NeuroMetrix Inc (NURO) 2024 Q2 法說會逐字稿

Good morning, and welcome to the NeuroMetrix second-quarter 2024 business and financial update. My name is Amy, and I will be your moderator on the call.

早上好，歡迎來到 NeuroMetrix 2024 年第二季業務和財務更新。我叫艾米，我將擔任這通電話的主持人。

On this call, the company may make statements which are not historical facts and are not considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature that depend upon or refer to future events or conditions are forward-looking statements. Any forward-looking statements reflect current views of NeuroMetrix about future results of operations and other forward-looking information. You should not rely on forward-looking statements because actual results may differ materially as a result of a number of important factors, including those set forth in the earnings release issued earlier today.

在這次電話會議上，公司可能會發表非歷史事實的聲明，並且不被視為 1995 年《私人證券訴訟改革法案》含義內的前瞻性聲明。依賴或涉及未來事件或條件的本質上具有預測性的陳述屬於前瞻性陳述。任何前瞻性陳述均反映 NeuroMetrix 對未來營運結果和其他前瞻性資訊的當前看法。您不應依賴前瞻性陳述，因為許多重要因素（包括今天稍早發布的收益報告中列出的因素）可能導致實際結果有重大差異。

Please refer to the risks and uncertainties, including the factors described under the heading Risk Factors in the company's periodic filings with the SEC available on the company's Investor Relations website at Neurometrix.com and on the SEC's website at sec.gov. NeuroMetrix does not intend and undertake no duty to update the information disclosed on this conference call.

請參閱本公司向 SEC 定期提交的文件中的風險和不確定性，包括風險因素標題下所述的因素，這些文件可在公司投資者關係網站 Neurometrix.com 和 SEC 網站 sec.gov 上查閱。 NeuroMetrix 不打算也不承擔更新本次電話會議中揭露的資訊的義務。

I'd now like to introduce NeuroMetrix's Senior Vice President and Chief Financial Officer, Mr. Thomas Higgins. Mr. Higgins?

現在我想介紹一下NeuroMetrix的高級副總裁兼財務長Thomas Higgins先生。希金斯先生？

Thank you, Amy, and welcome to our Q2 2024 business update. For those of you unfamiliar, we are a commercial stage medical device company, developing and commercializing neurotechnology devices to address unmet needs in the chronic pain and diabetes markets.

謝謝艾米，歡迎閱讀我們的 2024 年第二季業務更新。對於那些不熟悉的人來說，我們是一家商業階段的醫療設備公司，開發和商業化神經技術設備，以滿足慢性疼痛和糖尿病市場未滿足的需求。

Our products are wearable or handheld devices enabled by proprietary consumables and software solutions, including mobile apps, enterprise software and cloud-based systems. We have two commercial products: Quell is our wearable Neuromod platform currently addressing chronic pain related to fibromyalgia and also related to lower extremity chronic pain. There are multiple emerging indications, including CIPN along with COVID, chronic low back pain, chronic overlapping pain conditions, and others. DPNCheck is our point-of-care screening test for peripheral neuropathy, particularly focused on diabetes.

我們的產品是由專有耗材和軟體解決方案支援的可穿戴或手持設備，包括行動應用程式、企業軟體和基於雲端的系統。我們有兩種商業產品：Quell 是我們的可穿戴 Neuromod 平台，目前用於解決與纖維肌痛相關的慢性疼痛以及與下肢慢性疼痛相關的問題。有多種新出現的適應症，包括 CIPN 和新冠肺炎、慢性腰痛、慢性重疊疼痛等。DPNCheck 是我們針對週邊神經病變（特別是糖尿病）的即時篩檢測試。

Our business model is razor-razor blade with aftermarket sales as the primary financial objective and currently representing about two-thirds of our revenue. At current scale, we are adequately funded with approximately $16.4 million in liquid assets and quarterly cash usage of about $1.4 million, which we plan to further decrease going forward. Our capital structure is simple, it's debt-free and common stock based.

