Earnings Call Transcript - MOVE Q4 2021

Operator, Operator

Greetings. Welcome to the Movano Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to, J. Cogan, CFO. Thank you. You may begin.

J. Cogan, CFO

Thank you, operator. Good afternoon everyone and thank you for joining us today. Our CEO, John Mastrototaro, will open today's call with prepared remarks about the progress we've made during Q4. Afterward, I will cover the highlights of our fourth quarter 2021 operating results and provide perspective on our financial position. Finally, Movano's Founder and Chief Technology Officer, Michael Leabman, will join John and me for the Q&A session. Before we begin, I would like to remind everyone that we will make forward-looking statements during today's call. Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risk and uncertainties. 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 disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere to reflect changes in expectations regarding those events, conditions, and circumstances. Now, I'd like to turn the call over to our CEO, John Mastrototaro.

John Mastrototaro, CEO

Thanks, J. And welcome everyone. We appreciate you joining us today for our Q4 earnings call and are excited to provide you a business update. Today's call happens to fall almost exactly on the one-year anniversary of our initial listing on NASDAQ. When I take a step back to consider the progress we've made as a company over that time, I feel an immense sense of pride in our team. Since our IPO, we've been diligently laying the groundwork to build a platform of purpose-driven, competitive, and durable healthcare solutions while remaining dedicated to our mission of empowering and inspiring individuals to live a happier, healthier life. Despite the pandemic and various other external factors that the business sector worldwide has experienced, we feel extremely fortunate to have continued to grow with purpose and passion. We've met each milestone of our technology and clinical roadmaps. We've significantly grown our staff in areas of expertise, and we have developed and are in the process of preparing the business for our first commercial product, which is now less than a year away from a beta launch. In previous earnings calls, I've talked about our crawl, walk, run strategy for product commercialization in which we are taking incremental steps toward our end goal of bringing a Class II FDA cleared solution to the market while also developing a pathway to get our technology into the hands of consumers sooner. In December of last year, as part of our virtual participation at CES 2022, we brought this strategy to light by unveiling plans for our initial product, the Movano Inc. smart ring, and its accompanying app and cloud platform. This will combine vital health metrics with personalized intelligent feedback and is designed for women of all ages who have traditionally been an afterthought when it comes to wearable technology. The Movano ring will measure heart rate, heart rate variability, sleep, respiration rate, temperature, blood oxygen, steps, and calories while incorporating women's-centric features and design. The solution will provide users and their caregivers continuous health data distilled down to simple, yet meaningful insights to help women make lifestyle changes and take a more proactive approach to managing their health. The Movano ring is our foundational product as we work toward gaining FDA clearances. We are currently conducting clinical trials with our proprietary and non-invasive radio frequency enabled technology platform, as well as developing algorithms to add medical data, including non-invasive glucose and blood pressure monitoring to our core product in the future. Additionally, we have planned accuracy studies to gain FDA clearances on our vital signs monitoring capabilities, including heart rate, SPO2, and respiration rate. The ring will be available through a limited beta release in the second half of this year. The decision to release an initial product without blood pressure or glucose was one that we considered carefully, and the board and our senior leadership team ultimately agreed it was the right move for several reasons. First, we wanted to launch our brand and define our category in the market. There's a real opportunity for a new kind of health solution that sits at the intersection of medical technology and consumer devices, and we believe the Movano ring can provide real value beyond what's on the market today. Second, this strategic decision is poised to accelerate our ability to scale once we add blood pressure or glucose monitoring to the solution. While we are conducting clinical studies and advancing algorithms for our glucose and blood pressure technology, commercializing the initial Movano ring allows us to build the foundation of our platform with the essential data that people with or at risk of chronic conditions need to understand the full picture of their health. We will be able to collect feedback on our platform outside of the lab, so we can further optimize our solution and become better prepared for future product releases, and it gives us an opportunity to invest revenue from sales of