BioStem Technologies, Inc. (BSEM) Earnings Call Transcript & Summary

Thank you for standing by. My name is Stan, and I'll be your conference operator today. At this time, I would like to welcome everyone to BioStem Technologies First Quarter 2025 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to Adam Holdsworth, Director of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem Technologies' First Quarter 2025 Financial Results and Corporate Highlights. Leading the call today will be Jason Matuszewski, the company's Chairman and Chief Executive Officer; and Mike Fortunato, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks may contain forward-looking statements based on management's current expectations. These involve inherent risks and uncertainties that could cause the actual results to differ materially from those indicated. These risks are described in our filings with the OTC markets and with the SEC. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made. The company undertakes no obligation to update them unless required by law. Additionally, as discussed in our Q4 2024 earnings call, we are undergoing an SEC review process related to our planned uplisting to NASDAQ. Today's financial results are preliminary and unaudited and final results may change perhaps materially, pending the completion of our financial statement audit, which is predicated on the resolution of SEC comments related to their review of our Form 10. Before 2024 earnings call, we discussed the potential changes to our financial results and particularly revenues as a result of the resolution of SEC comments. Please refer to our prior comments as they continue to apply to our first quarter 2025 results discussed today. Finally, this call also includes references to non-GAAP financial measures. A reconciliation to comparable GAAP measures can be found in our earnings press release posted on the Investor Relations section of BioStem's website. With that, I'd now like to turn the call over to Jason Matuszewski. Jason?

Thank you, Adam, and thank you, all, for joining us. Before we get into our prepared remarks, I want to take a moment to revisit an important topic that we discussed in more detail on our fourth quarter call. A full transcript of that call is available on our Investor Relations section of our website. And as a reminder, we are engaged in an ongoing accounting review related to our distribution agreement with Venture Medical. This includes active dialogue with our auditors and the SEC, specifically around the treatment of bona fide service fees paid to Venture. While we do not believe this impacts the fundamentals of our business or the underlying economics, it could affect how we have presented top line revenue in the past and how we may present it going forward. That said, we do not expect any material changes to net income, adjusted EBITDA or EPS as a result of these discussions or the SEC review process. We are working diligently with our legal and accounting advisers to bring this matter to resolution, and we remain confident in the strength of our business. We appreciate your patience as we complete this important step to ensure our Form 10 is accurate and aligned with all applicable guidance. Now I'm pleased to report that BioStem delivered the strongest first quarter revenue in our company's history, with revenue increasing 73% year-over-year to $72.5 million, marking our fifth consecutive quarter of profitability. We reported GAAP net income of $4.5 million, or $0.27 per share, and an adjusted EBITDA of $7.8 million. Importantly, we ended the quarter with $26.7 million in cash, which is an increase from $22.8 million in Q4. Our commercial performance was driven by the ongoing momentum of our flagship products. VENDAJE AC continues to roll out nationally through our partnership with Venture Medical, and we are seeing meaningful adoption as that product gains traction with our customers in the private office, including mobile, long-term care and skilled nursing sites of service. We continue to see growing clinical and commercial demand for our products powered by BioREtain, driven by the differentiation of that technology and its performance for customers. While we are pleased with our strong year-over-year growth in the first quarter, it's important to acknowledge the impact of the LCD. Although the implementation of the LCD was delayed until January of 2026, the uncertainty that persisted during the quarter created headwinds across the chronic wound care market and impacted our sequential quarterly growth. Despite this challenge, our results clearly demonstrate BioStem's ability to execute and outperform industry trends. Our growing customer base, strong clinical value prop and proactive commercial strategies enabled BioStem to maintain positive momentum. From an operational perspective, we are prioritizing the transition of customers from AmnioWrap2 to VENDAJE AC to drive brand consistency within the VENDAJE product family. This strategy is expected to reduce SG&A costs as VENDAJE AC does not carry licensing fees and will ultimately improve profitability as we scale the business. With regard to revenue, we're focused on 4 core tactics to accelerate growth in the year ahead. First, Venture Medical continues to scale its commercial footprint. With more than 150 sales representatives already operating nationwide, they're aggressively expanding into new geographies, both by adding 1,099 reps in uncovered territories and by building a 40-person direct sales team to deepen coverage. Second, we're seeing strong and expanded adoption of OneView, Venture's proprietary practice management platform. OneView is designed to streamline the entire wound care process, everything from patient insurance verification and clinical documentation to inventory management, reimbursement and post-treatment tracking. It's become a key differentiator for Venture, enabling providers to reduce administrative burden and focus more on patient care. We're also enhancing OneView with new features that further automate workflow and provide integrated clinical and operational insights. These investments are not just about efficiency. They're about strengthening long-term customer loyalty, improving Net Promoter Scores and ultimately increasing customer lifetime value. Third, we're expanding sales efforts along the Eastern Seaboard, where we see strong provider density and favorable market dynamics. This initiative is tightly integrated with OneView, which continues to be a force multiplier for field teams, simplifying documentation, improving claim velocity and driving revenue capture. And fourth, we're actively evaluating acquisition opportunities to diversify our product portfolio and expand our reach across the advanced wound care continuum. We believe strategic M&A can unlock new revenue channels, strengthen our commercial infrastructure and increase shareholder value. On the clinical trial front, we continue to make solid progress across our randomized controlled trials with improved patient enrollment across all 3 active programs. In Q1, we received Institutional Review Board approval, or IRB, to initiate a new clinical trial evaluating BioREtain Amnion Chorion, or BR-AC, for venous leg ulcers. This marks our third prospective randomized clinical trial, which underscores our commitment to generating high-quality evidence that will commercially support our products and demonstrate superior patient outcomes. These trials continue to advance according to plan, with initial data readouts from our first trial anticipated by mid to late 2025 as final results expected in early 2026. In addition to these randomized controlled trials, we are actively exploring partnering with Venture Medical on their Project [indiscernible] program, which is a large-scale patient registry being designed to collect real-world data on the use of our products for the treatment of patients with a variety of chronic wound indications. Further strengthening our patent portfolio, we were issued notice of allowance for 2 new patent applications in Q1. Our intellectual property portfolio now includes 55 issued and 52 pending patents, providing protection for our proprietary technology and ensuring a sustainable competitive advantage in placental-derived technologies. Finally, on the capital markets front, we continue to make progress toward our planned uplisting to NASDAQ. We remain in active discussions with the SEC regarding our Form 10 registration. While this process takes time, we believe our submission was well positioned for approval once all comments are resolved. Achieving a NASDAQ listing is a major milestone for BioStem and will help broaden our shareholder base, increase liquidity and enhance our visibility within the investment community. Overall, we are extremely pleased with our Q1 performance and believe BioStem is well positioned for continued success as we advance through 2025. With that, I'll turn the call over to Mike Fortunato for a more detailed review of our financial results.

