NeuroOne Medical Technologies Corporation (NASDAQ:NMTC) Q2 2023 Earnings Conference Call May 11, 2023 4:30 PM ET
Dave Rosa – Chief Executive Officer
Ron McClurg – Chief Financial Officer
Conference Call Participants
Ben Haynor – Alliance Global Partners
Ladies and gentlemen, thank you for standing by. And welcome to the NeuroOne Medical Technologies Corporation Second Quarter 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 US Federal Securities Laws with respect to future operations, financial results, events, trends, and performance, which are based on management’s beliefs and assumptions as of today’s call or other specified date.
Forward-looking statements may involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. See NeuroOne’s corporate update press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, we undertakes no obligation to update such forward-looking statements.
With that said, I’ll turn the call over to Dave Rosa, CEO of NeuroOne. Dave, the floor is yours?
Thanks, operator. During our fiscal second quarter and through today, we continue to make progress towards the commercial launch of the Evo sEEG product line. We announced the commercial release of the product line and the completion of initial training with Zimmer Biomet sales personnel for a limited launch.
In addition, we also fulfilled five orders to Zimmer Biomet for the initial launch. The first clinical case was successfully performed at the Mayo Clinic by Dr. Jamie Van Gamble using a stereotactic frame system. An additional procedure using the Evo sEEG electrode in robotic neurosurgery was performed at a different medical facility. This procedure was the first to utilize Neuron’s Evo sEEG electrode with Zimmer Biomet, ROSA One Brain, a robotic platform that assists surgeons in planning and performing complex yet minimally invasive neurosurgical procedures.
Finally, we presented the complete EVO product line at American Association of Neurological Surgeons Annual Meeting in the Zimmer Biomet booth. To date, we are excited with the physician feedback and we’ll provide future updates on our progress. Regarding our OneRF ablation system, we mentioned last quarter that we were planning to complete internal device verification and validation protocols for the final OneRF system. I am pleased to announce that we were able to complete these tasks as well as completing usability testing with 15 neurosurgeon thought leaders. We are waiting for additional testing to be completed, along with other documentation from a few key suppliers, but remain on track for an FDA 510(k) submission in the second calendar quarter of 2023.
During the quarter, we also continued discussions with a few strategic organizations, regarding their interest in our technology. Next quarter, in addition to submitting a 510(k) for the OneRF system, we expect to transfer the project to production activities. We also have plans to complete an in vivo animal study with key neurosurgeons. Finally, we are scheduled to present results of a preclinical study at the Neurological Disorder Summit in June.
Next, I want to update you regarding our progress in the development of electrode to provide chronic stimulation and recording to treat chronic back pain due to multiple failed back surgeries. We successfully implanted a pat electrode in an animal model via surgical means. bench top testing was also successfully completed on delivering a paddle lead percutaneously through a needle. Next quarter, we expect to complete percutaneous placement in a spinal cord model by one of our physician advisers as well as complete an animal study designed to assess the electrodes biocompatibility.
In the second fiscal quarter, we discussed the potential for our electrode technology to offer the ability to deliver gene therapy or drugs as well as record the drug’s impact to the patient. I am pleased to report that we successfully completed feasibility bench top testing of our initial prototype and are planning on conducting additional testing in the small animal model. Physician enthusiasm remains high regarding the system.
During the second fiscal quarter, the company also strengthened our management team with the hire of Anthony Millar as Vice President of Operations. Anthony has held similar senior level roles with large well-respected medical device organization such as Boston Scientific, Medtronic, Minnetronix and Greatbatch where he was involved with electrode technology that was in development.
We also expanded our patent portfolio with a new US patent titled improved neural depth probes and related systems and methods regarding our thin film SEEG electrode technology. Finally, we also delivered an oral presentation at the Annual North American Neuromodulation Society Meeting, also known as NANS, titled electrochemical characterization of the first FDA-cleared thin film electrodes for recording and stimulation of brain activity.
Thank you for your time and attention. I would now like to turn the call over to Ron McClurg for a more in-depth review of our fiscal second quarter financial results. Ron?
Thank you, Dave. Product revenue was $466,000 in the fiscal second quarter of 2023 compared to product revenue of just $37,000 in last year’s second quarter. In the first six months of fiscal 2023, Product revenue was $581,000 compared to $70,000 for the same period in fiscal 2022. Collaboration revenue was $1.46 million in the first six months of fiscal 2023 and compared to collaboration revenue of $6,000 in the first six months of fiscal 2022.
Collaboration revenue was derived from the Zimmer development agreement and it represents a portion of the exclusivity and milestone fee payments that were eligible for revenue recognition during the respective periods. Our total operating expenses in fiscal second quarter of 2023 were $3.5 million compared with $3.0 million in the same period of the prior fiscal year.
R&D expenses in the fiscal second quarter of 2023, and were $1.7 million compared with $1.2 million in the same period of fiscal 2022. SG&A expense or selling, general and administrative expense in the fiscal second quarter of 2023 was $1.8 million compared to the same $1.8 million in the prior year period. For the first six months of fiscal 2023, total operating expenses were $6.8 million compared with $5.8 million in the same period of the prior year. This increase can be attributed to the R&D expense, which was $3.3 million for the first six months of fiscal 2023 compared to $2.3 million in the same period of fiscal 2022.
SG&A expenses in the first six months of fiscal 2023 were $3.5 million compared to $3.6 million in the prior year period. Our net loss was $3.5 million for the fiscal second quarter of 2023 compared to a net loss of $3.1 million in the prior year period. Net loss for the first six months of 2023 was $5.3 million compared with $5.9 million in the same period of fiscal 2022.
