electroCore, Inc. (ECOR) Earnings Call Transcript & Summary

This podcast for informational purposes only and is not provided as financial, legal or any other advice. The information is not investment advice or an offer to buy or sell any securities or make an investment. The views expressed by guest speakers are their own and any reference to third-party products, services or information does not constitute an endorsement thereof by SNN or its affiliates. SNN expressly disclaims all liability for any individual's use of the information presented in this podcast. Welcome to the due diligence series here on the Planet MicroCap podcast. I'm your host, Robert Kraft. My guest today is Dan Goldberger. He's the CEO of electroCore. It's a publicly traded company. The symbol is ECOR on NASDAQ. electroCore is a commercial-stage neuromodulation company developing a suite of non-invasive vagus nerve stimulation devices, delivering a two-minute therapy session designed to rebalance the autonomic nervous system. Built around its nVNS platform, the company operates across three channels, prescription medical devices for headache and migraine, the fast-growing Truvaga direct-to-consumer wellness brand and a specialized military and government division, built around its ruggedized TAC-STIM product. Founded in 2006 as a noninvasive alternative to implanted vagus nerve stimulators, electroCore has evolved into a multi-indication business with 7 FDA authorizations for headache, serving major customers like the U.S. Department of Veterans Affairs and the U.K.'s National Health Service. I invited Dan to this show to discuss all of this as well as how the nVNS platform works and the science behind vagus nerve modulation, electroCore's evolution from implanted alternatives to multichannel neuromodulation, the prescription business model across the VA, NHS and managed care, Truvaga's growth in the wellness market and why awareness is the primary competitor, the TAC-STIM military program and its role as a meaningful revenue stream, strategic priorities heading into 2026, profitability, capital allocation and commercial execution, challenges around insurance coverage and overcoming the chicken and the egg problem and the path toward becoming a $150 million to $200 million business and the long-term vision for the platform. With that, pleased to join my conversation with Dan Goldberger, CEO of electroCore. Dan, thank you for joining me today. How are you doing?

I'm doing very well. Thank you, Robert. Really big fan of what you do with Planet MicroCap. So thrilled to have this opportunity.

Awesome. So that's very kind of you to say. And I guess I won't totally grill you, "No, I'm just kidding." But Dan, I really do appreciate it. And you were at our event back in Vegas this year. And look, I wanted to invite you on to kind of get a progress report. I wanted to give a full picture of what the company does because I don't think -- we may have done the short form one, but either way, I wanted to give folks kind of a more broad picture of what's going on at electroCore, both leading up to today and potentially what some of your goals are moving forward. So with that, for those that have no familiarity with electroCore whatsoever, what would you say is that one line that best describes the company?

ElectroCore has a growing suite of noninvasive nerve stimulation products for health and wellness and for certain medical conditions. So that's the overview. And we're growing rapidly, and we're entering new channels, and it's a super exciting time for the company. Did I mention that the ticker is ECOR on NASDAQ?

Well, I did at the beginning, so don't worry about it. But -- so okay, so that was a great little start there. So I mean, let's take a little bit of look back at the company's history and what let us look at where we're at today. So when was the company founded? And what was the original thesis for its founding?

So great question. This company is an overnight success that was started 20 years ago in 2006. The founders of the company, Peter Staats is a physician, Thomas Errico is a physician, Charles Theofilos is a physician. All 3 of them have -- are physician entrepreneurs, I should have said, and have had business success alongside of their academic and medical practices. Implanted nerve stimulators and specifically implanted vagus nerve stimulators were first commercialized in the 1990s for pain indications and the vagus nerve stimulators are specifically on label for treating epilepsy and depression. And the founders of the company were looking at less invasive or noninvasive ways to replace the implant. And the implant involves a minor surgery, but it's still surgery. The physical device is relatively expensive. They don't always work. There are some complications. And so the thought was, can we do this less invasively. Early clinical trials were directed towards epilepsy and immune system response, allergy response. There was a significant trial started to treat epilepsy and more and more comments came back that it's helping me with my epilepsy, but my headache went away. And so the company anecdotally pivoted to headache and in 2017, got our first FDA authorization through a de novo process to treat cluster headache. Commercial operations started in 2017, 2018. We've now got, I believe, it's 7 indications around different forms of headache, migraine headache, cluster headache, prevention, acute treatment, adults and in adolescents. We've also gotten breakthrough designation to treat the symptoms of PTSD, and we have a program working to get an authorization in PTSD. A couple of years ago, we also launched some lower energy products into the health and wellness market for stress, for sleep, for focus and attention. And that business is smaller today, but it's growing very, very rapidly.

