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

Hello. My name is Leonard Osser. I am interim CEO of Milestone Scientific, and we're going to have a 15- to 20-minute presentation this morning. So I would ask you to go over the safe harbor statement, our forward-looking statements. Milestone Scientific is a research and development firm. We have invented the space of computerized injections, drug delivery by computer, and it brings us a number of possibilities. One possibility is that we can deliver a drug below the patient's threshold of pain. Another is that we have the ability to determine for the doctor exactly where the tip of the needle is. And that is very important for quite a number of injections. We have decided after being in the dental arena and given over 90 million injections, successful injections, we have moved into the medical area. And though we have the ability from a very broad platform of technology and numerous patents worldwide to move into many, many areas of medicine, our chief competitor is the hypodermic syringe. We decided first to enter the epidural market in labor and delivery, given a number of factors. One factor in labor and delivery is that the only drug that you can use are drugs for pain management. You can only use an epidural for pain management because any other type of pain management would interfere possibly with the health of the fetus. So if you want pain management during your epidural for labor and delivery, it's only -- the only option is an epidural or nothing. There are approximately 4 million births in the United States every year, 2.4 million women have the epidural. The other ones primarily choose not to because of the very high-risk factors. The risk factors are not 1 out of a million, the risk factors for an epidural worldwide are 4.5% to 5% of the time. In other words, 4.5% to 5% at the time, you have an epidural. For labor and delivery, there will be morbidity associated with that. There will be some problem that you will have. One of the problems is up to 6 weeks of severe migraine headache. The woman can have a transient paralysis from the point of injection down for up to 2 years of permanent paralysis. There is mortality, but that's very, very rare. So this is a very big problem in the area of anesthesiology for epidural. So we start out with teaching epidurals. Our competitor here, as you can see, is the hypodermic syringe. It was invented in 1860 and has changed very little since 1860. The present competitor that meet competitive technique was developed in the 1920s. So that's our competitor. To teaching anesthesiologists to be proficient enough to go forth and do these injections requires approximately 2 years and 90 injections in vivo, in the patient, in a woman in labor. And the problem with teaching is the attending or professor is next to the student, the resident, while the resident is giving the injection. And while giving the injection, the professor has no idea where the tip of the needle is. They do with our device, but not with our competitor. So the resident is giving the woman the injection using what we call the loss of pressure technique. The loss of pressure technique is basically a glass syringe, which eliminates friction, saline solution, sterilized water. And as the 4-, 6-inch needle is being progressed through the body, from the back, as you can see here, the student or the attending, the professor, is advancing the plunger with their thumb. And they're waiting for a loss of pressure against their thumb. And that loss of pressure may, in fact, indicate that they're in the epidural space because the pressure signature in the epidural space is much lower than the surrounding tissue. The problem is there are fat pads along the way. And those fat pads will give a drop in pressure as well. So often, the syringe is removed, another syringe is placed while the woman is in labor. And what happens is the drug is administered with no effect because it was injected too soon. So that's one significant problem for the institution, the anesthesiologists and, of course, the patient. The major problem is when they are in the epidural space. They don't realize they are in the epidural space, and they advance the needle further and the needle touches the very fine membrane that surrounds the spinal column. Once that happens, there is leakage of cerebral spinal liquid causing the morbidity that I just mentioned, which is very significant. As I'm speaking, I'm going through 9 different independent clinical studies on the subject. So what we are basically doing is with the use of computerization, we are letting the resident know or the doctor know that's delivering the drug for the epidural exactly where the tip of the needle is. That way, they don't inject too soon so they can give the anesthesia at the right time. The other one is they avoid the 4.5% [ morbidity ]. As I've said, there are 2.4 million women having this, 1.6 million do not because they read the risk factors or they hear a horror story that has happened to a friend. For the institution, the savings is very advantageous because that, of course, is very important in our present environment. If an institution, for example, has 12,000 births a year and they use our disposable because we have a razor/razor blade model. They use our disposable on every patient, they will save more than $500 per patient, given the morbidity that I just mentioned. Because once that needle stick happens, the patient, on average, will stay in the hospital another 2 days. There is an offspring, so the offspring has to stay another 2 days. And that cost is about $12,000 in the United States. And another anesthesiologist, by law, has to pull blood from the patient, do another epidural and try to close that hole. That's called a rescue. It's only successful 80% of the time. If you use the hypodermic syringe and cause that morbidity, and you use our instrument for the rescue, we have been successful 100% of the time. So we save 2 years of teaching time, and there is a study that was done by Professor Gebhard in the United States with first year residents, and they were 100% proficient doing the epidural on a robot after 1 to 2 days as opposed to 2 years. So we have the safety, we have 9 independent studies. We have an original very broad study in the United States. We have FDA approval. We have approval in the European community and other countries. And we have now hired a group of salespeople that are working directly for us. We have 3 salespeople at this point, and we're moving, unfortunately, slowly because of the pandemic. Many hospitals do not allow vendors in the hospital. But we've done many pilots, and we have a hospital that's begun using our product in Italy, and they have had 100% success thus far using our products. So our next model is to move the strategy throughout Europe and the United States. Our model for remuneration for the company is if that organization that I just mentioned, with 12,000 patients used our product, they would save $6 million a year. That does not include the savings for litigation. Because when the morbidity I described happens, there's generally a settlement and litigation, which is over $300,000 a year. So without taking into account any litigation, we have a situation where we're saving the institution on average of over $500 per patient. So our sales strategy now, having highlighted this in many