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Edited Transcript of MYOS earnings conference call or presentation 8-May-20 3:30pm GMT

·16 mins read

Q1 2020 MYOS RENS Technology Inc Earnings Call RIVERSIDE May 13, 2020 (Thomson StreetEvents) -- Edited Transcript of MYOS RENS Technology Inc earnings conference call or presentation Friday, May 8, 2020 at 3:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Joanne Goodford;Investor Relations * Joseph Mannello MYOS RENS Technology Inc. - CEO & Director * Joseph DiPietro MYOS RENS Technology Inc. - Controller ================================================================================ Conference Call Participants ================================================================================ * Jim McIlree;Bradley Woods;Analyst * Steven H. Maide;Key Client;Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the MYOS RENS Technology First Quarter 2020 Earnings Call and Webcast. (Operator Instructions) Please note that this conference is being recorded. I will now turn the conference over to our host, Joanne Goodford, Investor Relations contact. Thank you, you may begin. -------------------------------------------------------------------------------- Joanne Goodford;Investor Relations, [2] -------------------------------------------------------------------------------- Thank you, operator, and thanks to all of you for joining us today, and welcome to the MYOS RENS Technology First Quarter 2020 Results Conference Call and Webcast. Joining us on the call today is Joseph Mannello, Chief Executive Officer; and Joseph DiPietro, Financial Controller. I would like to remind our listeners that any statements on this call that are not historical facts are forward-looking statements. Actual results may differ materially from those projected or implied in any forward-looking statements. Any statements in this release that are not historical facts are forward-looking statements. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to: those relating to product and customer demand; market acceptance of our products; the ability to create new products through research and development; the successful results of strategic initiatives; success of our products, including Yolked, physician muscle health formula, MYOS Canine Muscle Formula, Qurr and MYOS Enternal Nutrition Formula; the success of our research and development; the results of the clinical evaluation of Fortetropin and its effects; the ability to enter into new parts partnership opportunities, and the success of our existing partnerships; the ability to generate revenue and cash flow from sales of our products; the ability to increase our revenue and gross profit margins; the ability to achieve a sustainable, profitable business; the effective economic conditions; the ability to protect our intellectual property rights, competition from other providers and products; the continued listing of our securities on the NASDAQ stock market; risks in product development; our ability to raise capital to fund continuing operations; the adverse impact of the coronavirus pandemic on the economy; and our business and other factors discussed from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements from events or circumstances after the date on which such statement is made except as required by law. These statements have not been evaluated by the Food and Drug Administration. Our products are not intended to diagnose, treat, cure or prevent any disease. With that, I would like to turn over the call to our first speaker, Joseph DiPietro, to go over the financial results. Good morning, Joe. -------------------------------------------------------------------------------- Joseph DiPietro, MYOS RENS Technology Inc. - Controller [3] -------------------------------------------------------------------------------- Good morning, Joanne, and good morning, everybody. Thank you for joining us. Happy Friday. MYOS RENS financial highlights. Our net revenues for the 3 months ended March 31, 2020, increased by $141,000 or 95% to $290,000 compared to net revenues of $149,000 for the 3 months ended March 31, 2019. This increase is primarily due to an increase of $155,000 for our MYOS Canine Muscle Formula product, an increase of $17,000 for our white label business, offset by a decrease of $31,000 from our older product lines. Our cost of revenues for the 3 months ended March 31, 2020, increased by 97,000 or 160% to $158,000 compared to cost of revenues of $61,000 for the 3 months ended March 31, 2019. The increase is primarily due to costs related to manufacturing products related to an increase in our product sales. Our operating expenses for the 3 months ended March 31, 2020, decreased by $66,000 or 6% to $985,000 compared to operating expenses of $1.05 million for the 3 months ended March 31, 2019. This decrease is primarily due to 27% decrease in selling, marketing and research expenses of $73,000, and 11% decrease in general and administrative costs of $41,000, offset by 11% increase in personnel and benefits of $48,000 due to the hiring of additional members to our sales and marketing teams last year. Liquidity and capital resources. In connection with the closing of a private placement on March 5, 2020, the company issued shares for aggregate cash proceeds of $1 million as well as an exchange of $825,000 of our principal promissory note. The company intends to use the net proceeds from the private placement primarily for working capital, research and development, strategic initiatives and other general corporate purposes. As of March 31, 2020, we had cash of $678,000. On April 22, 2020, the company received loan proceeds in the amount of $310,000 under the Paycheck Protection Program. The PPP establishes part of the CARES Act, provides for loans to qualifying businesses for payroll and other qualifying expenses. The company intends to use the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. With that, I'd like to turn the call over to our Chief Executive Officer, Joe Mannello. -------------------------------------------------------------------------------- Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [4] -------------------------------------------------------------------------------- Thank you, Joe. I hope everyone is safe and well and dealing with all the craziness that we have