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

Good day, ladies and gentlemen, and welcome to the Milestone Scientific conference call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Arjan Haverhals, President of Milestone Scientific. Sir, the floor is yours.

Thank you. Good afternoon, and thank you for joining us in our corporate presentation on Milestone Scientific. We will go over a couple of slides in the next 15 to 20 minutes, and my name is Arjan Haverhals, President of Milestone Scientific. I would like to ask you to go over the safe harbor statements that are forward-looking statements prior to -- go over to the next slide. We are a medical -- leading medical research and development company, and we invented this space of computer-controlled injection technology. This allows us to perform injections, or better saying, the clinicians to perform injections below the threshold of pain for the patients. And also, at the same time, to determine for the clinicians where the tip of the needle is. We started our technology and dedicated our technology initially in the dental industry. We have been successful by applying our technology within the dental industry. We have performed more than 90 million injections, and we have an installed base of units of about 20,000 units worldwide. And we decided to move into the medical market segment. And then in particular, we looked into the epidural market segment, and then primarily in first instance, for labor and delivery. Why labor and delivery for epidural injections? Because it is the only way for pain management to administer a drug through epidural injections. There is no other way to perform pain management, doing labor and delivery, because that might harm -- potentially harm the fetus of the -- might harm the fetus doing labor and delivery. We have about 2.4 million labor procedures outperformed on an annual basis out of 4 million births. So that means 1.6 million procedures are not performed or will not undergo labor and delivery, whilst having an epidural injection. And the reason for that is that the injection methodology is associated with certain risk factors. 4.5% to 5% of the time, these risks factors occur whilst performing epidural anesthesia during labor and delivery. And these risk factors can be translated into 6 weeks of severe migraine, transient paralysis [ for the woman ], also cases of permanent paralysis have been reported and also mortality, although the latter is rather seldom. We started -- we started out with teaching. I already told you about the morbidity rate. But what I would like you to understand is that the current competitor in this field, as you can see on this slide, is the hypodermic syringe, which was actually invented in the 1860s. And later on, it was established as the glass loss of resistance technique developed in the 1920s. What we know from a teaching point of view is that the residents prior to become profound by performing these epidural injections, it will take up to 2 years or 90 injections in vivo in a patient to get the experience and to be confident in performing these epidural injections. What normally happens at the teaching hospital, that the professor is next to the resident or to the students. But as he does not have direct contact with the patient, the professor or the teacher does not have any idea where the tip of the needle is. And knowing where the tip of the needle is for entering the epidural space is of utmost importance. They don't know where the tip of the needle is, but with our technology, they do know where the tip of the needle is. So the problem or the challenge that occurs by applying the current, what we call loss of resistance technique or the loss of pressure technique, is the following: the loss of resistance technique consists of a glass syringe that is filled with saline solution. And then by pushing the 6-inch needle being progressed into the back of the patients, as you see on the picture above in this slide, the needle is progressed into the patient. And what the clinician is doing is advancing the plunger with his thumb and is waiting for a loss of pressure. And that loss of pressure is based on the literature, what is known in clinical practice, is that the precious signature in the epidural space is lower than in the surrounding tissue. So if he or she feels that there is a lot of resistance, it may indicate that they are in the epidural space. However, at the same time, there are also fatty tissues or lower density tissues that also result in a loss of pressure. So in other words, there is no confirmation whether the epidural space really has been entered as this can be regarded as a false positive result of the procedure. What does the false positive result means is actually that the drug is not delivered at the right place for the patient, i.e., there is no pain reduction for the patients. Even more so when the needle is positioned too far and actually goes through the epidural space, it might reach a membrane and it might breach the membrane. And what happens then is that the needle enters the spinal cord. This will cause leakage of cerebral spinal fluid, which then will cause the side effects and the risk factors that I've already mentioned. So how do we solve this challenge? So we applied actually the use of computerization, where the need -- the tip of the needle is characterized and determined doing the delivery of the drop. And what it actually does is that the tip of the needle is measuring real-time changes of pressure at the tip of the needle. And based on that typical epidural pressure characterization, we are able to determine what a real reduction in pressure means. Like I mentioned, there are 2.4 million epidural procedures in labor and delivery, 1.6 million procedures are not. In other words, females do not necessarily welcome or are afraid or have heard other stories from friends that they decide not to use this type of analgesia during the epidural procedure and during labor and delivery. What also is important to understand is that we have conducted cost benefit studies, economic benefit studies at an institution in Texas. And we found, and it was concluded in that study, where more than 4,400 epidural procedures have been investigated and analyzed that, on average, the cost reduction per patient could be more than $500. Now let's assume that it is a hospital that is doing 12,000 epidural procedures per year, and that $500 per patient would then result in an additional cost of $6 million. The risk of having this puncture in the dura, what we call also a blood patch, will actually mean that the other anesthesiologist has to withdraw blood from the patient, injected into the patient, and then wait until that is