Biotricity Inc (BTCY) 2023 Q1 法說會逐字稿

Good day, and welcome to the Biotricity's Fiscal First Quarter 2023 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Valter Pinto, Managing Director, KCSA Strategic Communications. Please go ahead.

Good afternoon, everyone. Welcome to BioTricity's Fiscal 2023 First Quarter Financial Results Conference Call.

As a reminder, Biotricity's fiscal first quarter ended on June 30, 2022. Therefore, all figures presented for this period will reflect that end date.

Today, we issued our fiscal 2023 first quarter financial results press release. A copy of this press release is available on the Investor Relations section of our website. Additionally, our financials will be filed with the SEC on Form 10-Q and posted on EDGAR.

Before beginning our formal remarks, I'd like to remind listeners that today's discussion may contain forward-looking statements that reflect management's current views with respect to future events. As such, statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements, except as required.

I'd now like to turn the call over to Biotricity's founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead.

Thank you, Valter, and thank you, everyone, for joining today.

Welcome to our First Fiscal Quarter 2023 earnings Conference Call. During the first quarter, we continued to advance our product development and commercialization strategy in order to position our company as the all-in-one go-to solution for cardiac diagnostics and disease management. (technical difficulty) revenue for fiscal Q1 2023 continued to come from Bioflux, our high-precision single-unit mobile cardiac telemetry device, real-time monitoring and transmission of the patient's ambulatory ECG diagnostics. Revenues earned with respect to the device (technical difficulty) sales and technology fee revenues or technology to service revenue.

During fiscal first quarter, our revenue increased to $2.1 million. I'm pleased that our technology as a service revenue increased to $1.9 million for the quarter year-over-year, which is a testament to our business model. This recurring revenue model provides a technology to the doctor, who can prescribe (technical difficulty) our device within the clinic. This creates a more streamlined process for the patient and doctor, while also creating an additional revenue stream for the doctor as our product is fully reimbursable.

Today, we have hundreds of centers across 29 states with over 2,000 physicians using our Bioflux product. I was also pleased in our ability to maintain gross margin of 60% during the fiscal first quarter. Gross profit margins can be improved over time as we reduce discounts provided to customers. We expect that the cost of devices sold as well as cellular and other costs associated with technology fees will become lower as a percentage of revenues as our business expands.

For moderate-to-severe cases, remote real-time (technical difficulty) live-saving tool. However, it is critical we capture the life cycle of the patient and follow them through their cardiac care journey. Through our internal innovation capabilities, we set out to build a complete ecosystem that fills in the current gaps in cardiac care.

We commercially launched Biotres, our FDA-approved wireless wearable cardiac monitoring device. Biotres is a (technical difficulty) technology that represents (technical difficulty) future of remote patient monitoring and the delivery of real-time diagnostic data. It serves as a 3-lead device designed to continuously record ECG data. This provides a significant advantage over conventional one-lead patch Holter monitor, which requires a longer analysis and diagnosis time.

Biotres is a complementary product to Bioflux. The key differentiator between these 2 products is the patient profile that each is designed to serve. Bioflux is for high-risk patients, which naturally and thankfully results in lower volume of patients. Biotres on the other hand is designed for low-risk patients, of which there are significantly higher volume. Because Biotres is a high-volume product, we will all be able to go deeper within our distribution network and also focus on hospital integrated delivery networks.

These integrated delivery networks or hospital networks, centralized purchasing for the largest hospital systems in the country, and therefore, represent a substantial target market. Where Bioflux is meant for clinics and specialty groups within an estimated TAM of $1 billion going through the hospital's integrated network and other large distribution outlets, as a much larger TAM of approximately $5 billion. Since the introduction (technical difficulty) reception has been overwhelmingly positive. We are currently collecting data from our early adopters and are strategically launching a product in limited release, while establishing our expansion plans.

Earlier in (technical difficulty) we also launched Bioheart, a cardiac monitor now directly available to consumers. This device offers the same continuous heart monitoring technologies by physicians, allowing patients to manage heart conditions with retrospect to snapshots and long-term data collection in true state-of-the-art manner. Bioheart is currently available for purchase by consumers at www.bioheart.com for $199.

