Earnings Call Transcript - TIVC Q2 2025

Operator, Operator

Welcome to Tivic Health Systems Second Quarter 2025 Financial Results and Operational Update Conference Call. This call has been prerecorded. This call is being webcast, and the replay will be available on the IR section of the company's website for 3 months. Before we begin, let me remind you that during today's call, management will make various forward-looking statements. Investors are cautioned that these forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those indicated in our forward-looking statements. Please read the safe harbor statement contained in the press release that Tivic Health issued today as well as the risk factors contained in Tivic Health's filings with the SEC, including its annual report on Form 10-K of the year-end December 31, 2024, and the Form 10-Q to be filed with the SEC today as well as other company's SEC filings. On today's call, we have Tivic Health's Chief Executive Officer, Jennifer Ernst; and Chief Financial Officer, Lisa Wolf. Now let me turn the call over to Jennifer Ernst.

Jennifer Ernst, CEO

Thank you for joining us today. Before we dive into the financial details, I would like to provide some background for those who might be new to Tivic. In the past six months, we have transformed the company by expanding into the biopharmaceutical sector and continuing the development of our next-generation vagus nerve stimulation devices. This combination allows Tivic to uniquely treat diseases by targeting both biochemical and bioelectronic systems that regulate immune responses. We now have a strong set of opportunities in our pipeline that can potentially generate significant returns on investment. In this regard, our expansion into drug development through an exclusive licensing agreement with Statera Biopharma for their TLR5 agonist assets gives us access to a late-stage, low-risk Phase III drug candidate, along with various additional indications. Entolimod, which is our first commercial opportunity from this portfolio, was initially developed as a countermeasure against lethal levels of ionizing radiation. Many governments maintain a stockpile of treatments for acute radiation syndrome (ARS) to be utilized in nuclear emergencies. Additionally, U.S. defense agencies hold ARS treatments to protect nearly a quarter of a million military personnel and civilians stationed overseas. As a result of these stockpile opportunities, a single ARS contract could potentially be worth several hundred million dollars. Recently, we've made strides in validating government interest in Entolimod for ARS. Meetings with key decision-makers at the Military Health System Research Symposium reinforced our optimism about generating significant sales of Entolimod and delivering value to our shareholders. On the regulatory side, we have previously met with FDA officials in an educational capacity and have been discussing the possibility of an emergency use authorization for Entolimod for ARS, which could lead to earlier approval for this life-saving drug. The FDA has already granted Entolimod Fast Track and orphan drug designations for pediatric ARS. We are currently planning a Type B meeting this year to finalize clinical manufacturing and validation requirements for our planned Biologics License Application. We'll continue to discuss these expedited pathways with the FDA as we approach the filing process. In addition, we are transferring two existing Investigational New Drug applications to Tivic from Statera. Finalizing this transfer will facilitate our formal engagement with the FDA regarding these INDs. In May, we began collaborating with Scorpius BioManufacturing to validate the GMP manufacturing of Entolimod for ARS, a crucial step toward our biologic licensing application. After the initial batch of GMP materials is produced at Scorpius, we will commence bioequivalence and biostability testing, which may take around a year. As part of our strategic push for the ARS indication of Entolimod, this exclusive licensing agreement is helping us build our pipeline. Entolimod and its derivative Entolasta, for which we hold worldwide exclusive licenses, also show potential for treating radiation and chemotherapy side effects, such as neutropenia and gastrointestinal damage caused by cancer treatments. Market research indicates that neutropenia drugs could reach a market size of between $19 billion to $24 billion over the next few years. Most of this market is currently addressed by colony stimulating factors like G-CSF drugs. Since Entolimod operates upstream in the immune system, it can engage a broader range of mechanisms, potentially allowing for a wider spectrum of benefits. Neutropenia is characterized by low neutrophil counts, impairing the body's ability to fight infections. Entolimod has shown promise in preventing cell death post-apoptosis, such as what occurs during radiation treatments, thus promoting cell preservation. We are currently in the early stages of identifying research sites for future clinical trials of Entolimod for neutropenia. We have flexibility in scheduling trials, so they may start this year, depending on securing the right advisors and research partners. We believe this aspect of our pipeline is becoming increasingly significant. We see Entolimod as a substantial opportunity in the oncology market since it may be the only therapy capable of both preventing and treating radiation-related damage to human hematopoietic and gastrointestinal cells with a single dose. The licenses we acquired align well with our internal developments in vagus nerve stimulation. Together, these create a solid pipeline focused on various forms of immune dysregulation. We've been investing in bioelectronics as we regard this as a compelling area for regulating the immune system. Our innovative non-invasive approach employs electrical signals to target immune responses implicated in cardiac, neurological, and autoimmune conditions. In late June, we completed all study visits for an optimization trial of our patent-pending non-invasive cervical vagus nerve stimulation device. The insights gained from this trial, including early findings underscoring the significance of personalization for therapeutic efficacy, bolster our confidence that our NcVNS device can achieve clinical outcomes comparable to or better than those from surgically implanted vagus nerve devices. The Feinstein Institute, a leader in vagus nerve stimulation studies, is collaborating with us to prepare a report on the trial findings. I'm looking forward to sharing the results later this year. In summary, Tivic now has a distinctive and compelling clinical pipeline. Our therapeutics harness the immune system to address underserved medical conditions through biologic and bioelectronic therapies. Given this robust pipeline, we believe it is in our shareholders' best interest to exit the Consumer Health Tech business by the end of the year, whether through a strategic transaction, spin-off, or full divestiture. While ClearUP showcased our ability to successfully navigate FDA processes and launch a regulated product, its sales have not aligned with our expectations. Therefore, shifting our focus toward our prescription-based therapeutic pipeline will better serve our shareholders. This strategic refocusing is reflected in our recent financial results as we reprioritize marketing and sales efforts for ClearUP. I will now hand the call over to Lisa Wolf to review our financial results for the quarter.

