NeuroOne Medical Technologies Corporation (NMTC) Earnings Call Transcript & Summary

Good day. Welcome to the Second Annual Winter Wonderland Best Ideas Conference. The next presenting company is NeuroOne Medical Technologies Corp. [Operator Instructions] I'd now like to turn the floor over to today's host, Dave Rosa, President and CEO of NeuroOne Medical Technologies Corp. Sir, the floor is yours.

Good morning, everyone, and thanks for joining us today. The first slide that I'll bring up is our forward-looking statement. You're probably aware that we are a publicly traded company. I'm sure you've seen many of these. So I will move on to the next slide. Really what NeuroOne Medical Technologies Corp. is looking to do is actually develop groundbreaking electrode technology because there's really been a lack of innovation with electrode technology over the past 50, 60 years. Some of the indications that we're looking to treat you're probably familiar with, epilepsy; Parkinson's disease; chronic back pain due to failed back surgeries; some of the more emerging markets like depression, OCD are also in play; and then other neurological conditions, such as essential tremors as well. Really, what our electrodes are intended to do is both diagnostic and therapeutic. So on the diagnostic side, they're really intended to detect, record and monitor any sort of neurological activity, while from a therapeutic standpoint, the idea would be to provide chronic stimulation for some of these indications or the ablation of tissue. Moving to the next slide. Some of the exciting things, just as kind of a few highlights. The technology, I mentioned in the slide before that, it can be used for a number of different indications. And we really feel because of that, that what we have here is a true platform technology unlike what most companies have to offer, which is really a single product. We feel that given the ability to play across all those areas, this is a true platform technology. We're also proud of the partnerships that we have. We've had a long-standing partnership with the Mayo Clinic and then dating back to July distribution and development agreement that we forged with Zimmer Biomet. When you look at really the overall market and the opportunity, if you combine epilepsy, spinal cord stimulation, Parkinson is really the market that we're poised to go after. You're looking at in excess of $3 billion to $4 billion of existing revenue that's being generated in those markets. So we really feel that there's a solid opportunity there. In terms of the value proposition, what really differentiates us, broadly speaking, precision. So we refer to our technology as a thin-film, high-definition technology. The Mayo Clinic actually did some testing and noted that they were able to detect single neuron activity with our device. And the reason why precision is such an important piece of the story is when you're trying to identify whether it's borders of a brain tumor or the area of the brain that's causing seizures, you want to be as precise as possible because ultimately, what the physician is going to do, what the neurosurgeon is going to do is remove that tissue. So you don't want any more, any less. If you've got tools that offer greater precision, they're obviously going to carry higher value. The fact that the technology is also much thinner and much lighter than existing commercially available technologies really provides an opportunity for us to place these less invasively than current technologies. One of the other things that we're really excited about and attracted me to the company was the ability to really combine functions into one device. So you'll hear a little bit about the technology that -- in a later slide that talks about offering both diagnostic and therapeutic functions within the same device. And then in terms of cost and manufacturing, our devices use automated processes versus manual labor that's used today. And because of that, we feel that we've got a cost advantage over existing commercially available technologies. This picture that you're going to see, I apologize for the gruesomeness of this. What you're looking at is an existing technology that we currently compete with today. You can obviously see how invasive this is, but it's also much thicker and much heavier than the technology that we have today. And this is a device that relies on manual labor for manufacturing, which again brings with it higher cost to manufacture than using automated processes. In terms of our product portfolio, the devices on the left in the top 2 really pertain to diagnostic devices. So the first one is the Evo Cortical Electrode. That electrode is a thin film that's placed on the brain for recording purposes. The second one that looks like a thin tube is the Evo sEEG Depth Electrode. That's not currently cleared by FDA, but that device is placed less invasively through tiny holes drilled into the brain to record brain activity as well. The bottom-left 2 boxes, first one that we refer to as the Ablation Electrode, that's the device that is a combination therapy that can offer both diagnostics in terms of identifying the problematic tissue. And then when connected to a piece of hardware that we'll offer as well, you can also perform an ablation for the identified problematic area. In the lower left, the last box, it says Electrodes for Chronic Use. The application that we're initially focusing