Earnings Call Transcript - ECOR Q3 2025

Operator, Operator

Greetings, everyone, and welcome to the electroCore Third Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It's now my pleasure to introduce you to your host, Dan Goldberger, electroCore's Chief Executive Officer. Dan?

Daniel Goldberger, CEO

Thank you all for participating in today's electroCore earnings call. Joining me today are Dr. Thomas Errico, one of our founders and investor and our newly elected Chairman; Joshua Lev, our Chief Financial Officer; and our Investor Relations team from FNK IR. Earlier today, electroCore published results for the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, any guidance, outlook or future financial expectations or operational activities and performance are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. electroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, November 5, 2025. To begin, our Chairman would like to share a few thoughts on the company's strategy and future. Dr. Errico?

Thomas Errico, Chairman

Thank you, Dan. Good afternoon, everyone, and thank you for joining electroCore's Third Quarter 2025 Earnings Call. My name is Tom Errico, and as the newly elected Chairman of the Board, it's an honor to address you today. As a founder, practicing physician, consistent investor and daily user of our noninvasive vagal nerve stimulation technology for over 15 years, I am deeply committed to our mission of transforming lives. Today, I'll outline our strategic vision and discuss the background behind our key shift to accelerate growth. Dan and Josh will follow with an in-depth review of our financial and operational performance. Let's begin. electroCore was established to modernize vagal nerve stimulation by developing a noninvasive technology, starting with our FDA-approved medical device for the prevention and treatment of migraines and cluster headaches. While I personally do not suffer from these conditions, I use noninvasive vagal stimulation daily. About 12 years ago, during an investment meeting on vagal nerve stimulation in New York City, Dr. Kevin Tracey, the pioneer of VNS, was asked if he used the technology himself. At that time, he used an auricular device for at least 20 minutes a day. When questioned about this commitment, he answered, because it gives me a daily overwhelming sense of well-being. As a routine user of VNS, his words strongly resonated with me and helped explain the positive performance-enhancing effects I was experiencing. Fast forward a decade or so and research from Air Force Labs has further confirmed the remarkable performance benefits of noninvasive vagal nerve stimulation associated with electroCore's technology. As a practicing physician working with both adults and children, I encounter patients daily who could benefit from the substantial health and wellness impacts of VNS. Expanding access to this technology inspired us to launch Truvaga. As a microcap company listed on NASDAQ, we are uniquely positioned to innovate, although we contend with challenges related to scale and visibility. Previously, the company anticipated achieving positive quarterly cash flow from operations by the end of 2025. Along the way, opportunities emerged to significantly boost shareholder value by redirecting investments towards areas with higher growth potential. We were confident navigating this pivot, having experienced quarters with modest shortfalls but approaching positive cash flow on an adjusted EBITDA basis. After a thorough evaluation, the Board determined that maintaining the status quo would cap our growth and market penetration, failing to realize ECOR's full potential and meet shareholders' expectations. To accelerate progress, we executed targeted investments, completed a strategic acquisition, expanded our medical division through key hires, onboarded a new software AI partner to enhance our wellness app and welcomed 2 new Board members from Microsoft and Google. These immediate investments may slightly delay near-term profitability, but we are confident that they will set the stage for accelerated revenue growth in future quarters. We are managing these expenditures rigorously and strategically to ensure sustainable long-term value creation. To provide greater transparency and detail, our path to profitability would have likely yielded limited short-term gains, primarily from one FDA-cleared medical device within the VA and the single wellness product, Truvaga. Instead, we chose to defer profitability and invest in 3 priority areas: to broaden our product range; diversify revenue streams; and enhance long-term shareholder value. This intentional diversification also reduces customer concentration risk and is expected to increase electroCore's resilience over time. Pivot 1, the