the Movano ring into additional features and growth opportunities. Finally, we anticipated that this exposure would improve our ability to attract top talent and serve as a catalyst for strategic partners to engage with us. This has certainly proven to be true over the past few months. The response to our year-end announcement of the Movano ring by the media, consumers, investors, and potential strategic partners has been overwhelmingly positive and has far exceeded our expectations. Since launching the press release and in conjunction with a new website and branding direction, we have been featured in hundreds of mainstream media outlets, including Tech Crunch, Forbes, The Verge, and more. Additionally, we were named Best of CES 2022 by the Wall Street Journal, Wired, Business Insider, and others. The volume of media coverage Movano received as a result of the announcement at CES has not only launched the company and the Movano ring into the public eye, but it has also created a snowball effect of positive momentum across our growing franchise. Since late December, we have received over 50,000 unique visitors to our website, and more than 4,000 people have sent personalized messages to the company via social media or through our website to demonstrate their support and excitement about the ring. Their stories have been incredibly inspiring to me and the team and keep all of us laser-focused on our mission. As a result of our decision to focus our first product on women, we've had the great fortune to get to know several women executives who are recognized leaders across the healthcare and consumer sectors. We continue to search for new team members, as well as a new member for our board of directors. You’ve seen some of our recent press releases on key go-to-market hires and can anticipate more news in the near term on this front. Finally, the Movano ring announcement has provided a catalyst for our company to engage with potential strategic partners who represent a broad cross-section of the healthcare, consumer, and technology sectors. While we do not have any news to report on the strategic front at this juncture, our conversations have reinforced our belief that the Movano solution has tremendous appeal and can deliver significant value to individuals and potential partners. There are five major elements of the Movano ring and our mission that have resonated broadly in our conversations and stand out versus the competition. First and foremost, we have received extremely positive feedback on our decision to build our initial product for women. Wearable tech has historically favored styles and sizes that tend to be more masculine. While other companies are now 'pinking and shrinking' their products and adding women-focused features as an afterthought to their original device, our focus on women is embedded in the DNA of our solution from the outset. We want to help bring vitality to women who are often sidelined. Second, we have purposely emphasized a sleek, slim, and sophisticated design. In fact, we've had multiple consumers tell us they want to use the Movano ring as an engagement or wedding ring. We believe our design concepts have been appealing because the rings look more like jewelry than traditional wearables. The third major differentiator is our intelligent insights. We don't plan to just display data; we are taking it one step further. Our app is designed to note your body signals and transform them into insights. It will delve beyond typical graphs, charts, and percentages to provide accessible, actionable information that can help you make small changes that could have a significant impact on your short and long-term health. Fourth, Movano was built upon the principle that good health is a fundamental human right. We believe managing your health should not be expensive. Our commitment to bring the Movano ring to consumers at an affordable price with a low-cost subscription model has been a point of interest in many of our conversations. We are not interested in building a niche product; we're focused on helping a wide audience live healthier, happier lives. Lastly, we are structuring Movano as a medical device company. This enables us to pursue FDA clearances and designations that will certify the reliability of our data, and we believe this will be particularly attractive to potential strategic partners. We have a quality management system to meet regulatory requirements, our manufacturing will be done in a facility approved for medical devices, and we have deep expertise in the clinical and medical device world that gives us a leg up in developing devices that provide the quality and credibility consumers and enterprises demand. Combined with our focus on building an attractive, easy-to-use, and affordable solution, we are positioning ourselves at the intersection of the med tech and consumer device industries, which in our view represents the future of healthcare. In support of our plans to obtain FDA clearances, we completed two critical studies in Q4 2021 and in the early part of this year. At our last earnings call, we announced the first iteration of our wireless battery-powered and Bluetooth-enabled wearable prototype was out of