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Edited Transcript of MYOS earnings conference call or presentation 7-Aug-19 3:00pm GMT

Q2 2019 MYOS RENS Technology Inc Earnings Call

RIVERSIDE Aug 10, 2019 (Thomson StreetEvents) -- Edited Transcript of MYOS RENS Technology Inc earnings conference call or presentation Wednesday, August 7, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph Mannello

MYOS RENS Technology Inc. - CEO & Director

* Joseph DiPietro

MYOS RENS Technology Inc. - Controller

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Conference Call Participants

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* Brian W. Marckx

Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst

* Matthew Abenante

Porter, LeVay & Rose, Inc. - SVP

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Presentation

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Operator [1]

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Greetings, and welcome to the MYOS RENS Technology Second Quarter 2019 Financial Results Conference Call and Webcast. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Matthew Abenante, Senior Vice President of Porter, LeVay & Rose. Thank you. You may begin.

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Matthew Abenante, Porter, LeVay & Rose, Inc. - SVP [2]

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Thank you, Diego, and thanks to all of you for joining us today, and welcome to the MYOS RENS Technology Second Quarter 2019 Results Conference Call. 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. 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; the successful launch of our products, including Qurr, Yolked and MYOS Canine Muscle Formula; the success of our research and development including the clinical studies, the results of the clinical evaluation of Fortetropin and its effects; the ability to enter into new 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 the revenue and gross profit margins; the ability to achieve a sustainable, profitable business; the effect of 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; 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 statement for events or circumstances after the date on which such statement is made except as required by law.

The statements made on today's call have not been evaluated by the Food and Drug Administration. Our products are not intended to diagnose, treat, cure or prevent any disease.

And with that, I'd like to turn the call over to our first speaker, Joseph DiPietro, to go over the financial results. Good morning, Joe.

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Joseph DiPietro, MYOS RENS Technology Inc. - Controller [3]

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Thanks, Matt. Good morning, everyone. Thank you for joining us. I'm going to go over our second quarter 2019 financial highlights. All the dollar figures I will reference will be in thousands.

For the second quarter of 2019, our net revenues increased $66 or 75% to $154 compared to net revenues of $88 for the 3 months ended June 30, 2018. The increase was primarily due to an increase in net revenues of $124 for 2 new products launched in 2018, $38 for Yolked and $86 for MYOS Canine Formula, offset by a decrease of $58 from our old product lines.

Gross profit for the 3 months ended June 30, 2019, increased $47 or 181% to $73 compared to $26 for the 3 months ended June 30, 2018. Our gross profit margin was 47% for the 3 months ended June 30, 2019, compared to 30% for the 3 months ended June 30, 2018.

Operating expenses for the 3 months ended June 30, 2019, increased $179 or 17% to $1,239 compared to $1,060 for the 3 months ended June 30, 2018. This increase was primarily due to the marketing of our company's new products and the hiring of an in-house sales team that began a year ago in July 2018.

Net loss increased $141 or 14% to $1,175 for the 3 months ended June 30, 2019, compared to $1,034 for the 3 months ended June 30, 2018.

As of June 30, 2019, we had cash of $1.158 million and a total assets $4.519 million. Our cash increased $2.182 million primarily due to the net proceeds provided by our financing activities.

Working capital increased $636 to $1,905 on June 30, 2019, compared to $1,269 at December 31, 2018.

With that, I now would like to turn the call over to someone I have had a pleasure working with the last 3 years, our Chief Executive Officer, Joseph Mannello.

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [4]

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Thank you, Joe. Good morning, everyone. Thank you for being on the call today. I hope this doesn't sound like I'm reading a script, which is difficult because I am reading a script.

Our second quarter results and the achievements we've made in the first half of 2019 are highly encouraging. We have made significant progress on important drivers of future growth for our business, raising awareness and market acceptance of our core brands while demonstrating the scientific case for Fortetropin through the success of our clinical trials. This progress is in conjunction with the accomplishments and achievements we made in 2018, fueled -- which fueled 109% increase in revenues for the first half of 2019.