yield. This is what we call a rescue procedure. Rescue procedures, based on literature, are 80% successful. It also means that having these rescue procedures, it will mean that there isn't a prolonged stage for the mother and the child for up to 2 days at a cost of $12,000 for the hospital. With our system, we have shown that the placement of the needle in the epidural space is effective in more than 99% of the procedures performed. So where are we today? Whilst I'm speaking, I also would like to mention that our clinical results and our clinical documentation have been published in 9 peer-reviewed published studies with different KOLs national and internationally, and that is a confirmation of our technology and the proof of clinical concept. There are some studies ongoing. We have performed more than 2,000 epidural procedures worldwide. And actually, as we speak in the past as well, a hospital in Italy has adopted our CompuFlo for all epidurals in labor and delivery. So where we are now is, this year and the year 2020, we have a direct sales team consisting for the time being of 4 individual -- sales individuals, that are approaching the hospitals for setting up meetings demos, what we call, and trials. Of course, we will have been affected by COVID and by the pandemic. And also during the period of March, April and May, hospitals were not necessarily inviting or allowing representatives from the industry to have their meetings at the hospital site. However, in the past months, we have seen an uptake of these visits that also has resulted in an increase in demos and trials. So again, for the hospital, for the institution, by applying our technology based on 12,000 epidural procedures per year, it could potentially be a saving and a cost reduction for the institution of $6 million. What also needs to be taken into consideration is the cost of litigation. The cost of litigation related to the side effects that could occur with the, let's say, the older technology is about $300,000. So like I mentioned, we have 9 peer-reviewed clinical studies. And it goes in different areas. One is for the injection procedure as such. Second is the determination and the positioning of the needle. But what I would like to mention to you is as well is that wherever the hypodermic syringe is used, it is a potential indication for our technology to be used. So we could imagine that it could be used for intra-articular injections. It could be used for cosmetic or Botox injections as well. I mentioned that 2.4 million epidural procedures in labor and delivery are down per year in the United States. We believe that based on the clinical evidence and the clinical documentation that we have collected and the studies that we have performed, in addition to a reduction of pain for the patient and also increasing the patient care in this respect, let's then assume that our ambition is to become the standard of care. And we believe on the evidence that we have provided that we could become the standard of care. Let's assume that we would have 2 million epidural procedures where our injection technology and methodology is used, in combination with the use of our consumables because we use a razor and razor blade model. In other words, we have the units and then each unit will assure that there is recurrent revenue of the consumables. And based on the profit margin of these consumables of 60% or more, our net profit would be $80 million per year on disposables alone. And again, we can do everything the hypodermic syringe can do. So our sales strategy in the U.S., like I mentioned, we have a dedicated team of individuals that are visiting the hospitals. Our sales team actually have 3 different sales proposals or offers for the hospitals. It's either by lending the equipment or by financing the equipment or by selling these equipment directly to the hospitals. Now we are aware that in 2020, the hospitals have been challenged by their budgets or the budget allocation. And some hospitals actually have frozen or have stopped the investment in any capital equipment. So we also recently decided that in an attempt to help the hospitals, we have come up with an offering where we lend the equipment for the first hospitals to come versus a minimum volume of consumables, thereby helping the hospitals as well to get to know and to embrace our technology. For the time being, we are waiting for the first commercial success in the hospitals. But, as I mentioned, we have an increase in the number of demos, and we have an increase in the number of trials. From a marketing point of view, we have undertaken several initiatives to further support our awareness, not only of the company but also of the products that we carry, but more importantly, the provided services that we provide, which goes hand-in-hand with the cost reductions that I've already alluded on. Also on October 1, we reported that we have seen an uptake in the dental sales. It is not a fully 100% recovery towards the levels that we had prior to the breakout of the pandemic, but we have seen an uptake in the third quarter of the number of hand pieces ordered. So we are encouraged by that. And at the same time, we were able to keep our profit margins, and at the same time, we are also very critical and cost-conscious on our expenditures. So that has also resulted like we reported on October 1 that the cash at hand on September 30 was $14 million. And that enables us, from a marketing point of view, to make the right investments to support both the epidural and the dental business. We also have another product, which we call CathCheck. And CathCheck is a feature unique to Milestone Scientific. I already described what happens to the patients when she is undergoing an epidural procedure during labor and delivery. Now after labor and delivery, the patient is going to be moved back to her room. And actually, what is happening that is that the catheter is left behind and -- the catheter through which the analgetic is given to the patient, and it is connected to a pump and the pump is providing the anesthesia. What we also know that patients remain in pain after the labor and delivery procedure during an epidural injection. And actually, this is happening in about 40% of the cases after birth. Now what happens is also that whilst the patient is going to be transported back to their room, there is a risk factor that the catheter is dislodged. It also is reported, like I said, these 40% of patients remain in pain, and that means that they need to have additional anesthesia or additional supply of drugs but it is not always sure whether the catheter is still in place. So if the patient remains in pain, normally, what the clinician is doing, he or she will give a bolus injection and