organizations, is to move through the VAT committees, the budget committees, install our instrument, either as a sale of the instrument, as a leasing of the instrument or if they commit to enough use of the disposables, we will lend them the instrument. So the company now is looking forward to begin its sales in the United States. As I say, there are 2.4 million epidurals done in the United States in labor and delivery. There are 4 million births. If we were able to capture 2 million by becoming the standard of care, which means you have to use this product because it's much safer, and the economics drive you towards that, the company would have a net profit of $80 million on the disposable alone, keeping in mind that our technology allows us to do many other instruments. We can do anything that a hypodermic syringe can do. We can do, for example, delivery of cosmetic drugs such as Botox. We can do intra-articular or osteoarthritis. Anything that a syringe can do, we can do with our technology. And this is very, very important because we can go into any area of drug delivery that the hypodermic syringe is in. So our competitor, as I said earlier, was invented in the 1860s. The reason that we chose epidural first is because the high morbidity rate, the very high cost of teaching and of course, the high litigation. We have another product that utilizes the same computer with advancements in software. This is also through the regulatory approval process. And that's called CathCheck. When the woman, after the birth, is moved after labor and delivery, there was a strong possibility of the catheter being dislodged. When you do the epidural and you pull out the needle, you leave the catheter behind, which you wouldn't in numerous situations. That catheter is part of the tubing that's connected to a pump. That pump will pump in the anesthetic solutions so the woman doesn't experience pain. That pain is generally associated with 40% of women after the birth. When another anesthesiologist does the rounds and the woman is still in pain with the drug being administered, there are only 2 reasons: one could be that the catheter has become dislodged, which is probable because of all of the movement of the woman, both in labor and after being moved from room to room on a gurney; the other is that there's not enough drug. So what the anesthesiologist does is remove the far end of the catheter, shooting a bolus of the local anesthetic solution that means a great amount of it, and wait for 20 to 40 minutes to see if the woman now has pain relief. If the woman has pain relief and they increase the dosage. If the woman does not experience pain relief, then the realization is there that the catheter has now been dislodged. And they have to do another epidural and replace the catheter. We can eliminate that 20- to 40-minute wait, which is obviously excruciating to the woman, very costly for the institution because it's an anesthesiologist there for that 20 to 40 minutes and reduce that time to 1 to 2 minutes. In other words, in 1 to 2 minutes by taking the other end of the catheter tubing, placing it into our computer, we can tell the doctor definitively if the catheter has become dislodged. This is another product using the same computer with a different disposable. And the use of this disposable is probably more than for the epidural because we're told by doctors that they have to check the patient a number of times. And we're -- so we have a computer for all of our procedures, we're in the disposable business. So as we move ahead, as I said, we have an intra-articular instrument, we can do peripheral nerve blocks, Botox or anything that a syringe can do with all of the advancements that I've mentioned. There are more advancements such as we can keep a record of an event, which you must do under the Affordable Care Act. So in conclusion, we reduce or eliminate the pain; we make the teaching cycle in many areas, but specifically in epidural; we reduce that teaching cycle from approximately 2 years to 1 to 2 days; we make the injection far more efficacious, safer for the patient; we have clinical studies that are independent of us proving this; and we save money for the institution. So our next plan for shareholder value, which is why you're listening, is to start closing hospitals in the United States and Europe. We believe in the company, as I firmly believe, as there are a number of key opinion leaders that we will become, in fact, the standard of care. It's impossible to know when that will happen, but once we become the standard of care, you have to use our technology. And if that becomes the case, the numbers which I've given you are numbers that we're looking forward to having in the company in addition to moving into many different areas. Our balance sheet is very strong as we develop other areas of technology. And as we move forward, we have a balance sheet that will support us for significantly more than 1 year, perhaps 2 years regardless of what happens with the present pandemic and recession. I'd like to also mention one other thing that's very important. If you look at the screen on the left side, where the arrow is pointing, that indicates a pulse wave. We call it CompuWave, and that's a new invention of ours. Our clinical study -- our Clinical Director is our resident inventor. He is the world authority on computerized drug delivery. And our new invention is just that, which is now embedded into our present instrument. And what that does is it gives the doctor, in real-time, an indication of a heart rate, pulse wave. There are certain parts of the body that have the heart rate and other parts that do not. As it happens, the epidural space as a heart rate, as a signature from a heartbeat, the surrounding tissue does not. So when we do the catheter placement and why we can do it so quickly as opposed to the method from the 1920s, the catheter, if it's placed in the epidural space will indicate on our computer in real-time a heart rate. If it does not, then the catheter is not in the epidural space. It is that simple. And what's very important for us as a company is we were awarded patent on this about 4 months ago, so we have 20 years of patent life on this particular technology, which can be used in many other applications throughout the body in addition to CathCheck. So when performing the epidural, they have 2 indications. They have the loss of resistance, which has been proven. We've proven that with over a couple of thousand injections in Latin America, in the United States and in Europe, and it's relatively simple to use for the doctor. It is -- I guess we could say dumbed down. It's either yes or no, you're either in the space or you're not in the space. Now they can see it on the screen, but they can hear it also. And the reason that we do that is we want them concentrating on where they're working on the patient, not looking like ultrasound on the screen and then working on the patient. So it's made to be very, very simple and easy. And that's why it's so easy for us to teach students how to do this in such a short period of time. So I'd like to thank you very much for joining me today. You can go to our website and delve more into the company. We welcome you to do that. We welcome you to read the clinical studies and to see our business model for the company going forward. Once again, thank you very much for joining me. Good day. Okay.

