is a lot to look forward to on the marketing front and we are in great shape for our launch, next Monday. And with that, I’d like to turn it back to John.

John Mastrototaro: Thanks, Tyler. While we are gearing up to launch the Evie Ring, we are also continuing to build a high value healthcare solutions roadmap, including research and development toward cuffless blood pressure and non-invasive glucose monitoring solutions. As we mentioned earlier, we have had a significant breakthrough in our ongoing initiative to develop a cuffless blood pressure wearable device. And with this breakthrough, we have taken a major step forward on the path to commercialization. There is still more work to do, but we believe it’s important to highlight the significant progress here. During the third quarter, we completed a 44-person Institutional Review Board approved blood pressure trial at our clinical lab to assess the accuracy of our 4/6.7 millimeter system-on-a-chip and prototype.

Our solution demonstrated the level of accuracy within the standards recognized by the FDA for blood pressure monitoring devices. We’re incredibly excited about the results of the trial, and believe this is a substantial step forward in realizing our vision of commercializing cuffless RF enable blood pressure wearable medical device. The success of this study can largely be attributed to our proprietary system-on-a-chip, we have invested more than 5 years building the system-on-a-chip from the ground up in an effort to achieve an unprecedented level of precision and wearable health monitoring. After shrinking our multi-chip architecture from four integrated circuits into a single IC in mid-2022. We began using the RF power system-on-a-chip and clinical studies this year.

As a result, we’re seeing much cleaner signals and a material improvement in the accuracy of our blood pressure measurements. In terms of next steps, we’ll start configuring our prototype into a form factor suitable for a commercial product. Its compact size gives us the flexibility to add the chip to our ring or risk worn form factors, we will also conduct additional clinical trials, both in-house and with third party investigators. The additional studies will include a multi week study to determine whether periodic calibration is required, and will be helpful in refining our AI models on an individual patient basis, beginning in the fourth quarter of 2023. Following the completion of this longitudinal study, we intend to conduct a pivotal trial for our 510(k) submission to the FDA.

This development is especially important for the healthcare industry when you consider the scale of hypertension and lack of day-to-day technology for consumers to continuously monitor their blood pressure. According to the American Heart Association, high blood pressure effects half of Americans aged 20 years and older are more than 122 million people. Movano Health’s cutting-edge technology has the potential to seamlessly fit into a consumers lives and improve day-to-day health monitoring for individuals and their clinicians. We’re very excited about all the recent developments at the company and a well prepared for this pivotal moment of launching our first product. The ring has already generated a lot of interest, and we believe that addresses a significant need in the women’s health sector, we expect the product to be well received by our target market and believe there’s substantial potential for growth.

November 20, is just the beginning of an exciting road ahead. Even as we prepare for the product launch, our team continues to work on product enhancements and new features that will keep us at the forefront of women’s health technology. With that, I’ll turn it back to Jay to go over the financials.

Jay Cogan: Great, thanks, John. We detail the financial results today. In our third quarter earnings release, which you can find on our website. I’ll share a few key line items here. Movano Health reported an operating loss of $9.1 million in the third quarter of 2023, compared to an operating loss of $8.7 million in the year ago period. The increase was primarily related to the accelerated commercialization initiatives described earlier in the call. Our cash burn in the period was $7 million, generally in-line with the run rate for the prior seven quarters, given certain pre-launch costs for the Evie Ring and expenses related to our FDA submission, as well as other timing considerations. Partially offsetting the cash burn, the company raised approximately $200,000 on its $50 million ATM facility in the third period, selling 159,000 common shares and an average price of $1.20 per share.

This morning, we announced Movano Health has priced a $3.6 million underwritten offering of the company’s common stock. We’ve granted the underwriter a 30-day option to purchase up to an additional 15% of shares sold the offering at the public offering price of $0.85 per share less the underwriting discount. The transaction is expected to close on November 17. At the end of the third quarter of 2023, Movano Health had $7.7 million of cash and cash equivalents on the balance sheet, pro forma for the affirmation capital raise and before considering the potential overlap month option, the company had $10.8 million in cash and cash equivalents at the end of the third period. As I conclude our formal remarks we’d be glad to take your questions.

Operator, we’re ready to begin the Q&A section of the call.

Operator: [Operator Instructions]

Jay Cogan: And while you’re looking at the phone lines, operator, I do see a few questions in the webcast. And maybe we can start there and I can go ahead and see the ask those questions. Okay, so the first question what are your expectations of sales for the Evie Ring this year? Tyler and Stacy, maybe you want to help answer that question.

Tyler Bucher: Yes, happy to. I mean, while we can’t provide, obviously, number guide guidance, we feel with a significant number of indicators that are pointing to a very healthy response to our launch. First and foremost, we have a very engaged leads list of over 120,000 people who every time we send an email out, respond to us asking when they’ll be available to buy the ring. In addition, we have a digital marketing campaign that’s running across paid and organic channels that’s reaching 10s of millions of consumers across all of our different segments. And we’re seeing our business going up significantly on our website every single day. So there’s definitely traffic and people who are looking to see when orders will be open.

And the third thing is our social channels, which we monitor pretty significantly all day long. And the comments are constantly when can we buy and not only are individuals acting when they can buy they’re tagging one another. And so that’s building out the flywheel. So we feel really confident that we’re going to have a really nice, healthy response to do our launch date on Monday. And I’ll also ask Stacy, perhaps to give some context around the product.

