electroCore, Inc. (ECOR) 2023 Q1 法說會逐字稿

Greetings, and welcome to the electroCore First Quarter 2023 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Nicole Jones, Investor Relations. Please go ahead.

Thank you all for participating in today's electroCore earnings call. Joining me today are Dan Goldberger, Chief Executive Officer; and Brian Posner, Chief Financial Officer. Earlier today, electroCore released results for the first quarter ended March 31, 2023. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, any guidance, outlook or future financial expectations or operational activities and performance are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. electroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, May 3, 2023.

With that, I'll turn the call over to Dan.

Thank you, Nicole. Hello, everybody, and thank you for joining us on today's call. We are thrilled to report another record revenue quarter with sales of $2.8 million for the period ended March 31, 2023, a 46% increase over the prior year. Gross margins expanded nicely to 84% for the first quarter of 2023. Our prescription headache business continues to grow worldwide. We launched 2 new non-prescription product lines in late 2022; Truvaga as a direct-to-consumer wellness brand; and TAC-STIM for human performance for our active duty military personnel. Both new products exceeded our expectations in the first quarter and are driving excitement about the future.

Truvaga is currently available exclusively through our e-commerce platform at Truvaga.com. We are positioning Truvaga as a direct-to-consumer wellness product for stress, mental acuity and sleep. No prescription is required for this category. Truvaga recorded net sales of $147,000 in the first quarter of 2023. Based on this initial success, we are accelerating our marketing investments and raising our internal expectations for the product line. So far this year, our revenue return on advertising spend, what the industry calls a Media Efficiency Ratio, or MER, has been greater than 2.0. We're carefully monitoring return rates as well, which have been below 10% so far this year. We believe that the Truvaga business can scale nicely if we can maintain or improve these metrics as we move through the year.

TAC-STIM for human performance is being sold to select Air Force and Army Special Forces units for accelerated training, sustained attention, reduce fatigue and improves mood without a prescription as defined by the Air Force Research Laboratory, or AFRL. We recorded $88,000 of TAC-STIM revenue in the first quarter of 2023, and I'm encouraged by the growing sales funnel for this product. In parallel, we're developing a second-generation product known internally as TAC-STIM 2.0 in collaboration with AFRL, and I expect to deliver prototypes to Wright-Patterson Air Force Base for evaluation later this summer. Note that revenue growth for this product line is likely to be lumpy as active duty units purchase in bulk for pilot deployment.

Turning now to our prescription headache business, the VA/DoD hospital channel continues to be our largest customer. You'll recall that our gammaCore prescription therapy is free to patients covered by Veterans Administrations benefits, representing about 10 million covered lives. Sales in the VA/DoD channel grew 38% from $1,240,000 in Q1 2022 to $1,705,000 in the first quarter of 2023. 124 VA and DoD military treatment facilities have purchased prescription gammaCore products through March 31, 2023, as compared to 105 through March 31, 2022.

U.S. commercial sales of prescription gammaCore products grew 56% from $276,000 in Q1 2022 to $430,000 in the first quarter of 2023. While gammaCore is covered by certain Express Scripts and CVS Caremark benefit plans, most of our growth is coming from cash pay channels, including gCDirect and gConcierge. These channels have grown from 410 prescribers at the end of the first quarter of '22 to 1,834 at the end of the first quarter of 2023. We added 506 new prescribers during the first quarter of 2023, and our prescriber numbers continue to show strong growth through April 2023. We believe the increase in prescribers could be a leading indicator of future growth.

Last year, we announced a distribution agreement with Joerns Healthcare, LLC that we believe will add more than 12.5 million covered lives within a select managed care health system. The business model with Joerns will be similar to how we work with the VA hospital system. Joerns will handle adjudications, billing and collections, while electroCore will ship directly to patients and provide in-servicing and patient support. Our field sales team is responsible for educating clinicians within those managed care systems. We continue to work with Joerns on the implementation and while we do not have any revenue in this channel in the first quarter of 2023, we've been notified that the first prescriptions were being processed through Joerns late last month.

Revenue from channels outside the United States increased a healthy 34% to $410,000 in the first quarter of '23, as compared to $305,000 for the first quarter of 2022. OUS revenue included $45,000 of licensing fees in Japan, while most of the balance was generated in the United Kingdom by prescription gammaCore sales funded by the National Health Service or NHS.