Last year, we launched our Fortetropin-based canine product, MYOS Canine Muscle Formula, based on the encouragement that we received from veterinarians. We initiated a clinical study with Kansas State University College of Veterinary Medicine to examine the impact of Fortetropin on reducing muscle atrophy in dogs after TPLO surgery. That is similar to ACL surgery in humans. The results from the study showed that dogs that received Fortetropin have reduced muscle atrophy and could exert more force with their operated limbs relative to dogs that received a macronutrient-matched placebo. At the same time, dogs in the Fortetropin group maintained stable levels of myostatin following surgery, while an increase in myostatin levels of plus 10% was noted in dogs that received the placebo. Since then, we have had double-digit revenue growth from MYOS Canine every quarter, including a 46% growth in the second quarter of 2019.

While I'm thrilled with this performance, I believe that we've only scratched the surface of the potential for MYOS Canine Muscle Formula for several reasons. Thus far, the growth in revenues has largely been fueled by the amazing testimonials that we've received and continue to receive from dog owners. We have also received great testimonials from veterinarians.

We measure the traffic from our myospet.com website and social media channels, and they have caught consistently grown every month. We then established a presence on Amazon, which truly fast-tracked our sales momentum. But we've always said that the lasting strength of MYOS Canine would come from being accepted by veterinarians because while humans do not always follow their doctors' orders, pet owners follow their vet's instructions to the letter.

After we announced the successful results of our Kansas State study, we began in earnest reaching out to veterinarians with our data, sending samples of our product and engaging them with our scientific team. We are now starting to see the benefits of this education, which has translated to a sizable amount of increase that we receive weekly from veterinarians.

To build on this strategy, and in line with my commitment towards further building the scientific portfolio that supports Fortetropin, we announced another study at Kansas State University. This study is evaluating the impact of Fortetropin on the quality of life and activity in geriatric dogs. Thus far, 17 of the 40 dogs for the study have been recruited as of the end of the second quarter. Depending on the study outcome, we believe that there is potential for MYOS Canine Muscle Formula to one day become a mainstay in veterinary practices across the country.

In April of 2018, we launched Yolked, our all-natural, NSF-certified for sport nutrition product based on Fortetropin that is marketed specifically to competitive athletes. I'm pleased to -- pleased with the progress thus far in a highly competitive marketplace. Customers continue to enthusiastically respond to Yolked, and we have our eyes firmly fixed on our mission to change the way people think about the importance of muscle health.

Our marketing partner, IMG, has enabled us to establish relationships with athletic departments at over 12 Division 1 universities. We are in consistent contact with trainers and nutritionists at these schools, providing an ongoing education on the Yolked product and strategizing the best way for the product to help their student athletes. This fall, Yolked will be a key part of the athletic training programs at 3 partner schools: Boston College, Marshall University and Brown University. With the cooperation of each school's training staff, we hope to show that Yolked not only helps make athletes stronger but also helps in recovery. In addition to these 3 universities, we are deep in discussions with several other universities regarding similar training programs.

Throughout the spring 2019 basketball season, Yolked was featured prominently on each school's TV visible courtside basketball signage, reaching millions of fans via national TV coverage. In addition, Yolked was featured on each athletic department's official website and official social media channels and was featured as a sponsor of nightly on-court fan contests and T-shirt toss promotions. These marketing efforts were designed to introduce Yolked and drive brand awareness among millions of college sports fans, a very affluent, active and loyal audience segment.

Throughout this football season, I'm excited to announce that Yolked will be sponsoring a national consumer-facing sweepstakes with the grand prize being all expenses paid VIP trip to the Rose Bowl on New Year's Day in Pasadena. Obviously, the script didn't work well. Four golden tickets will be hidden in the boxes of Yolked throughout the country. Each customer who finds a ticket will receive the Rose Bowl trip. These sweepstakes will be promoted by a season-long digital campaign targeting customers strategically chosen for geographic, demographic and behavioral fit.

We enacted a national expansion for Yolked with our agreement with Vitamin Shoppe, which is selling Yolked at its 775 store locations across the U.S. and online at vitaminshoppe.com. Along with our distribution agreement with national sales associates, NSA will enable Yolked to be sold throughout their national sales network of 8 regional offices with over 160 associates.