NeuroMetrix acquisition. We acquired the Quell portfolio, including a second FDA-cleared neuromodulation therapy from NeuroMetrix at a minimal upfront cost aside from the transaction expenses and a minor capped royalty. Quell Fibromyalgia gained FDA de novo authorization in 2022, becoming the first nondrug device indicated for fibromyalgia-related chronic pain. In addition to Quell Fibromyalgia, we added the over-the-counter Quell Relief brand to our platform. According to Persistence Medical Research via a Global Newswire article, global fibromyalgia treatment revenue reached $1.3 billion in 2022 with a projected CAGR of 7% to $2.7 billion by 2033. This acquisition diversifies our offering within the VA and meaningfully mitigates product risk in that channel. We launched Quell Fibromyalgia through our sales force in July, and its early performance has exceeded expectations. Third quarter and fourth quarter projected results should cover the full acquisition cost and support years of revenue growth. Dan will share more details on this. Pivot 2, strengthening our VA channel. Our foundation in VA medical sales is robust. Although we saw a temporary slowdown in Q4 2024 due to external macroeconomic and political factors, we navigated these headwinds effectively. VA revenue growth resumed, and we secured a new 5-year contract and upgrade from our previous 3-year agreement. We are selectively expanding our VA sales team and pursuing multiple strategies to boost adoption and drive growth within the VA. Beyond VA, there are short-term opportunities in certain managed care systems. Even though our therapy has been included in formularies, we recently finalized a contract that provides a clear route to access and coverage. We have made a modest investment in a dedicated sales team to create a sustained revenue stream. Pivot 3, developing our wellness division. We have enhanced our expertise in the Wellness division and strengthened our Board. James Theofilos, formerly at Microsoft and now at Google is a member of the Theofilos family, our largest investor, and I look forward to continued collaboration with him on the Board. More recently, we welcomed Elena Bonfiglioli from Microsoft to our Board. She brings expertise in artificial intelligence, international product development and wellness. Her insights are shaping our approach to developing integrated software applications for our wellness products. Through her introduction, we partnered with StratejAI, a European software and AI firm to build software that complements Truvaga and Quell, providing users with personalized data-driven experiences and potentially generating new recurring revenue streams. We're not just participating in the $600 million global VNS market. We're targeting the fast-growing noninvasive category, aiming at an $80 million to $120 million global wellness opportunity with Truvaga and Quell. If we succeed in building out AI integrated software, we could establish a recurring revenue model in a market growing 15% annually with data supported by InsightAce Analytics and Global Wellness Institute. Additionally, I want to mention another significant investor in electroCore, Stephen Zhang, an experienced China-based investor. electroCore is broadening its options outside the U.S. through a royalty-based arrangement with his company to commercialize electroCore products in China. Timelines for approval and commercialization depend always on local regulatory processes, but this arrangement requires no capital investment from ECOR. Regulatory and commercialization efforts fall to the licensee. We appreciate Mr. Zhang's ownership and enthusiasm for our products. This teamed with Ms. Bonfiglioli's presence and connections in the EU and the Middle East, we have made a direct decision to broaden our opportunity outside of the U.S. Dan can provide more specifics. As a founder, investor and daily user of noninvasive VNS, I remain confident that prioritizing focused investments over immediate quarterly profitability is the right long-term strategy for our shareholders. Dan will outline our revised timeline shortly. The Board's decisions are intended to transform how people manage their health by merging the ancient practice of neuromodulation with cutting-edge AI and data technology. In summary, electroCore stands at a pivotal moment. Through acquisitions, expanded channels, board enhancements and advanced software integration, we aim for sustained growth and broader impact. We are evolving into the company we always aspire to be. Thank you for the ongoing support from our shareholders, employees and users. I look forward to what the future holds. I'll now hand things over to Dan for a detailed review of our quarterly performance. We welcome your questions. Thank you. Dan?