Now turning to our clinical progress. On April 26, 2023, we announced that the National Institute on Drug Abuse, NIDA, part of the National Institute of Health, NIH, has awarded Emory University and Georgia Institute of Technology a 3-year $6 million grant through the NIH Helping to End Addiction Long-term or HEAL initiative, to conduct a pivotal clinical trial of gammaCore nVNS for the treatment of opioid use disorder, OUD. Double-blind, randomized, sham-controlled study to be funded by the grant will recruit approximately 100 patients with OUD. The primary efficacy endpoint of the study will be peak difference in the Subjective Opiate Withdrawal score between nVNS and sham treatment on day 2 and 3 of the initial withdrawal period.

On April 24, '23, we announced that the Air Force Research Laboratory has reported data from its study on the ability of our non-invasive vagus nerve stimulation to improve second language learning. The study was conducted at the Defense Language Institute in Monterey, California, the U.S. Department of Defense's premier language school. The study was supported by the Defense Advanced Research Projects Agency, DARPA within their targeted neuroplasticity training program. The study showed a significant positive effect of nVNS over sham on language recall. Participants receiving our treatment also showed significant increases in energy and focus over the course of each training session.

On March 23, '23, we announced the publication of a paper entitled non-invasive vagus nerve stimulation improves brain lesion volume and neurobehavioral outcomes in a rat model of traumatic brain injury in the peer-reviewed journal of Neurotrauma. The control group showed significant deficits, but all of these deficits were reduced in the high-dose nVNS group. Additional work on the potential benefits of nVNS on TBI will be funded by an exploratory development research grant, an R21 from the National Institute of Neurological Disorders and Stroke. We will continue to provide updates about our pipeline and other opportunities.

Now I'll turn the call over to Brian for a review of our financials and other guidance items. Brian?

Thank you, Dan. For the quarter ended March 31, 2023, electroCore recorded net sales of $2.8 million compared to $1.9 million during the same period of 2022, which represents an approximately 46% increase over the prior year. The increase of $881,000 is due to an increase in net sales across all major channels. Gross profit for the first quarter of 2023 was $2.3 million as compared to $1.5 million for the first quarter of 2022. Gross margin for the first quarter of 2023 was 84% compared to 81% in the first quarter of 2022.

Total operating expenses in the first quarter of 2023 were approximately $8.5 million as compared to $7.1 million in the first quarter of 2022. Research and development expense in the first quarter of 2023 was $1.8 million as compared to $934,000 in the first quarter 2022. This increase was primarily due to targeted investments to support the future iterations of our therapy delivery platform, including the use of our intellectual property around the delivery of smartphone integrated and smartphone-connected noninvasive therapy.

Selling, general and administrative expense for the first quarter 2023 was $6.7 million as compared to $6.2 million in the first quarter of 2022. The increase was driven by severance charges of $332,000 as well as continued targeted investments in sales and marketing to support our commercial efforts, offset by decreases in insurance and stock-based compensation expense.

GAAP net loss in the first quarter of 2023 was $5.9 million compared to the $5.6 million net loss in the first quarter of 2022. Adjusted EBITDA net loss in the first quarter of 2023 was $5.1 million as compared to a net loss of $4.6 million in the first quarter of 2022. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release.

Net cash used in operating activities in the quarter ended March 31, 2023, was approximately $5.9 million as compared to $4.8 million in the first quarter of 2022. This increase is primarily due to our investment in product evolution expenditures. We expect the investment level in R&D to begin tapering off for the remainder of the year. Total liabilities decreased from $7.7 million as of December 31, 2022, to $6.5 million as of March 31, 2023, contributing to the $5.9 million of net cash used in operating activities in the first quarter of 2023.

Cash, cash equivalents and restricted cash at March 31, 2023, totaled approximately $12.2 million as compared to approximately $18 million as of December 31, 2022. Looking ahead, for the full-year 2023, we are reiterating our net revenue guidance of $14 million to $15 million, representing more than 60% growth over 2022. We believe that our prescription headache channels will continue growing by more than 50% to at least $12 million for the full year and revenue from new products in the Truvaga and TAC-STIM brands could be more than $2 million for the full year.

We expect net cash usage in the remainder of 2023 to be below the average quarterly net cash usage in 2022. Net cash usage will decrease as revenues increase, we complete development of new products and continue to rationalize other operating expenses. Therefore, we expect our net cash usage to decrease significantly as we progress through the year.

And now I'll turn the call back over to Dan.