Stacy Salvi: Yes, absolutely. Thanks, Tyler. So from a strategic and product perspective, what we’re really seeing is a validated product market approach, not just in social and the items that Tyler was mentioning, but really, in the feedback that we’re getting from consumers, and that’s really that focusing on women’s first is long overdue. People are extremely excited about this. And we’re hitting all the points that are important to them. And go back to something we’ve talked about in the past. But we spoke with more than 1,000 women to really understand what they were looking for in an experience. And we’re just really excited to be delivering on all of these high points, but ring is comfortable, the app is super intuitive, the data is presented in a beautiful way.

And it kind of turns the wearables experience on its head a bit. But it gets to all of those quality points that you come to expect from a high grade wearable. So we’re just super excited about what we’ve got going.

Jay Cogan: Okay, we’ll take one more from the webcast. And I do see we also have a call in the – on the phone line. So let’s just do one more here from the webcast. And then we’ll turn it over back to you operator for that one on the phone lines. So, John, maybe you want to answer this question. When would you start shipping rings? What’s your production capacity? And what’s your capacity to receive more than anticipated orders?

John Mastrototaro: Well, thanks, Jay. Yes, as I’ve mentioned on the call, we are on track to begin shipping rings before the end of the year. Now in preparation for orders and what could be a varying amount of orders. We’ve ordered a lot of the raw material, and obviously, especially components that have long lead items, so we have a lot on hand to be able to satisfy increased demand. If that comes to pass, we also have a production process where the cycle time for each unit is relatively short. And that allows us to ramp up capacity fairly rapidly if the need arises. And we also do have the capability to duplicate manufacturing lines, if we need to, we have the space set up we have some of the process equipment duplicated, so that we can flex appropriately based upon where demand goes.

And in all of this, we’ve been working very closely daily with our vendors so that they’re on the ready, they’re very aware of the launch dates are very aware of when we’re turning on our website to be taking orders. And they’re all prepared to hit the ground running. So that’s what we’ve been working on specifically to make sure that we’re in a good place regardless of increased demand.

Jay Cogan: Okay, operator, you want to take that question? A queue that from the frontline.

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Q&A Session

Operator: Yes. Our first question is from [indiscernible] with BTIG. Please proceed with your questions.

Unidentified Analyst: Hi, and congrats. And good luck ahead of next week’s launch. I’m excited to see it for you. I wanted to ask a couple questions here on the pipeline. Any more detail you could give us on your interaction with the FDA? What sort of questions that they came back with? Is there anything that you view as sort of a needs a little more work or what you’re focused on now in terms of the questions that came back?

John Mastrototaro: Sure, I will respond to that. First and foremost, it was – it’s been very interesting working with the FDA. And one of the things that we somewhat had expected before we filed is that there is a pretty strong interest on the FDA is part looking at new pulse oximeter is in light of what happened through the course of COVID. And for those of you who aren’t aware, during COVID, many pulse oximeters on the market had some inaccuracies when used on people of color, or people with darker skin tones. It would overread the truth in those folks. And there have been articles published in the New England Journal of Medicine and Wall Street Journal and other outlets, every major outlet about some of these challenges.

So you can imagine, based upon that happening, that the FDA is scrutinizing new pulse oximeters at a different level. Now, we had already previewed with ourselves that they were going to focus a little bit more with people with darker skin tone. And so, we overemphasize that as part of our clinical trial. And I should mention that the way our pulse oximeter works is we use the reflected mode, which has not been susceptible to changes in accuracy, regardless of someone’s skin tone. And that’s been very, very positive for us, and one of the reasons I have been really excited about having this filing go into the agency. So, we had already kind of dealt with that in advance. Another thing happened with the agency and we have talked about this before with our product that as a medical device company, patient privacy and the security of the data is very important.

And one of the things that we have to do is a cybersecurity assessment as part of the filing that we put in. And so we actually have to work with a third-party firm that looks for vulnerabilities in our data movement from the rate of the app and the app to the cloud. There is a new guidance that just came out in October, after we filed that revolves around cybersecurity and have some more evaluations and things that need to be done. And so, the FDA asked us if we would go ahead and update our filing to the latest standard there. So, it’s those types of things that we have been communicating with the agency on as it relates to the filing. There is nothing there, that’s a showstopper, it’s more of just us going through the motions of putting together the requested information, and then providing it to them.

And we have had the opportunity already once and we have another meeting scheduled next month with the agency to just review our package, make sure we have got everything the way they want it, and then put it back in. So, I feel pretty good about where we stand right now with that.

Unidentified Analyst: Okay, very good to hear. And then as a follow-up, you have an extensive pipeline of additional parameters you want to add to the ring or other wearables? How will the customers who are early adopters, those who are buying, starting next week, how will they get access to some of those upgrades? Are those mainly software upgrades, or will they need kind of a hardware upgrade as well? Thanks for taking the questions.

John Mastrototaro: Yes, I could probably – as it relates to blood pressure and glucose, the RF chip, that’s the separate product moving in the future, but as it relates to what we are going to do with the first Evie Ring, Stacey, you are best to really give this answer.

Stacy Salvi: Sorry for interrupting you, John. But yes, Murray, it’s a great question. So, anybody who buys the Evie Ring will be able to access the feature updates that we have planned for it over that are launching over time into 2024 that will be accessed through the app, and they can download either new firmware or a new app to get access to that. So, we look forward to keeping those users engaged and which host of new features that we have planned in the upcoming year.

Unidentified Analyst: Alright, very helpful. Good luck with it.

Jay Cogan: Thanks Murray. It looks like we have a few more questions in the webcast. John, I think this question is for you, can you share where you stand with potential strategic partners at this stage?