Conference Transcript - BSEM 2026-06-17

Noah Agron, Other

Okay, well, thanks for coming out. My name is Noah Agron. I'm the Vice President of Corbett Finance and Strategy at Biostem. I've been at the company for about a year and a half. I started at the company, actually, as a shareholder before an employee. So I'm very pleased to be here at Planet Microcap to talk about the company. Board-looking statements. Our mission to create and deliver the most advanced wound care healing technologies in the world. So just a quick snapshot on the company. If you're not familiar, the basics tickers BSEM are located in Pompano Beach, Florida. There's our share price and market cap. Recent financials from our first quarter earning call, 26 revenue, Q1 of 6.1 million and 61%.

Operator

Oh, gross margin.

Noah Agron, Other

Oh, that sounds better. As of end of Q1, cash an equivalence of $13.7 million. And we launched our top line guidance after a Q1 of $25 to $29 million. So this key corporate developments page is a very important page, and I think that if there's anything that I want to impart or anyone listening wants to leave with is the transformative nature of the biotissue acquisition, which we made in the first quarter. It'll be something that I'll be touching on numerous times throughout the presentation, and so it's a very important part of it. So the biotissue acquisition is the closed acquisition of biotissue surgical and wound care business and our progress integration initiatives. The deal terms were we made an initial payment of $10 million, excuse me, $15 million in cash in Q1 with a $10 million payment for a 510 award that is pending. and also a $15 million royalty once we affect the tech transfer. We cannot affect the tech transfer until one year after we close the acquisition. So we could do that as early as January of 2027. What we're really excited about that is bringing over the manufacturing of those products in-house will enable us to gain over 20% of gross margin, which will bring us from the mid-50s to the mid-70s on that. Equally as exciting is our progression and pathway to uplisting. We're OTC listed. However, we have filed a Form 10 confidentially with the SEC. We did that after the completion and publication of the 2024 and 2025 audit with KPMG. that was basically the main gating factor we set out for our form 10 last year but we pulled it because we wanted to bring a key service provider like kpmg to do that to do that audit so we could move forward with the form 10 we have really great service providers in addition to kpmg our legal is greenberg trierig and our ir firm is gil martin group so that that form was filed in April of this year. We're currently in the comment period, and we've also filed a NASDAQ application. Also, during this time, we received analyst coverage, our first analyst coverage by RK at HCW, who put out a report prior to Q1 earnings and a follow-up report after Q1 earnings with a price target of $7. In addition, over the spring, we strengthened our balance sheet by retiring by retiring some outstanding debt that we had with GMA all our debt is current at this time and at the same time we brought in 2.5 million dollars with our first institutional investor which was real excited to have them on board as well as last week we also announced an expanded leadership some some changes to our board I'll start with that we added three board members Most excited to have Raina Lessa Hannaway on our board, who is an ex-Fidelity small cap portfolio manager. So she brings a lot of key capital markets insight. Will help me out sort of in our NDRs. We've done a number of NDRs over the last year and have presented at Goldman, Morgan, Stanley, Cowan, and Needham. And she will be really helpful in that. Also, we brought in our first in-house general counsel, Catherine Guerrero as our Chief and Legal Compliance Officer in April. So this is a slide on the need for perinatal autografts versus standard of care. Again, using placental-based perinatal autografts enables faster healing, minimize scarring and adhesion, infection prevention, pain management, and reduce complications. Standard of care is simply bandaging the patient. If standard of care does not work, there are a number of very terrible comorbidities that may occur, including lower limb amputations and diabetic foot ulcer hospitalizations each year, which costs the Medicare Trust a significant amount of money, up to $30 billion each year. So just talking about the TAM and, again, going back to the biotissue acquisition and why that was so important for us. Up until the acquisition, Biostem operated in the chronic room care segment and the physician office segment, which is a good TAM, about a $15 billion TAM. However, going into the hospital and surgical adds another $8 billion on the TAM, including orthopedics, foot and ankle, urology, spine, and women's health. So some of our public comps include Orgo, organogenesis, and mimetics. This slide just sort of addresses the differentiated technology and strong foundation versus some of those. Most important is our 68-issued U.S. patents and 81-pending and our addition of industry-leading technologies, again, in addition to BioRoutine, which is our proprietary