NeuroMetrix, Inc. (NASDAQ:NURO) Q3 2023 Earnings Call Transcript

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The cumulative number of month refills almost doubled from 348 in Q2 to 663 in the third quarter. Overall, we are pleased with our early commercial experience with Quell fibromyalgia. We expect to see continued progress leading to material revenue in 2024. Moving on to our broader Quell neurotherapeutics program. As I mentioned, the second element of our growth strategy is to develop the pipeline for Quell neurotherapeutics beyond the initial fibromyalgia indication. The program that is furthest along is for treatment of chronic chemotherapy-induced peripheral neuropathy, or CIPN, which affects as many as 30% of the approximately 1 million people who receive chemotherapy every year. It is a chronic and debilitating side effect of cancer treatment.

Quell received FDA breakthrough designation for treating modern-to-severe CIPN in January of 2022 based on a pilot clinical study conducted at the University of Rochester. A NIH-funded multicenter double-blinded sham-controlled — randomized sham-controlled trial completed enrollment in the third quarter of last year, and we have now had the opportunity to review the results and have determined that they support a FDA 510(k) filing for Quell CIPN indication. We have largely completed the submission documents. But since the study was externally funded by NIH, we must wait for the results to be published before sending the data to the FDA. We hope that this occurs in this quarter or in the first quarter of next year at the latest. Depending on the FDA review time line and ultimate clearance decision, we believe that we could be positioned to initialize — initiate commercialization before the end of 2024.

Now moving on to DPNCheck. DPNCheck is our rapid point-of-care test for peripheral neuropathies such as diabetic peripheral neuropathy, or DPN, which is the most common long-term complication of diabetes. DPNCheck is the only point-of-care peripheral neuropathy test based on goal standard nerve conduction study technology. Our DPNCheck business has been comprised of a B2B sales into the U.S. Medicare Advantage market and international sales in China and Japan through distribution partners. About 80% of DPNCheck revenue has historically come from domestic sales. We have a value-based commercial team that has been focused on increasing DPNCheck adoption in the Medicare Advantage market. This includes large medical groups, IDNs, health systems and health assessment companies where a substantial portion of their patients are covered under Medicare Advantage.

This business has been growing over the past several years. However, substantial uncertainty was injected into the Medicare Advantage sector due to policy changes announced by the Centers for Medicare and Medicaid Services or CMS. In April of this year, CMS announced significant changes to the hierarchical condition categories or HCC risk adjustment model for calendar year 2024. The new model alters the risk adjustment environment and amongst many changes, essentially eliminated HAC codes for peripheral neuropathies are detected by DPNCheck screening programs. We believe that this uncertainty led our largest Medicare Advantage customer and several smaller customers to suspend their medical screening programs, including for DPNCheck or cleaning using DPNCheck.

We are evaluating the evolving landscape and at this point, believe it will be necessary to alter our strategy to move away from Medicare Advantage-focused business to one more broadly addressing value-based care. Our expectation is that we will finalize our new commercial strategy during the fourth quarter. As we saw in this quarter, the Medicare Advantage changes have caused a material downward pressure on DPNCheck revenues. Implementation of a new strategy will take time, and therefore, we do not see a reversal in 2024. Nevertheless, we expect the DPNCheck business line will continue to generate positive cash flow by virtue of its attractive operating margins, which will help offset our investments in the growing Quell Neurotherapeutics business.

And that constitutes our prepared comments, and we’d be happy to take questions at this point.

Operator: I am currently showing no questions at this time. I’d like to hand the conference back to Dr. Gozani for closing remarks.

Shai Gozani: Thank you for joining us on the call today, and we look forward to keeping you updated over the balance of the year.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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