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

Good afternoon. This is Leonard Osser. I am the Interim CEO of Milestone Scientific. I'd like you to review first the safe harbor statement, and then we can begin. Milestone Scientific is a research and development company that invented the space of injections by computer. We have given well over 90 million injections without any incident. And our sales model is a razor-razorblade model based on a very broad patent portfolio in the important countries worldwide. What I'd like to first discuss with you is how that technology works. The technology is based on density of tissue. As a needle traverses tissue, we are able to differentiate where it is very difficult to do with our competitor, the hypodermic syringe, which was invented in 1860. So what we do is we do a schematic of the density of the tissue as it traverses the tissue. So we can differentiate on a macro level -- on a micro level, the different tissues that will be encountered by that needle, such as fat, muscle, ligament. So we have reduced this technology by -- into a computer by embedding the algorithms of the tissue identification and then embedding in the algorithms of the computer all of the different aspects of the injection, the diameter of the needle, the friction created during the injection. And that's how we are able to let the practitioner know in real-time exactly where the tip of the needle is. Why that is very important is it allows the drug to enter the space that the practitioner wants it to enter. So the first market that we entered was labor and delivery for epidurals. In labor and delivery, the only anesthesia that you can apply is an epidural injection. There is no other. And that's why identification of the epidural space is essential for the excess of that injection. We chose that injection also because it has a very high learning curve, approximately 2 years and 90 injections in vivo. And if you look at the current slide, you'll see that our competitor, the hypodermic syringe, has not really advanced very much since 1860. The present standard of care with the hypodermic syringe is accomplished by the loss of pressure technique. So the woman is in labor, the anesthesiologists has a syringe with a 4 6-inch needle and as -- with saline solution, which is sterilized water. And as they advance the needle looking for the epidural space, which has a lower pressure signature than the surrounding tissue when they feel a loss of pressure against their thumb, they believe they're in the epidural space. The problem with this is multifaceted. One, if they hit a fat pad, it has a lower signature of pressure. And therefore, they inject too soon and the patient has no anesthetic effect, and they're still in pain. In the event that they're in the epidural space, and they don't realize that they're in the epidural space, they then can touch the very, very fine membrane and that membrane that surrounds the spinal column, if it's touched by the needle, will allow cerebral spinal liquid to escape, causing morbidity. The morbidity can be up to 6 weeks of severe migraine headaches, it can be a transient paralysis from the point of injection down. It could be a permanent paralysis. This is a major problem because this does not happen 1 in a million or 1 in 100,000. It happens 4.5% to 5% of the time worldwide as the general morbidity. The morbidity for students learning this technique is far greater, approaching 30%. So the problem -- the first problem is one in teaching the epidural, it's about a 2-year learning curve. 90 injections approximately are done in vivo with an anesthesiologist and attending -- sitting next to them while they're injecting into the patient. The problem is the anesthesiologist has no idea where the tip of the needle is. And that's why it's so problematic in injecting too soon or far worse, touching the membrane with the needle and causing the morbidity. We take care of this at Milestone Scientific by measuring the density of the tissue and letting the practitioner know in real-time exactly where the tip of the needle is. In that way, we significantly limit the possibility of injecting too soon and not providing the anesthesia. We also are able to signal in real-time the doctor to know when they are in the epidural space so that the woman gets the anesthesia. And being that they know they're in the epidural space, they do not have to go further. And if they go further, the morbidity is created. So what we're doing with this instrument, and we have 9 studies, if you go to our website to review it, is we are shortening the teaching cycle from 2 years to 1 to 2 days, we are significantly lowering the possibility of morbidity, and we are saving considerable cost to an institution. There is a study on our website done in the United States at a major university where we showed that if our product is used, and remember, we have a razor-razorblade model, you use our disposable, you will save $504 per patient by eliminating or significantly reducing the morbidity, while giving effect to the cost of our disposable. So what that means is if you have an institution doing 12,000 births a year, by using our product and eliminating or significantly reducing the morbidity, that institution will save $6 million plus per year, which is very compelling besides being far safer for the patient. We have an additional product in addition to the epidural product, called CathCheck. CathCheck came to market a few weeks ago. And what CathCheck is, is when the patient experiences pain after birth at what has to happen at this point is the anesthesiologists must determine whether the pain is caused by either a low dosage of the drug or that the catheters become misplaced. When you do the epidural, you give the injection, you pull out the needle and leave a catheter behind in the epidural space. That catheter is connected by tape to the back of the patient who has then moved to a journey to recovery and then moves again on a journey to the final bed. With all of that movement and the movement associated with labor, it's very possible that the epidural catheter has become misplaced, and the drug is going to the wrong location. In order to determine that today, the anesthesiologists doing the rounds has to then put in a large bolus, a large amount of anesthetic solution through the tubing to the catheter, wait up to 40 minutes to see if there's pain relief. If, in fact, there is pain relief, then the dosage is increased. Most of the time, however, there will be not -- there won't be pain relief. And therefore, the determination is made that the catheter is in the wrong location. The difficulty with this is it takes up to 40 minutes by removing the tubing from the pump and putting it in our instrument, we can tell definitively to the doctor whether the catheter has been misplaced in 1 to 2 minutes, thereby saving a great deal of money and a great deal of time for the institution and also, of course, making it far better for the patient. There are 4 million women giving birth in the United States. 2.4 million women have the epidural. The reason why 1.6 million don't is generally because they read the risk factors, the very high-morbidity rate or they heard a horror story from friends. What we intend to do is our strategy is to become the standard of care and replace the hypodermic syringe from the 1860s and the technique, which is now used, which was developed in the 1920s by using our product. So we are now piloting both the CathCheck and the epidural in quite a number of hospitals in the United States. And other than the problem of COVID-19, we are moving ahead in this process. Unfortunately, because of COVID-19, elective surgeries are not being done or being done very sparsely in the United States, and that is the only way hospitals make money. That problem is very significant because the capital committees of the hospitals do not have the capital to buy more equipment. So our model now is to finalize our pilots, which we've done in many cases and not go through the capital committee, but go to the new product committee, which is, of course, is much faster and just bill them not for the equipment, which we will lend them, but just for the disposable. The disposable for the epidural will give us a minimum of $40 profit. And if you look at the amount, the $2.4 million and the savings of $504 per patient having given effect to the cost of our disposable, it is a very, very compelling argument for the hospital to purchase our product. If there are -- we're ready to go for questions. If there are any questions at this point.