Thank you, Brian. I'm very pleased with our first quarter 2023 operating results and we are increasingly enthusiastic about the company's long-term prospects, especially in our 2 new product lines, Truvaga and TAC-STIM. Continued investment in our cash pay and covered business models have greatly expanded the prescription gammaCore therapy market as reflected by the continued revenue growth, number of facilities and number of prescribers realized in the first quarter of 2023.

Truvaga has tons of potential as a direct-to-consumer wellness offering. We started with an e-commerce business model, which will be the focus this year and I look forward to launching a next-generation app-enabled product platform next year. We believe our metrics are trending in the right direction and we will continue to adjust our investments in all of our commercial channels as the year progresses. TAC-STIM 2.0 is a next-generation human performance product being financed in part by the Air Force Special Forces through their BOOST program. It could accelerate the adoption of nVNS for human performance among our active duty military in coming years. The pipeline of interest from different branches of the military continues to develop for our TAC-STIM product, which may result in expanded adoption in future quarters.

Demand for our prescription gammaCore therapy in the VA/DoD channel continues to grow based on clinical performance and our increased presence in the field. We now have about 45 straight commission sales agents or 1099 reps in the field, managed by our small team of territory business managers and supported by our customer experience team. Note that our sales and marketing expense increased by $300,000 from $2.4 million in the first quarter of 2022 to $2.7 million in the first quarter of 2023, while sales grew almost $900,000, signaling that there may be real leverage opportunities in the P&L if revenue increases over time.

The timing of certain disbursements led to a substantial increase in cash used in operations in the first quarter, as Brian explained. Our R&D spend on new products likely peaked during the quarter and we had one-time expenses around the special meeting of shareholders reverse split and severance costs. Quarterly cash usage is expected to decline as we go through the year due to anticipated revenue growth, gross margins greater than 80%, declining R&D investments and our intention to maintain discipline around operating expenses. Further out, we're working towards establishing additional indications for prescription gammaCore to treat post-traumatic stress disorder and/or opioid use disorder.

Look for new product launches in 2024 featuring our app-enabled technology that can provide digital health solutions. That product platform will be launched in headache, wellness and human performance as we ramp up our supply chain. We see many potential growth drivers for the remainder of 2023 and beyond, including continued growth in our U.S. prescription headache business in both the VA/DoD and commercial channels, further development of the Truvaga product for wellness, mental acuity and sleep, driven by increased direct-to-consumer marketing efforts, further development of the TAC-STIM brand for human performance in the active duty military and beyond, our app-enabled new product platform that will facilitate consumer-facing digital health solutions and unlock new business models and prescription gammaCore label extensions into PTSD and/or OUD in 2024 and 2025.

Finally, in February 2023, we implemented a 1-for-15 reverse split and regained compliance with NASDAQ listing requirements on March 6, 2023. We've been comfortably above any lifting requirements since effectuating the reverse split.

At this time, I'll turn the call over to the operator. Operator, please open the line for questions.

(Operator Instructions) Our first question comes from Jeff Cohen with Ladenburg Thalmann.

This is actually Destiny on for Jeff. I guess what I'd like to start with is actually the VA and DoD channels. You now have 324, if I heard correctly, facilities and 45 reps.

124.

124. Okay. Got it. Got it. Got it. So can you talk a little bit more about the growth there? And now that you have the 45 reps, how you kind of see it growing throughout the balance of the year and then obviously beyond?

So thanks for the opportunity, Destiny. The VA hospitals we have basically 2 tactics. The first is opening new customers, new VA hospitals that haven't ordered from us before. And the second is taking care of our existing customers and going deeper within those existing customers. Both of those tasks at the end of the day, still require feet on the street. We just haven't found a way to get these kinds of hospital-based sales without showing up and showing up reliably. And that's where the straight commissioned sales agents, I call them, really allow us to scale the activity.

Many of us at the home office, our medical affairs team, our territory business managers get involved in targeting specific new facilities to open up. And then once we have opened them up, we rely on the local sales agents as well as our customer experience team to follow through. And this is one of those areas where success begets success. And more and more of our sales agents as they're doing better and their network of colleagues who are also in the neighborhood hear about their success, we're looking at some acceleration in our ability to reach new facilities as well as to go deeper within existing facilities. And just to be clear, the sales agents are all variable expense. There's no fixed expense associated with them.

And you said you had 45 reps. Has that changed at all since last we spoke?

That's a dramatic increase from where we were at the end of last year. We were just starting to put together our network of 1099 reps as we exited last year.

Perfect. Okay. That's really encouraging. And then perhaps I'll go over to TAC-STIM 2.0 as you're calling it. Can you just talk a little bit about some of the advancements you're making or some differences between the TAC-STIM device now and 2.0? And then -- yes, well, let's start with that, and then I'll have a follow-up of course.