Very good. So I mean, what would you say makes the noninvasive vagus nerve stimulation, based on what you guys do for all these various indications. What would you say makes it unique and different compared to some of your peers and/or maybe other standards of care that are available right now?

So great question. Our device is -- it's a personal use device. It's handheld. It's portable. It only takes 2 minutes to deliver that nerve stimulation. We have a large and growing body of clinical research publications that talk about effectiveness certainly in headache, but also in behavioral health issues like PTSD. And there was publications earlier this year in mild traumatic brain injuries or concussion. And then on the health and wellness side, more and more biohackers and longevity spokespeople are talking about and tinkering with the benefits sort of -- real-life benefits around managing stress, around getting better quality sleep, around focus and attention. The Air Force and Army, in particular, have done some really exciting work on those areas, focus and attention and sleep, but it's classified. So I'm not allowed to talk about it.

Absolutely. So let's also talk core customer base. From my understanding, it's available to everybody, but you had -- you had previously a contract with the VA and then a new contract with VA. Tell us a little bit more about who's actually using your products right now.

Right. So on the prescription side, the VA hospital system is our largest customer. In the VA hospital system, the therapy is free to the patients. Doctor or a nurse writes a prescription. We get a purchase order from the VA hospital system. We ship it directly to the patient. We have a customer service organization that helps with in service, whether it's with YouTube videos or Zoom call or phone call. And then we get paid directly by the hospital. The National Health Service in the United Kingdom is our second largest customer, same business model. It's free to headache patients in the U.K., and we get paid by NHS. We talked about on our conference call that we -- earlier this year, I think it was in September, we went on contract with a large regional managed care organization. I'm not allowed to say the name. And that business is very similar, but it's a little bit different because in the managed care system, the members have deductibles and co-pays. And so we work with a durable medical equipment distributor, Joerns. What Joerns does is they administer the prescription. They figure out which benefit plan, where that particular individual is on co-pays. They collect from the insurer, they collect from the customer and then they give us most of the money that they collect and they keep a little bit as their fee for that adjudication service. So all in, the VA hospital system is 9.5 million covered lives. The other regional insurers like the one I just described are probably another 20 million covered lives. So we still have a lot of work to do on getting coverage for headache. In contrast, we launched the Truvaga brand a few years ago. Truvaga is a wellness product. So it's sold directly to consumers. Most of our sales are through an e-commerce website, www.truvaga.com. You can go there, hit the buy now button and for $499, get our Truvaga Plus, which is a mobile app-enabled consumer product. It's lower energy than our prescription devices, but it works beautifully and consumers really like that mobile app functionality. And that business has been growing very rapidly over the last 3 years -- 2 years, really.

Absolutely. So what's some of the hurdles in getting more regional coverage for -- just to get your product in front of you?

Yes. So for better or worse, our products have been classified as durable medical equipment. And with most of the carriers, including CMS and Medicare, it's a chicken and egg problem, right? They want to see claims data, but you can't really get claims data until you have some coverage. And so we've been building a database of not just safety and effectiveness, but also health care economics.

But how many years do they need? I mean you've been commercial, we forget 2017, 2018, it's long enough to go now, I believe 8 years of data, like what's going on -- clinical data -- I don't understand.

I don't -- well, welcome to my life. And we go there and we show them 3 years of health care economics data from NICE in the United Kingdom, and they say, that's great, come back with 4 years. There was actually a paper published out of Stanford that said that was talking about exactly this problem that medical devices that had gotten breakthrough designation from the FDA, how long it took from that breakthrough designation by FDA to actually get coverage, Medicare coverage through CMS and the mean is 7 years. That's where we are. So in the meantime, we're building a profitable, fast-growing business where we do have coverage. And we'll get to it. We'll get to that tipping point, but it always seems to be just over the horizon.

No, listen, Bureaucracy is...

Fun...

It's fun with every business, but...

Every business.

Especially medtech is just peachy as always, to say the least. All right. Well, let's talk VA specifically because, look, the #1 thing that most investors want to see with any business, public or not is predictable revenue. Obviously, they know that you had this previous contract with them. I think there was maybe a fear of -- with all the budget cuts and DOGE and everything going on at the end of '24. But correct me if I'm wrong, was the contract renewed in March of this year? Talk a little bit more about that.