我們的業務模式是剃刀刀片，以售後市場銷售為主要財務目標，目前約占我們收入的三分之二。以目前的規模，我們的資金充足，流動資產約為 1,640 萬美元，季度現金使用量約為 140 萬美元，我們計劃未來進一步減少。我們的資本結構簡單，無債務，以普通股為基礎。

Today, we reported Q2 revenue of $769,000. This was a drop from $1.656 million in the second quarter of 2023, and this drop was anticipated. The DPNCheck product line accounted for the entire revenue decline. As previously discussed, CMS rule changes in Medicare Advantage initiated early last year 2023, encompass a two-year phaseout of risk adjustment compensation to health care providers for a range of patient screenings, including peripheral neuropathy. This is the second and final year of that timetable. As would be expected, many providers have curtailed this activity. We are working to identify domestic DPNCheck interest in potential new markets and are pursuing several attractive opportunities. The ultimate outcome of our efforts is uncertain at this point.

今天，我們報告第二季度收入為 769,000 美元。這比 2023 年第二季的 165.6 萬美元有所下降，而且這一下降是預期的。DPNCheck 產品線是整個營收下降的原因。如前所述，CMS 於 2023 年初啟動了 Medicare Advantage 規則變更，其中包括在兩年內逐步取消對醫療保健提供者進行一系列患者篩檢（包括周圍神經病變）的風險調整補償。這是該時間表的第二年也是最後一年。正如預期的那樣，許多提供者已經減少了這項活動。我們正在努力確定國內 DPNCheck 對潛在新市場的興趣，並尋求一些有吸引力的機會。目前我們努力的最終結果還不確定。

The Quell product line, however, continues to post revenue growth. Quell revenue in Q2 of $192,000 was a year-on-year gain of 47%. While Quell revenue is a relatively small contributor, its growth rate provides an encouraging indication of future potential. Our careful strategic launch of Quell fibromyalgia in 2023 and earlier this year has been quite effective in building market knowledge while controlling spending on sales and marketing activities. The legacy product, ADVANCE, for peripheral neuropathy completed a planned phaseout and was terminated as of July 31, 2024.

然而，Quell 產品線的收入仍持續成長。Quell 第二季營收為 19.2 萬美元，年增 47%。雖然 Quell 收入的貢獻相對較小，但其成長率為未來潛力提供了令人鼓舞的跡象。我們在 2023 年和今年稍早精心策略推出 Quell 纖維肌痛，在建立市場知識、同時控制銷售和行銷活動支出方面非常有效。用於治療週邊神經病變的遺留產品 ADVANCE 已完成計劃淘汰，並於 2024 年 7 月 31 日終止。

Gross profit in the quarter was $492,000. This reflects a gross margin rate of 64%, which at 360 basis points lower was generally in the margin range of the second quarter of last year. Individual product gross margins in the quarter were stable for DPNCheck, which is in the 80% range and improving for Quell, where growth has pushed the margin rate into positive territory at 36% and trending upward. Of course, the overall margin of 64% was adversely impacted by the effect of reduced sales volume on indirect cost absorption.

該季度毛利為 492,000 美元。這反映了64%的毛利率，比去年第二季的毛利率低了360個基點。DPNCheck 本季的單一產品毛利率穩定，處於 80% 的範圍內，而 Quell 的毛利率有所改善，其成長已將利潤率推向 36% 的正值區域，並呈上升趨勢。當然，64%的整體利潤率受到銷售減少對間接成本吸收影響的不利影響。

Operating expenses in the quarter totaled $2.3 million, down about $422,000 or down 15% from the prior year quarter. This spending drop reflects the effects of a Q1 2024 reduction in force, which going forward, will reduce personnel costs by over $0.5 million per quarter. The savings in Q2 were partially offset by professional service costs associated with our ongoing strategic review process.