development, operational, and would soon be put to use in an upcoming blood pressure clinical study. In late December, we completed that study, which was our third and largest blood pressure trial to date with 110 participants at the Movano clinical lab. During the study, participants wore Movano's adjustable both finger ring prototype, and our wrist-worn wearable prototype along with a hospital-grade FDA cleared vital signs monitor. Movano's devices collected pulse pressure waveform data for three minutes, a total of five times over the course of a 30-minute session with three-minute breaks between each measurement cycle. Our proprietary integrated circuits in the wrist-worn prototype, which is supported by our radio frequency technology platform, allow us to calculate blood pressure, heart rate, and heart rate variability, while the ring prototype uses sensors to estimate SPO2, heart rate, heart rate variability, and respiration rate. We're actively evaluating three different calibration methods to analyze the accuracy of our blood pressure data and are pleased with the progress. Based on the analysis we've completed thus far on our SPO2 and heart rate data, we believe the accuracy is commensurate with predicate devices that have received FDA clearance. We also recently announced the completion of our second IRB approved glucose pilot study, which was conducted on 10 participants with diabetes in conjunction with an independent FDA compliant clinical lab. During each four-hour session, participants wore Movano's wrist-worn wearable prototype and reference devices. The reference devices included an FDA cleared finger stick glucose tester, the subject's existing CGM device, and a vital signs monitoring device. Both these recent studies will allow us to further refine the algorithms we use to calculate glucose and blood pressure values, as well as other vital signs measurements. The results of these studies will also inform our approach in follow-on studies and support future FDA clearances. Now, if you recall during our last earnings report, we shared that we had completed the tape-out of our single chip solution and are moving forward with the fabrication process with our partner Global Foundries. This milestone allows us to shrink our proprietary multi-chip architecture into a single integrated circuit, giving us the flexibility to design small form factors that are key to developing competitive commercial products. We recently received our single chip stack from Global Foundries on time and as planned and have begun the testing process, which is expected to continue through the spring. To prepare for the commercialization of the Movano ring, we've grown our company in a very deliberate and meaningful way over the past few months, with the addition of key strategic hires on both engineering and non-engineering sites. Most recently, we hired Vice President of Strategy, Stacy Salvi, who was formerly Head of Strategic Partnerships for Google Fitbit, and also Vice President of Business Development, Michael Soule, who has held several senior leadership roles managing global and national sales, strategic direction, and new business development at Embr Labs, Bose Health, Medtronic, Weight Watchers, and other recognizable brands. We also expect to announce our new Chief Marketing Officer in the coming weeks, who we are equally thrilled to have on our team. These seasoned professionals will be working alongside our senior leadership team to further refine our go-to-market strategy. It's been a major vote of confidence to know we can attract such talented individuals, given how competitive the labor market is today. While we're making great progress, I want to reiterate that we're not taking the easy path. We've chosen to develop proprietary technology from the ground up rather than use off-the-shelf components, and we're pursuing medical device clearances. Although this route comes with meaningful challenges and barriers to entry, we believe it's necessary in order to establish the level of credibility, quality, and accuracy we're aiming to achieve. We have already seen the payoff of these decisions. They are opening doors with strategic partners and helping us rise above the crowded market of wellness devices. 2022 is going to be an exciting year for us as we prepare for our beta launch and you can continue to expect to see regular updates as we progress forward. We plan to participate in various industry events to attract investment and strategic opportunities and have already presented at two investor conferences and held several calls with groups of investors year to date. Considering the pace at which we've been advancing our technology, our aggressive clinical study roadmap, the experienced team we're assembling, and our unwavering commitment to ensuring that good health is accessible to everyone, I truly believe we have the foundation we need to deliver on our promise to provide vital health data to a massive and underserved population, improve health outcomes, while at the same time building a durable enterprise that can create significant value for our shareholders. We're looking forward to a great year ahead. I'll turn it back to J to discuss the quarterly financials.

