Q4 2023 Neuroone Medical Technologies Corp Earnings Call

Presentation

Operator

Yes, ladies and gentlemen, thank you for standing by, and welcome to the NeuroOne Medical Technologies Corporation fiscal fourth-quarter and full fiscal-year 2023 financial results conference call. Today's call will be conducted by the Company's Chief Executive Officer, Dave Rosa; and 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 the federal US federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management's belief and assumptions as of today's call or other specified dates. Forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements. Femara ones, 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 statement.
With that said, I'll turn the call over to Dave Rosa, CEO of NeuroOne Medical Technologies.

Thanks, operator. And before I start, I'm just a heads up for everyone that I'm trying to get over a cost. And I apologize in advance if some if I start to cough, it becomes a nuisance. I'll just have Ron finish the call. So first and foremost, thanks for joining us this evening. During our fiscal fourth quarter and through today, the Company continued to make significant strides in our objectives relating to commercial progress, product development and regulatory clearances. I would first like to discuss what I believe is the Company's most significant accomplishment in our history, and that is FDA clearance of our one RF ablation system, which is the first FDA-cleared system that has obtained an indication for both recording electrical activity and ablation of nervous tissue utilizing the same device.
I mentioned last quarter that we had submitted a five 10 K application to the FDA. This past June, the FDA responded to the submission with questions that we responded to last month. We were confident in our responses to FDA and this past Monday, we announced that the FDA provided a five 10 K clearance for the system for the creation of radiofrequency lesions and nervous tissue for functional neurosurgical procedures. We anticipate the commercial launch in the first half of 2024. Currently, we are waiting for hardware components for the RF generators. Once they are available, we will release the product for commercialization We remain in discussions with two strategic organizations regarding their interest in licensing the technology for these procedures and expect to reach a decision in the near future and also remain open to commercializing the device directly, if excuse me, if we believe it presents the best option for the Company. In addition, the Company is exploring other applications for the system to treat pain. We believe there are additional market opportunities. We may be able to take advantage of with the system, and we'll provide further updates regarding this in the future.
We are extremely excited with this major accomplishment and continue to demonstrate the company's ability to execute on our strategic plan. We believe that the addition of the system to our profit product offering positions us well to compete not only for the ablation business, but also for the SEG. electrode sales opportunity.
I'd now like to provide an update regarding the expanded launch of our Evo SEG. electrodes electrode product line with our commercialization partner, Zimmer Biomet. In our fourth fiscal quarter, Zimmer continued to strategically open new centers. Feedback remains consistently positive.
Regarding the device performance and we are seeing increasing usage in recent months. We expect to see continued ramp in device sales and revenue as the launch expands further and believe that the clearance of our one RF ablation system will also have an additional potential positive impact on the EVOSEG. sales.
Moving on to our drug delivery program, you might recall that I discussed the potential for SEG. electrode technology to offer the ability to deliver genes or drugs to the brain as well as record the therapy's impact during the past quarter, we defined the product requirements for use in both clinical and research developed prototypes for future studies and were granted a patent by the United States Patent and Trademark Office. We are currently in contract discussions with a biotech company regarding their interest in using our device and their upcoming clinical studies and have discussions scheduled with other potential partners as well. We are excited with the prospects of this technology and how it may assist the biopharma biotech industry in their drug or gene therapy delivery development, but also its value clinically and current neurosurgical procedures. If we are able to reach an agreement with our existing contract negotiations, excuse me, that technology has the potential to add revenue later in calendar year 2024.
Regarding our development efforts with our spinal cord stimulation program to treat chronic back pain, members of our Physician Advisory Board successfully placed a nine millimeter paddle electrode paddle electrodes are very similar in concept to cortical or film electrodes, but they were able to place nine millimeter paddle electrodes utilizing a percutaneous placement approach and a cadaver model. In addition, we completed a histological analysis of a 28 day implanted paddle electrodes. Without any notable concerns excuse me, spinal cord stimulation and pain management remain a priority for the company given the market opportunity and potential competitive advantages of our technology.
Thank you for your time. And now I'd like to turn it over to Ron for a more in-depth review of our fiscal fourth quarter and full fiscal year 2023 financial results, highlighting highlighting revenue gains, past financing and other key financial metrics. Ron?

