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

Ladies and gentlemen, thank you for standing by, and welcome to the NeuroOne Medical Technologies Corporation First Quarter Fiscal Year 2023 Financial Results Conference Call. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa; and Chief Financial Officer, Ron McClurg. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of the U.S. federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified date. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. See NeuroOne's corporate update press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, we undertake no obligation to update such forward-looking statements. With that said, I'll turn the call over to David Rosa, CEO of NeuroOne. Dave?

Thanks, operator, and thanks, everyone, for your attendance today. During our first fiscal quarter, we achieved one of the most significant milestones in the company's history when we received FDA 510(k) clearance for the Evo sEEG Electrode for less than 30 days use. Zimmer Biomet is still targeting the end of the first calendar quarter of 2023 to begin a limited commercial launch. We're particularly excited about the synergies that exist between using Zimmer's ROSA robotic platform with our Evo sEEG Electrode. The company also shipped the initial Evo sEEG limited market release order to Zimmer Biomet during the first fiscal quarter and continue to manufacture product to meet additional orders for a future full-product launch. We also made tremendous progress with our OneRF therapeutic ablation electrode system as we completed a successful animal feasibility study with Dr. Jamie Van Gompel at the Mayo Clinic in Rochester, Minnesota. The results confirm that the system is capable of both recording brain activity and ablating brain tissue using the same electrode. I am also pleased to report that we met our goal of completing the development of the system by the end of calendar year 2022. We are excited that the system is performing to our specifications and our final steps, already complete design validation testing. We also remain on target to submit a 510(k) application to the FDA early in the second calendar quarter of 2023. Now I'll discuss our efforts in developing electrodes that could be used for chronic stimulation and recording. Our focus remains on treating chronic back pain due to multiple failed back surgeries. Our goal is to offer a percutaneously placed panel electrode that can be deployed in a comparable manner to existing percutaneous systems while offering an increased stimulation area, improved conformability and lower energy requirements. We have already developed and tested percutaneous delivery system prototypes that have received positive feedback from key opinion leaders. The company also engaged in discussions with potential strategic partners and are exploring opportunities to expand our offerings to other markets. While there is nothing definitive yet regarding these discussions, I am pleased to see the level of interest in our technology. We are also continuing to explore the potential for our technology to offer the ability to deliver genes or drugs as well as record the agents impact to the patient. We expect to conduct preclinical feasibility studies to assess the device's potential but are enthusiastic based on physician feedback to date. The company was also active with poster presentations highlighting the Evo sEEG Electrode performance at the following meetings: Congress of Neurological Surgeons, Society of Neuroscience, and the American Epilepsy Society. Our products were also displayed at the Zimmer Biomet booth at the CNS and AES meetings. We will continue to target key society meetings to present our data in an effort to increase our exposure. And relating to increased exposure, I also had the pleasure of being interviewed on the show Mornings with Maria during the quarter as well. In addition, the company was invited to rang the NASDAQ stock market closing bell to celebrate the FDA clearance milestone for the Evo sEEG technology. Thanks for your time and attention. I would like to now turn the call over to Ron McClurg, for a more in-depth review of our fiscal first quarter financial results. Ron?

Thank you, Dave. Product revenue was $115,000 in the first quarter of fiscal 2023 compared to product revenue of $34,000 in the first quarter of fiscal '22. We had collaboration revenue of $1.46 million in the first quarter of fiscal '23 compared to collaboration revenue of $6,000 in the first quarter of fiscal '22. Collaboration revenue is derived from the Zimmer development agreement and represents a portion of the exclusivity licensing payment that is eligible for revenue recognition as of December 31, 2022. Total operating expenses in the first quarter of fiscal '23 were $3.2 million compared with $2.8 million in the same period of the prior year. R&D expense in the first quarter was $1.6 million compared with $1.1 million in the same period of fiscal 2022. SG&A expense in the first quarter of fiscal 2023 was $1.66 million compared with $1.74 million in the prior year period. We had a net loss of $1.7 million or $0.11 per share for the first quarter of fiscal '23 compared to a net loss of $2.8 million or $0.18 a share in the first quarter of fiscal '22. As of December 31 of '22, the company had cash and short-term investments of $7.6 million compared to $11.1 million as of September 30, 2022, our most recent fiscal year-end. The company had no debt outstanding as of December 31, 2022. That concludes my remarks. I'll now pass it back to the operator to open up the call for Q&A.