Thank you, Jason, and good afternoon, everyone. We are very encouraged by our results in the first quarter of 2025. Net revenue was $72.5 million compared to $41.9 million in Q1 of 2024, representing a 73% increase. This growth was primarily driven by continued strength in our wound care portfolio led by VENDAJE AC. Gross profit was $71.7 million or 99% of net revenue compared to $39.7 million or 95% of net revenue in Q1 of 2024. The increase in gross profit margin reflects product mix benefits and scale efficiencies, particularly as VENDAJE AC continues to gain traction. Importantly, VENDAJE AC does not carry licensing fees, which supports margin expansion. Operating expenses for Q1 were $66.4 million, up from $35.1 million in the prior year period. This increase reflects investments in head count, increased bona fide service fees due to the increase in sales of our products through our distribution channel, higher research and development costs and higher compensation costs as we continue to scale our business. As Jason mentioned, GAAP net income for the quarter was $4.5 million or $0.27 per share compared to $3.3 million or $0.20 per share in Q1 of 2024. Adjusted EBITDA was $7.8 million compared to $7.9 million in the same period last year. We are pleased to have delivered positive GAAP net income for the fifth consecutive quarter, which underscores our continued focus on operating discipline and profitability as we scale. Our strong balance sheet and improving cash flow positions us well to fund our growth going forward. Despite the LCD-related uncertainty that has impacted the broader market and our results, BioStem's business model remains highly resilient. We believe that our strong financial position, deepening partnership with Venture Medical and ongoing capital markets initiatives position us well to continue delivering strong financial performance in the quarters ahead. With that, I'll turn the call back over to Jason for closing remarks.