each day. I'm actually doing this from my office at home, as I'm sure many of you are. Let me begin by just saying, as we entered 2020, we were focused on our 3 verticals: animal health, age management and sports nutrition. As you know, these 3 verticals are each linked to our positive clinical studies, Kansas State for Pet, anti-aging and longevity for Berkeley, and sports nutrition for Tampa. It is rare for a product, especially a nutrition product, that is not a drug would have such efficacy and statistically positive results from studies. These verticals are large and have great growth prospects over the next 5 to 10 years. However, we don't look at each vertical in the same way. Our focus and resources are used first on our pet products, then anti-aging or longevity; and finally, on sports nutrition. That decision was made on where we believe we can get a better return of your money. And so far, it is playing out according to plan. However, we will adapt and change if we feel there's a better use of your capital. Let me give you some of the highlights of the first quarter. We were able to able to achieve fairly good results while cutting expenses. Our U Cal Berkeley study was presented remotely in France at the frailty and sarcopenia conference in March. Our KSU 100-dog study was published in the peer-reviewed journal PLOS ONE in early April, and the impact of having a peer-reviewed study and going public with it was much greater than I realized. These results were a year old but yet going out with that study was just impactful, especially to veterinarians, who want to see a peer review study. And we just got a great response once we went public with it. We also announced that many top-tier insurance companies cover MYOS Canine. There's approximately 7 pet insurance companies. If a veterinarian recommends our product, they can get covered up to 90%. Each insurance company is different, but supplements are covered with pet insurance. And pet insurance is small in the United States. It's 5x as big in Europe, but it is growing. Millennials are bringing their dogs and cats to the vet -- to vets much more than older baby boomers and Gen Xers are. And pet insurance looks like it's just going to continue to grow. So we're very excited about that. We also announced an agreement with KVP International. KVP was introduced to me by one of our Board members, Andy Ponte. They sell products such as surgical supplies, braces to approximately 10,000 veterinarians. They're just a great company to work with. So I'm really excited about this partnership. As Joe alluded to, we closed a private placement on March 6. We had tremendous incredible momentum going into March. And then, as we all know, COVID hit. First, we made sure all of our employees were set up to work remotely to make sure that they were safe. Then we quickly made sure our fulfillment centers had greater normal supply anticipating issues there. However, we see positive news that we were deemed an essential business, so we were able to make -- to better manage all aspects of our supply. Joe also discussed the $310,000 we received under the Paycheck Protection Program. The company will use these proceeds for payroll, benefit, rent and utilities. I do not get a salary so none of this money will go towards my salary. So now we had to create a plan to do our best to get revenue when many of our clients and prospects were essentially and are essentially shut down; veterinarians, anti-aging doctors, chiropractors, gyms, fitness centers. So let me try to tell you what we're doing. We're trying: one, to drive as much traffic to our direct-to-consumer customers through e-commerce; two, we've created educational webinars to tell our story in the pet and human -- to the pet and human medical community. We've done numerous webinars now. We did it before COVID. We've done tremendous amount since, not only with Dr. Padliya from MYOS, but we've had some outside veterinarians also do webinars for us. We did one with Dr. Leilani Alvarez from Animal Medical Center, who talked about supplements for aging dogs and Fortetropin. And so -- and it went over phenomenally. And we'll continue to do that even once we get through COVID, but we will continue to try to reach our customers this way and get a lot of new customers. We've been offering the product and deals as marketing to get a greater awareness of Fortetropin and its benefits. We've stayed in constant contact with our customers, offering whatever we can do to help them during these times. And we're looking for opportunities. As everyone on this call know that during difficult times, they come, if you're open to it. We want to make sure also that we understand what the landscape of our business is going to look like over the next 6, 12 and 18 months, and if COVID is going to change any of the habits of our customers. So what are we doing now essentially? We're trying to take a bigger piece of a smaller pie and -- now and then once we get on the other side of this to have a much bigger piece of a bigger pie. I will now take your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Jim McIlree with Bradley Woods. -------------------------------------------------------------------------------- Jim McIlree;Bradley Woods;Analyst, [2] -------------------------------------------------------------------------------- Yes. You mentioned near the end of your call that you're trying to drive traffic to the direct-to-consumer. I was curious if you could elaborate on that a little bit if that's mostly a Facebook-driven issue? And maybe talk a little bit about how much you're spending or would like to spend and how you're measuring success for that initiative? -------------------------------------------------------------------------------- Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [3] -------------------------------------------------------------------------------- Sure. I won't go into particulars what we spend, but what we did is we took some spending that was going to other areas and through social media, Facebook, Google, Amazon, we're taking our spending and focus it more on -- and specifically, probably mostly the MYOS Canine Muscle Formula and MYOS Canine Muscle Formula vet strength and trying to drive the traffic to Amazon or our own e-commerce sites or chewy.com as the vets are shut down or