on is spinal cord stimulation for failed back surgeries. Because of the flexibility of the device, our intent is to place these electrodes percutaneously or through a needle, thereby avoiding any sort of surgical incision. The next just shows briefly the time lines -- projected time lines. As I said, the Cortical Electrode is currently cleared by FDA and being marketed for recording and monitoring purposes. The sEEG Depth Electrode, that was the device that is placed through tiny holes in the brain tissue, we're waiting for FDA clearance and hoping that we get that, if not this month, in the very, very near future. The Ablation Electrode is not expected, again, pending FDA clearance until the first half of next year. And we're currently in development for the therapeutic devices for spinal cord stim that are off into the future. The next slide talks a little bit about our partnership with Zimmer Biomet. In 2020, we signed an exclusive distribution -- worldwide distribution agreement for our first 2 diagnostic products that I just showed. The reason why Zimmer was interested in this technology is the picture on the slide is of their robot. And currently, their robot predrill holes into the brain for these diagnostic procedures. And all the other competitive electrodes are actually used with this. This was an opportunity for Zimmer to really expand their footprint in these procedures by including, in essence, the razor blade to their razor. So in essence, whenever they're in these cases, they will have an opportunity to market these electrodes instead of having competitive electrodes used. There are also some additional milestone payments that are triggered when we ship this product after clearance in addition to the $2 million upfront licensing fee that they gave us. That's all nondilutive as well. And the other nice thing about the partnership is there are some accessories that are required for our electrode to be used with their robot, which really fit into Zimmer's wheelhouse being a large orthopedics company that they are. So they are responsible for the development of the accessories, while we were able to just focus on the electrode. The next slide refers to the partnership that we've had with the Mayo Clinic, which really dates back to around 2015. The 2 physicians that you see on there have been closely working with us over this period to help advance the technology. And even today, they're still really instrumental to the company and very supportive. The next slide shows a picture of the Cortical Electrode. This is the one that already has clearance. Again, I mentioned that it's got thin-film lightweight properties to it. One of the things I didn't mention is Mayo Clinic did some additional testing in terms of just the amount of swelling or inflammation that's caused by our device versus competitive devices, and they found it to be much more brain-friendly than any of the other devices. And I already touched on the precision properties of this type of technology. We also offer disposable cables, which the operating room really likes. Instead of having to resterilize cables or have to search for them when they're not in the room, we prepackage everything sterile. They're thrown away after the case, really affording a higher level of convenience than what's offered today. The thin-film Depth Electrode or sEEG Electrode, we currently have 510(k) clearance for 24-hour use. But what we're waiting on is for 30-day use, which is more commonly required in today's procedures. I would say the average length of use is probably 3 to 4 days, but all the other devices that we will be competing with have 30-day clearance. We do expect that once the FDA gives us clearance that we'll be able to pretty much immediately start shipping the product to Zimmer as they've already placed stocking orders. The next slide talks about this combination device. So a little bit of history here. Today, if you came in with epilepsy, they would drill holes into your brain, put electrodes in there, try to identify the problem area, then send you home and reschedule surgery, whereby they might use a laser or some other device to remove that tissue. So it's basically 2 hospitalizations, 2 separate procedures. And what we're aiming to do is to use the same electrode that does the diagnostic part for the ablation or the tissue destruction as well. And we did forge an agreement with a company to develop the hardware for us, which we expect to have later this year, around the Q3 time frame. The electrode development is pretty far along. And we just recently announced -- or I should say we announced late last year testing that we did, animal testing at Emory University with one of our Advisory Board members. And we've got a lot of enthusiasm about this project for obvious reasons. If you're able to do this procedure in one hospitalization, using the same device so that you don't have to drill multiple times into the brain tissue, it's got obvious cost advantages as well as likely safety advantages for the patient. And there's no patient who is interested in having holes in their brain drilled twice. I could tell you that. The next slide just briefly touches on deep brain stimulation. So the electrodes that we're developing are currently being tested. In fact, this morning, a press release went out on long-term testing for just recording brain activity. We expect to release the results of long-term testing for