We are excited to roll out our ecosystem, for the first time cardiologists will have a suite of products available for their patients, all within 1 portal. We have purposely designed our ecosystem in a way that when we bring on new customers, they have full access to the portal, align hemostatic collection as they adopt new devices for the entire cardiac care journey.

With Bioflux and Biotres in the market today, we have successfully increased our total addressable market from $1 billion to approximately $6 billion.

More importantly, we have designed scalability with minimal marginal cost into our business model as we can now offer additional products and services to current clients for little-to-no increased marketing spend.

During the remainder of 2022, we look forward to introducing Biocare, our virtual clinic and disease management platform, with secure HIPAA-compliant technology enabling clinicians to provide outstanding patient care remotely, ensuring at-risk patients in those needing remote cardiac monitoring, do not have to leave the safety of their home. This user-friendly platform ensures seamless integration to the clinic's current workflow, saving time and reducing costs.

(technical difficulty), it's a large market opportunity, roughly about $35 billion. We have seen other industries such as diabetes to be very successful with this model, but no one has attempted to execute this model in the cardiac space. We are the first.

We are, of course, at the beginning of this journey. Our newly expanded product portfolio, combined with the upcoming Biocare clinic platform will enable us to enter this market in the near future. Cardiac disease often afflicts patients for the rest of their lives and is the leading (technical difficulty) across the globe. The current approach to care is often destroying and unintegrated. Biotricity's technology assists the patient throughout their cardiac care journey, beginning with diagnostics, monitoring and lifestyle management. This comprehensive (technical difficulty) approach could help solve some of the major issues in cardiac care today in an efficient and cost-effective manner.

I will now turn the call over to our CFO, John.

Thank you, Waqaas. During the quarter ended June 30, 2022, the company's revenues totaled $2.1 million. During this period, Biotricity incurred a net loss of $5 million or a net loss per common share of $0.098. For the 3 months ended June 30, 2022, Biotricity's net loss included onetime expenses related to convertible note conversions as well as onetime fair value adjustments under derivative liabilities.

We are pleased that year-over-year, we saw an increase in $425,000 in technology fees this quarter compared to the prior year quarter, which corresponds to a 30% increase in technology fees. Gross profit for the fiscal quarter ended June 30, 2022, totaled $1.2 million, yielding a gross profit margin of 60%. We expect margin to improve as we reduce sales discounts provided to customers in order to generate increased volume sales. As Waqaas mentioned, we expect that the cost of devices sold as well as cellular and other costs associated with technology fees to become lower as a percentage of revenues as business sales volumes expand, in other words, economies of scale.

Total operating expenses for the fiscal quarter ended June 30, 2022, were $5.7 million compared to $4.2 million for the fiscal quarter ended June 30, 2021.

Our general and administrative expenses for the fiscal quarter ended June 30, 2022, increased to $4.9 million compared to G&A of $3.6 million during the fiscal quarter ended June 30, 2021. The increase in G&A expenses was a result of investment made by the company in building its professional sales force. That has been a focus.

During the fiscal quarter ended June 30, 2022, we recorded research and development expenses of $821,000 compared to $589,000 incurred in the fiscal quarter ended June 30, 2021. The increase in R&D activity is directly related to the development of new technologies for our ecosystem as well as the development of continuous product enhancements to our existing products. You can see these developments as we announced various clearances from the FDA that will allow us to commercialize these products.

Biotricity ended the fiscal quarter with $7.2 million in cash. We remain focused and confident in our fundamental business strategy to innovate, commercialize, capture share of a fast expanding marketplace and grow revenues. While revenue growth has been strong, we believe that the business has great potential for growth. We expect to continue disrupting the cardiac care marketplace for devices and BioSphere cloud-based subscription services.

I would now like to turn the call back over to Waqaas for his closing comments. Thank you.

