ECOR: Getting A BOOST from New Initiatives
NASDAQ:ECOR
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First Quarter 2023 Financial and Operational Results
For the quarter ending March 31, 2023, electroCore Inc. (NASDAQ:ECOR) posted revenues of approximately $2.8 million vs. $1.9 million in the prior year quarter. This represents growth of nearly 50%, driven by increases in the VA/DOD segment and commercial revenues augmented by electroCore’s cash pay initiatives. Since our previous update following the report of fourth quarter results, electroCore has presented a poster at the American Academy of Neurology, reported favorable results from a study evaluating well-being, announced promising results for traumatic brain injury and foreign language learning, participated in multiple conferences and preannounced near 50% revenue growth in the first quarter.
First quarter 2023 financial and operational results were provided in a press release and Form 10-Q filed with the SEC on March 8th. A conference call with investors and analysts was held immediately following the release. 1Q:23 revenues of $2.8 million were slightly ahead of our initial estimates and matched revised company guidance. Net loss per share was ($1.24). Management reiterated its outlook of revenues between $14.0 and $15.0 million in 2023.
Operational and scientific highlights for 1Q:23 and to date include:
➢ 1:15 reverse stock split – February 2023
➢ Distribution agreement with Byond Healthcare – February 2023
➢ Traumatic brain injury results reported in Journal of Neurotrauma – March 2023
➢ Import license granted for Indonesia, Malaysia and South Africa – April 2023
➢ Teijin license fee remitted – April 2023
➢ Three patent issue notifications received – April 2023
➢ AAN Foreign Language Learning study presentation – April 2023
➢ National Institutes of Health Grant Award – April 2023
In the financial domain, revenues for 1Q:23 were $2.8 million, a 46% increase over the $1.9 million generated in 1Q:22. Net loss was ($5.9) million in 1Q:23 which compares to our ($7.4) million estimate. This equated to a loss of ($1.24) on a per share basis.
For the three-month period ending March 31, 2023 and versus the same period a year prior:
➢ Net sales were $2.8 million, up 46% primarily due to increases in the VA and DOD channel of 35% and growth in commercial revenues of 55%. Initial contributions from the launch of Truvaga and TAC-STIM added to the revenue line. Ex-US revenues resumed their rapid growth rate, rising 34%;
➢ Gross margin was 83.5% versus 81.0% due to product mix tilted towards longer duration therapy and a greater number of refills. Favorable absorption of labor and overhead also contributed to the improvement in the metric;
➢ Research & development expenses totaled $1.8 million, rising 94% on increased investment in next-generation, smartphone integrating gammaCore devices;
➢ Selling, general & administrative expenses of $6.7 million were up 8.5% from $6.2 million on account of a severance charge payment and targeted investment in sales and marketing for cash pay, direct-to-physician, direct-to-consumer awareness campaigns and the e-commerce platform;
➢ Net loss was ($5.9) million versus ($5.6) million with loss per share ($1.24) and ($1.18), respectively.1
As of March 31, 2023, cash, equivalents and marketable securities on the balance sheet totaled $11.9 million. Cash burn was ($5.9) million. No financing cash flows were recognized. Management has reiterated its 2023 revenue guidance of $14 to $15 million. We anticipate operating expenses rising mid-single digits net of expense reductions early in 2023. R&D activities will be driven by new product development and $6 million in National Institute on Drug Abuse (NIDA) grant funding work to use gammaCore to treat symptoms of substance withdrawal.
New Indications
The number of indications that may benefit from nVNS seems to be endless. Announcements of grants to support opioid use disorder, and the recent launch of Truvaga to improve stress, anxiety, sleep, energy and mood build on previous work done demonstrating benefits in post-traumatic stress disorder, stroke, and Parkinson’s disease. Recently, work conducted in collaboration with the Department of Defense at the US Defense Language Institute Foreign Language Center demonstrated a statistically significant benefit for language test performance.
Data from the language study was presented at the 75th Annual Meeting of the American Academy of Neurology (AAN). Support for the study was provided by the Defense Advanced Research Projects Agency (DARPA)/AFRL within the DARPA Targeted Neuroplasticity Training (TNT) program. 36 subjects were assessed in a 1:1 ratio between nVNS and sham following a baseline determination. gammaCore stimulation treatments were self-administered before and after training. On day five, assessments were administered on language recall. Mood was also measured. Subjects using nVNS showed increases in energy and focus relative to sham participants.
The study’s findings suggest that transcutaneous vagus nerve stimulation (tcVNS) promotes learning by inducing neuroplasticity, enhancing focus and mitigating fatigue. tcVNS training benefits are sustained for at least 24 hours after stimulation. Based on current and related demonstration of training enhancement, the study’s authors conclude that tcVNS could be beneficial in language learning as well as acquisition of skills in intensive learning environments.
Traumatic Brain Injury is another area where a study was conducted. This pre-clinical work was presented in a paper entitled “Non-Invasive Vagus Nerve Stimulation Improves Brain Lesion Volume and Neurobehavioral Outcomes in a Rat Model of Traumatic Brain Injury” in the peer-reviewed Journal of Neurotrauma. The use of nVNS was associated with small brain lesion (damage) volume as compared with the control group. Results were seen after one day of treatment and by day 7, nVNS was associated with a decreased lesion size of 35% and 89% in the low and high dose nVNS groups respectively. Neurobehavioral assessments were also more favorable for the treated mice.
The $6 million NIDA grant will fund a 100-patient trial that will be conducted at Emory University and the Atlanta VA Hospital and will have a duration of three years. Based on today’s visibility, enrollment could be completed by the end of 2024 and regulatory submissions may be able to start in 2025.
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1. Note that our earnings per share actuals use updated share counts in previous periods to reflect the February 2023 reverse stock split.