Daniel Goldberger, CEO

Thank you, Tom. Turning to the details on the third quarter. electroCore delivered another strong performance, extending our growth trend and strengthening our foundation for scale. The VA hospital system remains our largest customer and continues to grow. Following the closing of the NeuroMetrix acquisition on May 1, 2025, Quell is showing strong early traction as a noninvasive pain therapeutic for fibromyalgia in the VA hospital system. Truvaga sales also returned to growth, driven primarily by our e-commerce store at www.truvaga.com and an expanding network of affiliates who actively promote Truvaga to their audiences. As Dr. Errico noted, electroCore pioneered noninvasive vagus nerve stimulation. Today, we are broadening that innovation into a suite of noninvasive bioelectronic technologies that improve quality of life for patients and for wellness consumers in the United States and select international markets. Science and data continue to guide every step we take. In the third quarter of 2025, revenue reached a record $8.7 million, up 33% year-over-year and 18% sequentially. Gross margins remained strong at 86%, up slightly from 84% last year. We model gross margins in the mid-80s going forward. Prescription device revenue grew 19% year-over-year to $6.8 million, driven by both gammaCore and Quell sales in the VA hospital system. As of September 30, 2025, 195 VA hospital facilities have purchased prescription gammaCore products, up from 166 a year ago. The VA Headache Centers of Excellence estimates approximately 600,000 patients are being treated for headache in the VA hospital system, including approximately 24,000 cluster headache patients. We have now dispensed 12,000 gammaCore devices, roughly 2% of the addressable VA headache market, with additional opportunity among patients experiencing headaches related to PTSD and mild traumatic brain injury. We believe there are as many as 550,000 fibromyalgia patients in the VA hospital system based on published incidence and prevalence data. NeuroMetrix has dispensed less than 700 Quell fibromyalgia stimulators since launch in 2024. So we believe there's plenty of room to grow here as well. We plan to continue growing our VA hospital business by adding W-2 and 1099 staff in select locations through 2026. While the VA remains our largest customer, we are also investing in sales talent to focus on a large commercial managed care system. In the third quarter, our DME distributor, Joerns, was finally able to add gammaCore Sapphire to their contract with that managed care system. This step could remove a lot of the friction prescribers have faced and opens an additional pathway for growth. Health and wellness product revenue reached $1.9 million, a 54% increase sequentially and 121% year-on-year. That includes a $500,000 onetime Truvaga order for a third-party clinical trial. Excluding that transaction, Truvaga revenue grew 18% sequentially and 79% year-on-year. We believe this return to sequential growth is a result of the shift away from Amazon and the team's increased focus on driving sales through other direct-to-consumer platforms. Return on advertising spend, or ROAS, for the period was approximately 1.80, meaning for every $1 spent on media, we generated nearly $1.80 of revenue. Return rates across our e-commerce platforms are approximately 11% to 12%, consistent with prior periods. We have sold more than 19,000 Truvaga handsets, powering more than 1.6 million user sessions on our mobile app. We plan to continue making marketing and promotional investments in our Truvaga platform to drive growth in 2026 and beyond. For example, national media outlets like Women's Health and Men's Health have been driving website traffic. Miranda Kerr mentioned Truvaga on The Skinny Confidential podcast this month. Affiliates like TruMed, Ben Greenfield and Luke Storey have been promoting Truvaga, and Truvaga will soon be available through online retail outlets like Best Buy and Rehabmart. We expect to add new use cases in target demographics for our nVNS products and launch additional health and wellness offerings such as Quell Relief for lower extremity pain. In addition, on the recommendation of our new Board member, Elena Bonfiglioli, we've begun developing our next-generation application to complement Truvaga and Quell, creating personalized data-driven user experiences and potentially a new recurring revenue stream. Based on the opportunities in front of us, we are investing now in people, marketing and product to accelerate growth and drive scale in 2026 and 2027. As Dr. Errico described, this is a strategic decision to prioritize growth and long-term value creation, delaying company-wide profitability as measured by adjusted EBITDA until the back half of 2026. We believe that a Truvaga copycat from Eastern Europe has been infringing our patents and trademarks. You may have seen some filings in the Federal Court in the District of New Jersey about our escalating dispute. The case is ongoing, and we will refrain from commenting beyond the public filings. Josh will discuss operating expense, cash trajectory and guidance in more detail later in the call. However, our cash balance as of September 30, 2025, was $13.2 million. We used approximately $1.5 million in the 3 months ended September 30, 2025, and a total of approximately $6.5 million in the first 9 months of the year to fund operations. We forecast a pro forma cash balance at December 31, 2025, at approximately $10.5 million. Let me return to the 3 pivots that Dr. Errico mentioned earlier. The NeuroMetrix acquisition closed on May 1, 2025, was integrated and launched in our VA hospital channel ahead of schedule and has exceeded our revenue expectations. We had to increase our estimate of future royalties due to the legacy NeuroMetrix shareholders because revenue is ahead of plan, resulting in a noncash hit to EPS of about $0.05 per share. That's actually great news even though it negatively impacted our income statement. We're strengthening our VA hospital sales channel by adding talent in key geographies. We are further investing in developing a parallel channel through a large managed care system. We're strengthening our wellness initiatives through the addition of key people, recruiting influencers, affiliates and new outlets and investing in products. Quell Relief for lower extremity pain could be an exciting new offering in our direct-to-consumer channel. I expect that operating expenses will increase as we scale marketing and sales. Accordingly, the quarterly revenue required to reach cash positive operations is expected to rise. On our August 25 earnings call, we indicated that approximately $12 million in quarterly revenue would cover our OpEx plan and support positive cash from operations as measured by adjusted EBITDA. Based on our current trajectory, we believe that we can achieve these levels and deliver positive adjusted EBITDA in the second half of 2026. Just to summarize our guidance. First, we are increasing full year 2025 revenue guidance from $30 million to $31.5 million to $32.5 million. Second, we expect to have approximately $10.5 million of cash at December 31, 2025. Third, we believe that the business can achieve cash positive operations as measured by adjusted EBITDA at approximately $12 million in quarterly revenue. Fourth, we expect to reach $12 million in quarterly revenue and positive adjusted EBITDA in the second half of 2026. And finally, we expect to use approximately $5 million of cash to fund operations in the first 9 months of 2026, after which we expect the business operations will become self-funding. Now I'll turn the call over to Josh for a review of our financials and select guidance. Josh?