So Air Force Research Laboratory has been working closely with us to develop a MIL-SPEC, rugged, reliable version of our handheld personal use vagus nerve stimulator. And we -- I actually had the great pleasure of showing some prototypes to Special Forces operators at Hurlburt Field in Florida just last week and they're getting very excited about this next generation configuration because it's going to be far more useful to them in the field. So as far as timing, we're going to have to stay quiet about the timing for when that product is going to launch, but we're very excited about it. And maybe more importantly, the Special Forces operators are excited about it.

And then I want to bounce over to Truvaga. I was wondering if you could talk a little bit about your demographic data there, given that this is a kind of an over-the-counter type product that's pretty readily available. Are you seeing a huge change or difference in demographic between your gammaCore and the Truvaga?

So most of our U.S. gammaCore sales are through the VA hospital system and that's a very different demographic. But on our -- on the commercial side, I think the demographic skews younger and is closer. But still, the Truvaga personas that we're currently targeting with our media spend and our Internet search and social media spend is younger and more affluent. But it's really small numbers at this point. And I don't want to draw to many conclusion from what are really small numbers by -- in the grand scheme of things.

And then Brian, I just have a couple for you. The gross margin expansion, is this kind of a level we should expect to see going forward? And the driver is volume or channels or both? Yes, I guess, let's start with that. I get ahead of myself.

That's okay. I'll try to keep up with you. No, we've been consistently in the 80s for the past year. We had some clean-up on the balance sheet in Q4. So we were down to 75%. But without that cleanup, we would have been right around where we finished Q1. So I think that's -- right now in the 80s is a safe place to assume. I think it's a combination of increased revenue, that way we absorb more labor and overhead. We continue to also sell more and more longer duration products, which also is accretive to gross margin as well.

And then last one, I promise. In terms of greater investment in marketing, what kind of investment are you looking at maybe on a percentage basis going forward?

So I talked a little bit about the growth in our sales and marketing expense compared to the growth in revenue. And back of the envelope, our sales and marketing expense grew at sort of less than 30% of revenues. So I think that might be a good way to think about how we're going to be reinvesting in sales and marketing to grow that revenue line.

Next question comes from John Vandermosten, Zacks SCR.

You guys have had a lot of great press releases on just the wide profile of the device and what it can do and language learning is just something else that I haven't even thought about. But in our research, we've seen a lot of other areas that you've talked about also as well. And it seems to have a safety profile and kind of the benefits of exercise, right, but without the effort and you also have opened up a channel that doesn't rely on the FDA to distribute the product. And I'm wondering how can you leverage that and also get more eyes on the product and what it can do to really leverage that Truvaga channel that you have.

Well, we're -- this is early days for us, John, but you're absolutely right. If we do this correctly, the direct-to-consumer wellness for stress, for mental acuity, for sleep is going to draw attention to the fundamental benefits of vagus nerve stimulation and should have carryover to our prescription strength gammaCore brand and vice versa. And then all of the work, the really exciting work that Army Special Forces and Air Force Special Forces are doing that I can't talk about yet and I'm really looking forward to the day that we can start a campaign that's, for example, as used by Army Special Forces. So all 3 brands, if we do this correctly, are going to reinforce and build on each other.

The other yet another opportunity for us, and we haven't talked about it too much yet is the relatively young Vagus Nerve Society. It's a professional academic society, which is really focused on all of the benefits and method of operation of the vagus nerve, starting from holistic approaches, including implants and of course, noninvasive, minimally invasive approaches. But that society is becoming a form of -- for broad-based discussion by health care professionals, by neuroscientists and ultimately, I think, by the late public as well.

And as you know, we're still in the early stages of Truvaga with very low revenues relative to some of your other businesses. But I guess do you prefer -- on a margin basis, do you prefer $1 revenues from Truvaga or the VA kind of NHS source?

All of these -- all 3 of the brands right now are in that low 80% gross margins. So they all help each other. And because we're still a very small business, revenue in general, helps us spread the fixed expenses of the company, the public company expense, rent, insurance.

So it sounds like Truvaga right now is kind of on par with the other ones. As it grows, the attractiveness might increase? Just leveraging kind of the fixed efforts.

Yes, absolutely. Absolutely. Yes.

No, that's really helpful. And I wanted to look at the NIDA grant. How is that going to flow through your income statement? You mentioned it was a 3-year study. Was that...