[Operator Instructions] Our first question comes from the line of Alex Nowak with Craig-Hallum Capital Group.

Okay. Great. I know we're waiting for Zimmer to receive FDA approval for drill bits and some various accessories to go on the ROSA robot. And that was all going to be done to [indiscernible] commercialize the Depth Electrode. So just where does Zimmer stand with those 510(k)s.

Yes. Regarding Zimmer, there was only one device that required a 510(k), and that was the drill bit, Alex, and they did receive 510(k) clearance on that.

Okay. So with that in hand, is there anything else that -- I guess, what is the next barrier to do in the commercialization at the end of this calendar year? Or is it more or less getting the reps trained, getting the product out there into the field, getting the initial sites trained up? Is there any other, call it, roadblocks or barriers to watch for? Or is everything pretty much ready to go?

Well, they're still procuring some of the accessories. So at this time, I'm not aware that they have all the products that they need in terms of the accessories in-house yet. But in terms of regulatory holdups or anything like that, there shouldn't be. And yes, all the other things that you mentioned, field training, site training, the sites have been identified at least the target sites that they plan on going to. But all that work really needs to be done in the next six weeks.

Okay. Understood. And then so you've got the Depth approved, which is great. Zimmer's committed to the launch and they're ready to go with the ROSA robot. So how do we think about that launch? Is this going to be within the next 12 months, think of it like a hockey stick sort of worldwide launch, you're going to see it being used in a lot of ROSA cases, maybe a majority of ROSA cases? Or should we expect it to be a bit more of a pilot rollout to select ROSA users? Just how do we -- how do we think about modeling this?

Yes. So it's not going to be a worldwide launch. The device is only going to be commercialized in the U.S. So we don't have OUS clearance, but it will be a controlled rollout. So there -- I do think that the first three to six months, we're obviously going to be making sure that everything is fine with the technology, which is really why you do a limited launch. We don't expect that there's going to be any issues based on the experience that we have. But it will be a very controlled methodical launch, at least in the first to second quarter. And then after that, I would expect -- I mean, the goal is for the technology to be used in all the procedures and all the robotic procedures.

And to that point, in the initial KOL discussions that you've had either yourself or Zimmer together, with the KOL their initial feedback, did these initial sites intend to replace all their electrodes that they use with your electrode. Is it going to be using kind of a one-off situation at first and then slowly ramps?

Yes. So I haven't participated in discussions about how they plan on using it when Zimmer has held the meetings. I mean, we've definitely been able to attend the sessions where these doctors have been. But the feedback that was really requested was on the electrode itself. And the feel of it, the tactile feel of it, the features of it, there was definitely no discussion about using this in just select cases. There would be no reason to use any other electrode over our electrode. And at least none of that ever came up in any of the discussions that I participated in or had ever heard of. So this is intended to be a replacement for all of the sEEG electrodes that are being used today.

Okay. That's great. And then just two more questions. The first one is, just any update around the pulse generator that you plan on using for the chronic use electrode. I know you've talked about some potentially some strategic partnerships there in the past. Just any update? And then just the second question with regards to capital, needs for capital. Just how to think about that? And should we also think about there could be -- whether it be something similar to Zimmer where you have non-dilutive capital come in through a partnership?

Yes. So I'll answer the capital part first. So yes, I mean, at some point during the course of 2023, we're going to need capital. But regarding the ablation technology that I talked about, we'll just say there's been strategic interest in that technology. So the goal here is to explore nondilutive capital first, and those discussions are happening now. That's always going to be the first option. And if not, obviously, there's other ways of generating capital. We have an ATM in place. We can always do a capital raise as well. But our efforts right now are really focused on non-dilutive capital because of the interest in the ablation system that we have. And I'm sorry, but I forgot what your first question was.

That's okay. Just any update around the pulse generator for chronic use.

No. I mean the same options that we had before, we still have. So there's really nothing new with that. What we are working on in addition to the electrode is now. We have to start designing the connectors so that the electron can communicate with the system that we're intending to use, but nothing further on negotiations or anything like that.

Appreciate the update. Thank you.

Our next question comes from the line of Ben Haynor with Alliance Global Partners.

Just wanted to check one thing. Did you say Zimmer was launching -- planning on launching by the end of this calendar quarter? Or was it the end of this calendar year?