Thank you, Mike. In closing, BioStem delivered the strongest first quarter revenue in the company's history, with revenue increasing 73% year-over-year to $72.5 million and marking our fifth consecutive quarter of profitability as we continue to build positive momentum across our business. We continue to strengthen our balance sheet now with $26.7 million in cash, which was an increase from $22.8 million in Q4. Our commercial engine remains strong, supported by the ongoing nationwide adoption of VENDAJE AC. Patient enrollment in our ongoing clinical trials is progressing as expected and will generate clinical data to support broader market adoption and payer coverage. We believe BioStem is well positioned for 2025 as we focus on delivering strong results and creating meaningful value for all stakeholders. Looking ahead, we will remain focused on growing our VENDAJE AC footprint through Venture Medical's expanded coverage, driving profitability through operational efficiencies, advancing our clinical validation efforts and completing the NASDAQ uplisting process. We are excited about the opportunities ahead and look forward to updating our shareholders on future developments. I want to thank our dedicated employees in the Stem, our partners at Venture Medical and our shareholders for your continued support. With that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Bruce Jackson from The Benchmark Company.

I wondered if we could get a quick update on the enrollment for the 2 diabetic foot ulcer trials and when we might see some data?

Sure, Bruce. So thanks again for calling in. We -- for the first DFU study, we are almost completed with patient enrollment. We anticipate final enrollment by the end of this month. And so hoping to look at data readouts in the back half of this year. The second trial is moving along and hoping to get full enrollment by mid to late Q3, with readouts in the beginning of next year. And the VOU study, we just initiated enrollment. So we anticipate getting hopefully towards final enrollment by the end of this year and readouts midway through next year.

Okay. Great. And then one follow-up question. Are you going to be collecting any cost effectiveness data?

We anticipate on doing a health economics analysis once we complete the data set. And so, that would be looking at analyzing the existing trial data and then kind of doing a health economics analysis to kind of cross reference some of the cost effectiveness.

Okay. Great. And then one last question for me. You mentioned that you're expanding -- not you, but your partners expanding the geographic coverage for sales. Roughly, what percentage of the country do you have covered right now?

So in -- as far as reimbursement coverage or specific sales footprint coverage?

Sales footprint coverage, please?

Yes. So right now, we're very strong, I would say, West in the Mississippi. We are just starting to look at adding coverage on the East Coast of the United States, kind of what we alluded to in the call earlier. Venture Medical, like we mentioned, is bringing on 40 direct representatives, and they put in place 3 area sales directors, East, Central and West. And so we're looking to drive more adoption on the East Coast, where we don't have a significant amount of coverage currently.

Our next question comes from the line of Shiva Gajula, private investor.

So I just wanted to ask 2 questions. Regarding operating expenses, it has increased nearly 90% year-on-year. So what are the main cost drivers? And how are you controlling SG&A and distribution costs?

Sure. I'll let Mike answer that one.

Sure, sure. So basically, there's the scaling up of the business that's happening as a result of the increase in revenue is part of it. And also legal fees with respect to the SEC uplisting and NASDAQ uplisting and SEC legal costs.

Okay. So I have one more question, like are the margins sustainable at the current 99% gross margin level? Or what are the initiatives that are in place to maintain or improve the EBITDA margins?

So on the gross margin, the short answer is yes. So basically, as Jason mentioned, we're moving more towards VENDAJE AC, which does not carry with it a license fee. So without the licensing fee hitting cost of revenue, the margin should stay relatively high. And I'm sorry, I missed your second question.

Yes. What are the initiatives that are in place to maintain or improve the EBITDA margin?

Yes. So I think just cost containment, obviously, and we'll continue to be disciplined around management of expenses. I think that's the first step. We've always run a lean ship here, and I think we'll continue to do that as much as possible.

Okay. And what is your updated full year revenue guidance? Anything in percentage basis? And also like the Venture Medical, most of the portion is going to Venture Medical. So in the upcoming quarters, like what are the plans to minimize or any other way to reduce?

I'm sorry, I had a hard time understanding your question. Can you repeat it?

Yes. I'm asking about the full year guidance for 2025? And also, do you have any plans to reduce the percentage of the revenue going to the Venture Medical?

Sorry, I'm still having a hard time understanding. I apologize.

I think the question was around, are we anticipating or planning on giving any guidance around revenue or EBITDA margin. At this time, no, we are not planning on giving any guidance. The second piece around EBITDA margin, I think, is what you answered, right? Correct?