Thanks, John, and thank you again for everyone who has joined our call today. We're more confident than ever that our technology pipeline will produce major growth over the years as we build our cardiac ecosystem to further penetrate and monetize the patient population that we have already touched with our cardiac (technical difficulty), a small portion of the cardiac patients that need these most.

For our most advanced remote cardiac monitoring solutions, we expect our services will follow those customers throughout their lifetime to monitor and protect them and make sure they are provided with technologically sophisticated and superior chronic care. Doing so within a recurring revenue business model is a powerful means to scale the business, (technical difficulty) both revenues and gross margin.

We are excited for what fiscal year 2023 and 2024 have in store for our company and our shareholders.

I would now like to open up the call for questions.

(Operator Instructions) We will take our first question from the line of Frank Takkinen of Lake Street Capital Markets.

I wanted to start with the 29 states and over 2,000 physicians using the product that seems like it picked up a little bit since last quarter. A nice work. Wanted to understand the utilization opportunity. When I say that I'm kind of talking about depth into the accounts, it sounds like you have a lot of breadth right now, and I assume there's a really solid utilization opportunities for both Bioflux as well as new products. I was hopeful you could provide any commentary or metrics around that to give us a little better color.

It's good question, Frank. So what I will do is I will speak to it in terms of an opportunity. So of course, we're expanding the network and the Bioflux cardiac telemetry is -- and as I indicated in the call, higher risk patients, a smaller percentage to give them in these clinics and in the network. So if you're talking about a typical doctor who's got about 2,000 patients, how many of them are high risk on a monthly basis, it's going to be 1% to 2%, it is a small percentage. But as we build our product portfolio, that product portfolio is complementary and designed to touch the (technical difficulty) profiles within that clinic.

And so that's where we get that depth and that increase in utilization. And to your point and how is that utilization and what does that opportunity look like? So when we look at the Biotres product, and we were talking about early adopters, who are those early adopters. They are existing customers who have lower risk patients and we are now offering them Biotres. And the same thing is going to happen as we build out our chronic disease management and chronic solutions.

Now in terms of me giving you numbers and ideas on utilization rates. It's early days right now. Probably you'll hear us talk to that in 1 or 2 quarters. As I mentioned in my earlier remarks, Biotres we just launched. It's so we're collecting data. We have it with early adopters. What are those utilization rates going to look like across the network? How much better usability and penetration do we get in terms of patient profiles within existing customers? I think within a quarter or two we will be able to really nail it down. What I can say is the premise of the product development approach was to go deeper and to increase utilization by creating complementary product portfolios, Biotres was the first of that.

And what I can say is based on our early data, that is holding true, as well as the interest from existing customers. So we had a strategy. We tested that strategy through our surveys and through contacting customers. Then we implemented a product. We launched our product. We're now bringing in some revenue from that project. But all of it has lined up with our initial assessment. So I think that that's a positive (technical difficulty) about that coming down over the next couple of quarters.

Okay. That's great color. And then I wanted to ask the next one on the commentary around IDN. It sounds like it's a great opportunity, too. So maybe just dive a little bit deeper into that opportunity and how you're thinking about these contracting conversations as you're looking out over the next year or two.

Yes, absolutely. So IDNs as -- for those who are not familiar, are hospital purchasing groups, right, where they are purchasing across multiple network systems. Of course, the sales cycles on these things are much longer and they do take a long time. But when you go into a higher volume product and when you go into something like a Biotres or Holter solution, when you -- and just anecdotally, I'm going to go a little bit technical in the world of cardiac. So when you talk about Holter monitoring within a hospital system, it's not just the cardiologists and electrophysiologists that utilize that product. In fact, the bigger users are the internists, right, the GPs and the family medicine docs.

And so what ends up happening is that volume in a hospital system generally is not actually coming from the cardiac specialty group, it's actually coming from the family medicine and the GP and the internists. Now they have a much less patient population in terms of demand, but there's just so many them. And so when you go to the hospital system opportunity, this is why you really need a Holter-specific solution for that network.