The NIDA grant is to Emory University and the VA -- the Atlanta VA Hospital. All of that money is going to those entities to execute the pivotal trial. So I think the right way to think about it is it's an expense offset because that pivotal trial will become the foundation of a 510(k) submission and ultimately, a label extension to treat the symptoms of withdrawal from opioid use. So it's money that we don't have to spend in order to get that additional indication in the future.

And it was a 3-year study. What was the start date on that or anticipated start date?

So the trial will start in coming months. We're optimistic that they will complete enrolment towards the end of 2024, in which case we can execute on the regulatory process in 2025.

And last thing, Teijin, you had a press release announcing that you received the annual license fee from them. Are there any milestones in the near term or medium term that we should look out for to help us predict when royalty revenues may come?

So we're booking license revenues on a quarterly basis and they're making quarterly payments. I think what you're really asking is when is it going to turn to product sales and that's probably over -- that's probably still over the planning horizon there. Our good friends at Teijin are working with the Japanese Ministry of Health. They're lobbying hard to get the Ministry of Health to accept the pivotal data that was collected in the United States, but that's -- there's still a high likelihood that they're going to be forced to conduct at least a small in-country pivotal trial, which is going to true up calendar time.

Next question comes from Swayampakula Ramakanth with H.C. Wainwright.

Dan and Brian, this is Swayampakula from H.C. Wainwright. Obviously, we have discussed quite a few interesting pieces of the company. A couple of things that I would like to understand a little bit more is, so on the commercial business, I believe you stated that there are about 1,834 prescribers or approximately 506 new additions, which is quite a decent number in terms of prescribers added. How does that translate to revenue? And you said you're kind of thinking of them as a lead indicator. So I'm just trying to understand like how are you coming to that conclusion? And when you say lead in, what is the lifetime you are thinking of from them coming on board to getting scripts return on a regular basis?

So those -- that cohort of 500 that we engaged in the first quarter, our metric is that they -- we filled at least 1 prescription in order for that prescriber to be counted as a new prescriber. So they're already generating revenue and there are 2 metrics there. The first is how many of those are new prescriptions and then how many are refill prescriptions. I think to an earlier question, Brian said something about product mix and refill prescriptions are higher margin for us. But we need the new prescriptions in order to build the install base, if you will, of happy patients that are going to come back for refill prescriptions. So there are 2 ways that this business builds on itself. The first is that once we've engaged a prescriber, if their patients have a good experience, they come back and prescribe for more of their patients and within their patient population, getting patients stay on therapy and come back for refill prescriptions.

And then when you made your statements about Joerns Healthcare, you're also suggesting that this could potentially become something close to what VA is doing for you. So for that really to happen, what needs to get done? I know you are just in very, very early stage as you just said. The first set of prescriptions have been processed in late April. But I'm just trying to understand like how would it become meaningful? Or like how long could that take to become meaningful?

So the short answer is that we think it's going to be meaningful revenue as we exit this year. As a practical matter, these first prescriptions are bumping their way through the Kaiser system first and then they get to Joerns and Joerns has to identify the particular patient, figure out which benefit plan they're on, figure out where they are, where that individual is with respect to copays and deductibles, it's called adjudicating the prescription and then they have to collect that copay from the patient before we can dispense to the patient.

And each one of those steps has to be sorted out in the bureaucracy. But once it's sorted out, it should start to become far more systematic and scalable. And so as the bureaucracy starts to work smoothly, we're going to take our same field sales force calling on the VA hospitals, to start calling on the Kaiser facilities to engage prescribers to scale that business. And it's got a lot of the same characteristics as the VA hospital business. So I'm very optimistic that -- it's always -- it's going to take a little longer than I want, but I'm optimistic that as we roll into 2024, fundamentally will have access to another 10 million covered lives.

Then this is kind of a 2-part question. So when we think about gammaCore, Truvaga, TAC-STIM, TAC-STIM 2.0, how -- what is the margin contribution from -- is the margin contribution different from each one of these things? And then also in terms of the pricing, how different is it for these -- for each one of these?

So it's a very good question and the numbers for our new brands are still very small. So the margin profile is going to evolve. The Truvaga product that we're currently selling is on the Internet for $300 for a first transaction. So that's kind of the price point. The TAC-STIM is right now is [variably made] distribution to certain units of Special Forces in each one of those transactions has its own pricing profile. So right now, it's -- not that it's complicated, but we're not sharing very much pricing information publicly until these lines of business get substantially larger.