stimulation sometime later this month. And the important piece here is to have a technology, an electrode technology, that offers our advantages that can last at least 5 years. So we were excited to put out the press release this morning discussing the successful completion of the diagnostic long-term evaluation. And again, we should be putting out information on the long-term stimulation capabilities. That affects everything, not just the electrodes for deep brain stimulation. It also affects the electrodes for spinal cord stimulation, which I talked about on one of the other slides. The ability to demonstrate long-term viability opens up all these markets to us that we've been talking about for a while now. So artificial intelligence, the film that you see on that slide, which is a little bit larger than the size of a quarter, that has 900 contacts on it, whereas traditional electrodes, even that we sell today, would typically have 16. So I showed the slide because one of the advantages of this technology is the potential to pack thousands of contacts in the brain. You've all heard of Elon Musk. He has a neuro company called Neuralink. In fact, one of our employees and another consultant left there to work with us to develop our electrode technology. The future of treating patients that have pretty complicated conditions like paralysis should benefit from having electrodes, thousands and thousands of electrodes, in the brain as opposed to today's capabilities, which are more in the hundreds. So we feel that while this is still a ways out that we've got technology that really positions us well for treating future therapies using artificial intelligence. The next slide regarding the management team, Ron McClurg, who's also joined me on the call. Ron's our Chief Financial Officer. He's got a wealth of experience in private companies, public companies as CFO. Steve Mertens is an industry vet. He's worked in large companies. He and I worked together many years ago at Boston Scientific. Mark Christianson is our Co-Founder. Hijaz Haris brings a wealth of experience in the space from Medtronic. And Camilo Diaz Botia is the employee that I just referenced a minute ago, one of the people that we hired from Neuralink, Elon Musk's company, to work with us. The next group is our Scientific Advisory Board, the Mayo doc that you saw on a previous slide. We have physicians from Emory. Justin Williams, who's a PhD, is at the University of Wisconsin. And he is actually the patent holder on the initial technology. We filed a lot of our own intellectual property since that time. But he still works with us on a monthly basis and has been very, very useful to the company. Vanessa Tolosa is also the other ex-Neuralink person. She's a consultant but also on our Scientific Advisory Board. So we have the last slide, really, which is financial information. This will be updated on our earnings call, which is next week on 14th. But this was our last reported information financials, which, again, need to be updated. That gives you an idea of how many warrants and shares are currently outstanding. So that's the end of the presentation. And with that, I think we could open it up for some questions if there's any questions that we can handle.

Okay. So the question that we got says when new Cortical Electrode is FDA cleared, what is the estimated annual revenue? And what is the margin? So we haven't made that information public. First of all, it's an sEEG Electrode. We have not made that information public before, and it's clearly strictly based on revenue that would be coming from the orders from Zimmer. So next question is, address the FDA time line. And for the sEEG Electrode, honestly, it could be any day. So we'll have more of an update at the call -- the earnings call next week. But we submitted for 30-day use late last year and are waiting. In fact, what the FDA is reviewing are really the results of 2 additional tests that they had asked us to perform that are both biocompatibility tests. So the short answer is as soon as the FDA can get back to us, but I really expect it to be this quarter for sure. This question says, what do you suspect has been the wait for the current FDA approval you're expecting? I believe you suggested it could come yet in February. Yes, I did suggest that. The FDA has been slow. So I'm on the Board of 4 other medical device companies, all of which are in communication with the FDA, all of which had expected feedback from the FDA in December, and all of them are still waiting for the FDA to get back to them. So I'm sure part of this is COVID-related, part of it is resources. But the FDA had initially told us that they were targeting getting back to us before Christmas. So you can imagine, they're definitely -- they appear to be backed up. So we will see if we have any more questions and if not, give it another minute. I would tell any of you that are interested, please feel free to join us on our earnings call next week on the 14th, February 14. So it looks like that's all the questions. I just want to thank everyone for participating, for joining. Much appreciated. And again, hopefully, you'll get to hear more of an update next week as well. Have a good day.

Thank you. That does conclude the NeuroOne Medical Technologies Corp. presentation. You may now disconnect. The next session will begin shortly. Please consult the conference agenda for your next presenting company.