Joshua Lev, CFO

Thank you, Dan. Net sales for the third quarter of 2025 were $8.7 million, an increase of 33% as compared to $6.6 million for the third quarter of 2024. The $2.1 million increase was driven primarily by higher sales of prescription devices and growth in the company's non-prescription general wellness Truvaga product. Gross profit for the third quarter was $7.5 million as compared to $5.5 million for the third quarter last year. Gross margin was 86% compared to 84% for the third quarter last year. Research and development expense in the third quarter was $662,000 as compared to $521,000 in the third quarter last year. This increase was primarily due to increased development costs associated with our next-generation health and wellness mobile application in the 3 months ended September 30, 2025, as compared to the 3 months ended September 30, 2024. Selling, general and administrative expense was $9.7 million for the 3 months ended September 30, 2025, an increase of $2.1 million as compared to $7.6 million for the previous year. This increase was primarily due to greater investment in selling and marketing costs, consistent with the company's increase in sales. For the remainder of 2025, the company plans to continue to make targeted investments in sales and marketing to support its commercial efforts. Total operating expenses in the third quarter were approximately $10.4 million as compared to $8.1 million in the third quarter last year. Total other expense was $521,000 for the 3 months ended September 30, 2025, which consisted primarily of $384,000 of acquisition-related costs in connection with the change in the estimated liability payable to pre-closing shareholders of NeuroMetrix pursuant to a contingent value rights agreement or CVR, and $150,000 of interest expense on the convertible debt financing with Avenue Capital. This compares to total other income of $154,000 for the 3 months ended September 30, 2024, which consisted mainly of interest income. GAAP net loss in the third quarter of 2025 was $3.4 million or a loss of $0.40 per share as compared to net loss of $2.5 million or a loss of $0.31 per share in the third quarter of 2024. The increase in net loss is primarily attributed to an increase in other expense related to the CVR liability and interest expense on the convertible debt financing with Avenue Capital. GAAP net loss per share includes a loss of $0.05 per share and $0.02 per share attributed to the CVR liability and interest expense, respectively. Adjusted EBITDA net loss in the third quarter of 2025 was $2 million as compared to adjusted EBITDA net loss of $2.1 million in the third quarter of 2024. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Cash, cash equivalents, restricted cash and marketable securities at September 30, 2025, totaled approximately $13.2 million as compared to approximately $12.2 million as of December 31, 2024. On August 4, 2025, we secured a term debt facility with Avenue Capital, providing approximately $7.2 million of net cash at closing. Additional details on the Avenue Capital facility can be found in our filings. On October 2, 2025, we closed a small private placement with certain institutional investors in satisfaction of an aggregate of approximately $1.9 million of legal services rendered or to be rendered to the company by the investors. Our balance sheet has been strengthened by these transactions, and we have no plans to access the capital markets at this time. For the full year of 2025, the company is increasing its revenue guidance to $31.5 million to $32.5 million and a cash balance of approximately $10.5 million as of December 31, 2025.

