NeuroOne Medical Technologies Corporation (NASDAQ:NMTC) Q1 2023 Earnings Call Transcript

NeuroOne Medical Technologies Corporation (NASDAQ:NMTC) Q1 2023 Earnings Call Transcript February 14, 2023

Operator: Ladies and gentlemen, thank you for standing by. And welcome to the NeuroOne Medical Technologies Corporation First Quarter Fiscal Year 2023 Financial Results Conference Call. Today’s call will be conducted by the company’s Chief Executive Officer, Dave Rosa; and Chief Financial Officer, Ron McClurg. Before I turn the call over to Mr. 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 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 corporate update press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, we undertakes no obligation to update such forward-looking statements. With that said, I’ll turn the call over to Dave Rosa, CEO of NeuroOne. Dave?

Dave Rosa: Thanks, operator, and thanks everyone for your attendance today. During our first fiscal quarter, we achieved one of the most significant milestones in the company’s history when we received FDA 510(k) clearance for the Evo sEEG electrode for less than 30 days use. Zimmer Biomet is still targeting the end of the first calendar quarter of 2023 to begin a limited commercial launch. We’re particularly excited about the synergies that exist between using Zimmer’s ROSA robotic platform, which with our Evo sEEG electrode. The company also shipped the initial Evo sEEG limited market release order to Zimmer Biomet during the first fiscal quarter and continue to manufacture product to meet additional orders for a future full product launch.

We also made tremendous progress with our OneRF therapeutic ablation electrode system as we completed a successful animal feasibility study with Dr. Jamie Van Gompel at the Mayo Clinic in Rochester, Minnesota. The results confirm that the system is capable of both recording brain activity and ablating brain tissue using the same electrodes. I’m also pleased to report that we met our goal of completing the development of the system by the end of calendar year 2022. We are excited that the system is performing to our specifications and our final steps are to complete design validation testing. We also remain on target to submit a 510(k) application to the FDA early in the second calendar quarter of 2023. Now I’ll discuss our efforts in developing electrodes that could be used for chronic stimulation and recording.

Our focus remains on treating chronic back pain due to multiple failed back surgeries. Our goal is to offer a percutaneously placed paddle electrode that can be deployed in a comparable manner to existing percutaneous systems, while offering an increased stimulation area, improved conformability and lower energy requirements. We have already developed and tested percutaneous delivery system prototypes that have received positive feedback from key opinion leaders. The company also engaged in discussions with potential strategic partners and are exploring opportunities to expand our offerings to other markets. While there is nothing definitive yet regarding these discussions, I am pleased to see the level of interest in our technology. We are also continuing to explore the potential for our technology to offer the ability to deliver genes or drugs as well as record the agent’s impact to the patient.

We expect to conduct preclinical feasibility studies to assess the device’s potential, but are enthusiastic based on physician feedback to date. The company was also active with poster presentations highlighting the Evo sEEG electrode performance at the following meetings. Congress of Neurological Surgeons, Society of Neuroscience, and the American Epilepsy Society. Our products were also displayed at the Zimmer Biomet booth at the CNS and AES meetings. We will continue to target key society meetings to present our data in an effort to increase our exposure. And relating to increased exposure, I also had the pleasure of being interviewed on the show Mornings with Maria during the quarter as well. In addition, the company was invited to ring the NASDAQ stock market closing bell to celebrate the FDA clearance milestone for the Evo sEEG technology.

Thanks for your time and attention. I would like to now turn the call over to Ron McClurg for a more in-depth review of our fiscal first quarter financial results. Ron?

Ron McClurg: Thank you, Dave. Product revenue was $115,000 in the first quarter of fiscal 2023 compared to product revenue of $34,000 in the first quarter of fiscal ’22. We had collaboration revenue of $1.46 million in the first quarter of fiscal ’23 compared to collaboration revenue of $6,000 in first quarter of fiscal ’22. Collaboration revenue is derived from the Zimmer development agreement and represents a portion of the exclusivity licensing payment that is eligible for revenue recognition as of 12/31/2022. Total operating expenses in the first quarter of fiscal ’23 were $3.2 million compared with $2.8 million in the same period at the prior year. R&D expense in the first quarter was $1.6 million compared with $1.1 million in the same period of fiscal 2022.

SG&A expense in the first quarter of fiscal 2023 was $1.66 million compared with $1.74 million in the prior year period. At a net loss of $1.7 million or $0.11 per share for the first quarter of fiscal ’23 compared to a net loss of $2.8 million or $0.18 a share in the first quarter of fiscal ’22. As of 12/31/2022, the company had cash and short term investments of $7.6 million compared to $11.1 million as of 09/30/2022, our most recent fiscal year end. The company had no debt outstanding as of 12/31/2022. That concludes my remarks. I’ll now pass it back to the operator to open up the call for Q&A.

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Q&A Session

Operator: Our first question comes from the line of Alex Nowak with Craig Hallum Capital Group. Please proceed with your question.

Alex Nowak: Okay, great. Good afternoon, everyone. I know we are waiting for Zimmer to receive FDA approval for drill bits and some various accessories to go on the ROSA robot. And that was all going to be done after commercializing Evo sEEG electrode. So just where does Zimmer stand with those 510(k)?

Dave Rosa: Yes. Regarding Zimmer, there was only one device that required a 510(k) and that was the drill bit Alex and they did receive 510(k) clearance on that.

Alex Nowak: Okay. So with that in hand, is there anything else that – I guess what is the next barrier to doing the commercialization at the end of this calendar year? Or is it more or less getting the reps trained, getting the product out there into the field, getting the initial sites trained up. Is there any other roadblocks or barriers to watch for or is everything pretty much ready to go?

Dave Rosa: Well, they’re still procuring some of the accessories. So at this time, I’m not aware that they have all the product that they need in terms of the accessories in house yet, but in terms of regulatory holdups or anything like that, there shouldn’t be. And yes, all the other things that you mentioned, field training, site training, the sites have been identified, at least the target sites that they plan on going to, but all that work really needs to be done in the next six weeks.

Alex Nowak: Okay, understood. And then so, you’ve got the debt approved, which is great. Zimmer is committed to the launch and they’re ready to go with the ROSA robots. So how do we think about that launch? Is this going to be, you know, within the next 12 months to think about, like, a hockey stick sort of worldwide launch? You’re going to see it being used in a lot of ROSA cases, maybe a majority of ROSA cases or should we expect it to be a bit more of a pilot rollout to selected ROSA users, just how do we think about modeling this?

Dave Rosa: Yes. So it’s not going to be a worldwide launch. The device is only going to be commercialized in U. S. So we don’t have OUS clearance, but it will be a controlled rollout. So there are – I do think that the first three to six months. We’re obviously going to be making sure that everything is fine with the technology, which is really why you do a limited launch. We don’t expect that there’s going to be any issues based on the experience that we have. But it’ll be a very controlled methodical launch at least in the first to second quarter. And then after that, I would expect I mean the goal is for the technology to be used in all the procedures in all the robotic procedures.

Alex Nowak: And to that point, in the initial KOL discussions that you’ve had into yourself or Zimmer together, with the KOL with their initial feedback, do these initial sites intend to replace all their electrodes that they use with your electrode? Is it going to be using kind of like a one-off situation at first and then slowly ramps?