Isoray, Inc.
Q1 2021 Earnings Call Transcript

Published: 13 May 2021

[Operator:]

Greetings, welcome to the IsoRay Inc.'s Q3 Fiscal Year 2021 Call. At this time, all participants will be in a listen-only mode. And the question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I'll now like to turn the conference over to Mark Levin, of Investor Relations.

[Mark Levin:]

Thank you, Operator. Good afternoon, and thank you for joining us today for IsoRay's fiscal third quarter 2021 earnings call for the quarter ended March 31, 2021. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

[Lori Woods:]

Thank you, Mark. Good afternoon, and thank you for joining us today for IsoRay's fiscal third quarter 2021 earnings conference call for the quarter ended March 31, 2021. Following my prepared remarks, our Chief Financial Officer, Jonathan Hunt will provide a more detailed review of fiscal second quarter financial results. I am pleased to share with you the progress we've experienced in our fiscal third quarter. As we look with increasing confidence to the future opportunities for growth at IsoRay. Fiscal third quarter revenue only decreased 10% from the record quarter a year ago, but increased 10% sequentially to $2.6 million. This was the best quarter revenue total since the onset of the pandemic. Although our prostate revenue declined from the record quarter a year ago, I haven't been encouraged by the 7% sequential growth we experienced in our core business, as well as our growing strength in adoptions for the treatment of other hard to treat cancers. The sequential uptick in prostate brachytherapy revenue in our fiscal third quarter reinforces our belief that there is a significant backlog of patients who will be seeking treatment as a result of the many men who have delayed annual check-ups, screenings and prostate cancer treatments during the pandemic.

[Jonathan Hunt:]

Thank you, Lori. I'm going to discuss some of the financial information that was contained on our press release for the fiscal third quarter ended March 31st, 2021 that we released a short while ago. We anticipate that our form 10 Q will be filed with the SEC on or around May 17th. Revenue for the third quarter and in March 31st, 2021 decreased 10% to $2.6 million versus the record $2.88 million for the same period last year. As Lori mentioned earlier, total revenue increased 10% sequentially from the fiscal second quarter ended December 31st, 2020 prostate brachytherapy revenue declined 16% versus the third quarter of fiscal 2020 that's procedure volumes continued to be impacted by COVID-19. Third quarter revenue was comprised of 78% for prostate brachytherapy with the balance or 22% of revenue attributed to other brachytherapy. Other brachytherapy revenue increased 20% versus the third quarter of fiscal 2020. The majority of other revenue in the quarter was comprised of cells to treat brain and one cancers gross profit as a percentage of revenues for the third quarter ended March 31st, 2021 was 52.4% compared to 59.2% for the quarter ended March 31st, 2020. Driven by the year-over-year revenue decline, third quarter gross profit dollars of $1.36 million decreased 20% when compared to the same period last year, total operating expenses, consisting of research and development, sales and marketing in general and administrative total $2.13 million representing a 6% decrease versus the third quarter of 2020. Total R&D expense increased 23% versus the comparable prior year, quarter to $362,000. The increase in total research and development expenses was primarily the result of increased payroll benefits and share based compensation from greater headcount and increased protocol expenses, which were partially offset by a reduction of development expenses for the Blu Build delivery system versus the comparable prior year period. Sales and marketing expenses decreased 28% versus the comparable prior year quarter to $581,000. The decrease in sales and marketing expenses, which was driven primarily by declines in travel and trade show costs due to COVID-19 limitations, as well as decreased incentive compensation resulting from lower revenue growth compared to the prior year comparable period,

[Operator:]

Thank you. We will now be conducting a question and answer session. . Our first question is from Frank Takkinen - Lake Street, capital markets, please proceed.

[Frank Takkinen:]

Hey, thanks for taking my questions. Congrats on the return to sequential growth and growth in the quarter. I wanted to start with your primary prostate brachy market. First. I was hoping that you could share some monthly procedural information with us as it trended over fiscal Q3. And if you could maybe give us an early taste into how those procedural volumes have been trending in the early part of fiscal Q4?

[Lori Woods:]

So we don't give guidance on specific numbers per say, but I would love Frank to address kind of what we're seeing in the marketplace and what's starting to happen and how excited we are about what we view as kind of coming out of the pandemic and starting to move forward. We've had a lot of access to hospitals and the physicians that we haven't had since the pandemic started. And we hear from our physicians that they're seeing an increased number of patients coming through the system. It's not an immediate sort of thing that happens. The patient has to work through a couple of different physicians before they get to actually a brachytherapy procedure, but they're starting to see that those those channels are filling up with patients who've gotten in, who've gotten diagnosed and are moving through.

[Frank Takkinen:]

Got it. That's helpful. Why don't I move over to the nonprofit state or non prostate brachytherapy revenues, particularly brain as this continues to perform? Well, I was hoping you could just take a moment to kind of give us a broader overview of the brain cancer market specific to brachytherapy and how you feel you're positioned and how, how will you feel that can trend over time?

