Q3 2023 Neuroone Medical Technologies Corp Earnings Call
Participants
Dave Rosa; President & CEO; NeuroOne Medical Technologies Corporation
Ron McClurg; CFO; NeuroOne Medical Technologies Corporation
Presentation
Operator
Good day, ladies and gentlemen. Thank you for standing by and welcome to the NeuroOne Medical Technologies Corporation third-quarter fiscal year 2023 financial results conference call. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa, and the Chief Financial Officer, Ron McClurg.
Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of US federal security laws with respect to future operations, financial results, events, trends, and performance, which are based on management's beliefs and assumptions of today's call or other specified date. Forward-looking statements may involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed in our implied or implied by such statements. See NeuroOne's corporate update press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, we undertake no obligation to update such forward-looking statements.
With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.
Dave Rosa
Thanks, operator. During our fiscal third quarter and through today, the company continued to make significant progress across a number of commercial, development, and financing objectives. Let's first cover progress with the company's Evo sEEG electrode limited launch.
I'm pleased that we have completed the number of cases we were targeting for a limited launch and have begun training the remaining Zimmer Biomet field sales personnel in an effort to expand the launch. Those efforts began in August. All the centers that participated in the limited launch, with the exception of one, placed the Evo sEEG electrode with Zimmer Biomet's ROSA One Brain, a robotic platform that assists surgeons in planning and performing complex, yet minimally invasive, neurosurgical procedures. We solicited feedback on the performance of the system from physicians and staff during and after these cases, and we're pleased with the feedback received. We have also received our first order for calendar year 2024 product supply from Zimmer Biomet.
With regards to our OneRF ablation system, we submitted a 510(k) application to FDA on June 8. The FDA recently responded to the application with questions regarding some of the labeling, as well as requests for additional information on some of the testing we performed. We expect to discuss the request with the FDA at the end of this week in an effort to address them efficiently. At this time, we remain confident in our projections on commercialization of the system in the first half of 2024.
Last quarter that we mentioned that we held discussions with two strategic organizations regarding their interest in licensing the technology, and we expect to continue those conversations during our fiscal fourth quarter. At this time, we are also evaluating commercializing the device directly. In our next fiscal quarter, we expect to place initial orders for the system components in order to prepare for future commercialization.
The company also continued to make progress in the development of our spinal cord stimulation program to treat chronic back pain. We successfully completed a 28-day animal implant utilizing a novel flexible thin film material without experiencing any adverse events or neurological complications. We also filed a non-provisional patent for a novel conformable thin film paddle that could be placed percutaneously on the spinal cord. In the fourth fiscal quarter, we have scheduled a study for the percutaneous placement of the paddle design in a spinal cord cadaver model by members of our advisory board.
During our last quarterly call, I also discussed the potential for our electro technology to offer the ability to deliver genes or drugs to the brain, as well as record the agent's impact to the patient. As planned, we successfully completed feasibility testing in a small animal model at the Mayo Clinic in Rochester, Minnesota. We've received enthusiastic feedback from neurologists and neurosurgeons on the clinical applications, as well as potential for use in pharmacologic trials. We are currently in discussions with a biotech company regarding their interest in using our device in research studies and product development efforts, and expect to expand our efforts to discuss the technology with other potential partners.
On the financial side, the company made progress with respect to revenue gains and improving our cash position. Moving forward, we also expect to see a reduction in operating cash burn from the current fiscal year as the cost for the development of our OneRF ablation system decrease. In addition, we increased product revenue based on our sales to Zimmer Biomet for the Evo product lines, and we improved our balance sheet through the use of an ATM facility and the recent capital raise, which Ron will take you through.
Thank you for your time and attention. I would now like to turn it over to Ron for a more in-depth review of our fiscal second quarter financial results. Ron?
Operator
Mr. McClurg, this is the conference operator. Is your line unmuted?
Ron McClurg
I apologize. I was muted. Thank you, Dave. Product revenue was $630,000 in the fiscal third quarter of 2023, compared to product revenue of $32,000 in the fiscal third quarter of 2022. For the first nine months of fiscal '23, product revenue was $1.2 million, compared to $102,000 for the same period in fiscal '22.
Collaboration revenue was $1.46 million in the first nine months of fiscal '23, compared to collaboration revenue of $6,000 in the first nine months of fiscal 2022. Collaboration revenue was derived from the Zimmer Development Agreement and represents the portion of the exclusivity and milestone fee payments that are eligible for revenue recognition during the respective periods.
Total operating expenses in the fiscal third quarter of '23 were $3.8 million, compared with $2.8 million in the same period of the prior fiscal year. Research and development expenses in the fiscal third quarter of '23 were $1.9 million, compared to $1.2 million in the same period of fiscal '22. Selling general and administrative expenses in the fiscal third quarter of '23 were $1.9 million compared with $1.5 million in the prior year period. For the first nine months of fiscal '23, our total operating expenses were $10.5 million, compared with $8.6 million in the same period of the prior fiscal year.
R&D expense in the first nine months of fiscal '23 was $5.2 million, compared with $3.5 million in the same period of fiscal '22. SG&A expense in the first nine months of fiscal '23 was $5.3 million, compared with $5.1 million in the prior-year period.
