NeuroMetrix, Inc.
Q2 2021 Earnings Call Transcript

Published: 22 Jul 2021

[Operator:]

Good morning and welcome to the NeuroMetrix First Quarter 2021 Earnings Call. My name is Michelle and I will be your moderator on the call. On this call, the Company may make statements which are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature that depend upon or refer to future events, or conditions are forward-looking statements. Any forward-looking statements reflect current views of NeuroMetrix about future results of operations, and other forward-looking information. You should not rely on forward-looking statements because actual results may differ materially and as a result of a number of important factors, including those set forth in the earnings release issued earlier today. Please refer to the risks and uncertainties, including the factors described under the heading Risk Factors in the Company’s periodic filings with the SEC available on the Company’s Investor Relations website at neurometrix.com and on the SEC's website at sec.gov. NeuroMetrix does not intend and undertakes no duty to update the information disclosed on this conference call.

[Thomas Higgins:]

Thank you, Michelle, and those of you attending today’s call. Dr. Shai Gozani our President and CEO is also participating in this Q2 review. NeuroMetrix is a leader in proprietary non-invasive medical devices for the diagnosis and treatment of pain and neurological disorders. We design and deploy a recurring revenue business model in all of our products. These commercial products include the neurodiagnostic technologies of DPNCheck and ADVANCE, plus our chronic pain treatment technology Quell. Our results for the second quarter of 2021 were just released. Overall financial performance was in line with our expectations. We continue to make progress in positioning our commercial products for future growth while supporting the ongoing research and development programs which Shai will address shortly. Turning to the highlights of the Q2 earnings report, Q2 revenue was about 2.2 million, an improvement of 63% from 1.4 million in Q2 of last year. Last year results however were depressed by the pandemic-related decline in customer orders that we across the industry. Within total revenue DPNCheck was the largest component, and within DPNCheck, our domestic Medicare Advantage business was the largest contribution. International DPNCheck sales which are primarily in Japan and China improved from Q1 of this year, but continued to lag last year. We believe this reflects conditions on the ground in those two countries. ADVANCE electrode sales delivered another strong quarter, this was both year on year as well as on a sequential quarter basis. Electrode unit volumes and pricing were both higher. ADVANCE is primarily used to evaluate carpal tunnel syndrome by hand surgeons and by occupational health physicians in industrial settings. Quell continued to deliver positive operating margins. Our gross profit on revenue for the quarter was about 1.7 million that represents a margin rate of 74.8% versus 63.6% in the prior year quarter. This improvement of 11.2 percentage points is primarily due to increased cost absorption in the higher -- due to the higher production rates, currently Q2 of this year versus the low production volumes of last year. Operating expenses totaled 2.2 million. R&D spending of about $600,000 was relatively constant year on year. Sales and marketing spending of $300,000 was lower than last year due to reduced Quell advertising spending, and G&A spending of 1.3 million was up about $600,000 from 2020. This primarily reflects the timing of equity awards, incentive comp accruals, professional services and state sales tax obligations.

[Dr. Shai Gozani:]

Thank you, Tom. First, I would like to comment on the recent activity in our stock. We appreciate the interest that was generated by the recent announcement that Quell received FDA Breakthrough Device Designation. This is gratifying the new investors of learning about NeuroMetrix, and our efforts to improve patient health through our diagnostic and therapeutic products. Our business strategy is guided by three principles. The first is continued R&D investment in our technology platforms to drive market penetration and to open up additional markets; the second is transitioning the business to operating profitability and cash generation; and the third is establishing consistent and predictable top line growth. I'll take this opportunity to provide updates on each of these elements. First, with respect to R&D, our R&D strategy is to develop unique proprietary medical devices that utilize non-invasive neurostimulation to diagnose and treat neurological conditions and pain. We seek to define new products categories and leapfrog existing technology. We develop products using our specialized in-house 10 person R&D team. We have two near term R&D projects along with several nascent programs. Today, I'll focus on our near term programs. We are on the late stages of our second generation DPNCheck development project. As a reminder, DPNCheck is a proprietary, rapid point of care tests for neurodegeneration, such as due to diabetes, chemotherapy and autoimmune diseases. Polyneuropathies, as these conditions are called having an overall population prevalence of 5% to 10%, then increases to over 25% in elderly individuals.

[Operator:]

Our first question comes from Jerry Noury with Little West 12th Street. Your line is open.

[Jerry Noury:]

Good morning and I want to congratulate you for rising to the moment where senior citizens in the United States across the world suffering from diversified pain, I am one for instance, and it's very important that Medicare and hopefully Medicaid will honor your medical device. I saw in past years Jerry Lewis, the comic, he had a medical device attached to his spinal cord and he pressed it and the pain went away, but what replaced it, was a very numb feeling that he disclosed during the Telethon. And I'm wondering, because I don’t know, is there a numb feeling when your device is on or your totally back to normal, relaxed nerves, with no pins and needles or thousand needles feeling in your -- in the part of the body that is activating to reduce the pain? It's reduced pins and needles. It's what I’m asking, a numb feeling.

[Dr. Shai Gozani:]

Thank you for the question and the kind comments. So the way that Quell, which I believe is what you're referring to operate, is it does stimulate the nerves in order to induce an analgesic or pain relief response? That is a sensation that is experienced. You can feel it to most individuals, it is not uncomfortable, but is it the same as sensation that is felt, not numbness, but there is a feeling of stimulation.

[Jerry Noury:]

Does it take away from your in the day or you can continue your workforce or your daily activities as a senior citizen entirely?

[Dr. Shai Gozani:]

Yes. So, it does not in fact, distract. And in fact, it's used by many people overnight and doesn't even disrupt their sleep.

[Jerry Noury:]

I'm waiting to experience it. I hope you put me on your list for clinical studies.

[Dr. Shai Gozani:]

Okay. Thank you very much for the comment and the kind words.

[Operator:]

There are no further questions. I'd like to turn the call back over to Dr. Shai Gozani for your closing remarks.

[Dr. Shai Gozani:]

Well, thank you very much for joining us on this Q2 conference call. We look forward to updating you over the balance of year.

[Operator:]

This does conclude the conference. You may now disconnect. Everyone have a great day.