[Lori Woods:]

Yeah, absolutely. So in brain brachytherapy, surprisingly, we've seen kind of the same kind of problem in some degree to some degree that we've seen with prostate. And that is I think most likely because patients haven't gotten diagnosed to begin with or aren't getting into the system. So surprisingly we saw early on in the pandemic that those numbers were a little bit flat, but now we're seeing a return to growth in those numbers, which you're seeing definitely as we report here today. And what we're expecting is to see that number continue to grow. There've been a lot of initiative started with GT medical that we reported previously about clinical trials and those kinds of things where they are going to be having centers that are enrolling patients. I think we're starting to see some of that. I think we're also starting to see the, both they and us have been able to get back in front of neurosurgeons and radiation oncologists again, where we haven't for the last few quarters had that same flexibility and being able to talk to these physicians and help them understand the benefits of cesium one 30, one for brain, and all of that is really coming back. And you're seeing that in the numbers and we expect that to grow into continue because we have both, as we reported before and GT medical technologies has expanded their approval for treatment, and now they can treat any metastatic cancer in the brain. And so that allows a broader group of patients to be selected for this particular procedure. So we see this, this area continuing to grow and we expect to see some upticks in the upcoming quarters on this. Definitely.

[Frank Takkinen:]

Perfect. And then just last one for me, I was hoping you could remind us of some timelines around potential milestones associated with your studies underway in that head and neck area with KEYTRUDA, as well as in melanoma area with Optivo.

[Lori Woods:]

Absolutely. So milestones would really be reflective of patients starting to accrue for the trials. And then you look at going out and unlike our prostates data, where we had to go at 10 years, we are expecting this to be a lot faster, a cruel. So getting out a year, 18 months, 24 months, we would expect that these centers would be wanting to talk about what's happening with the data sets and the patients involved in these clinical.

[Frank Takkinen:]

Perfect. Thanks for taking my questions.

[Operator:]

Thank you. Our next question is from Mike Ott with Oppenheimer. Please proceed.

[Mike Ott:]

Good afternoon. Thanks for taking my questions and congrats on a nice quarter. Lori and Jonathan, I'm doing though, which is obviously unique to you guys. You mentioned that, you know, hospital access is improving. Have you seen any new customers evaluate or start using do builder? Are they all still fairly preoccupied with COVID?

[Lori Woods:]

You know, they tend to be fairly preoccupied with COVID and what we've noticed during this period of time is that a lot of the physicians are staying with the types of procedures that they're familiar with so if you, if you categorize them as in the evaluation process, we have several and an increasing number of people in that in terms of actually having them using the product. I think COVID has slowed us down certainly in this area. And I think we'll start seeing as we come out of COVID and they start seeing more patients filling up coming into their offices and getting scheduled brachytherapy, we'll start seeing them then move from that evaluation process into using the product.

[Mike Ott:]

That's great to hear. Okay. And then shifting gears on the C4 MRI marker that was cleared back in January. I wonder if you could just update us on, you know, any traction with KLS and also your own internal validation work. Are you still targeting? I believe it was fiscal 2022 for the full launch of that T4. Okay.

[Lori Woods:]

Yes. So we're, we are definitely still targeting that timeline. We have been proceeding with our internal evaluations. I think we're very close to being finished. We have engaged with KOL and MD Anderson in particular to do some evaluation for us, make sure that we're ready for our full market launch we're. So I would, I would say that all the things that we had put in place that we needed to accomplish and the milestones for this are moving along just fine. And on our we're on our timeline on that, to be able to release this product a little later this year.

[Mike Ott:]

And finally, you know, back in March, she signed a new purchasing agreement with JFC isotope that despite COVID tapering off in the U S anyway, we seem to be reading more about supply chain disruptions. Just curious how your supply chain is doing these days?

[Lori Woods:]

You know, that's a great question. Our supply chain has been very solid for us throughout this entire epidemic. And that really speaks to how well that the, the group over in Russia has managed what's happening in their particular facilities. We have not had any issues at all, any I think I've spoken to this before our biggest issue was with airlines and that was easy to overcome by switching to different plans that we already had in place. So from a, a on the ground perspective in Russia and getting our isotope, we're not expecting any issues there nor are we expecting any issues on getting the isotope here to us in the U S and that has been backed up by this last year of not having any issues at all.

[Mike Ott:]

Excellent. That does it for me. Thanks. Sorry.

[Lori Woods:]

Thanks so much, Mike.

[Operator:]

Thank you. Any more questions? Okay. If there are no more questions and this will end the question and answer session, and I would like to turn the call back to Lori Woods for closing remarks.

[Lori Woods:]

Thank you everyone for joining us this afternoon. We appreciate your time and attention. Have a great day.