Milestone Scientific Inc. (MLSS) Earnings Call Transcript & Summary

Greetings, and welcome to the Milestone Scientific Summer Investor Webcast. It is now my pleasure to introduce your host, Mr. Osser. Thank you. You may begin.

Thank you very much, and welcome to Milestone Scientific's presentation. I am the Interim CEO of Milestone Scientific. I'd like you to review first the safe harbor statement. And as you're doing that, we will move ahead given the limited amount of time into our present focus of Milestone Scientific, which is the epidural sector, primarily in the United States and Europe, in labor and delivery. That is our first entree into medical. We have a very broad platform. We are not specifically an epidural company. We have chosen epidural out of the many areas that we can enter with our razor-razorblade technology given the high cost of training which is a 2-year process generally and requires approximately 90 injections in vivo in actual women in labor in order to reach a stage where the anesthesiologist can go out and perform the epidural. The epidural in labor and delivery is the only recourse for pain management. One cannot use radiation because there is a fetus and can harm the fetus. So either one has an epidural in labor and delivery or one has no pain management. The epidural in the United States, and we'll deal with U.S. numbers, is a -- is done with a technology that was invented in 1860. It is the hypodermic syringe. The epidural in the United States out of the 4 million women that give birth, approximately 2.4 million women have the procedure. The reason for that is that the procedure has a high degree of morbidity, which is why we entered the epidural market first along with the teaching curve. The epidural has a 4.5% to 5% morbidity rate. And this is really worldwide, and it's a mix between new residents and top professors. So the morbidity rate is very high, has a very significant cost factor to the hospital. And therefore, between that and the long curve for education, the high morbidity factor is something that Milestone Scientific has entered the market in order to deal with. We have over 10 studies dealing on the safety and efficacy of our technology since our original study where we have FDA approval and approval in the European community and other areas. We have approximately 10 additional studies where we have been 100% successful in locating the epidural space. As you could see in this piece of equipment, this is our computer. On the right, you see a syringe-like product, which is part of our disposable. And everything that we do at Milestone has a disposable entity. So we are -- though we make a reasonable profit on the computer, we are in the disposable business. How do we prevent the high morbidity that exists today with the present standard of care, the hypodermic syringe, using a technique developed in 1921. We do that in 2 different ways, which are proven. One is today with the hypodermic syringe, we use what's called the loss of pressure technique. And that is a glass syringe, which is frictionless with saline solution with a 4- to 6-inch needle that the anesthesiologist chooses based on the size of the woman, and they enter through the back while the woman is in labor, and they push on the plunger as they advance the needle waiting to feel a loss of pressure against their thumb. And the loss of pressure is because the epidural space has a lower pressure signature than the surrounding tissue. So ideally, they feel a loss of pressure. They remove the syringe from the needle. They place another syringe with the actual drug onto the needle, and they deliver that, pushing the plunger into the epidural space, and they wait 20 minutes for profound anesthesia. They receive the profound anesthesia about 70% of the time and then have to reinject if they do not. That's one problem. The problem is as they advance the needle, they may hit a fat pad. The fat pad has a lower pressure signature and they can believe reading that against their thumb that they are in the epidural space. So they remove the syringe from the needle put in the drug, but it has no effect. That is one significant problem. The woman is not getting profound anesthesia and the anesthesiologists are spending a lot of very expensive time. The most significant problem is not that. The most significant problem is when they are in the epidural space. They do not realize it using their thumb as the indicator of pressure force feedback is not the best instrumentation for that. And they then move beyond the epidural space and the needle touches the very fine membrane that surrounds the spinal column. Once that needle touches that membrane, they have leakage of spinal cerebral liquid, which causes morbidity. The morbidity can be up to 6 weeks of very severe migraine headaches. It can be a transient paralysis up for 2 years from the point of injection down. It could be a permanent paralysis. It could be a dead spot in your back for the rest of your life or pain for the rest of your life. So this is considerable and a considerable cost to the institution. So what we do is our technology, in the first instance, measures on a very high level the pressure force feedback as the needle progresses through the tissue. So we can differentiate, and we have proven this with a couple of thousand injections that we can differentiate between all of the tissues on the way to the epidural space surrounding the epidural space and of the epidural space. So as the needle progresses, whether it's a student or a professor, they know proof positive that they are either in or not in the epidural space. So when they are in the epidural space, they can then give the injection knowing that the patient is getting the pain relief and knowing that they are not going beyond the epidural space causing morbidity. We also have a new invention called pulse wave for the epidural and for CathCheck. So for the epidural, if you look at the instrument, it's a little hard to see, but on the left side, there is a rectangle. And you see kind of a graph in that. And what that is, various parts of the body have a heart rate and various parts do not. As it happens, the epidural space has a heart rate signature. We read that signature with pulse wave. We received patent protection on that about 2 months ago, and that is now embedded in the instrument. So the anesthesiologist knows definitively if they have this heart rate, they're in the epidural space, that they do not -- they are not in the epidural space. So they have 2 ways with the same instrument to know that they are in the epidural space and giving the injection as they desire to and not causing the morbidity. When you train an anesthesiologist on the present standard of care, the syringe, the professor are attending sitting next to the student injecting into the women in labor does have -- has no idea where the tip of the needle is. And that's why it's so dangerous during instruction and during the 90-odd injections that an anesthesiologist resident has to do to reach proficiency. With us, the attending will know from looking at the instrument exactly whether they're in the space or not. So we bring efficacy and safety to perhaps the most dangerous injection. And that's why in the marketplace of the 4 million women having an epidural, only 2.4 million women have it in the United States. So our financial model is to offer the institutions this instrument, either for training or for usage for epidurals on a purchase basis, on a licensing basis. If they do enough procedures per year, we can lend them the instrument because our business is the disposable business, not the computer. If you go to our website, you can read all of these studies. But most importantly, from a business perspective, you will see a recent study from a major institution in the United States where they did an analysis of the cost benefits of our product because, obviously, no matter