And with the Biotres has (16:07) (technical difficulty) and so that's why we are now really looking at that. The Biotres product is truly a product that is designed for the IDN and the hospital system network just because of the way the physician is set up there. And the contracting process is very long for sure, but our products are unique in terms of what is out there in the Holter market today, and we are able to provide results much faster.

And another thing that we have done is we've used a standardized disposable elements that the hospital is already purchasing. So it's not like they have to purchase our device plus (inaudible) consumable. The consumable electrodes that they're already purchasing gets utilized. So I think all of those actually reduce the barriers. Of course, the IDN strategy is a longer-term strategy. We had actually hired a couple of people that are just focused on building that channel out for their sole job every single day.

Biotricity is to build out that IDN strategy, and that has been a big shift for us. And we expect to see fruits from that longer down the line, but with our existing network, we can provide the data and the evidence to show the importance and, of course, show the efficacy of our product, because that's another thing, IDNs want to see, what is your footprint today? How do you (technical difficulty)?

So I think all of that works in tandem together to really put us in a very strong position. But I will be -- and as anybody in the healthcare knows, the IDN strategy is a longer-term play. So we will continue to focus on building out our existing network with our sales force, and this is an add-on strategy that's going to be worked on in parallel.

Okay. And then maybe just last one. Gross margin looked really solid again for the quarter. Maybe provide any additional commentary on how new products are going to impact that gross margin profile on a go-forward basis?

Yes. So -- and I think you'll see that there's always a little bit of -- whenever bringing in a new product, there's a little bit of that upfront hardware cost, let's call it, hardware like. But as we get to steady state on these products, and as we get economies of scale, they work in favor that up a little bit more our revenue is going to shift more into the software as a service and technology as a service place.

So I expect our margins to really be where they are and improve a little bit, but I expect them to really settle around steady state around the 60 to mid-60% range, depending on what mix of products we (technical difficulty) terms of percentages, right? So if you have 25% Bioflux, 25% Biotres, do the disease management. So what does that mix look like? And that will indicate what our steady-state margins are. But I think they are going to really stay around here, because I know we saw some fluctuation before. But now what has certainly happened is that we are becoming more and more (technical difficulty) service and software as a service.

(Operator Instructions) We'll take our next question from the line of Kevin Dede with H.C. Wainwright.

If I may, can I just expand on where I think Frank was going? Is there -- I mean, I understand, obviously, 29 states, 2,000 physicians. But is there any other quantitative measure you can offer in suggesting the success that you've had in selling through to physicians?

So I guess, what are you exactly trying to ask. I'm unsure. I'm sure I can speak to like what is our percentage in shelf control within those physicians. So once we deploy, like, let's say, they're doing mobile cardiac telemetry, we have basically, I would say, in most cases, in most physician cases, we have 100% of their mobile cardiac telemetry business, right? Now with the Holter solution, Bioflux could be used as a Holter product, but many of these doctors are still using their commodity Holter devices, because those devices are not capable as mobile cardiac telemetry; however, they had already invested in it or they were using some other Holter provider just because they weren't really generating a lot of revenue off the Holter as it was.

And so the Biotres really provides the same type of model where it actually becomes a profit center. So my expectation is that we will have control of that shelf with customers. So if you're asking about what is the success rate of mobile cardiac telemetry in a doctor. So if you have 2,000 physicians, who else (technical difficulty) you on that shelf. I would say 85-plus percent of those doctors. If we -- in their clinic, we control that shelf right now. It takes time, right?

So one of our customers, it took us 6 months to convert them just because there was a very big group. And we launched with them, it was like 10-15 [days]. But over 6 months, we controlled the shelf. So now any mobile cardiac telemetry they do, they do with us. Now they were still doing Holter, but were not using the Bioflux for Holter monitoring, because it just the economics didn't work for them on that device. And so now with the Biotres, they're piloting the Biotres and they are moving to taking on that shelf. So I can speak to that.