該季度營運費用總計 230 萬美元，比去年同期減少約 42.2 萬美元，即下降 15%。這項支出下降反映了 2024 年第一季兵力減少的影響，今後每季將減少超過 50 萬美元的人員​​成本。第二季的節省部分被我們正在進行的策略審查流程相關的專業服務成本所抵銷。

Net loss in the quarter was $1.488 million or $0.74 a share, a small improvement of about $50,000 from a net loss of $1.5 million in the second quarter of last year. Operating cash usage in the quarter was approximately $1.4 million, lower again by about $90,000 from Q2 of 2023. Working capital at the end of the quarter was $16.9 million, and we ended the quarter with liquid assets of $16.4 million.

本季淨虧損為 148.8 萬美元，即每股 0.74 美元，比去年第二季 150 萬美元的淨虧損小幅改善約 5 萬美元。本季營運現金使用量約為 140 萬美元，較 2023 年第二季再次減少約 9 萬美元。本季末的營運資金為 1,690 萬美元，本季末我們的流動資產為 1,640 萬美元。

And now for the comments of Dr. Shai Gozani, our Founder and CEO.

現在請聽聽我們的創辦人兼執行長 Shai Gozani 博士的評論。

Thank you, Tom. Let me start by providing an update on the review of strategic options that we announced in February of this year. Our goal was and remains to consider all reasonable opportunities to maximize shareholder value. Over these past six months, we have invested considerable time, effort and resources in this process. And then in terms of specific activities, we have been conducting an extensive survey of potential transactions in collaboration with our financial adviser, and several of these have led to detailed diligence.

謝謝你，湯姆。首先，我要介紹我們今年 2 月宣布的策略選擇審查的最新情況。我們的目標過去是，現在仍然是考慮所有合理的機會，以實現股東價值最大化。在過去的六個月裡，我們在過程中投入了大量的時間、精力和資源。然後在具體活動方面，我們一直在與我們的財務顧問合作對潛在交易進行廣泛的調查，其中一些已經導致了詳細的調查。

However, thus far, the Board has determined that none of these opportunities are in the best interest of shareholders at this time. As Tom noted, we implemented a substantial reduction in force at the end of the first quarter that lowered operating expenses on a going-forward basis by over $0.5 million per quarter. This helps bring our revenue and OpEx into better alignments. We are actively exploring opportunities to monetize noncore assets to further offset cash consumption. And here, we are particularly focused on international markets that are not core to our US focus. And in April, we engaged in discussions with one of our large shareholders that resulted in addition of Joshua Horowitz as a new independent director. And we also, at that time, terminated our at-the-market, ATM, equity facility.

然而，到目前為止，董事會已確定這些機會目前都不符合股東的最佳利益。正如 Tom 所指出的，我們在第一季末大幅削減了人力，從而使每季的營運費用降低了 50 萬美元以上。這有助於使我們的收入和營運支出更好地保持一致。我們正在積極探索非核心資產貨幣化的機會，以進一步抵銷現金消耗。在這裡，我們特別關注國際市場，這些市場不是我們關注美國的核心。四月份，我們與一位大股東進行了討論，最終任命約書亞·霍洛維茨（Joshua Horowitz）為新的獨立董事。當時我們也終止了我們的市場 ATM 股權融資。

Our plan is to continue the strategic review process while also efficiently operating the business and seeking to return to growth. There can be no assurance that this process will result in the company pursuing or consummating a particular transaction or other strategic outcome. And at this point, we have not yet set a specific deadline for completing the process. Returning now to our operating business. As Tom noted, we reported good year-over-year growth in our Quell business of 47% to around $200,000 in the second quarter.