From a marketing perspective, we want Yolked to represent much more than a standard nutritional product. We want to create an emotional connection with our target consumers by telling stories about a commitment to hard work, perseverance, persistence, humility and professionalism in our workouts, in our games and finally in our daily lives. I don't think those attributes can be better represented than with our most recent endorsement partner, Carli Lloyd. Carli is a 2-time Olympic gold medalist, 2-time FIFA Women's Player of the Year, 3-time Olympian and now a 2-time FIFA Women's World Cup Champion in her fourth appearance as member of the team. Carli joins NBA superstar, Aaron Gordon, of the Orlando Magic as endorsement partners forming Team Yolked. We've rolled out some additional footage of the ads featuring Aaron throughout social media and will be meeting with Carli Lloyd soon to prepare her campaign.

As I've said since taking over as CEO, the success of our products is driven by our ability to research the clinical uses of our key ingredient, Fortetropin, to fully leverage its capabilities. We were delighted to announce positive top line results from our randomized, double-blind, placebo-controlled study that was recently completed at the University of California, Berkeley and the University of Arkansas for Medical Sciences, where we were -- where we evaluated the impact of Fortetropin on the rate of muscle protein synthesis in older men and women between 60 and 75 years of age.

This study showed that Fortetropin significantly increased the fractional synthetic rate of muscle proteins relative to placebo. Of all our positive studies, this one excites me the most for a number of reasons. First, the principal investigator, Dr. William Evans, at the University of California, Berkeley, is truly a key opinion leader in the field of muscle health and sarcopenia. Second, Dr. Evans commented, "Fortetropin clearly has a robust effect on the rate of muscle protein synthesis in older adults. It is rare for a nutrition product to show such a consistent and positive effect. As someone who sits at the lower end of that age range, the much lower end, the value I place on muscle for maintaining an active lifestyle is a paramount importance to me".

Our successful studies enable us to support our product claims, expand our commercial footprint and with that, truly create shareholder value. We also believe that Fortetropin has beyond-the-label potential to enhance health benefits in both pets and humans. All these efforts I've discussed today are working towards the goal to building and growing shareholder value. And while I'm pleased with our overall progress of the building of our brands and expansion of our patents and clinical study data, we have only scratched the surface of the opportunities for MYOS. In fact, where our stock sits today doesn't nearly reflect this potential.

So in closing, I would advise everyone listening today to stay tuned this fall. While I can't go into specifics quite yet, we have several potential opportunities for growing our distribution partners, potential additions to our brand portfolio on both the human and pet segments and I -- that I look forward to discussing later this year.

We want to thank our loyal shareholders for their continued support. And with that, I'm happy to take any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Brian Marckx with Zacks Investment Research.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [2]

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Joe, congrats on the quarter. Not to start on a low note, but just to get it out of the way, Yolked sales have slipped, looks like 2 consecutive quarters sequentially. Just wondered if you can address that. And if there's anything, I guess just anything relevant to talk about related to that.

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [3]

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Yes. First of all, the reason you see the slip is The Vitamin Shoppe order was -- even though it -- they're wheeling it over the year, that was in the fourth quarter of last year, that large order. So that skewed that quarter.

And -- but I'll be honest, Yolked is -- we're building a brand, and building a brand takes time, and it's going to have its ups and downs. And in sports nutrition, there are -- our competition is everywhere. So we feel very comfortable that when your growth going forward, you'll start to see an uptick in Yolked.

And as I look back, I believed it would catch on bigger -- I think we're hitting singles and occasional double, but I thought it would be more triples and home runs, kind of like the Yankees last night. But again, it the Vitamin Shoppe order that skewed the last quarter. And now you're going to start seeing, I think, gradual improvement in Yolked sales.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [4]

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Okay. All right. Great. So relative to...

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [5]

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And while we started, please, low notes, I want those questions.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [6]

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Okay. Okay. The rest are higher than that one so -- on the positivity scale. So relative to the human clinical studies, the U Berkeley study, you just had a readout recently, is there another, I guess, phase or piece or another study that you seek and follow that to sort of help reinforce or revalidate what was found in the Berkeley study? And then if you can talk about what your plans are for the knee replacement study you had referenced in prior calls.

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [7]

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Sure. The answer is it's tough, but studies beget studies, as you know, anyone who follows biotech or pharma. So the -- let's first talk about the knee replacement or the recovery in rehab study. The preclinical study was at Kansas State in dogs which, believe it or not, there are somewhere between 0.5 million and 1 million-plus TPLO surgeries a year. And we are actively pursuing surgeons who perform these. If we can get a small fraction of that market, it is huge for this company, and I believe we can.