J. Cogan, CFO

Thanks, John. We detailed the financial results in today's 4Q earnings release, which you can find on our website, but I'll share a few key line items. Movano reported an operating loss of $6.3 million in the fourth quarter of 2021 compared to an operating loss of $3.2 million in the year-ago period. For the 12 months ended December 31, 2021, we reported an operating loss of $19.8 million versus $11.1 million in the 12 months ending December 2020. The increase was primarily related to the expansion of our team and R&D initiatives, as well as the inclusion of public company costs related to our March 2021 initial public offering. At the end of the fourth quarter, we had $33.6 million of cash, cash equivalents, and short-term investments and total assets of $36.3 million. We will not be providing specific financial guidance, but as you've heard in today's quarterly report, as well as through our commentary on previous quarterly calls, we're making great progress across our small but mighty organization. We've separated the development of our platform of purpose-driven health solutions and are now poised to bring the Movano ring to market in a beta release in the back half of 2022. At our third quarter earnings call, we highlighted that our cash burn would increase in the fourth quarter of 2021 and into 2022, and that remains our view at this juncture. That said, capital deployment and operating efficiency are critical to our strategic plan, and when you consider the market opportunity and the progress that we've made to date on our invested capital, we feel very good about our trajectory and the opportunity ahead. As that concludes our formal remarks, we would be glad to take your questions.

Operator, Operator

It looks like there are some questions in the webcast, so let's go ahead and get started. I can address a few of those, and we can see if anyone is dialing in.

J. Cogan, CFO

Okay, John, I can take the first question. It's on cash burn rate or there's one on strategic partners for you after that. You mentioned in your prepared remarks that you continue to expect your cash burn to run higher into 2022. Can you talk about that in a little bit more detail? Our cash burn, as we just mentioned, was $5.7 million in the fourth quarter, and we also had $33.6 million in cash equivalents and short-term investments at the end of the year. As I'm sure you can understand, and given our development stage, we're not at the point where we are going to provide specific financial guidance as a general practice. But taking a broad view, the more progress that we're making in developing our platform of health solutions, including preparing for the upcoming beta launch of the Movano ring, the more we want to invest behind that progress, including expanding our team, accelerating our R&D and clinical studies initiatives, and also preparing to launch the product. We have said it before, but to reiterate one more time, we take capital deployment and operating efficiency very seriously, and we plan to continue to be good stewards of the cash on the company's balance sheet. We’ve got a small but mighty team, and when you consider the market opportunity and the progress that we’ve made to date with our invested capital, we feel really good about our trajectory and the opportunity ahead.

John Mastrototaro, CEO

Yeah, well, certainly our year-end announcement right before CES of the Movano ring provided a catalyst for our company to engage with potential strategic partners. Several elements of the ring and our mission have resonated broadly in our conversations—primarily the focus on women, the ring form factor, structuring ourselves as a medical device company with medical-grade data, pursuing FDA clearances for many metrics that we will be monitoring, and providing intelligent insights that connect cause and effect. Finally, having a solution that's affordable enough for a mass audience has all resonated really well. We've had a lot of interest. At this point, we're not in a position to be specific about the status of conversations we've had with strategic partners, but as we noted, we have great interest across the healthcare industry, consumer, and technology sectors, and in fact, the interest level has definitely surpassed our expectations. I think it really speaks to the appeal of what we're attempting to do right now and how that solution could provide great value to both consumers and potential partners.

J. Cogan, CFO

Okay. We've got a few more in the webcast. This is for you as well, John. What is the status of your blood pressure and glucose algorithm development efforts? Are you getting close to filing for FDA clearance?