Daniel Goldberger, CEO

And now I'll turn the call back over to you, Dan. Thank you, Josh. I echo Dr. Errico's enthusiasm about the future of electroCore. We continue to report above-market operating results. Prescription device sales continue to grow with sales of both our gammaCore and Quell Fibromyalgia products. Our strategy of offering a suite of bioelectronic products and technologies into our established channels is developing nicely. Demand for prescription devices in the VA hospital channel is driven by clinical data and our increased presence in the field. The launch of prescription Quell Fibromyalgia has exceeded our expectations. We plan to hire additional W-2 territory business managers to increase adoption of our technologies in the VA hospital system as well as dedicating resources to accelerate adoption in managed care systems. We currently have approximately 80 sales agents, including sub reps, managed by an internal sales team of 16 salaried employees. Truvaga Plus has been favorably received by the market since its April 2024 launch. The brand continues to show exceptional potential as a direct-to-consumer general wellness offering and has returned to sequential growth. We sell Truvaga products direct-to-consumer through our e-commerce site, www.truvaga.com, and through Truvaga partners like Ben Greenfield, Perks at Work, TruMed, Rehabmart, Best Buy Online and through a growing number of affiliates and influencers. We continue exploring the expansion of the Truvaga proposition through new product offerings and have begun development of our next-generation mobile application. We believe the Truvaga brand has potential to become a significant player in the health and wellness space, and the evolution of the brand is important for providing shareholders with long-term value. For the third quarter of 2025, our sales and marketing expense increased sequentially by approximately $640,000, while sales grew by roughly $1.3 million, demonstrating operating leverage despite those increased investments. The acquisition and integration of NeuroMetrix exceeded our expectations. Adding products like Quell Fibromyalgia into the prescription VA channel allows our field sales team to offer a growing suite of bioelectronic self-administered therapies for certain debilitating conditions. As we continue to add new products to our established channels, we'll also continue working towards additional indications for prescription gammaCore to treat post-traumatic stress disorder and other clinical opportunities. In summary, I believe we are poised to accelerate growth and we'll be increasing our investment in the high-margin prescription device space to help underwrite investments in the health and wellness channel. With our current cash position, we believe we have access to sufficient liquidity to execute this plan as we get closer to breakeven in 2026. At this time, I'll return the call to the operator. Operator, please open the line for questions.

Operator, Operator

Thanks, Dan. We're now going to open the line for Q&A. But just note, if we run out of time and have a constraint, someone from the IR team will get back to you if your question is not asked on today's call. With that, we're going to go and open up the call, and we'll start with Jeff Cohen from Ladenburg.

Jeffrey Cohen, Analyst

Sorry, can you hear me okay? Just a couple of quick questions for you. So firstly, congrats on the Quell in both the VA channel as well as the other channels. Can you remind us previously what channels NeuroMetrix was selling into before the acquisition?