Thank you, Dave. Product revenue was $742,000 in the fourth quarter of fiscal 2023 and $1,952,000 for the full fiscal year compared to a product revenue of about $69,000 in the fourth quarter of fiscal '22 and $171,000 for the full fiscal year 2022. The company had no collaboration revenue in the fourth quarter of fiscal '23 and $1.45 million for the full fiscal year 2023 compared to collaboration revenue last year of $1.9 million in the fourth quarter and just slightly below $1.950 million for the full year of fiscal 2022. Collaboration revenue was derived from the Zimmer development agreement and represents the portion of the exclusivity and milestone fee payments we're eligible for revenue recognition during the respective periods.
Our total operating expenses in the fourth quarter of fiscal '23 were $3.4 million compared with $3.3 million in the same period of the prior year. R&D expenses in the fourth quarter of fiscal 2023 were $1.8 million compared to $1.4 million in the same period of the prior year. SG&A expenses in the fourth quarter of fiscal '23 were $1.6 million compared with $1.9 million in the prior year period. Total operating expenses for the full fiscal year of 2023 were $13.9 million compared with $11.9 million in the prior fiscal year.
R&D expenses for the full fiscal year of 2023 was $6.9 million compared with $4.9 million in fiscal 2022. SG&A expenses for the full fiscal year of 2023 were $6.9 million compared with $7 million in the prior fiscal year. Our net loss was $3.1 million for the fourth quarter of fiscal 2023 compared to a net loss of $1.4 million in the prior-year period. For the full year, net loss was $11.9 million for fiscal '23 compared to a net loss of $10 million in fiscal 2022.
On July 27, 2023, the company consummated an underwritten public offering of its common stock for $6 million in gross proceeds from which the Company received $5.2 million in net proceeds. In addition, the company sold common stock under the ATM program at an average price of $1.77 per share, from which the company received net proceeds of $2.5 million as of September 30, 2023. At the end of our fiscal year, the company had cash, cash equivalents, and short-term investments of $5.3 million compared to $11.1 million as of September 30, 2022. We had working capital of $5.5 million at September 30, 2023, compared to working capital of $9.1 million as of September 30, 2022, company had no outstanding debt as of September 30, 2023 or 2022.
With that, I will turn it back to Dave.

Thanks, Ron. Operator, at this time, I think we can open up the call for questions.

Question and Answer Session

Operator

(Operator Instructions) Ben Haynor, Alliance Global Partners.

Good afternoon, gentlemen. Thanks for taking my questions and congrats on the FDA clearance of First off for me. Just regarding the commercialization with it's you guys are through a partner. I was just curious on how you have kind of scoped out what sort of sales force and activities that might be needed if you do choose to go it alone.

Sure. I'll take that and thanks for the question, Ben. Good to hear from you on what we see now is that when you look at the number of centers that are really doing the bulk of these procedures. It's about 50 centers on the upper end. And when you look at what's reasonable in terms of a sales rep or distributor and in terms of how many accounts they can handle, probably five and if you're pushing that six. So this isn't a situation like many technologies where you have thousands of hospitals that are licensed to do the procedure in the U.S., it's only about 100 to roughly about 190, and it's kind of the old 80 20 rule, 80% of the procedures are being done at 20% of the centers. So we think with a combination of distributors and we've already had distributors express interest on working with us to distribute this product and a handful of direct people that we could effectively call on those top 50 centers. And what we're going to do then as well is we would obviously focus on the centers that are already using the product that have already converted to the product and start there because those are kind of the low hanging fruit there already believers and Tom, adding the ablation procedure would really be a no-brainer.
Okay.

That makes sense. And I imagine it will be to a huge number of people but a half a dozen sounds a fairly reasonable. And then I'm just curious on any feedback that you received from folks who clinicians and such, Al now that you are following the FDA clearance?