Yes, especially about the Venture Medical. The -- most of the portion from the marketing and sales going to be Venture Medical, right? I just wanted to check is there any outlook --

So currently, our core focus is specifically in the physician office segment, looking at long-term care skilled nursing and mobile wound care. And that partnership with Venture Medical is really driving our success and sales success and the adoption of VENDAJE AC across those sites of service. So at this time, specifically around those sites of service, we're continuing to utilize Venture and the OneView platform for really continuing to roll those things out. We anticipate, as we mentioned in the call, expanding access and coverage around the East Coast of the United States. And I think the OneView platform is going to really be instrumental in driving adoption and success there. We are, as we mentioned, looking at M&A opportunities. And with that, maybe we will also help, to your point, diversify risk around our single commercial partner. But looking to -- we're looking at opportunities along the way as we go here throughout this year.

Yes. Thanks [indiscernible]. And also one more last question. So the revenue is down compared to the Q1 with the Q4 2024. So is it because of any seasonality or any other reason related to supply chain or any other issues?

No, it's a good question. I mean I think the biggest challenge, obviously, is we had 2 scenarios where the potential LCD would have gone into effect the February date and the April date. So we had a lot of consternation around providers concerned about utilizing product and then running into a situation where if they're applying product for a course of therapy over 10 weeks that, ultimately, that patient would run into a situation where they would have to cross them over to another product, or just this uncertainty of when my claims get paid, and there was kind of a lot of unknown and uncertainty. So the dialogue that we had with providers is that they -- some of them pulled back on utilization of skin substitutes in general. And I think we see that across the marketplace. Along with our peers, we all -- due to the uncertainty, all had similar pullbacks within the marketplace. But now as we mentioned, that has moved out to Jan 1, 2026. So we have a clear line of sight. We're going to continue to work on getting the clinical data for CMS and HHS to make sure that, if they do come back out with -- or this LCD goes into effect with the covered and noncovered products, that we'll be able to have a dialogue with them before that November date and be able to satisfy those requirements to make sure our products are on the covered list.

Got it. And can you also give an update on the enrollment and the time lines for the DFU and VLU clinical trials and how those might impact the reimbursement or the market expansion?

How they will impact it in what context, sorry?

In the context of reimbursement or the market expansion?

I mean, right now, the goal is to get that clinical data to demonstrate why our product should be "on the covered list of the current LCD that hasn't gone into effect that potentially may go into effect on January 1, 2026". And so we're looking at our product versus standard of care is the second leg of the arm of those trials. And so our goal is to hopefully demonstrate the product's efficacy and make sure that CMS and the MACs acknowledge the efficacy and the superiority of BioREtain to make sure we meet that covered list requirement.

Got it. So regarding the reimbursement, the Medicare and other areas, like, are there any improvements? Any -- are you planning to add any more products to the Medicare and other benefits area?

No, not at this time. Our core focus is really supporting the VENDAJE product line. So VENDAJE, VENDAJE AC and VENDAJE OPTIC. And so that's kind of what we've been core focused on. As we mentioned in the call, we are transitioning away from AmnioWrap2 and making sure that we're mitigating some of the licensing fee, which will hopefully improve SG&A costs and improve the bottom line as well. But right now, our core, at least in the Physician Office segment, specifically mobile wound care, long-term care and skilled nursing is really the VENDAJE product family.

Okay. Can I know the breakdown Q1 sales by product, like how much percentage is VENDAJE AC and AmnioWrap2?

Yes. Currently, we don't disclose specific product breakdown at this time.

No problem. And the last question. Is there any expectation that you give on the NASDAQ listing, like how long it might take?

Yes. So as we mentioned in the press release, we're still working through it with the SEC process and the [ comment ] letter. I can't really speculate on the timing. I know we've had some productive conversations with them and our auditors as well as SEC counsel. But it would be just speculation for me on what time frame it would be.

Yes. And [ may I know ] the market share that is for the BioStem, the overall wound care perspective, how much market share currently we are grabbing?

Across the global market share of advanced wound care, I mean, or a specific subset? I mean, it's a pretty vast question.

I'm sorry, just curious to know like how much -- even in the future, how much percentage you are planning -- you are targeting?

Yes. I mean I think our goal is to -- like I mentioned earlier, our goal with Venture Medical is to really focus on the Physician Office segment. And so we're continuing to expand our footprint. We have a strong foothold on the West Coast, but our goal is to expand on the East Coast and continue to execute in and around that. Next question?