process with the bio-tissue acquisition, we brought on the CryoTech and StereoTech products as well. Here's a little bit closer look at our product mix. Again, the blue box shows the different products that we've brought in with the bio-tissue acquisition. Vendahe and Vendahe RC is our legacy physician office product. We've added the Clarex and Neox family that is that is those are products that are used in the surgical setting along with the addition of the commercial sales force what's very interesting is that we can add Vendahe our legacy products into the hospitals on those agreements and we're looking to do that this year. So again with the bio tissue acquisition this is effectively de-risked our market prior to the acquisition in the physician office the vast vast majority of that blue circle. The pair was Medicare and Medicare Trust. With the hospital products, we've de-risked by having a commercial, mostly a commercial pair based and that's been very important given the changes of CMS's reimbursement over the years, over the last year. So with the biotissue acquisition, the most exciting thing is that we've been able to add our first in-house sales force. At the time we made the acquisition, we brought on 15 W2s and a number of independent sales folks. Since then, we've added that number to get up to 35 W2s and 30 independent salespeople. The blue states that you see are the states that we're currently doing business. So just given the map, you can see how much greenfield we have to go, and we're very excited to go down that path. In addition, we have done some RCT studies. We put out our first results in the physician office product at the end of last year. That was for DFU. We also will have the entire DFU readout this year, as well as the top line for our VLU. But we were very pleased with the results of the studies. they showed superior outcome with bio-routine allograft and diabetic foot ulcers versus standard of care. And that's important for physicians who are making those decisions on which allografts to put on their patients. A little bit about our manufacturing facility. Like I said, we're based in Pompano Beach, Florida. It's about a 6,300 square foot facility. Currently, we're processing about 30,000 square centimeters monthly. That is, we're working at about 15 to 20 percent capacity currently on one shift, so we have a lot of room to grow. Again, what's key about this is and where there's a lot of excitement is once we affect that tech transfer with bio tissue, we will bring in all of that manufacturing in-house, which we have that capacity and the ability to gain 20 basis points in margin. They are basically currently manufacturing this product at a very high level, at the LA level, and we can do it much more efficiently. Again, we can't do it until one year after the transaction occurs, but we're looking to do it as soon as possible after that. And it's also of note that there's not a lot of capex associated with affecting that tech transfer. A little bit about the management team. So Jason and Andrew, our co-founders. Brandon Poe is new as our CFO. He's coming up on about a year, but he's had over two years at the company as he was chairman of the audit committee on our board, and he went off the board in order to take the CFO role. So we're really happy to have him there full-time. We do have some legacy biotissue folks, which we're very excited to have, including Barry Hassett, our chief commercial officer, and Lita Lilly, who runs our sales force. We brought Lita at her retirement. There's a lot of excitement around the Biotissue sales opportunity. Biotissue, the company, was really focused on their ocular franchise and was managing it for cash, not so much for growth. And we're excited with these folks to be able to get this back into high growth mode. And Lita and Barry will be very helpful in that effort. So the financial and capital markets Outlook, as I've mentioned before, we're investing for growth. We've made significant growth in our sales base going from 15 to 35 sales folks. And again, so we've 13.7 million cash on the balance sheet. We have a positive track record of delivering EBITDA in the past, and we're looking forward to continue to grow both those segments. Again, uplist to NASDAQ, we're in the process of doing that. It's not so much in our hands, it's in the hands of the SEC, but we've had a good back and forth through the comment period and we're hoping to affect that uplisting to NASDAQ at some point over the summer, so stay tuned with that. So key catalyst roadmap for those looking to see what we've got coming up For the rest of 26, we really have two check marks there on the successful integration of the biotissue assets and our uplist to NASDAQ. I did touch on the sales expansion. We're looking to get to 40 direct sales reps. We're really moving along well in that effort and the fact that we're at 35 right now. We're excited to get the 510K clearance in order to upregulate our particulate product through the biotissue. It's called Catalyze. We'll continue to present clinical evidence. As I mentioned, we've got the full readout on DFU and top line for VLU this year. And then, again, on the financial side, deliver revenue growth