我們的計劃是繼續策略審查流程，同時有效地經營業務並尋求恢復成長。無法保證此過程將導致公司追求或完成特定交易或其他策略成果。目前，我們尚未設定完成該過程的具體期限。現在回到我們的經營業務。正如 Tom 指出的，我們第二季的 Quell 業務年增了 47%，達到 20 萬美元左右。

While the absolute number is modest, there are a number of encouraging signs. First, the growth was entirely from Quell fibromyalgia. And in fact, the over-the-counter business decreased as it has been in a commercial pause. We are now planning to restart the OTC business, which will give us two sources of growth going forward. We are planning to have both parts of the Quell business, fibromyalgia and OTC active by the fourth quarter.

雖然絕對數字不大，但也有一些令人鼓舞的跡象。首先，生長完全來自於纖維肌痛。事實上，場外交易業務由於處於商業暫停狀態而下降。我們現在正計劃重啟 OTC​​ 業務，這將為我們帶來兩個未來的成長來源。我們計劃到第四季度讓 Quell 業務、纖維肌痛和 OTC 業務都活躍起來。

Second, in addition to revenue, we saw good growth in the number of Quell starter kits sold. There are 540 sold in the quarter, which was 165% year-over-year growth, and we had 3,682 one-month refills of Quell electrodes, which was 13% growth. Again, this is with the planned drop in the OTC business that we should be able to reverse shortly. And third, we are starting to see uptake of Quell fibromyalgia in the Veterans Administration health system. This is an exciting opportunity as the device and refills are attractively reimbursed. We are operating just a few VA centers at this time, but we'll be looking to grow steadily for the rest of the year and expect to make the VA a core focus in 2025. We believe that we now have clarity on how to move forward with our CIPN indication. CIPN standing for chemotherapy-induced peripheral neuropathy.

其次，除了收入之外，我們還看到 Quell 入門套件銷售的良好成長。本季售出 540 支，年增 165%，Quell 電極一個月補充量為 3,682 支，成長 13%。同樣，這是由於 OTC 業務計劃中的下降，我們應該能夠很快扭轉。第三，我們開始看到退伍軍人管理局衛生系統開始採用平息纖維肌痛療法。這是一個令人興奮的機會，因為設備和補充裝的報銷很有吸引力。目前，我們僅運營幾個 VA 中心，但我們將尋求在今年剩餘時間內穩步增長，並預計在 2025 年使 VA 成為核心焦點。我們相信，我們現在已經清楚如何推進 CIPN 指示。CIPN 代表化療引起的周邊神經病變。

We will make a De Novo submission for CIPN by the fourth quarter of this year with a potential commercial launch by the end of 2025 if everything falls into place. If obtained this indication will introduce Quell technology as the devices like to have a new branding into a large and commercially attractive oncology market. As noted by Tom, the DPNCheck business suffered an expected year-over-year drop due to substantial changes to Medicare Advantage announced early last year. 2024 is the final year of a phaseout of risk adjustment compensation for many types of patient screening, including peripheral neuropathy.

我們將在今年第四季之前向 CIPN 提交 De Novo 申請，如果一切順利的話，可能會在 2025 年底之前進行商業發布。如果獲得這項指示，將引入 Quell 技術，因為這些設備希望以新品牌進入大型且具有商業吸引力的腫瘤市場。正如 Tom 所指出的，由於去年初宣布的 Medicare Advantage 發生重大變化，DPNCheck 業務預計會出現年減。 2024 年是逐步取消多種類型病患篩檢（包括週邊神經病變）風險調整補償的最後一年。

While we expect that some of our MA customers will continue to utilize DPNCheck next year and beyond, it is imperative that we rotate into other markets. We are working on a number of attractive opportunities that have the potential to scale up the business again, but we are still at least several quarters for meaningful revenue from these newer channels. Hopefully, nevertheless, we hope to provide updates and announcement of pilots over the balance of this year as indicators of our progress. And on the scientific and clinical side, there were several prominent DPNCheck abstracts presented at the Japanese Diabetes Society meeting in May 2024 and the ADA Scientific Meeting in June of 2024.