If you're asking me about -- so it just depends on what lens you're looking at, like how much of those patients do we -- can we conceivably touch? Well, that all depends on which product and what does that mix look like and how we make that product available across the board, right? So I can speak very, very openly and candidly about Bioflux, because we've been in the market and we have enough data. And that's why I can say, listen, 85-plus percent customers, we have 100% control of the mobile cardiac telemetry shelf there, right?

Will that stand true for Biotres? I suspect it will, but it's early days.

Waqaas, I think I lost you.

No, I'm here.

Okay. Sorry about that. Okay. Okay. Maybe we could slice it a different way. I'm sure you don't want to speak to the specifics here, but could you talk to how you framed out your sales team's quotas and how they're measured, at least from a 20,000-foot perspective.

From a 20,000-foot perspective, my -- we have a baseline rep analysis that we have internal, and we cannot share that, obviously. And we benchmark reps against that, and we have an expectation that at plan, they earn a certain amount of -- certain salary. And if they are at that they're opening up a certain amount of clinics and there's a certain revenue target that they have to meet. If they don't meet their revenue target, their commissions are obviously not that pleasant. But if they meet those targets, their commissions are good. And if they exceed those, they're very good.

Okay. Could we expect at some point, Waqaas, that you might speak to the number of physician doors that you open? I mean in terms of more specific terms, yes, on it say, maybe not monthly, but certainly in the quarter?

So as we get bigger, I think we will certainly disclose that information. The problem with us today is, I think that, that is just competitive intel that, why give that out in terms of how many doctors I'm knocking on or what is my comp plan look like, my rep, because somebody can go in and offer a better comp plan...

No, I wouldn't do that. No, I just wanted just -- I guess, just some color on how they're right -- how they're targeted, how you're weaponizing them?

How I'm weaponizing my reps?

Yes. That's extremely helpful. Can you talk to -- now I know it's still early days, with its recent introduction, but can you talk to the synergistic effect that you might be seeing at least so far with Biotres and Bioflux offered in the combination?

Yes, for sure. So what I can say -- (technical difficulty) clinic that I was telling you about for 6 months that we transferred. It's a great example, right? So we went to them and we said, well, Bioflux is Holter capable, right? Why won't you use the Bioflux, right? And they said, look, (technical difficulty) thing, right? The Holter reimbursement for us, I think, is like $100 from where they are, right? And they said -- so -- we have to invest in your device, right? Then we have a technology fee.

And realistically, with the flow of the patient, how long it takes for the patient to go and come back and go back and whatnot. Basically, they can do 2 Holts on a monthly basis. And so the economics on that side, and this is very specific to this clinic just because of where they're located, how far patients are, et cetera, what not. It's a good example. And so they were using different versions of (technical difficulty) they were certainly using Bioflux in certain cases for Holter, but they were also using some legacy devices that they had already bought and purchased and then they were also using a third-party service provider, right, like a Zayo or (inaudible) or one of these guys in the marketplace.

When we introduced the Biotres, suddenly, they're like, "Oh, well, this is a much cheaper device from a purchasing standpoint". And so they're able to turn -- they're able to justify their turn better. So economically, you start meeting a lot more sense. And so then they ended up making one of -- I think they were the first or second customers that came in. And so that became a very complementary approach for them, right, where they have got a Bioflux, they're already using the portal, clinic is already familiar with our ecosystem, the Biotres all the same systems, same environment. But now that (technical difficulty) and that economic play in terms of location, device cost plus reimbursement that they're receiving, all of that started lining up just like the Bioflux did it with the [MCP].

So that's an early day example of something that complementary customer that gave us all of their business on mobile cardiac telemetry was even using Bioflux in some cases for Holter, but that last mile without having a Holter specific product was not possible and now it is. And of course, all examples won't be like that.

As there are no further questions at this time, we'll turn the conference back over for any additional or closing remarks.

Thanks, everybody, for joining the call. If you -- as I -- as you all [aware], John and I are always available for questions. If you have any questions that we did not address or did not come up on in this call, please feel free to reach out to the company. We will get back to you and happy to set up a call. Thank you.

Thank you. That does conclude today's conference. We thank you for your participation. You may now disconnect.