Daniel Goldberger, CEO

So the prescription Quell for fibromyalgia was sold in 4 or 5 VA hospitals off contract through open market access prior to the acquisition. And there were a few cash pay customers who were served through HealthWarehouse, which is a PDM, but small numbers.

Jeffrey Cohen, Analyst

Okay. Got it. Can you give us any further color on the Truvaga sale for a clinical trial? I'm assuming one clinical trial.

Daniel Goldberger, CEO

Yes. It's one clinical trial that's being run in long COVID subjects. There are a variety of other therapies that are being evaluated. It's a pretty large trial. Candidly, we don't know very much about it because it's an investigator-initiated trial, and they really didn't share the protocol with us, et cetera.

Jeffrey Cohen, Analyst

Got it. Okay. And then lastly, talk about the next-gen mobile app that you're working on. I'm assuming it's software-only, and will it be usable for all your platforms being gammaCore, Truvaga and Quell?

Daniel Goldberger, CEO

So great question. So the next update of our app will be Truvaga Plus only. It will work with the legacy Truvaga Plus that we've been selling since inception in April of last year, but it is not set up to work with gammaCore or Quell. Quell has its own app, mobile app environment. As we wrap our arms around it next year, we're going to look at harmonizing the various mobile apps for vagus nerve stimulation and for the Quell fibromyalgia apps, but that's going to take us a little bit longer to get our arms around it.

Operator, Operator

Our next question comes from RK of H.C. Wainwright.

Swayampakula Ramakanth, Analyst

Can you hear me, Dan?

Daniel Goldberger, CEO

Yes.

Swayampakula Ramakanth, Analyst

And thanks to Dr. Errico for giving those comments, which is really helpful for us. So I have a few questions. So let me start off with a high-level one in terms of how the strategy of acquisition of Quell fibromyalgia seems to be doing much better than what we were in internal expectations? So can you kind of comment on what's helping this product especially in the VA space? And what sort of learnings do you have at this point that you can help the next class of salespeople that you're going to bring on board?

Daniel Goldberger, CEO

Great question. Thanks, RK. In May and June, we accomplished two key tasks. We relocated our production facility to Rockaway, New Jersey, and successfully added prescription Quell for fibromyalgia to our VA hospital contract. Once we had the product and the contract in place by June and July, we began training our sales team. They then started demonstrating the product to their accounts, and the adoption rate has exceeded our expectations. Our main focus for headaches is neurology, while rheumatology is our primary point for fibromyalgia, although both specialties intersect in pain management and polytrauma. We have been pleasantly surprised by the enthusiasm for adopting the fibromyalgia solution, largely due to the safety profile we've established with gammaCore and the NeuroMetrix Quell for fibromyalgia. Professionals in pain management and polytrauma have been quick to embrace this solution, partly because of its safety and the limited options available for fibromyalgia patients. There is a significant unmet clinical need in this area.

Swayampakula Ramakanth, Analyst

Thank you for providing insight into what is driving that pull. Now that you have experience in the VA segment, how easily can this be replicated in other areas or segments, such as Kaiser Permanente or other hospital systems, based on what you have learned so far?

Daniel Goldberger, CEO

So we're going to do that carefully. We've just got a contract at a large managed care system. I'm not allowed to say Kaiser. But that contract is specific for gammaCore Sapphire. We have not even attempted to bring Quell fibromyalgia to that system. But obviously, that's something that we're going to do once we gain traction with Kaiser.

Swayampakula Ramakanth, Analyst

Perfect. And then maybe you made some comments that I didn't listen. I was looking on some commentary on TAC-STIM and what should be our expectations in terms of Air Force procurement and not just for this year, for the next 45 days, but thinking about '26. I do understand it is a lumpy business, but just trying to get a feel for things.