Okay. We're now opening the line for our Q&A session. We have with us today for the Q&A, both CEO, Leonard Osser; and new President, Arjan Haverhals. So welcome, gentlemen.

Thank you very much. Thank you.

Glad to have you here. We do have a lot of questions, so we'll just jump right into things. Our first question, what is the status of the epidural device in the VA hospitals? Thought the hold up was cybersecurity related.

No. The hold up actually is the U.S. government at this point is not allowing any purchases of any devices from certain foreign countries, including China. We have parts in our device that, in fact, come from China. And that's what's held that up.

And next. What is the status of the intra-articular device 510(k) application?

At this point, our new regulatory person has told us that we can move ahead with that. At this point, however, we are putting all of our energies into the commercialization of the epidural instrument, given the fact that we have a very strong balance sheet now as of about 2 months ago, which gives us a runway of perhaps 2 years with finalizing other products, including the IA product, we are looking into that now.

And next question, I think you may have touched on the answer to this as well in the previous question, but what is the status of the Botox design?

Same thing. We have prototypes of the Botox instrument. We have the capital to finish it. Arjan, in fact, is looking into that to see if we want certain design changes to enhance that product. And that determination will be made over the next 90 days.

And the next question. Is the company still pursuing any veterinary applications as was talked about, but seems to be abandoned?

No, it's not abandoned at all. In fact, we have clinicals that were done at a major institution, which shows the possibility of our product, both for large animals and for small animals. As you're probably aware, half the procedure -- you have the surgical procedures done on small animals, cats, dogs require an epidural. However, as I said, in order to keep a very low burn rate and give us at least a 2-year run rate, we are concentrating right now on the hospitals in the United States and Europe to commercialize our epidural instrument having completed 9 studies away from us, a major study based on the economic value of the product. We are putting all of our attention in that at the moment, but the veterinary market is a very large market that we will pursue in the future.

And our next question. Since the dental sales and dentist in general are back on track, is the sale of the dental division back of the table?

Well, in your introduction, you introduced our new President, Arjan Haverhals, but he is also CEO of the dental division. We had an arrangement to sell the dental division prior to COVID, prior to January. However, that fell through because of COVID and the banks moving away from the acquirer. We have since decided to put energy and capital into building up the dental division. So at this point, we have no plans to sell it. Our plan is to build it from its present base.

Good. And our next question, I actually have a few questions related to it. In general, what is the status of getting the epidural device covered by insurance companies?

Well, the epidural, the procedure is already covered and were included in that procedure. So given the relatively low-cost of our disposable compared to the remuneration of the procedure, it's something that we're not pushing for right now. However, to have it covered, you need a code number. To have a code, you need to do approximately 25,000 procedures in order to apply for a code. We have not reached that amount of procedures. When we do, we will apply for a separate code. But that is not a barrier at the moment, given what the product in its present form does both economically for the procedure and the safety of the patient. If you'll recall, we had a release out from a major institution in the United States, given the economics of using our product. And the economics in that study were that if our product, our disposable, because everything is a razor/razor blade at Milestone. So if they use our computer and our disposable, taking into account the cost of the disposable, the savings per patient, if they were to use it on every patient because you don't know which patient will have the morbidity, the savings would be over $500 per patient. So with an institution similar to the one that did the study, they do 12,000 labor and deliveries a year, the savings would be $6 million. So the small additional cost of our disposable is really irrelevant based on those savings.

Good. And the next question, you used the term lend regarding the instrument. Can you talk more about that program and how that option works?