Lisa G. Wolf, CFO

Thank you, Jennifer. For ease of listening, all of the financial metrics I will be reporting compare the second quarter ended June 30, 2025, to the prior year quarter ended June 30, 2024, and the 6 months ended June 30, 2025, to the 6 months ended June 30, 2024, unless otherwise stated. Financial results for the second quarter and the first half of the year reflect our transition as a company with our focus towards the biopharmaceutical market and away from the consumer device market. Revenue net of returns totaled $86,000 for the quarter compared to $140,000 in the year-ago quarter. Revenue net of returns totaled $156,000 for the first half of 2025 compared to $474,000 for the first half of 2024. The decline was due to decreased unit sales of ClearUP, which were a result of reductions in our overall marketing expenditures. We have intentionally reduced our advertising expenses in order to focus our capital resources into the advancement of our TLR5 program. Cost of sales decreased to $32,000 from $110,000 in the year-ago quarter and to $52,000 from $277,000 for the 6-month period. The decreases were primarily due to the decreases in unit sales and the restructuring of our supply chain with new partners that was completed in August 2024. Gross margins have increased to 63% for the second quarter compared to 21% a year ago and increased to 67% from 42% for the first half of 2025 compared to 2024. The increases were due to reductions of our product support and fulfillment costs. Operating expenses were $2 million for the second quarter of 2025 compared with $1.3 million for the same period in 2024. Operating expenses for the first half of 2025 were $3.5 million compared to $3 million for the first half of 2024. The increases were primarily due to increased research and development investments in our biologics programs, offset by reductions in sales and marketing costs for ClearUP. Net loss was $1.9 million for the second quarter of 2025 compared with $1.3 million for the second quarter of 2024. Net loss for the first half of 2025 was $3.4 million compared with $2.7 million for the first half of 2024. At June 30, 2025, cash and cash equivalents totaled $1.2 million compared with $2 million at December 31, 2024. Subsequent to the quarter's end, we raised gross proceeds of $0.9 million through utilization of our equity line of credit and the sale of Series B preferred stock pursuant to our preferred purchase agreement. The company has no debt on its balance sheet. We believe these funds, along with the $7 million in remaining planned tranches of our preferred purchase agreement will allow us to make meaningful progress toward GMP manufacturing validation for Entolimod, which is a key value inflection point for the company and will provide a strong signal of our potential to achieve commercialization. With that, I'll turn the call back over to Jennifer.

Jennifer Ernst, CEO

Thank you, Lisa. Let me finish my prepared remarks by highlighting a few other areas of important progress that we achieved during the quarter. We made important adjustments to our staff to align the team more closely with our newly defined focus. One of those changes included having Lisa join us now as our CFO from her previous role as Interim CFO. And Lisa, let me congratulate you on that move. We also made important investments in talent to advance the Entolimod program. To support our clinical work and create a government relations capacity, we hired key team members from Statera that include a Head of Regulatory and Quality, Clinical Operations and a new business development lead. We're very pleased to have this infusion of talent, and I'm looking forward to working with these new team members and to their contributions in advancing our clinical and commercial opportunities. Blake Gurfein stepped down as our Chief Scientific Officer, but stays on as a consultant to support advancing our VNS program as we continue to refine the focus of that program. Looking ahead, our next milestones include completing the transfer of existing INDs from Statera to Tivic, completing the cell line verification, completing our first batch of GMP materials, validating bioequivalence, which we can commence working on upon receipt of those materials, reporting out the study results of our VNS trial and meeting with the FDA for the previously mentioned Type B meeting on Entolimod. We will, of course, be providing updates to our shareholders as each of those milestones are completed. I look forward to reporting to you as we move the company increasingly into these new clinical areas and delivering what we expect will be life-changing treatments for patients in need and strong value creation for shareholders. And with that, I'd like to say thank you for the time you've taken today and have a very good rest of the day.

Operator, Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.