Earnings Call Transcript - NMTC Q4 2024

Operator, Operator

Good day, ladies and gentlemen. Welcome to the NeuroOne Fourth Quarter and Fiscal Year-End 2024 Earnings Call. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa; and Ron McClurg, the company's Chief Financial Officer; Chris Volker, the company's Chief Operating Officer will also be in attendance. 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 financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NeuroOne undertakes no obligation to update such forward-looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.

Dave Rosa, CEO

Thanks, operator, and good morning to everyone. During our fiscal fourth quarter and through today, we have continued to execute our plan and accomplished key milestones regarding commercialization, product development, and financial objectives. In 2024, our top priorities were to pursue a 510(k) clearance from the FDA, to market our OneRF Ablation System and to secure a strategic partnership for distribution. While there was risk associated with the 510(k) given there were no other devices with such a clearance, we successfully achieved this objective, as well as securing a strategic partnership to distribute the system. We are proud that the OneRF Ablation System is the first and only FDA cleared system with an intended use for both reporting electrical activity and ablation of nervous tissue utilizing the same device. Our recent announcement regarding the extension of the partnership with Zimmer Biomet provides a broad distribution network for both the U.S. and certain OUS geographies. In addition, NeuroOne received an upfront license payment of $3 million and the potential to earn an additional milestone payment if certain performance criteria are achieved. We expect the expanded partnership to boost NeuroOne sales and to drive improved profitability. With that confidence, we are excited to provide guidance for fiscal year 2025 for revenue of $8 million to $10 million, representing revenue growth of 132% to 190% over 2024. We are also projecting gross margins for fiscal year 2025 to range between 47% and 51%, compared to gross margins of 31% in 2024. We are very happy to be reporting strong annual revenue growth in fiscal 2024 and expect our revenue growth and margin improvement to accelerate in 2025. We have also been able to strengthen our balance sheet with the $3 million license payment from Zimmer Biomet along with the improved product gross margins from the expanded Zimmer Biomet partnership, as well as the $2.65 million private placement completed in August. Regarding the launch of the OneRF Ablation System, we have been working very closely with the Zimmer Biomet team to initiate commercialization activities, including initial product shipments and training of Zimmer Biomet personnel. Physician interest has been very strong, including during the product exhibition at the American Epilepsy Society Meeting last week. We are also very happy to report that OneRF Ablation procedures have now been completed in 12 patients and to date all patients are either seizure-free or have had a significant reduction in seizure occurrence and less severe seizures after the OneRF Ablation procedure. We continue to be overwhelmed with the initial results and have now performed more than 150 RF Ablation ablations on 12 patients in five centers during our initial limited launch. To date, 24 epilepsy centers have requested proposals to acquire the technology, which doubled from last quarter, and we continue to receive strong interest from neurosurgeons and neurologists regarding the technology. We are also happy to report that the new ICD-10-PCS code granted by CMS for the OneRF ablation procedure became effective October 1, 2024, and will allow hospitals to report inpatient procedures that are performed using the OneRF Ablation System. This will serve to support accurate data collection and processing of reimbursement claims by hospitals for the procedure. Turning to our product development programs, I am excited to announce that we are pursuing additional applications for RF Ablation outside of the brain. Our next FDA submission will target patients with debilitating facial pain, also known as trigeminal neuralgia. The trigeminal nerve is located in the face with one nerve on each side of the face. Trigeminal neuralgia is also a chronic pain condition and is characterized by severe sudden and recurrent facial pain with over 150,000 patients diagnosed each year in the United States. We expect to submit our 510(k) application to the FDA in the first half of calendar year 2025 with the potential to contribute to revenue in calendar year 2025 that is not currently factored into our 2025 revenue plan or revenue guidance. We remain convinced that the OneRF Ablation System can serve as a platform technology for additional indications such as RF Ablation for lower back pain and knee pain, among others. We believe that having multiple indications for the OneRF Ablation System provides competitive differentiation, compared to a single function system and will offer added value to hospitals and physicians, which can be a consideration in hospital purchasing decisions. I would also like to provide updates on our product development programs, leveraging our thin-film electrode platform technology for spinal cord stimulation and drug delivery. With regard to our percutaneous paddle lead program for use in spinal cord stimulation, we have successfully optimized the percutaneous delivery of our paddle lead system by incorporating steerable capabilities for reliable deployment. Preclinical studies performed by renowned pain specialists have confirmed that our electrode can be implanted percutaneously in less than five minutes. They also noted that our percutaneous paddle electrode has the benefits of being up to 20 times thinner, while providing broad therapeutic coverage similar to what is provided by traditional electrodes, but without requiring more invasive surgical implant techniques. Based on the strong feedback from our advisory board, we initiated discussions with potential strategic partners and are actively exploring partnerships for this technology. This technology is another great example of our novel thin film technology that can be applied for multiple indications, including not only back and neck pain, but also for other potential peripheral pain applications. We are also making significant progress with our sEEG based drug delivery program, which leverages the small size and easy implantation of our commercially available sEEG devices. We are confident that we can deliver a smaller device than competitors while providing a larger internal diameter that does not require the use of real-time MRI for placement, which is very costly and time-consuming. Going forward, we will be preparing a 510 application for sEEG based drug delivery, as well as developing a miniaturized device for use in preclinical research. We believe that NeuroOne’s sEEG based drug delivery technology with multi-functionality is uniquely capable to provide physicians and researchers with neurological reporting data before, during, and after directly delivering in the brain a therapeutic agent such as gene therapies, stem cell therapies, and other biopharmaceutical therapies for the treatment of neurological disorders. Finally, we intend to continue actively monitoring the closing bid price for our common stock between now and January 7, 2025, and we'll consider all available options to resolve the deficiency and regain compliance with NASDAQ's minimum bid price requirement.