Yes. Actually, we've got a couple. The first one asks any plans to possibly partner up for the BOTOX procedure given the size and potential of that market?

Yes. Definitely. We are about 10 months away from finalizing a BOTOX product. We did not put it -- we held that in advance until we raised capital about 2 months ago because of the COVID and because -- unless COVID is dealt with, the recession will remain with us. We raised enough money to finalize BOTOX to market and sell our present epidural product, our CathCheck product, advance another technology we have to fruition and have a runway of 2 years. So we have a very strong balance sheet. We have enough to accomplish all of that. So we're now looking into a partner going ahead after we finalize the final design, and we have a prototype now for BOTOX. So we will be looking for that in the near future.

And the next question asked, would you expect to sell the technology or get a license agreement to a larger party to properly sell the epidural instrument?

We are open to anything. We're in a unique position because we are not an epidural company. We went into epidural because of the very large expense, because of the time of the learning curve and the morbidity and the litigation associated with the morbidity. However, we have a very broad platform of technology, and we can do whatever can be done by the hypodermic syringe. Therefore, whatever arrangement we can make with any company, we're happy to do as long as the bottom line is there. So we're open to partnering, licensing, selling outright, any technology born of our very broad platform. Also another issue that one could look at as a potential investor, is when a, let's say, Merck, Pfizer, a large company in the pharma area, has a drug that goes off patent, they now move from 100% market share to about 5% market share. We could take that drug, which is delivered by a doctor, without changing the formulation, we can make a special adapter for that with a unique instrument for that drug only where no other drug can be used, and we can have all the benefits recording, reducing or eliminating pain, finding the right location for that drug. Now of course, they won't achieve 100% market share again with the biosimilars, but if it's a $3 billion drug and they can move it from 5% to 8%, 10%, that could be a major use for our technology, which is something that we will pursue. However, right now, all of our attention is on the commercialization and profitability of the epidural.

Very good. Well, thank you for all the great information this afternoon, and that's the end of our time. So we're going to wrap things up. Thank you again.

Thank you very much. Good day.