Daniel Goldberger, CEO

It's a tale of two cities. The feedback and research we've received from the Army and Air Force are very positive, but our revenue generation remains limited and inconsistent. In the quarter ending September 30, we generated about $140,000 from TAC-STIM products sold to active duty military. The current quarter has significantly slowed down mainly due to the government shutdown. I expect we will receive some orders in November and December, depending on the government reopening. Our internal forecast for 2026 estimates around $400,000 in total revenue for the year, which aligns with the approximately $100,000 per quarter pace we maintained in 2025. There's substantial potential for growth, and while we're in discussions regarding some large orders, I cannot predict when those will materialize, so we are adopting a conservative outlook for 2026.

Swayampakula Ramakanth, Analyst

Okay. And then last question from me is as Dr. Errico was talking about China, how meaningfully in a higher market is that going to be? And how do you really plan to commercialize that opportunity?

Daniel Goldberger, CEO

So great question. We, as electroCore, do not plan to commercialize it at all. Mr. Zhang now owns roughly 10% of electroCore. He has a license to commercialize our technology in China and only in China for the time being. He seems to have significant resources, financial access to product development and access to manufacturing. What he has shared with me is that he plans to go through the CFDA process in China with a product that uses our technology, but of his own design; it will be manufactured in-country and will pay us a royalty on unit sales and revenue.

Operator, Operator

Our next question comes from Jeremy Pearlman of Maxim Group.

Jeremy Pearlman, Analyst

Okay. Can you hear me?

Daniel Goldberger, CEO

Yes.

Jeremy Pearlman, Analyst

Congrats on the quarter. Just firstly, the current growth, let's say, just specifically the VA segment, is that coming from more new accounts or increased utilization from existing customers?

Daniel Goldberger, CEO

It's both, right? We're going deeper into our existing customers. We added almost 40 new VA hospitals over the course of the last year. And so that's the leading indicator is opening up new hospitals. And then the Quell fibromyalgia product was meaningful revenue in this quarter.

Jeremy Pearlman, Analyst

Right. Is there an expectation for 2026, how many additional VA hospitals you hope to start prescribing in?

Daniel Goldberger, CEO

Yes. But it's a secret.

Jeremy Pearlman, Analyst

Okay. Then in a year's time, we hope to have that answer. Additionally, could you specify which geographies you are focusing on? You mentioned that you have only reached 2% of the potential patient population in the VA system. Where do you see the greatest growth potential geographically?

Daniel Goldberger, CEO

Right now, we are strong in Texas, the Southeast, and along the West Coast. We have a good presence in the Chicago area, but New England, the Mid-Atlantic, and the rest of the Midwest are still untapped opportunities for us.

Jeremy Pearlman, Analyst

Okay. Understood. And then just maybe one more question related to your clinical development pipeline. In the past, you've talked about many other indications. Maybe any update on the progress of how any of those trials are going? And when we could expect maybe potential new indications?

Daniel Goldberger, CEO

Yes. We have been focusing our efforts on PTSD, specifically with gammaCore. This year, we held meetings with the FDA to present our data, which we believe is sufficient. In the meantime, we are preparing to launch another pivotal trial in PTSD that will start enrolling next year. While obtaining the label isn't necessary, it would certainly aid our marketing efforts. If the FDA continues to pose challenges, we will have additional data to help us succeed. We’ve also published some findings related to mild traumatic brain injury, commonly known as concussion, and we are now planning how to collect pivotal data to support a de novo submission for this condition, aiming for a 2027 initiative. NeuroMetrix has gathered significant data on neuropathy resulting from chemotherapy, and we are considering pursuing a label extension for the Quell product line related to that indication. Additionally, there is some interesting data about low back pain that we will evaluate in 2026.

Operator, Operator

Our next question comes from Walter Schenker of Maz Partners.

Walter Schenker, Analyst

Just one quick question. My first comment is that my wife and I use the product every day, and we are very happy with it. So it might be beneficial for us to promote it through our Chairman.

Daniel Goldberger, CEO

Thank you.