in the second half. I would say that on the biotissue side, that's somewhat of a seasonal business because it's a commercial payer base. What you see is patients use up their deductibles in the first part of the year and then they go in for these elective procedures in the second part of the year. So we're looking for second half growth there. And again, improve our operating margins across the year. But again, the tech transfer with biotissue, bringing that in-house is going to go a long way to achieve that goal. And if there are any questions, thank you for listening. Sure. Oh, great. Sure. Yeah. No, it's fine. Fire away. No, the KPMG 24 and 25 is in. We didn't file a 10K because we're OTC. And so we don't file a 10K. Are you? Yeah, they should be, yeah, those can be found in the OTC disclosure section. They're available on OTC, yes, yes, OTC disclosure. I'm not exactly sure about that, that could be a question for Brandon. Well, could you be more specific? Again, right now we have a contract manufacturing agreement at a cost plus arrangement. And that will change with the tech transfer, and then it will shift to a royalty. On the 510K award, once that 510K award is granted by the FDA, we will make them a $10 million award payment, and we will have ownership of that product. Both. Both, correct. FDA approval, and then the terms of the agreement are once that approval is made, we'll have 30 days in order to make that payment post-approval. no we we want to have that we want to have a 510k pathway product for sure um i mean one of the things we're really excited about the biotissue acquisition if you look at it versus other acquisitions i mean this was an acquisition that we made it for 0.8 times revenue um if you look at the sylventum acera deal where sylventum went and bought acera that had a portfolio of 510k products i mean that um that that transaction ended up going i think they sold to acera for nine times revenue is a 725 million dollar transaction and so um we absolutely want to we want to have the 510k we want to make that payment and and start to start to upregulate that particular product it's a major no and it's it's a major pivot for the business right i mean we one of the reasons we're so excited about this acquisition is we're a completely different company than we were in uh in 25. if you look at our first quarter revenues the biotissue side is 87% of our revenue. And I think that it will be the vast majority of our revenue guidance for this year. I do think that the physician office, the legacy business will recover right now, but there have been serious changes at CMS. They've gone from ASP plus six pricing to flat pricing. And what you're seeing right now is a shakeout in the business where a lot of those producers that couldn't produce at this 127 number are exiting the market. But at the same time, they're liquidating inexpensive inventory. And we need to see that sort of play itself out and leave it sort of to the, sort of as I like to say, the adults in the business. I think that for the analyst community that's covered, call it organogenesis and mimetics, like BTIG, basically a lot of the analysts say, look, this has to sort of play itself out. And then you'll have the vertically integrated producers that can produce at 127 that this business will be left to. It's important that they made these changes to 127. ASP plus six was not a very responsible pricing matrix because it simply incented the doctors to buy the most expensive product possible because they were getting that 6% to put it on. Making it a level playing field will bring in the RCT data that we're doing and others that are doing so the doctors can make the right decisions for their patients versus how much they're sort of putting in their pocket. And while we're at 127 now, the fact is that a lot of the opportunists in this sector are still liquidating that inventory, and the doctors will still buy product at $20 a square because they can get reimbursed at 127. And so we're sort of playing this waiting game to see how long it's going to take for that to run out. But it is a finite supply. Yeah, correct, we did an earnings restatement in the third quarter of last year. Basically, what we did was there was really no change to the EBITDA or bottom line. We just basically recognized what we used to do was called Bonafide Services as Contra Revenue instead of calling it top line. At the time when we had one sole distributor, which is Venture Medical, They were taking in 78%, so we moved that down contra revenue, but there's really no difference to the bottom line. But when you take a look at it, it's a very serious change if you look at top line number versus bottom line. Yeah, I mean, look, the margins remain strong, the margins are 61% margin right now. we think we're gonna be able to up that once we affect that tech transfer you know we've put on top-line guidance of 25 to 29 million this year obviously we're looking to beat that and you know if you're looking sort of more long-term I think RK's model is is fairly sound in what he's put out on us as well but like said I'm happy to talk to you a little bit more when you sit down we'll see we'll see you soon yeah great look forward to it thank you