Ron McClurg, CFO

Thanks, Dave. Product revenue was $1.3 million in the fourth quarter of fiscal 2024, down from $1.7 million in the same quarter of the previous year. The decline in product revenue for this quarter was attributed to the cancellation of a Zimmer Biomet purchase order as we transitioned our manufacturing to the new OneRF product line. For the full fiscal year 2024, product revenue increased by 77% to $3.5 million, compared to $2 million in fiscal year 2023. Additionally, we recorded collaboration revenue of $1.5 million in fiscal 2023 from the Zimmer Development Agreement, which included portions of fees that were acknowledged for revenue recognition during that fiscal year. Our total operating expenses fell by 12% to $3 million in the fourth quarter of fiscal year 2024, compared to $3.4 million in the same quarter last year. For the entire fiscal year 2024, total operating expenses decreased by 6% to $13 million, down from $13.9 million in fiscal year 2023. Research and development expenses were reduced by 39% to $1.1 million in the fourth quarter of fiscal 2024, compared to $1.8 million in the fourth quarter of the prior year. For the full fiscal year 2024, R&D expenses decreased by 27% to $5.1 million, compared to $6.9 million in fiscal year 2023. Selling, general, and administrative expenses, or SG&A, were $1.8 million in the fourth quarter of fiscal 2024, up from $1.6 million in the same quarter last year. SG&A expenses totaled $7.9 million for the fiscal year 2024, compared to $6.9 million in fiscal year 2023. Our net loss was $3.3 million for the fourth quarter of fiscal 2024, versus a net loss of $3.1 million in the same period last year. The net loss for the entirety of fiscal year 2024 was $12.3 million, compared to a net loss of $11.9 million in fiscal 2023. In the fourth quarter of fiscal 2024, the company completed a $2.65 million private placement of its common stock and established a $3 million standby secured credit facility agreement. As of September 30, 2024, we had cash and cash equivalents of $1.5 million, down from $5.3 million a year earlier. Our working capital was $2.4 million as of September 30, 2024, compared to $5.5 million on the same date in 2023. There was no outstanding debt as of September 30, 2024. After receiving a $3 million payment from Zimmer Biomet in November 2024, the company ended the $3 million standby secured credit facility agreement. Dave previously mentioned that we are providing full fiscal year 2025 financial guidance. We anticipate product revenue for fiscal year 2025 to be between $8 million and $10 million, reflecting an increase of 132% to 190% compared to the product revenue of $3.5 million in fiscal year 2024. We expect product gross margin for fiscal year 2025 to be between 47% and 51%, up from 31% in fiscal year 2024.

Dave Rosa, CEO

Thank you, Ron. In closing, we are very happy with the progress made in fiscal 2024 and are looking forward to driving accelerated revenue growth and margin improvement in 2025. We now have clear near-term growth drivers, as well as a strong product pipeline leveraging our novel platform technology. In the near term, we are well positioned to drive meaningful revenue growth and margin improvement, having just completed the first shipments to Zimmer Biomet of the OneRF Ablation System, the first and only FDA cleared device for RF Ablation in the brain. We also expect our trigeminal nerve indication to be commercialized potentially in calendar year 2025, and we are continuing to make progress on product development milestones and potential strategic partnerships for our drug delivery and spinal cord stimulation programs. I would like to thank everyone for attending the call and look forward to updating you on our progress next quarter.

Operator, Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.