many are. We do see some green shoots, just to let you know, as states are opening up, we're starting to see people -- veterinarians come back. But how did we judge that? We used normal things. We look at what our expense is and where it's driving traffic, and we look at all the data there to see how well it's performing. -------------------------------------------------------------------------------- Jim McIlree;Bradley Woods;Analyst, [4] -------------------------------------------------------------------------------- Is it too early to say that you're going to change the spending permanently towards more of a direct-to-consumer instead of veterinary-driven sale? Or do you have enough data yet on that to determine the efficiency of the spend there versus the, let's call it, pre-COVID marketing thoughts? -------------------------------------------------------------------------------- Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [5] -------------------------------------------------------------------------------- And that's your -- your last statement is the tough one to figure out. I do believe that we'll judge it each time. But for example, when we put out the press release on the PLOS ONE study, we drove some of that to vets. Because we want them aware of it. And the beauty is we'll continue to do that. So we're going to continue to look at what's happening out in the market. If vets are opening up, we'll use some of that spend to market and advertise to vet. Direct-to-consumer is a big, big market for us. So I would think that will be still a big part of our marketing and ad spend. But we will move it around as we see fit. And I can't tell you what the results are, obviously, for April and going into May, that will be for a later date. But right now, we're still using a good amount of our spend direct-to-consumer. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from Steven Maide with Key Client. -------------------------------------------------------------------------------- Steven H. Maide;Key Client;Analyst, [7] -------------------------------------------------------------------------------- Congratulations, I think it was a really good quarter given the circumstances with the really good data and then pivoting that with the reimbursement from the insurance carriers, I think that's really positive. So I had a question about sort of moving forward on how to utilize those 2 positives to gain traction with the vets. I mean, what's the strategy to try to get as many vets as -- I know you guys did the vet conference and stuff like that. I assume the partnership with KLD or KLV has something to do with that as well. But what's the best way to get traction with these vets to sort of start identifying the best way to utilize their patients and their dogs that are having surgeries or elderly to try to get them to start pushing the product on to the retail market, especially now that there'll really be -- a lot of people have pet insurance that I know that they're going to be getting reimbursed for that. -------------------------------------------------------------------------------- Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [8] -------------------------------------------------------------------------------- So thank you, Steven, thank you for the question. There's quite a few ways to go about that. As you know, we have a consultant, Dr. Albert Ahn, who's a veterinarian. And he -- with public relations, we do some things with him that we target the vet community where he'll be -- from different outlets, we'll ask to speak on the topic. And for example, products for aging dogs or why Fortetropin can benefit your dog. And so we utilize that in that community. We -- and then this is public, we put out ads and stories in publications that vets see. If we feel that there is a very, very good open rate. One is Vet Practice News that we advertise in and that reach vets. And we've had a very, very good ROI from -- we've talked to vets and said, what publications, if any, or what digital media, if any, do you focus on to look for new products or new information? So there's the webinars, there's publications, specific publications and then there's trade shows. We just did VMX and that's the big one down in Orlando. I don't know there's a surgery, a group of vet surgeons that they have a trade show. There's rehab surgeons -- vets -- there's rehab vets. We do a very big job. Could someone please mute their phone? And we have -- there's holistic vet conferences. So between conferences, publications, webinars and Dr. Ahn, that's really how we are targeting vets. The good news is we had the results of this study be published. The bad news is it probably would have gotten bigger traction if we published it later or we put it out later. We can't do that, we're a public company. But it lives. There is -- a 100-dog study is a very, very large study. So we're going to continue through social media and all those other tools I just told you about to get the word out. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Ladies and gentlemen, there are no further questions at this time. I'll turn it back to management for closing remarks. Thank you. -------------------------------------------------------------------------------- Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [10] -------------------------------------------------------------------------------- Great. First of all, I want to thank everyone who's invested in MYOS. I really do believe, as I said after the end of last year that the company has been transformed, and we still are getting great results out here. And whether it's anecdotal or in our studies. I was very, very optimistic about where we were in March as with sometimes in life, you get hit right between the eyes. We picked ourselves up very quickly. And I think we're, again, moving in the right direction. And I look forward to that direction and where we're going. So please feel free to give me a call or e-mail me if there were questions that you had or questions that come up tomorrow. I want to thank you all again for being on the call, and please stay safe, stay well, you and your family, and we'll talk soon. Thank you. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Thank you. This concludes today's call. All parties may disconnect. Have a great day.