As of March 31, 2023, the company had cash, cash equivalents, and short-term investments of $4.6 million compared to $11.1 million as of September 30, 2022. The company had working capital of $4.8 million as of March 31, 2023, compared to working capital of $9.1 million as of September 30, 2022. The company had no debt outstanding as of March 31, 2023.
With that, I will turn it back to Dave.
Thanks, Ron. Operator, at this time, I think we can open for questions.
Thank you. The floor is now open for question. [Operator Instructions] And our first question comes from Ben Haynor from Alliance Global Partners. Go ahead, Ben.
Good afternoon, gentlemen. Thanks for taking the questions. First part for me, congrats on — given the first sEEG Evo case is done and the shipments to Zimmer. Can you talk a little bit about the stocking situation at Zimmer? I mean do you expect additional shipments during the current quarter, or are they pretty good for the time being? How would you characterize the situation at the moment?
Yes. So thanks, Ben. By the way, thanks for joining. So as we said earlier, we fulfilled so far 5 orders. I think that probably ideally, we all would have liked to maybe have done a much broader launch initially. But I think both of us have been through this enough times to know that you always want to make sure that everything that you’ve seen in benchtop, animal, preclinical, cadaver testing and even the handful of clinical cases that we have, we want to make sure that there aren’t any surprises.
So with the inventory that we have now and that Zimmer has now, we feel that it’s adequate for at least the initial launch. Now, as we expand the launch, clearly, there’s going to be a need for greater inventory. But the company is very confident, especially what we’ve witnessed, say, over the last six months and the ability of our suppliers to meet the increased demand that we’ll have. So, so far, we feel pretty good, but we do expect that there will be additional orders coming in as we begin to expand the launch.
Okay. That’s helpful. And then you mentioned there’s been a handful of cases now. Any kind of feedback that you can share how those cases have gone?
Yes. So what’s need that we had one done using just a stereotactic frame, and then one done using the Zimmer ROSA 1 robot, which I think will see the majority of cases being done using the robot. But in the case of so far, the feedback has been pretty much what we expected, given the amount of feedback that we had prior to this and maybe with some specifics in particular, the handling of the electrode.
We’ve had positive comments on that, meaning just the tactile feel when you’re placing it. The resolution, there’s been comments, positive comments about the clarity regarding the wave forms. One thing that we weren’t necessarily sure of, but we’re happy to hear is that you don’t see much distortion, much artifact on a CT scan when there’s an image taken of it, which is one of the challenges with some of the other devices today.
So you get too much artifact it’s difficult for a physician to really assess what’s going on in the brain. So far, that hasn’t been the case with this device. Comments on accessories, positive comments on that, in particular, are anchorable. One of the challenges in cases today is that if your anchorable isn’t seeded very firmly that you’re probably more likely to not get the electrode in the spot that you want to get it in.
So again, very good stability with respect to the anchorable. And one of the cases, the most devices that were tested in one of the cases was 18. So — and we haven’t had any device performance issues. It’s still early, but it’s encouraging, and it’s really what we expected out of the device.
Okay. That’s good color. And then on the upcoming milestones that you mentioned in the press release, the expanded sales training for the sEEG product line of the Zimmer sales force. How broad does that go? I mean is that basically just the folks that I saw in the robots so doesn’t go beyond that?
Yes. So there’s really two groups involved at Zimmer and selling the devices the robotics group is involved. They were not involved in the sale of the cortical electrodes with obviously, the cortical electrodes aren’t used in conjunction with the robot. But the existing sales force that was selling cortical remains the primary contact for these devices, but they’re also receiving assistance and participation from Zimmer robot group as well.
And sort of the training that’s going to take place is that for both groups or
Sure. Yes. And the full — it will be the full sales force. Obviously, initially really focusing on the sites that were targeted for the initial launch we will have to do broader sales training as we expand the launch of the product.
Okay. Got it. And then lastly for me, and I’ll jump back in queue. But the one – one RF testing maybe with the 15 neurosurgeons was looking for the feedback that you’ve gotten there. I mean, were the comments fairly similar between the neurosurgeons that we’re testing and out? And then what do you have kind of left to do there? I know there’s — I think you’re going to do some more testing there or at or resurgent or something. Can you talk more to that?
Sure. So probably the proper terminology to use for the testing, I was referring to when I said usability, it’s called summative testing, which is included with your submission to the FDA. And basically, what it is, is that a surgeon is put into a room with a system is handed your construction manual and without any assistance, he has to be able to demonstrate his ability to use the system just with the instruction manual in front of them.
And the feedback that we got, so all 15 surgeons were able to do that. The feedback that we’ve gotten along the way is that the system, one of the advantages is its ease of use. So we expect that, that will still be an advantage and feedback that we’ll receive as time goes by.
Yes, we are going to do additional testing regarding everything from the size of the lesions that we’re creating to just performance of the system. So — but many of the — the clinical work that preclinical work that needed to be done is done. What’s left now is validation of things like the software that’s used in the system, test reports being written up. We’re really at the final stages of this, but — now it’s a lot of pay for work. So we just need to get this additional documentation from our key vendors so that we can put it into the 510(k) and get this submitted.
Okay. Got it. That’s all I have for the moment. And thank you very much for taking the questions guys.
Thank you. That appears to be the last question at this time. I would now like to turn the floor back to Dave Rosa for any closing remarks.
Yes. Thanks, operator. I just want to thank everyone for joining us on the call, and I appreciate the time that you spent listening to the progress that the company has made. Have a good rest of the day.
Thank you. This does conclude today’s conference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.
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