wait then until 20 or 40 minutes, whether there has been a pain relief for the patient. Now by applying our technology with a different set of disposables, where we would connect the catheter with our disposable through our monitor, we are able to detect within 2 minutes whether the catheter is still positioned in the right place. With other words, there is a time-saving from 40 minutes to 2 minutes. And this would also mean an increase in the efficacy for the clinicians and the nursing staff that are treating the patient. So in conclusion, with our technology and with our concept and with our clinical studies that we have conducted, we believe that there is support and that we have been able to get that support for reducing or eliminating the pain during these procedures. We also have been able to show that there is a reduction in the teaching cycle. I mentioned, perhaps earlier, that during the training of the residents, we have performed a study by [indiscernible]. Like I said, normally, it takes 2 years up to 90 procedures to become profound in applying this technology. And in this study with [indiscernible], we were able to demonstrate that residents, by using robot, we're able to reduce that into 2 procedures or 2 days. We have been able to show the efficacy when our injection methodology is implied. We have been able also to show the safety aspects when our system is used and all the combinations of previous factors, more importantly as well, we have been able to show that there is a potential saving for the institution by using our concept. So in summary on our business plan, what I already mentioned to you is we are very -- we are in a very fortunate position that our balance sheet is very strong. We have an uptake in the dental business. I already mentioned to you the profit margins that we're currently having and what that could mean on the net profit results of the company on the disposables alone loan. What is important also to understand is I only talk about the standard of care when 2 million epidural procedures would be performed by using our technology. The market is larger than that. Only -- already 11 million epidural procedures are performed in the United States on an annual basis and 30 million worldwide. And also this market is growing fast. There are other areas of interest, like I said, intra-articular, as well as Botox or cosmetic injections and also in peripheral nerve blocks. That is also an area and an indication where we are looking into, and studies have been ongoing at the Lapeyronie University in France by [ Dr. Oliver Choke ], and there's actually an article in press that he has given the scientific evidence that there is a difference of pressure when there is an intra-neural injection or an extra-neural injection. So in a way,[ Dr. Choke ] has given the evidence that there is also a precious signature i.e., a potential differentiation possible when the injection is performed in the nerve or outside the nerve and more clinical studies are underway as we speak. Another feature that I would like to discuss with you and present with you, and we are proud to be able to present this to you as well, is that -- I already mentioned what you see on the top of the monitor, you see these vertical bars. That is actually the detection and the monitoring of the pressure. So when the pressure is high, that is then not possible to inject. But when there is a pressure drop, you see that, on the right hand, on the monitor on the slide, that is then approved that the epidural space has been reached. On the left bottom of the monitor, you see actually a curve. And that curve is what we call a pulse wave or is actually what we also call a Compu wave. So what it actually is, is that there are several spaces in the human body where there is a heart rate. And the epidural space has a heart rate, whereas the surrounding tissue has not. So we have been able not only to measure the pressure, but also to register that heart rate in the epidural space. So there are now 2, let's say, 2 features that show the confirmation of the placement of the needle in the epidural space: one, by registering the pressure; secondly, by showing the pulse wave or the Compu wave. And actually, we have been awarded a patent for these technologies and for these features, I would say, that gives us patent protection for the next 20 years. So what do these new features actually mean? So like I said, we have 2 indications. It objectively identified the false loss of resistance and true loss of resistance, which you see was indicated by the smaller arrows moving up on the monitor. So we can, by detecting these pressures, we can delineate between false loss of resistance and true loss of resistance. It also allows the practitioner to verify that the needle is in the epidural space when the pulse or waveform is displaced. So you see it, but at the same time, we also have audible registration as well, which allows the clinician to hear it as well. And why we have done that is that we would like the clinician to be able to concentrate whilst working on the patient. Recent developments we have reported on a regular basis. And probably what you have seen today is that we are very proud and honored to announce that we have been awarded a group purchasing agreement with Premier for the CompuFlo Epidural System as well as CathCheck with the GPO. Effective as of November 1 this year, this new agreement allows the Premier members to take advantage of special pricing and terms prenegotiated by Premier for the CompuFlo epidural system and CathCheck. Through Premier, which is, as you know, a leading healthcare improvement company, uniting an alliance of approximately 4,100 U.S. hospitals and 200,000 other providers to transform health care, we are honored and pleased that we have been able to be selected as a partner by Premier. It provides us enhanced access to Premier's members and should help accelerate as well our mission to become the standard of care. We believe that this agreement is a further validation of the growing awareness and the importance of our instruments in improving health outcome and lowering costs for health care institutions. Bye. We thank you for your interest and your attention during this presentation. I would sincerely like to invite you to our website where you would be able to get more information about our clinical studies, about our business model, and I would be more than pleased to answer any questions you might have. Thank you very much.

Thanks so much for the presentation today. Unfortunately, we no longer have time for questions. So for all attendees, the company may follow up post event. But thank you for your attendance. This concludes today's event. You may now disconnect.