how good the product is and no matter what benefit it brings to the patient, there has to be a cost factor to buy it. Here, the institution saves a great deal of money. If you have an institution, for example, with 12,000 births a year, and you have -- you use our product to deliver the epidural on every patient, giving effect to a $70 disposable cost of our product, you will save over $504 per patient because when you have the -- what we call the wet tap, when you've invaded the membrane surrounding the spinal column and that morbidity, the patient generally has to spend 2 days in the hospital. There is an offspring. The offspring has to spend 2 days. That's about $12,000 in the United States. Another anesthesiologist by law has to then pull blood, do another epidural, try to close that hole. That's called a rescue. When that's done with the hypodermic syringe, it's about 80% effective. When we do the rescue for someone else's error, we have had 100% success. So this product is now being introduced. Unfortunately, we're in a pandemic. So we've been closed down along with every other vendor in the United States from visiting hospitals, but it has been used in many hospitals. It has been through testing in hospitals, through pilot studies. And we are waiting for the finalization of our disposable to accommodate the market to allow -- instead of putting together the disposable for 2 minutes, which is the case today, starting in the third week of this month, they will have a disposable that they requested, which is the last thing that we had to do other than the economic study, which will allow them to open the package and just use the disposable, saving them time. So that's the epidural. I'm sorry that I have to go through quickly, but we have limited time. The other product that we have in the same sector which is now finalized is called CathCheck. When the patient postpartum -- gives birth, a catheter is left behind as it is in many other procedures throughout the body. The catheter is -- the other end of the catheter is taped to the patient's back who has gone through labor. The patient is then moved onto a gurney and moved to recovery, moved onto a bed and recovery, then at a certain point, they are put on another gurney and moved to the final bed. With all of this movement, there is a possibility of the catheter becoming dislodged from the epidural space. So when the rounds are then being done by an anesthesiologist an hour, a couple of hours later, and the patient is not getting pain relief from the pump pumping through the catheter to the epidural space, there are only 2 reasons why that would happen. One is that they're not getting enough medication; two, that the catheter has become dislodged and the medication is going to another space, not the epidural space. In order to determine which is the problem, the medication is now put in through the catheter, wherever it might be in a very large bolus. The anesthesiologist at a significant course of time has to wait 20 to 40 minutes to see if that medication has reduced the pain in the patient. If it has, then the dosage is increased through the pump. If it has not, the determination is made that the catheter has become dislodged. It's no longer in the epidural space. So then another epidural has to be done. This is 20 to 40 minutes, which is an enormous amount of time for the anesthesiologist and for the patients suffering the pain. We can determine this within 10 seconds, given our pulse wave, which I described earlier for the epidural. So if you now remove the end of the catheter to our instrument, you will know within 10 seconds, which one of the 2 problems it is. We believe that this will be a very significant product in anesthesiology, saving a great deal of money and providing much better patient care to the institution. So we now have, in the last few weeks, finalized our quick start, which allows the anesthesiologist to basically press a button and be able to do the epidural immediately. We have now embedded in the same computer the ability to do CathCheck. We have another disposable for the CathCheck, which can be used multiple times with patients, only one of our disposables per time. So that's a significant market for us. And that those disposables will be finalized by June 21 for both the epidural and for the CathCheck requires no further regulatory approval. It is validated and it will be led us to file. We are in a number of hospitals now that are waiting for those disposables to be finalized. So we are hoping that in the very near future, we will begin our commercial rollout. We have been held up in that commercial rollout because of the pandemic. However, as of last week, we are able now to visit hospitals in Florida and visit hospitals in Texas. So that is now happening. We have 3 salespeople. We have put a hold on hiring salespeople because of the pandemic. But we are in a number of hospitals at the moment that have tried our product and that are waiting for the new disposables so that they save time. So the model here is though we can go into numerous areas, wherever the syringe is used, we are using our team at the moment, which includes Dr. Hochman. Dr. Hofman is the world authority on computerized injections. He is also our resident inventor of the technology. The ability to go into many different areas, whether it's Botox, intra-articular, rhinopasty is something that the company can do, but we have decided to put all of our effort into not that, but into the epidural, given the high cost of the morbidity and the danger to the patient, which is well known, which is why only 2.4 million of the 4 million women have it at this moment. You're welcome to go on to our website. You can see all of the clinical studies, which we have, dealing with the efficacy and safety and look at other areas that we're at different levels of advancements to different areas. But given that we're trying to maintain a relatively low burn rate, we have not moved into these other areas commercially yet and all of our commercial efforts are being used for the epidural. If you look at the screen now, the rectangle on the left that the arrow is pointing to, that is our new invention, which is patented, which is the pulse wave, which gives definitive proof whether you're in the epidural space or not. Keep in mind that we can do this anywhere in the body. Here, we have the advantage of having the woman be the alarm. In other words, the woman is telling the doctor, I'm not getting pain relief. So you know that there is a strong possibility that the epidural is dislodged. But what happens when you're doing -- leaving a catheter behind in another area? Whether it's the brain, whether it's chemotherapy, whether it's intra-articular injections, you're leaving catheters behind in many, many areas to continue medication. You have no alarm because it's not pain. So 3 weeks, a week, a month later, the patient might not have gotten the medication in the ideal location because there's no way for the doctor to know if it's the ideal location or not, other than by ultrasound or by fluoroscopy using radiation. With us, they can know immediately, whether the catheter is placed in the correct space or not. So the company -- our company has the ability to enter any area of medicine with our technology. Once again, we've chosen this area first because of the very high cost of 2 years of teaching, the high morbidity rate when they're doing the injection to a resident. Because when you go into the hospital, you're signing documentation, that allows them to have a resident who may have done this once before to give yourself or your spouse the injection, which is not a good idea using a device from 1860 and the 1921 technique. So we're looking to change that in many different areas of medicine but we've chosen for the reasons that I've mentioned the epidural first. At this point, thank you very much. I'd like to open up for Q&A.