But that, as I've stated, is going to lead us to a clinical study. And we hope soon to announce a recovery -- rehab and recovery study. One of the issues we have with regard to knee replacement or hip surgery is finding good endpoints that we felt would show that Fortetropin really was having an effect or not having an effect. But we wanted to make sure the endpoints would show what Fortetropin could or couldn't do. It is difficult to find a study that doesn't have a lot of variability of results. People with knee surgery or total knee replacement or hip surgery at times can improve because they started the surgery later, earlier, different points in their lives. So we think we now have a study that makes sense, and we hope over the next month or 2 to announce that study. That's on that area.

With regard to building on the Berkeley study, what we are looking at is the potential of doing something more in that age, a little older where there's activity involved. So we are exploring that. That -- we're speaking to Bill Evans. And first, we are waiting to get the abstract of the study. And then we will look at -- like I said, doing a study in that demographic, adding activity to it, which we think if we get positive results there is huge for us.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [8]

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Okay. And maybe you mentioned in your prepared remarks what you expect the time line to be on the Kansas State quality of life and activity dog study. And if you didn't -- if you can talk about that.

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [9]

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Fourth quarter -- first quarter of 2020, fourth quarter of '19, first quarter of -- it depends how quickly they can get dogs enrolled. And at the end of the second quarter, I believe we had 17 dogs enrolled in the study. The goal is to get 40. The summer is usually a little slower. So I think it's realistic to say no later than first quarter, but it's always difficult when you're dealing with large institutions and people who will make their dog part of the study and then for whatever reason drop out.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [10]

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Yes. Okay. On my...

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [11]

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And let me just say some, Brian, sorry. We hope to at some point over the next couple of months have the publication of the Kansas State TPLO surgery study. That is big, and you want to know how many veterinarians or how many people say when is it going to be published. As you know, that lends huge credibility because it's just not your investigators but someone else is now looking at that study and publishing it. So they're putting their seal of approval on it, and we hope to get that in 30, 60, 90 days. So in the fall, we should have that.

And then we start the time to get the Berkeley study published, which again will be powerful because we can give the press release for the Berkeley study and Kansas State we can give the abstract, but people like to see the publication.

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Brian W. Marckx, Zacks Investment Research, Inc. - Director of Research and Senior Medical Technology, Medical Device & Diagnostics Analyst [12]

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Yes. Yes, that's great. That's great to hear. And that kind of leads me into my next question relative to MYOS Canine, which is -- seems to really be growing really nicely. Is it -- can you attribute the growth to specific catalysts? And particularly, do you think that the positive clinical data in dogs has been a catalyst?

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [13]

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Yes. I think the positive clinical data gets people to try it. What I think is -- what's incredible is when they try it, they keep stay on it and they keep purchasing it. And we're doing business with vets, we're doing business with rehab centers. A big part of our business is rehab. I didn't even know before I got into this business that there were rehab centers for dogs and cats and horses. We do a lot of business there because they are seeing results.

So the big part up here is if you look at our testimonials on Amazon and the testimonials on our website, they're pretty powerful, and I think that is growing. And our repeat customer business is -- just continues to expand. So the clinical trials get us in for the vets to focus. I think direct to consumer is the testimonial one gets them to buy, and then the results keep them coming back. So it's all of the above. But I think you need the clinical trial to get into the vet market or the surgery market.

Again, dog surgeries, there's about 1.7 million a year. TPLO makes up, I think, 78% of that roughly. No one knows exactly. But that anywhere could be well over 1 million. So we are now targeting those surgeons and having the publication will only help.

And Brian, any other questions, feel free to give me a shout.

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Operator [14]

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(Operator Instructions) There appears to be no additional requests or questions. I'll turn it back to management for closing remarks. Thank you.

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Joseph Mannello, MYOS RENS Technology Inc. - CEO & Director [15]

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Everyone, thank you again for being on the call. I do enjoy doing these every quarter. I'm incredibly optimistic, I think, this company has been transformed and is really on its way now. And I think you will be seeing over the next 3, 6, 9, 12 months real fruits of the labor and the money we've spent building these brands.

So again, thank you. Have a great day. I hope the market turns around for everyone. Take care.

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Operator [16]

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Thank you. This concludes today's conference. All parties may disconnect. Have a great day.