雖然我們預計一些 MA 客戶明年及以後將繼續使用 DPNCheck，但我們必須轉向其他市場。我們正在尋找一些有吸引力的機會，這些機會有可能再次擴大業務規模，但我們至少還需要幾個季度才能從這些新管道中獲得有意義的收入。儘管如此，我們希望在今年餘下的時間裡提供試點的最新情況和公告，作為我們進展的指標。在科學和臨床方面，在 2024 年 5 月的日本糖尿病協會會議和 2024 年 6 月的 ADA 科學會議上發表了幾篇著名的 DPNCheck 摘要。

Those are our prepared comments, and we'll be happy to take questions now.

這些是我們準備好的評論，我們現在很樂意回答問題。

(Operator Instructions) Jarrod Cohen, JM Cohen & Company.

（操作員說明）Jarrod Cohen，JM Cohen & Company。

Yes. Just a quick question. Just long term, I know you've talked about this so far for a long time. But how are you really going to grow the Quell business since the DPN business is really dropping off to be somewhat substantial because years ago, if I'm correct, the Quell business was running on a quarterly basis over $1 million a year. And I think you had grown it and on a gross margin basis, you had changed the business around that it was running at a gross margin even over 50%. How can you get that?

是的。只是一個簡單的問題。從長遠來看，我知道到目前為止您已經談論這個問題很長時間了。但是，既然 DPN 業務確實已經下降到相當可觀的程度，那麼你該如何真正發展 Quell 業務呢？我認為你已經發展了它，並且在毛利率的基礎上，你已經改變了業務，它的毛利率甚至超過了 50%。你怎麼能得到那個？

I know it's going to -- as you said, to the veterans market and all that and opening up new markets beside fibromyalgia still relatively -- you're growing that. But yes, how can you get it back to that and beyond? I mean it takes time. I know that, but you've now been in the prescription market for two years. And you're still just not even back to you're still at way less than you were two, four years ago. So if you could just elaborate a little bit more, and it takes money also.

我知道這將 - 正如你所說，對於退伍軍人市場和所有這些，以及相對開放的除纖維肌痛之外的新市場 - 你正在成長。但是，是的，你怎麼能讓它回到那個狀態甚至更遠呢？我的意思是這需要時間。我知道這一點，但您現在已經進入處方藥市場兩年了。而你仍然沒有回到兩四年前的狀態。所以如果你能再詳細一點，這也需要錢。

Yes. Thanks for the question, Jarrod. So we've been in the prescription market for about six quarters. But as we've stated previously and really since we launched the product, we're being very methodical and deliberate in this. So we have not invested heavily on the commercial side. We have one director of sales as our commercial team. We really want to understand the business and how to grow it efficiently before we invest significant cash in building that business.

是的。謝謝你的提問，賈羅德。我們進入處方藥市場已有大約六個季度了。但正如我們之前所說，自從我們推出該產品以來，我們在這方面非常有條理且深思熟慮。所以我們在商業方面並沒有大量投入。我們有一名銷售總監作為我們的商務團隊。在投入大量現金建立該業務之前，我們確實想了解該業務以及如何有效地發展該業務。

So the answer to your question is the growth opportunity is there, but we wanted to be extremely careful about how we approach this market and wanted to understand it very thoroughly before we invested. So as an example, we've been understanding the VA market. And now that we have a clear idea of how to penetrate the VA, we're starting to add contract reps, so not direct sales rep but contract reps who are compensated on a variable basis. So there's no structural costs associated with that. And we believe that will rapidly grow as well as in the commercial market.

因此，你的問題的答案是成長機會是存在的，但我們希望非常謹慎地對待這個市場，並希望在投資之前非常徹底地了解它。舉個例子，我們一直在了解 VA 市場。現在我們已經清楚地知道如何滲透到 VA，我們開始增加合約代表，所以不是直接銷售代表，而是根據可變報酬的合約代表。因此不存在與之相關的結構性成本。我們相信這將在商業市場中迅速成長。

So the answer to your question is the growth opportunity is there, but we've been very, again, very methodical going to that -- very methodically deciding how to make the investments. And we're at the point now where I think we're ready to start increasing those investments and we'll see concomitant growth.