So yes, technically, we started down the renewal path. There was a lot of -- as you know, there was a lot of distraction in the federal government earlier this year. I don't remember the technical reasons, but we ended up with a completely new 5-year contract instead of -- instead of merely getting an extension of the original 3-year contract. The pricing in our 5-year -- I mean 5-year contract was improved a little bit, but it just removed that overhang, that uncertainty about why it's taking so long to get the contract renewed. And since then, things have been going very, very smoothly in that channel on the supply chain side.

Absolutely. So I mean, let's also talk a little bit more about Truvaga. This is pretty interesting. I mean, tell us a little bit more about the product itself. And I'm curious as to who you're really competing with on the -- like, for instance, I mean, this is totally different, but I'm a runner, and I use some -- I've tried out those -- the compression stuff that's supposed to activate your nerves and the muscle, all that good stuff. Obviously, that's for the legs. What we're talking about is for headaches, migraine and stuff like that. So who's kind of your main competition on that front on the direct-to-consumer side?

So really, it's a huge blue ocean opportunity. I think our competition fundamentally is awareness. the benefits....

and Ibuprofen, maybe.

Ibuprofen. The holistic benefits of vagus nerve stimulation have been known for centuries. There's a lot of writings from Asia, for example, meditation is used, cold plunge is used. And there are various yoga maneuvers that are designed to stimulate the vagus nerve. But the fundamental benefits of stimulating the vagus nerve are that it restores balance. And at the risk of oversimplifying, we all know what it feels like to be in that sort of fight-or-flight state, and we all know what it feels like to be in that rest and digest state. And what stimulating the vagus nerve does is it brings you back to balance. So in other words, if you're anxious, you're feeling that fight-or-flight sensations, stimulating the vagus nerve will bring you back down. If you're lethargic, if you're drowsy, stimulating the vagus nerve will bring you back up again. And so that's the fundamental function of the device and the benefit that you get. Now you can get there with meditation, you can get there with yoga. That takes time and effort and a little bit of technique or you can use our gadget. It's a 2-minute stimulation of the vagus nerve and you get for many people, the same benefit that you get from the traditional techniques of getting balance in your nervous system. This is mine. It's a little handheld device. There are 2 electrodes on the business end. There's a power button. It talks to my mobile app. We train people to palpate the neck. You find your carotid artery. Most of us can feel it pulsing. And then you place the electrodes directly over that location. The vagus nerve travels in that same sheath with the carotid artery. So it's pretty easy to physically place it and then you hold it in place for 2 minutes. It will time out of 2 minutes, but obviously, if it's not comfortable, you just take it away.

Interesting. And the main goal for that is to really just reduce pain, migraine, and that's the primary...

On prescription side, it's headache, it's PTSD, it's concussion. But on the direct-to-consumer side, it's these health and wellness opportunities. We talk about stress, we talk about quality of sleep. To get real pain reduction, you need to move up to our prescription strength device, although between you and me, you can get the same benefit as our prescription strength device if you do 2 or 3 sessions with our over-the-counter device. In other words, 2 minutes is what we label it for, but you can give yourself a second or a third dose and get to that prescription strength efficacy, but I didn't say that.

For sure. I mean, obviously, there's a lot of blue sky opportunities, great. I mean, have there been conversations with sports teams and leagues and all that kind of stuff as well? Because I mean, I would assume they are probably going to evaluate any potential gadget that can help.

Right. The most surprising uptake has been in our active duty military. Air Force Research Laboratories has been working with neurostimulation for these attributes for focus attention, sleep, stress for a long time, probably for 20 years. About 5 years ago, they found us, and we didn't even realize it, but they began doing studies with earlier versions of our device. They have published a little bit. They published about language learning. They publish about drone pilots. And so a little bit about drone pilots, right? They're sitting in a skiff, a secure room, they're staring at video screens, and they have a pot of coffee. They've got a fridge full of energy drinks and they have one of these sitting on the bench. And what Air Force found was that the drone pilots were more accurate and responding faster on target identification when they had access when they were using the nerve stimulator. That was the primary benefit, and they published on this. The secondary benefit, which was unexpected, is that these kids are using less caffeine, less stimulants when they're on shift. And then they don't have to self-medicate when they come off shift in order to relax. And so there was a quality of life benefit that they've seen. So fast forward to today, the Air Force gave us a grant to take our standard consumer device put it in a mil-spec heavier vibration-proof, dustproof water-resistant package that we now call TAC-STIM, and that's a significant revenue stream for us. So it's only available to active duty military. Several Army Special Forces units are using it. Air Force is deploying it, for example, at Air Mobility Command, which are the big planes that go for hours and hours, the long-distance bombers are using it. So -- and then if we could talk about it, right, obviously, there's civilian crossover to the gamer community to first responders. You mentioned elite athletes. We are in the training room with several football teams, with several hockey teams, with several baseball teams, both at the professional level and at the division 1 level, but they never let us talk about it, right?