Our net loss was $3.5 million for the fiscal third quarter of '23, compared to a net loss of $2.8 million in the prior year period. Net loss for the first nine months of fiscal 2023 was $8.7 million, compared with $8.6 million in the same period of fiscal '22.
As of June 30, 2023, the company had cash and cash equivalents of $3.1 million, compared to $8.1 million in cash and cash equivalents and $3.0 million in short-term investments as of our last fiscal year end, September 30, 2022. The company had working capital of $3.1 million as of June 30, 2023, compared to working capital of $9.1 million as of September 30, 2022.
On July 27, 2023, the company consummated an underwritten public offering of its common stock from which the company received $5.2 million in net proceeds. In addition, since January of 2023, the company sold common stock under the ATM program from which the company received net proceeds of $2.5 million. Companies had no debt outstanding as of June 30, 2023.
With that, I will turn it back to Dave.
Dave Rosa
Thanks, Ron. Operator, at this time, I think we can open for questions.
Question and Answer Session
Operator
(Operator Instructions) Alex Nowak, Craig-Hallum.
Hey, good afternoon, everyone. This is Connor on for Alex. Hey, my first one here is, can you speak to the training that Zimmer has done in the field for the depth electrode alongside the ROSA robot? And feeding off that, how many centers will they be rolled out by year end?
Dave Rosa
Yeah, so the training that's been done to date, we've trained over half their sales force on our device. Obviously, they were already trained on the ROSA robot. The question of how many centers by the end of the year, we can't put a hard answer to that. I think the longest part of the process in getting these centers up and running is getting the committees to approve the use of the device in the hospital. So, it really is going to depend on that.
But Zimmer is actually going through a very targeted launch. The initial cases that we did in the limited launch were done at five sites. And then once we felt we hit the minimum number of cases for that part of the process, we then this month started to open it up beyond that. So, it's really going to depend on how quickly they're able to get the other centers through the product approval committees.
Got it. Awesome. Okay. How is Zimmer thinking about adding the ablation electrode to their portfolio? Is that something that makes sense from your end or are there other partners that might make more sense?
Dave Rosa
The RF ablation project that we have was not included as part of the contract discussions with Zimmer or the agreement that we signed. In terms of does it make sense, this device would really be used after the procedure that Zimmer is currently selling into. So, there's a lot of synergy between the two systems.
And we've said before that we've had discussions with Zimmer about this. And even in our press release, we talked about two strategics that we've had discussions with. So, you could probably figure out who one of them is regarding that. So, we'll continue those discussions.
And if it makes sense from a financial standpoint as well as a strategic standpoint, then we would move forward. But I think Zimmer is very interested in that technology because it really does, it's really a follow-up to the procedure that they're already selling in.
Perfect. And looking at next year with the launch of Evo, how much revenue could this business start to generate? And then adding on top the ablation, what can we expect to see from that or how can we think about that?
Dave Rosa
Yeah, we haven't pre-announced on what we expect for the Evo sales for 2024. As I mentioned, we did get an order from Zimmer for calendar year 2024 already. We still haven't finished off the orders that we have for 2023. But I think from both of our perspectives, Zimmer wants to see how many sites they'll have signed up by the end of the year before we really get a good feel for what those numbers would look like. And so, probably around the November time frame, we'll reevaluate where things are and that should give us a better idea as to what to expect next year.
In terms of ablation, we haven't given any guidance on that either. And I think the first step, obviously, is to get the device cleared through FDA. And we're obviously probably going to be dealing with a launch time that starts somewhere during the course somewhere during the course of next year as opposed to January 1. So we'll obviously have to come back and determine what impact that could have.
Got it. And then just feeding back to that FDA submission, you mentioned that there were questions on labeling and request for additional information there. Can you just expand on that at all? Or is that something you can dive into?
Dave Rosa
Yeah, I can't go into specifics. We're still in the middle of discussing this with FDA. But I can tell you that we were pleased with what we got back from FDA. We feel that what they've sent us is addressable. In fact, we had fewer questions than we had in the submissions on the other two devices, the Evo Cortical and Evo sEEG by itself. And the good news is we didn't have any other discussions on or questions on biocompatibility, which came up really in our last discussions with FDA on sEEG. So we feel good about the request that the FDA has come back with. And as I mentioned, we'll be having conversations with them at the end of this week to get more clarity.
Awesome. Well, that's all I have, guys. Thanks for taking my questions, and good luck on the Evo launch.
Dave Rosa
Thank you.
Operator
(Operator Instructions) It appears that we have no further of the questions at this time. I'll now turn the program over for any additional or closing remarks.
Dave Rosa
Thanks, operator. Everyone, I just want to thank you for joining us on the call. Apologies for a little technical issue there, but appreciate the time that you spent listening to the progress that we've made. Have a good rest of the day, and we'll definitely be updating the market on how things go with discussions on FDA as well as the launch of the Evo sEEG electrode. Have a good evening.
Operator
This concludes today's conference. Thank you for your participation, and you may now disconnect.