So the last question for me is, among these 4 devices, like our brand or lines of gammaCore, is the technology any different? Or it's all the same, except that it's packaged differently for different uses?

So the way that I'd like to describe it is that gammaCore is our prescription strength product offering. Truvaga is our direct-to-consumer wellness product and has the same -- exactly the same safety profile, but it's not as energetic as the prescription strength. We may have talked about it, but I can go to the corner store and get 200 milligrams of Ibuprofen under the Advil brand, pretty much any store you want to, but I can also go to my doctor or dentist and get a prescription for Motrin, which is 800 milligrams of Ibuprofen. So there's prescription strength, Ibuprofen and then there's the direct-to-consumer over-the-counter strength. And that's how we're trying -- that's how we differentiate those product lines.

So Truvaga is not going to teach me a different language or it will have a tougher time?

No. No. There is evidence that it helps mental acuity, but you're pretty sharp. You don't need it.

Next question comes from Kemp Dolliver with Brookline Capital Markets.

Just a couple of questions. When you talk about R&D spend tapering from Q1's level, I mean, how much of a reduction should we think about?

Yes, we're -- go ahead, Dan.

Go ahead, Brian. No, go ahead, Brian. You, go ahead.

Yes. So we were about $1.8 million this quarter. I don't think we're going to give specific dollar guidance on the call, but we expect by the end of the year, that number will go down significantly.

Dan, were you going to give away the goods?

Nope. I was going to be even vaguer than him -- than Brian.

He wasn't going to use the word significantly probably.

Yes.

With regard to Kaiser and Joerns, when you talk about the length of the process currently, claims adjudication once you get it set up and running is at least in the prescription world is electronic and I assume with VA, you're pretty well set. But what's the length of the process you're experiencing currently for claims processing versus what it would look like normally?

So the goal is that everything is loaded into the computer systems at both Kaiser and Joerns and it's automatic. That once a prescription is generated in a Kaiser facility, it flows through. There is always -- in this DME world, there's always a [lack of turns] has to reach out to the individual around collecting deductibles or copays. And that's probably a 30-day step in the process on average. Some are much faster depending on the benefit plans and that's -- but we have very, very small numbers in that channel right now. I'm really speculating.

And Brian, I was looking at the 10-Q quickly and there was a pretty significant reduction in the long-term inventory number? And can you talk about the dynamic there? And when we...

Thank you for noticing.

Sure. Just we on track for that to, say, disappear by early '24, because it -- obviously, the goal here is to avoid any write-down consequence.

Yes, it's a great question. I don't think there's a right now a write-down risk, but it's more what do we expect to sell that we have in inventory in the next year from the date of the balance sheet. So the good news is the current is going up because when we're selling, we're selling inventory; and two, we project our revenue to go up, as you can see to our guidance. So eventually, we won't have long-term inventory. We'll be more traditional just it will be in current asset. But that's good news. The more that goes into current from long term means we're confident about selling that inventory in the next 12-month period.

And look, I'll pile on, I think Brian and his team have done a great job of monetizing that inventory that we inherited several years ago. Kudos.

Thank you.

Next question comes from Nick Sherwood with Maxim Group.

This is Nick Sherwood speaking for Anthony Vendetti of Maxim Group LLC. Can you get into a little more detail on what's driving the traffic for the e-commerce platform, Truvaga? Is that a lot of digital marketing? Or are you seeing some organic growth just from word of mouth that comes from the VA channel?

So there is some organic, there's some early adopter. Most of our spend in the first quarter was around paid search. We've started to open up social media channels. And I think we just went live on TikTok. We're starting to learn about influencers and we're doing a lot of A/B testing on these different digital marketing techniques. So we're pretty excited. As I said in the script, it far exceeded our expectations in the first quarter and now we're feeling more and more comfortable about increasing the spend and maintaining that return on advertising spend ratios go, so it should scale nicely.

There are no further questions at this time. I would like to turn the floor back over to Dan Goldberger for closing comments. Please go ahead.

Thank you, operator, and we appreciate everybody joining today's call. Lots of good questions. I hope we were helpful in our answers. I want to give special thanks to all of our employees and our new cohort of sales agents who are working tirelessly to deliver this amazing therapy to patients. I also want to thank the health care professionals and their patients to their loyal support of our gammaCore therapy. We greatly appreciate support from Air Force Research Laboratory and the National Institute on Drug Abuse for supporting our new product initiatives and label expansions. We've made a tremendous amount of progress and would not have been possible without all of you and your unwavering support.

So thank you, and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.