I guess -- but another thing that maybe think of is like it almost seems like this is kind of a first-generation looking device. Sorry, we're talking -- for those watching on YouTube, you'll be able to see it, but it looks like a first-generation kind of device. Is there already things going on in the back end to make it even more or less bulky? I mean not that -- if it works, it works, right? Like that's one thing. But like I'm sure you're also maybe hearing from some consumer brands of like, all right, cool, it works, great. We're seeing the -- but can we Apple it up a little bit to make it like that? I mean what's going on that front?

Yes. And that's a conversation that we have in the boardroom. You're going to see a refresh of the mobile app, for example, we've got great ideas to do exactly what you said. But I'm dragging my feet a little bit on the R&D spend so that we can get to profitability, right? Our focus in 2026 is to get to profitability. And R&D, we've got great ideas. I'd love to be spending more, but not right now.

So on that front, when it comes to allocation and capital allocation, the company in '25 did an acquisition. You bought NeuroMetrix Quell platform. Tell us a little about why this acquisition and why now? Why now? I mean this year?

Yes. So the Quell for fibromyalgia product that we acquired is an exquisite technology that was inside of a struggling enterprise. The clinical data around treating fibromyalgia is fantastic. And since we took it over in May, the revenue has grown very, very rapidly. And all we're doing is selling it. We added it to our VA hospital contract. That process went pretty smoothly. And so we've got salespeople in the VA hospital system and just added it to their bag, and it started selling very, very well. It's unfortunate what happened to the parent company and the financial distress that the company was in. But out of their distress, we got a very, very nice asset for a very, very low acquisition price. And it fits into our distribution panel, that distribution channel is very, very smoothly. So -- and it is also a noninvasive nerve stimulator. And so there's a technology adjacency, there's clinical adjacency, there's a distribution adjacency that all makes it look very, very exciting right now.

Absolutely. All right. Dan, I'm going to now transition to some of my devil's "advocitty" type questions. Everything is all exciting and that but we also got to come back to earth a little bit. But what would you say -- and I ask this to every CEO on this series here. But what would you say after you were at our conference in Vegas. You've done the dog and pony show, you meet with a ton of investors at all the time, catching up a shareholders and investors, all that stuff. What would you say even after you get potentially new investors, new calls, new meetings, all that stuff. After they've done their research, done their due diligence a little bit, what would you say investors still get most confused about when trying to put their thesis together around electroCore?

So the cash runway dilution, when will the company be generating enough cash flow to be self-sustaining? I think management has some credibility around our forecasts -- some credibility challenges around the guidance we've been giving in our forecasts. And so we're focusing on execution. And I'm very proud of the operating results that we've posted, but those operating results haven't been good enough to satisfy the investing community. I feel like we are unfairly in the dog house, given our revenue growth, given our gross margin profile, given the discipline around operating expenses, but we're still in the dog house.

For sure. I mean, in your opinion, what are -- what's the company doing in order to hit some of those execution goals that you want to see and it sounds like investors want to see as well.

So most of our investment in the second half of this year, beginning of next year is going to be around sales and marketing on the -- in the prescription channel, we need more feet on the street to drive penetration in the VA to drive penetration at the Kaiser system that we just put on contract. We need -- we're spending a little bit on market access, right, to expand insurance coverage for our prescription products. And then on the consumer side, it really is largely driven by media spending, whether that's social media or sponsoring podcasts or signing up affiliates and the return on advertising spend keeps getting better and better.

I mean, amongst all those initiatives, what would you say -- and tell me to [ F*** off ] if I'm asking -- if it's too forward thinking -- too forward-looking. But of all these initiatives that you're looking to achieve, what would you say of all of them is like, all right, we get this minimum, even just this one, that's the catalyst where you'll see that self-sustaining growth and put all your...