John Mastrototaro, CEO

Great question. Well, we aren't there yet, but I will start off by saying that we have made a lot of progress and remain very optimistic. There are a couple of things to keep in mind about the progress we're making. The first is related to the shrinking of the technology and the hardware. Each time we go from a larger prototype system to a smaller one, we find that the cleanliness of the data improves. For example, we started with something the size of a pizza box, then went to a large iPhone, and most recently, down to our first wrist-worn prototype. In our 110 subject study conducted at the end of last year for blood pressure, we found that the cleanliness of the data improves substantially each time we shrink it down. Now, the second part is the work we're doing with both the signal processing and algorithms. We have a strong team: all the folks we have working on this have at least 20 to 25 years and up to 30 or 35 years of experience in the field. With each new set of data that we bring in, we come closer to our goal of having something that we can file with the FDA. I also want to mention that we are looking at different calibration processes, with the approach of doing a unique calibration for each individual. However, our ultimate goal is to have a universal calibration so that someone can just take the product, put it on their finger or wrist, and it will automatically provide blood pressure readings. For that, we are not quite there yet, but we've made a lot of progress as it relates to solutions that require calibration. We're marching forward to achieve something that would require none. Lastly, I want to reiterate that we're trying to get FDA clearance for several different metrics beyond glucose and blood pressure. To that end, when we ran the 110 subject blood pressure study, we monitored heart rate and SPO2, and we believe that the accuracy of those measures is already commensurate with what we need to seek FDA clearance. We are excited about where we're going as a company, and I look forward to the future where we can monitor multiple analytes that are all FDA cleared—all part of this small-looking wearable that provides great medical data. That's where we currently stand and I'm very happy with the state of the company at this point.

J. Cogan, CFO

Okay. We've got a couple of questions that are along the same vein. One about being a little bit more specific about the beta launch of the ring, including things like pricing and subscription models, and there was also another subscription model question. So do you want to start on that?

John Mastrototaro, CEO

Sure. Regarding the beta launch, I can tell you that there's no shortage of interested data testers. As we mentioned in the prepared remarks, we've received thousands of messages from individuals who are very excited and have requested to participate in our beta launch. Obviously, we're not yet prepared to go public with details of what we're going to do for the beta launch, but our focus will be to thoroughly test the solution and ensure it's ready for both direct-to-consumer and B2B activities. It’s certainly a lot of work to do over the course of this year, but it's very exciting for the organization. In terms of the details on the pricing and subscription model, as you've heard on the call and seen in the recent releases, we're rapidly building our go-to-market team. They will work very closely with senior management on the launch of the ring and future products. Expect to hear more about our team in the coming weeks, including additional details about how we're planning to bring this to market.

J. Cogan, CFO

I think we've been pretty clear that we want to make the solution attractive and accessible to a wide audience. We remain committed to this. We believe good health is a fundamental right. We've also discussed that we're leaning towards a subscription model that would appeal to consumers and potential partners, enabling the company to reinvest in our solution, allowing us to add more features over time. We look to create an economic model that works for both our customers and our shareholders, and we feel good about where things are going in that regard.

John Mastrototaro, CEO

Yeah, great question. I've been in the healthcare space, specifically in med device, for over 30 years now, and with smaller and larger companies throughout that time. Most of my work has dealt with chronic conditions, predominantly in the diabetes space. The solutions we are developing are aimed at helping individuals who need tools to live with chronic conditions day in and day out. This approach is somewhat different at Movano, where we aim to help a broader group—millions of people who are just trying to live healthier and those who may have type two diabetes or hypertension. This proactive approach contrasts with the traditional, treatment-focused methods once these conditions arise. This is very exciting to me because hitting that critical mass is where we need to be as a society to manage the overwhelming healthcare-related costs associated with rising rates of these conditions. It is thrilling because of how many people it can apply to, and I believe we're on the cutting edge of healthcare. This sector needs to become more consumer-oriented, as consumers need to be more aware and educated about their health. Thus we want to help better than traditional devices, marrying the best of both consumer and medical technology at a more accessible price point. Since our start, focusing on women has received overwhelmingly positive feedback, affirming that we made a smart decision. We're very excited about where this is headed. Naturally, we will develop solutions for men and additional form factors, but we wanted to start with a gap that we identified in the market, and based on all the feedback since we've gone public, we've confirmed that gap exists. I can tell you that, for myself, this has been the most exciting year of my 30 spent in the industry, and the team we have assembled will accomplish significant achievements.

J. Cogan, CFO

Okay, I think that does it for the questions. Yes, on my end, I'm not seeing anything, so Jay, I'll pass it back over to you for any closing remarks. Thanks, operator. Thanks everybody on the call today for your time. As a reminder, you can stay connected and up to date on Movano news and events by checking out our investor website at ir.movano.com. Thanks, goodnight.

Operator, Operator

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.