所以你的問題的答案是成長機會是存在的，但我們一直非常非常有條理地去做——非常有條理地決定如何進行投資。我認為我們現在已經準備好開始增加這些投資，並且我們將看到隨之而來的成長。

Okay. And I guess it's just going about what the product has always been about. I mean it's not a cure, but there's really -- the side effects are very minimal, right? It does with the pain relief product, right? How do you --

好的。我想這只是關於產品一直以來的主題。我的意思是，這不是治癒方法，但副作用確實非常小，對嗎？它與止痛產品有關，對吧？你怎麼樣--

It's symptom relief. So Quell fibromyalgia has a broad indication for relief of fibromyalgia symptoms beyond pain, but obviously, pain is a big one. The feedback from the market has been excellent. So we're quite confident that the product is effective in fibromyalgia both from our clinical work and now from our commercial experience. And as you said, there is no -- there really are very few options for these patients, particularly with the safety profile that Quell fibromyalgia offers.

是症狀緩解。因此，平息纖維肌痛具有廣泛的適應症，可以緩解疼痛以外的纖維肌痛症狀，但顯然，疼痛是一個很大的適應症。市場反饋非常好。因此，從我們的臨床工作和現在的商業經驗來看，我們非常有信心該產品對纖維肌痛有效。正如您所說，這些患者的選擇確實很少，特別是考慮到平息纖維肌痛所提供的安全性。

And then beyond fibromyalgia, as we noted, we're ready to restart the over-the-counter business for lower extremity chronic pain, which is a business we think we can grow cost effectively to complement Quell fibromyalgia. And then we have the additional indications that we've talked about, including for chemotherapy. So we're quite optimistic, but we're going to be methodical in how we build these businesses. And so it will take time, but we should see on a quarter-by-quarter basis, strong signs of growth and improved gross margins.

然後，除了纖維肌痛之外，正如我們所指出的，我們準備重啟下肢慢性疼痛的非處方藥業務，我們認為我們可以有效地增長這項業務，以補充平息纖維肌痛。然後我們還有我們討論過的其他適應症，包括化療。因此，我們非常樂觀，但我們將有條不紊地建立這些業務。因此，這需要時間，但我們應該在每個季度看到強勁的成長跡象和毛利率的提高。

Perfect. I know you probably don't want to talk about it, but the OTC market, are you going to do it differently than what you did before, in terms of which -- whether you go through stores or online or so forth for that you're still trying to figure that part out?

完美的。我知道你可能不想談論它，但是在場外交易市場，你會採取與以前不同的方式嗎？ 無論你是通過商店還是網上等等，你都會這樣做。

No. I mean, that will be pretty much exclusively online through our e-commerce site. We will consider going back on Amazon. But there -- we're really looking carefully at margins. And the attractiveness of bricks-and-mortar retail, which we were in, as you know, is access and distribution, but the margins are not nearly as attractive. So at least for the foreseeable future, it will be purely e-commerce.

不。我的意思是，這將幾乎完全透過我們的電子商務網站在線上進行。我們會考慮回到亞馬遜。但我們確實在仔細研究利潤率。如您所知，我們所處的實體零售業的吸引力在於准入和分銷，但利潤率卻沒有那麼有吸引力。所以至少在可預見的未來，它將是純粹的電子商務。

(Operator Instructions) And I'm showing no further questions at this time. I would now like to turn it back to Dr. Gozani for closing remarks.

（操作員說明）我目前沒有提出任何進一步的問題。現在我想請 Gozani 博士做總結發言。

Thank you very much for joining us today, and we look forward to keeping you updated as we get through the balance of the year. Thank you.

非常感謝您今天加入我們，我們期待在今年剩下的時間向您通報最新情況。謝謝。

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

感謝您參加今天的會議。這確實結束了該程式。您現在可以斷開連線。