Yes. So for 2026, -- it's more -- it's adding sales assets in our prescription channel. That's a very profitable business. We know the model. We're 2% penetrated in the VA hospital system. So adding sales assets to get to 4%, 5% or 6% penetration, that's execution, not very risky. Adding sales assets to focus on the Kaiser opportunity where we just went on contract. That's going to be a slower burn because it always takes longer to get -- we have 8 or 9 or 10 patients that have -- that are starting to generate revenue in that system. So tiny numbers, but we're getting that flywheel going. Beyond that, it's additional coverage decisions, but that's really a 2027 catalyst to look at, getting label extensions, especially the PTSD. That's something that I'm optimistic will happen in 2026. If we can get that label extension, that increases the total addressable market for our existing prescription products. And then in parallel, the consumer opportunity is huge, but it needs to get to scale in order to be profitable.

Is there -- I'd also love to better understand electroCore's moat around each of these verticals. What's stopping -- obviously, there's FDA and all that kind of stuff. But I would assume with the kind of the heat around looking for alternative methods to migraine this -- like there's a lot of folks that are working on this problem as well. So what's kind of the moat around what you're doing with electroCore and all your various products and services that prevents maybe somebody with a better mousetrap from entering the market or something like that?

Yes. So look, our primary protection are patents. We have a large and growing patent portfolio. A European competitor filed a declaratory judgment basically saying that they do not infringe our patents earlier this year. I think I want to say it was May or June. So they filed a declaratory judgment in Federal Court in the District of New Jersey. And we countersued them with a dozen of our patents, trademark issues, restraint of trade issues. So I really -- the lawyers won't let me comment on it, but I really don't understand why they decided to be aggressive and try to get a declaratory judgment. So patents are our primary defense. They're being tested now. Obviously, our lawyers say we're going to win in a slam duck. We'll see. Beyond patents, it's execution, right? As you said, the FDA clearance process, the contracting process with different channels, all of those are -- take years to execute properly. And so that becomes another level of protection. And then the third level of protection is doing well, right? As we get more penetration, as our distribution channels become more compelling, it's harder for somebody to break in, but it also creates opportunities like this NeuroMetrix acquisition to add product to our portfolio.

Absolutely. So what's also stopping one of these larger med tech companies like saying, right, again, we get it. This is kind of the first line of defense because really, that's how you're positioning, right? It's like, all right, this is the first thing you try when you have chronic migraines, let's give this a shot. If it's not working, we'll go to something more intense. Why isn't -- aren't some of these larger med tech saying, "Hey, buy or partner with you in order to get more penetration."

Yes. So to be clear, nobody is knocking on the door right now. But I think it's just size, right? We're now at a size where this product line would be accretive for one of the obvious consolidators, whether they're small or midsize, right? With our gross margin profile, you take out the C-suite and the business is incredibly profitable. So I think that will happen, but I don't think we're big enough yet to make it worth somebody's while.

Absolutely. Well, aside from that happening, you really answered a ton of my questions here today. I think we've covered quite a bit. But my final question I always like to ask everybody on here is, assuming you don't get taken out in the next 1 or 2 years, where -- from what you can tell us, where do you see the company in 3 to 5 years? Where you want it to be in 3 to 5 years? And what would you say are some of the inflection points that will get you there?

Yes. So look, the Board and I are all about building a great company. We've got tremendous momentum right now. I think our core franchise in vagus nerve stimulation is going to continue to grow. We haven't given guidance for 2026 yet. But if you look at our 5-year CAGR, there's every reason to believe that our core business will continue to grow at that rate. The consumer business, the Truvaga brand is going to grow faster than that. We have to balance how fast -- how we can invest in that business with our path to profitability. But once we turn the corner on profitability, I think we'll have more resources to invest in that blue ocean opportunity, label extensions increase the total addressable market. So every reason to believe that this is going to be a $150 million, $200 million revenue business within that planning horizon.

All right. Well, Dan, I think we're there. Did I miss anything? Was there anything else that you maybe wanted to for an investor audience to know regarding...

I know -- you gave me a great opportunity and the ticker is ECOR on NASDAQ.

Very cool. All right. Well, Dan, with that, where can our audience go and find more information on electroCore?

Electrocore.com, sec.gov. You can look at our commercial sites at gammacore.com or truvaga.com or quell.com.

Very cool. Well, Dan, thanks so much for joining me today. I really do appreciate.

Thank you, Robert. Really appreciate the opportunity. And I said it before, you and Planet Micro do a great job of creating a platform for good ideas. So keep doing it.

Absolutely. Really appreciate it. It was very kind of you. Good luck. Stay safe. We're recordings before Thanksgiving, so have a nice Thanksgiving and....

Happy holidays.

Happy holidays, too.