Our first question is, it appears the company was added to the Russell 3000, can you confirm? And when will the final reconstitution take place?

Yes. It looks like from the release last Friday that we are on the Russell 3000 and the Russell Microcap. However, that can change. We will have a further reading of that this Friday. And then I believe it's definitive on, I believe it's the 25th or the 29th of June. But thus far, yes, thus far, we've made it on to both, but that's not definitive until the end of the month.

Okay. Our next question is, can you give us an update on how the CompuFlo, CathCheck pilot is going?

Yes, extraordinarily well. We've had 100% success with the CathCheck pilot. But when one understands the technology, it really has to be -- we're in another area of medicine where it's far more difficult to define the location, and we've given over 90 million injections with success. So the epidural for our technological development is much easier than what we've already accomplished. So it shouldn't back the -- have this high level of success, which it had.

Okay. Great. Our next question is when can we anticipate seeing some news on commercial agreements?

Very soon. We had anticipated this happening a number of months ago. We were delayed first very sadly with the death of our Director of Regulatory who was with us for 12 years. And that caused a significant delay. And we have since hired someone who's come on board and move very quickly with our team, and that's why we will be -- we have finalized a number of things, and the last thing will be finalized by the 21st of June. So that's one thing that held us up. The other thing that held us up is the pandemic. Vendors, no matter who they are, we're not allowed in facilities in the United States because of the pandemic. Having said that, we were in a facility actually that wanted us in because of the CathCheck because they felt that the amount of times that their touching the patient because of the deficiency in the present technology was not good given the coronavirus. So they wanted us in there with the CathCheck. But other than that, it's been impossible for vendors to go in. But as I've said, both Florida and Texas have opened up, and we are as of, I believe, last Wednesday, visiting institutions in those 2 states. As far as when we'll have a definitive agreement, that's up to the -- it's beyond the anesthesiologist and the chair people at this point. It's up to procurement as to when they -- we will get the POs. I'm hoping that that's relatively soon once we finalize the 2 disposables, which will be done this month.

Thank you. Our next question is, how large is the catheter market compared to the epidural market?

Well, the catheter market generally is humongous because it's used in so many procedures. The catheter market for CathCheck in epidurals for the disposable should be larger than the epidural market because we're told by a major -- one of the leading universities in the United States, if not the world, that they use multiple catheters because they test the patient a number of times to make sure that the medication is going to the epidural space after the birth. So they are telling us 1, 2, 3, even 4 times for the use of our disposables. So it's quite a large market for us that 6 months ago we did not anticipate. We didn't look at it, but we have been introduced to that by one of our leading KOLs who's on a scientific committee, Professor Capogna in Rome. And with the help of Eric Gilbert, our Executive Vice President in charge of sales. So we have moved very, very quickly to finalize that. We had to, as I said, change the software. We had to design a different disposable, which was in her role, but it had to be done. And we have to do the validation, which is behind us, and then they led it to file. So it's quite a large market in epidurals alone.

Okay. Thank you very much. That concludes our questions for right now. Len, do you have any closing remarks?

No, I want to thank you very much for listening. I want to invite you because there's obviously a lot more information, both in the clinical studies dealing with the economics and of course, the safety and efficacy of the product. So I invite you to go to milestonescientific.com. And if you have any questions, please reach out to Crescendo Communications, and we will get as quickly as possible the answer to any of your questions. Once again, thank you very much for attending today. Stay safe. All the best.

This concludes today's webcast. You may disconnect at this time, and thank you for your participation.