ECOR: 2023 Guidance Propelled by New Products
NASDAQ:ECOR
READ THE FULL ECOR RESEARCH REPORT
Full Year 2022 Financial and Operational Results
For the year ending December 31, 2022, electroCore Inc. (NASDAQ:ECOR) posted revenues of approximately $8.6 million vs. $5.5 million in the prior year period. While year over year growth was up 58%, sales in the fourth quarter accelerated sharply to a 72% increase driven by increases in the VA/DOD segment. Since our previous update in early February, electroCore has executed a reverse stock split, sold net operating loses for immediate cash, further expanded its patent portfolio and entered into another distribution agreement. Other events that took place in the fourth quarter include participation in several investor conferences, publication of findings demonstrating symptom reduction in opioid abuse patients and presentation of data supportive of gammaCore in the treatment of traumatic brain injury (TBI). The company also signed an agreement with Joerns Healthcare to distribute and bill gammaCore Sapphire to selected managed care health systems in November.
Full year 2022 financial and operational results were provided in a press release and Form 10-K filed with the SEC on March 8th. A conference call with investors and analysts was held immediately following the release. 2022 revenues of $8.6 million were slightly ahead of our estimates and revised company guidance and produced a net loss per share of ($4.69). Management anticipates revenues will fall between $14.0 and $15.0 million in 2023.
Operational and scientific highlights for 4Q:22 and to date include:
➢ Oral presentation given at NCS Annual Meeting on Traumatic Brain Injury – October 2022
➢ Distribution agreement signed with Joerns Healthcare – November 2022
➢ Received first purchase contract under the BOOST program – November 2022
➢ Launch of Truvaga – December 2022
➢ Reverse stock split – February 2023
➢ Distribution agreement with Byond Healthcare – February 2023
In the financial domain, revenues for 2022 were $8.6 million, a 58% increase over the $5.5 million generated in 2021. Net loss was ($22.2) million in 2022 which compares to our ($22.1) million estimate. This equated to a loss of ($4.69) on a per share basis.
For the 12-month period ending December 31, 2022 and versus the same period in 2021:
➢ Net sales were $8.6 million, up 58% primarily due to increases in the VA and DOD channel and growth in commercial revenues. Initial contributions from the launch of Truvaga and the BOOST program also added to the revenue line. Ex-US revenues grew more slowly than in the previous year due to US dollar strength;
➢ Gross margin was 81% versus 75% due to the favorable absorption of labor and overhead costs, and product mix tilted towards longer duration, higher margin therapy, and the contribution of high margin license revenues from Teijin. Some of the margin benefit was negatively impacted by a $217,000 charge in the fourth quarter related to the change in estimated useful life for licensed products;
➢ Research & development expenses totaled $5.5 million, rising 120% on increased investment in next-generation, smartphone integrating gammaCore devices;
➢ Selling, general & administrative expenses of $24.3 million were up approximately 13% from $21.6 million propelled by investments in cash pay, direct-to-physician, direct-to-consumer awareness campaigns and the e-commerce platform;
➢ Net loss was ($22.2) million versus ($17.2) million with loss per share ($4.69) and ($4.36), respectively.1
As of December 31, 2022, cash, equivalents and marketable securities on the balance sheet totaled $17.7 million. Cash burn was ($16.6) million. No financing cash flows were recognized. For 2023, management has guided to revenues from $14 to $15 million. We anticipate operating expenses rising mid-single digits net of expense reductions early in 2023. R&D will be driven by new product development and we could see a National Institute on Drug Abuse (NIDA) grant funding work to use gammaCore to treat symptoms of substance withdrawal.
New Distributor
In February 2023 electroCore added another distributor to its roster, Byond Healthcare Pty Ltd in South Africa, bringing its total number of distribution partners to eleven. The exclusive distribution agreement with Byond has a three-year term which will allow the partner to distribute gammaCore Sapphire in South Africa and Namibia. We summarize below the distribution arrangements that electroCore has signed in the last several years.
Truvaga
electroCore’s strategy over the last several years has been to expand its revenue sources into new geographical, government and product verticals. The latest initiative is Truvaga™ which is a device similar to gammaCore Sapphire which activates the vagus nerve. Truvaga reduces stress by activating the vagus nerve at the primary source in the neck.3 There is a broad body of research demonstrating that vagus nerve stimulation can influence the body’s stress response, which in turn increases serotonin and norepinephrine. Serotonin is involved in regulating mood, appetite, and sleep, among other functions and is associated with feelings of happiness and well-being. Norepinephrine acts as a neurotransmitter and hormone, playing a role in regulating attention and alertness, as well as regulating the body's sympathetic nervous system response in times of stress. Norepinephrine is also involved in regulating blood pressure and heart rate. See footnotes for additional research on vagus nerve stimulation and stress.4,5
The product sells for $299 online and claims to reduce stress, improve sleep, induce calmness and boost thinking. Support for the product is available with both online video and written instruction as well as a customer support line. Training sessions are also offered during the week. electroCore reported sales from Truvaga in 4Q:22.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
________________________
1. Note that our earnings per share actuals use updated share counts in previous periods to reflect the February 2023 reverse stock split.
2. Analyst work compiled from electroCore press releases.
3. The vagus nerve runs from the brainstem, down the neck and into the thorax and abdomen. It can be found in the neck near the pharynx, larynx, trachea and esophagus.
4. Bremner, J.D., et al. Application of Noninvasive Vagal Nerve Stimulation to Stress-Related Psychiatric Disorders. J Pers Med. Sept 2020.
5. Breit, S., et al. Vagus Nerve as Modulator of the Brain–Gut Axis in Psychiatric and Inflammatory Disorders. Front. Psychiatry, 13 March 2018.
6. Source: electroCore’s Truvaga website. Accessed February 2023.