[Operator Instructions] Our final question comes from the line of Erik Voss from Mission Vertical.

Congratulations on another good quarter, guys. I had a number of questions. Some of them you answered already. It sounds like the diabetic foot ulcer and the leg ulcer take somewhere around the 10 weeks. I'm trying to understand how much of Q1 was affected by these LCD deadlines first being pushed to April and then into next year? Do you have a sense for the impact in Q1 of that -- of those 2 events?

Yes. Internally, we've been using some metrics. I think the easiest indicator is insurance verification requests or IVRs. We definitely saw some downturn in Q1, especially as we got closer to the Feb date and the April date. And then as soon as we -- the April date kind of lifted off, we definitely started seeing an uptick in IVRs in Q2. So we do kind of have a -- track an internal metric, and that's something that we've been kind of following to kind of see how big of an impact. Also, frankly, Venture sent out customer surveys on several cadences and just really kind of paying the customers on what are their top 3 concerns. And some of the larger mobile wound care practices were becoming a little bit resilient -- or excuse me, hesitant to start adopting a patient on a skin substitute as we got closer to those LCD dates. And so, now that those kind of are behind us, like I said, we've been tracking IVR submissions and see some good levels coming back.

Brilliant. So that was my second question because this kind of affects Q2, the first, I guess, a couple of weeks as well, but you immediately, after this got pushed, saw kind of a recovery in the trends that you were on before the LCD was announced?

Yes, that is correct, Erik.

Okay. Very good. And then the Form 10, just a follow-up on that, Mike, we're down to the last 1 or 2 issues on that. And...

Yes.

Is that right?

That's right. It has to do with -- as we disclosed last quarter, it has to do with the placement geography of the payments we make to Venture to commercialize the product. And the question becomes whether it's a gross revenue versus a net. We think we have a really good position. We had productive calls last week. And so the fact that the SEC is still working through it, I mean, it's a pretty complex issue. And so we're getting through it, but I do believe we have the right -- our auditors support us, I think it's in the right place. So hopefully, we'll hear something relatively soon.

Yes. And then last question, just on that again. How long does it take to submit the Form 10, obviously, because you got -- you just brought your numbers out again? And so, is that a day [ turnover ], is that a week turnaround? What is that?

Yes. We're actually actively working on it offline. I've already have a draft Form 10 with the March numbers. The numbers that we currently have there become still in about 2 days here. So we've got the Q1 numbers updated. We've got the cap table and beneficial ownership table. So we're actively working on it getting it ready to go here. So hopefully, once we hear back from the SEC, it will be a matter of -- we've got to get the auditors through it. I don't want to overpromise, but they have a review process. They'll have to get through it. And obviously, it will depend on the answer that the SEC gives us, right? So if there's a net revenue recognition, we'll have to do quickly. It's not a complex adjustment to make, but there will be some time to revise disclosures, et cetera. So I would say, -- and I hate to put a time frame on it, because I have no idea when I'm getting the SEC comments back or the decision, but it shouldn't be that much longer. We appreciate you understood.

Yes. Well, congratulations again on a good quarter, guys.

I will now turn the call back over to Jason Matuszewski for closing remarks.

Well, thank you again, everybody, for your thoughtful questions and your continued interest in BioStem. We're incredibly proud of our performance this quarter, the strongest Q1 in company history, reflecting not only the growing demand of our products, but also the strength of our operational execution and the resilience of our business model, even amid reimbursement uncertainty, like you all just asked and around your [ guys' ] questions. The traction we're seeing with VENDAJE AC across private practice, mobile wound care and long-term care settings affirms the clinical performance of our BioREtain technology and the power of our distribution partnership with Venture Medical. At the same time, we continue to strengthen our balance sheet, scale our infrastructure and invest in clinical validation, all of which are essential for building a durable high-growth business. As we move through 2025, we remain focused on 4 key priorities: expanding access to VENDAJE AC; driving operational efficiencies; advancing our clinical trials; and completing our uplisting to NASDAQ. Each of these pillars support our long-term mission to deliver innovative evidence-based solutions that improve healing and outcomes for patients with chronic wounds. We appreciate your support and look forward to keeping you guys all updated on our continued progress. Thank you, and have a good evening.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.