Walter Schenker, Analyst

The Quell royalty is capped, meaning that for the current year, after paying $400,000, most of the payments have been made and only minimal payments should follow. Next year, the royalty payment will be capped at a lower level, resulting in a total that will be less than this year's amount. Is that correct?

Daniel Goldberger, CEO

Yes, in spirit, what we didn't pay anything. We adjusted the estimate that flowed through the income statement and now sits on the balance sheet as a future liability. The payment, the cash doesn't go out until May or June of next year. But otherwise, the income statement effect, you are correct.

Walter Schenker, Analyst

But the income statement, I realize I should have stated it more clearly. The income statement effect in the next quarter and in the coming year will decline.

Daniel Goldberger, CEO

Correct.

Walter Schenker, Analyst

Year-over-year and quarter-over-quarter?

Daniel Goldberger, CEO

Yes.

Walter Schenker, Analyst

And secondly, although someone asked the main question, I was curious about given how large the market is and given that your Chinese investor is a significant investor having filed on the company, just to further expand. So he is planning on moving forward as best you know, as a medical device, not as a consumer device.

Daniel Goldberger, CEO

Correct. He is moving forward as a prescription medical device for a really exciting list of indications. And what I should have mentioned to the previous caller is that given the clinical studies that he's planning to underwrite, we may be able to migrate some of his data back to the U.S. for additional indications.

Walter Schenker, Analyst

And don't answer the question, if you don't owe me answer, I'm going to ask it anyway. As he looks at the Chinese market and given what you just said, their trials are as lengthy as ours. So even if he is very successful, we're talking substantial number of years before that data might be useful either in China or here...

Daniel Goldberger, CEO

That's my understanding. In headache and in PTSD, where the clinical trial protocol is pretty well understood, he can get up and running relatively quickly. But for some of the other like rheumatoid arthritis things that he wants to chase, it's going to take longer. But in any case, it's years, not months.

Walter Schenker, Analyst

The most positive aspect of this entire call for me is that you have finally made a significant acceleration in your penetration of the VA hospital system. We were previously at 10% penetration, and there is considerable opportunity to continue expanding in this area.

Daniel Goldberger, CEO

Very well said and thank you for the compliment. It was not left-handed at all.

Operator, Operator

Okay, Dan, Josh, in our last few minutes here, we're going to try to bang out all of the texted-in questions. First, what is being done to combat the copycat marketing vagus nerve stimulation devices?

Daniel Goldberger, CEO

Yes. There is a European company called Pulsetto. They sued us earlier this year for a declaratory judgment claiming they do not infringe our patents. We quickly filed a cross complaint stating that not only do they infringe that patent, but they also infringe several additional patents. Furthermore, there are various trade-related and trademark-related cross complaints involved. The filings are in the Federal Court District of New Jersey, and my lawyers have advised me not to comment beyond what is included in those public filings. Since we are currently in litigation, our focus is on achieving a significant win. There may be other infringers that we have notified, but our priority is on the ongoing litigation.

Operator, Operator

Can you guys break out what neuro revenue contributions were for the quarter? The question came in from Andrew Rem.

Daniel Goldberger, CEO

So Quell fibromyalgia or actually the full Quell line was $595,000 of net revenue in the third quarter.

Operator, Operator

Okay. Can you break out the Truvaga details for Q3?

Daniel Goldberger, CEO

I think we did, but it was $1,674,000.

Operator, Operator

Well, everyone, thanks for your participation. Dan, I'm going to turn the call back to you for your closing comments.

Daniel Goldberger, CEO

Thank you, Rob. Thank you all for your time and attention. I know this was a little bit longer call. A special thank you to Dr. Tom Errico, our new Chairman, who has been a profound champion for this technology and for this company for many, many years. I want to thank all of our employees and sales reps out there that are working hard every day. I want to thank the folks in the VA hospital system and our other customers, but especially the federal workers who are struggling under this ridiculous government shutdown stuff going on right now. And yes, there's probably a bunch of other people I need to thank. But thank you all for your time and attention. Have a great day.