Yes, the feedback is one, can we get a system, which is which is a nice problem to have. So there's been really for the last since since we submitted to FDA for building enthusiasm from the field. And what's been happening is in the cases that we've been supporting them with our Zimmer Partners and physicians will bring up the fact that they're very interested in using the device for ablations and when will the device be available and what's the rollout plan and things like that. So and now that it's gotten cleared. I mean, literally the on Monday, the day we put out the announcement, I had e-mails from physicians from our advisory board neurosurgeons, who were who were already wondering when they were going to be able to get the system. So and so it's exciting for me because this this obviously has been in the works for a while, and I kind of see the interest in the momentum build from Keno. I I'm I'm pretty excited to get this product out into the field. I think it's going to do very well.

Okay. That's helpful. And so what have you been telling them on when they can get that system?

First half for the March to April, May February ended the problem is whenever you make a whenever you throw a date out to physicians, well, really to anybody, then that becomes the expectation. And when that doesn't happen, there's a lot of people disappointed. So what we told physicians is that we're waiting for parts to come in as for the generators. Those parts from a schedule perspective are due in March, but these are parts that had about a 10 to 12-month lead time. So we would have these quite a while ago, and we're completely dependent on the vendor to get those parts in. And as we all know now, the reliability of some vendors is not just during COVID, but after it has been challenging.
Now the good news is this company has been pretty consistent on when they feel they can deliver. But until until our vendor that's making the boxes for us has those parts in hand, we're going to continue to say in the first half of the year. We're confident confident doing that. But if we can expedite those time lines by three months, four months when those units first become available, the product will be available for commercialization. We will not delay. So I'm hopeful we get them in when when they say. But we've we've certainly all been burned before on commitments from vendors when parts are coming in and that is 100%. So the devices that we're actually manufacturing ourselves, the assemblies, the electrodes, we have full confidence and you know that we can launch this product in in January, February, but it's just the generator parts, a few of them that we're waiting on.
Okay.

That's understandable and Fair enough. And then lastly, for me just on drug delivery, what are the clinical trials that the firm that you're in contact with now I would presume their earlier stage trials. I mean, is that accurate and then with the folks that you're scheduled to talk to or are talking to at some point, what's kind of the right way to think about what sort of stage these trials might be at?

Yes.
So it would be very difficult for a company that has done a Phase one Phase two, but without our device to then kind of incorporate that in that would be, in my mind, a significant change to their protocol. So it would be very, very unlikely that any of those companies would want to change their protocol because it brings added risk to the FDA have had this happen personally in other companies where if something goes wrong, then the FDA, the question is, is it your product or is it this new technology that you introduced. And so these would all be Phase one studies that we're talking about, but they haven't started yet. The protocols are being developed, but the studies with the company that we're talking to are expected to start late Q3, early Q4, Tom and the areas that they're looking to evaluate with our technology. And this has been really consistent with other companies that we're speaking to now, it's been for epilepsy, which is kind of a slam dunk, given that that's where our procedures are being done today. Parkinson's is another one. And then one that was a little bit surprising to me was some ALS or Lou Gehrig's disease. So that one, we still need to learn a little bit more about how they would want to use our device. And it may be the cortical or the strip electrodes versus the SEG. for that type of procedure.

Okay.
That's helpful. That's all I had, gentlemen, thanks for taking the questions.
Thanks a lot.

Sure.

Operator

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing.

Yes. Thanks, operator. I just wanted to close with that. We really believe the Company has made extraordinary progress towards the goals that we actually set for fiscal 2023. And just to remind everyone of just a handful of these, we received FDA clearance actually on our SEG. electrode during fiscal 2023. We commercially launched that line in May with Zimmer Biomet, our distribution partner, we submitted for FDA clearance on our one RF ablation system. Obviously, subsequently received FDA clearance for that product as well. In addition, we did raise capital with existing and for me, even more importantly, new institutional investors without including warrants, we launched the drug delivery program and continued to make progress regarding our implantable electrode intended to treat back pain. I also believe the company has the potential to add revenue in 2024 beyond SEG. sales with contributions coming from our ablation system and potentially our drug delivery partnership or partnerships.
In closing, I hope you all continue to follow our exciting progress. Thank you and have a good evening.

Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.