Nova Eye Medical Limited (EYE.AX) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining Nova Eye Medical's Investor Webinar. Again, record registrations coming through. So it's great to see everyone's support post our results recently. Today's focus will be on two key milestones, and that will be back again on the record results that we had for FY '25 announced earlier this month. And then we'll move to the quarterly activities report, which we released this week. So where we have excitingly provided some clear guidance to the market on FY '26. So Tom Spurling, as usual, our MD, will walk through the quarterly performance and the drivers behind the sales growth and the assumptions underpinning our FY '26 guidance. As usual, we'll also have the Q&A. So there's a Q&A function within Zoom. I have a number of questions that I have received from shareholders and interested parties, which we will ask, but please send them through. And with that, I'll hand over to Tom.

Thank you very much, Mark, and thanks, everybody, for coming along again this morning. We're having lots of webinars, but I think we've got lots of good news to give. And we are hitting the targets we promised and that I find very exciting. The first slide, Mark. So just a reminder to everybody, and I think that there'll be a lot of registrants who are familiar with our company, but glaucoma is very simply, it is a failure of the eyes plumbing. So clearing blockages to ensure the liquid-rich protein runs around the eye, that is the mission of our business. Next slide. So as Mark said, we've got a record revenue, AUD 29.2 million. We really manage it as USD 18.8 million, and that's 23% up in constant currency. Our Glaucoma segment, we -- as guided, we made a profit in the second half at the EBITDA level. And very pleasingly, we're reporting that group cash flow in that last quarter was down from $1.4 million in the quarter before to $847,000 in quarter just ended. We have $5.1 million of cash on hand. We'll talk about that further. Our guidance, excluding China, just because China could be a bit tricky to predict, $21 million to $24 million. That equates to using the midpoint, 26% growth. Our business is forecasting 26% growth next year. I have a view, I talk with various people, they tend to support the idea, that the maturity of a company can be measured by its ability to predict that revenue inflow. We're not something -- we're not -- we've done all hard yards. We can now see, we have an outlook about who our customers are, when -- and what our revenue is going to be, and that's really pleasing. We think that those revenues are going to drive improvement in the bottom line, and most importantly, operating cash flow generation, operating cash flow breakeven, whatever you want to call it, so that we are using the resources we have right now. First, on to our financial performance that we described. Our market in the U.S., 78% I think that is, 26% growth, 78% of our revenue is in America. That -- and we had growth in all territories. We were at the high end of our guidance. Our guidance was $9 million to $10 million, excluding China, and we got $9.942 million, could have nearly rounded to $10 million. And so we have a continuing growth in the U.S., the primary market, the market where we get our highest margin. So it's not quite right. We get good margins in Germany, certainly the highest volume and margin mix. So we have enough confidence again to then predict sales again next year and give guidance as we have. Next slide. Here, we can look at the improvement from the first half to the second half. The second half was where we were very focused on providing shareholders with that guidance as to how things would pan out. We had -- operationally, manufacturing-wise, we had a difficult first half. You can see the gross margin improvement. And we are really giving guidance that, that second half is more indicative of what things are going to look like going forward in the ratio, the gross margin ratio, and then the OpEx too, and the leverage that we see coming through. The AlphaRET costs and -- I mean, we have very, very humble corporate costs. I mean we put a big red sign on what they are. We don't include them in OpEx. That's to give everybody visibility, but they are very humble. With respect to AlphaRET, we did have some cost to discontinuation not of the management of the technology, but we did have people working on the project, which we've -- so there were some people costs associated with that, that are now finished. Our cost for AlphaRET, even though we see that technology as super interesting, it does not fit with right now. We are partnering to -- we would like to partner to expand that. In the meantime, it's care and maintenance and progression to operating cash flow breakeven for our business. That's what our shareholders are demanding. Next one. This shows that our progression from cash outflow from operations is falling up and to the right, always makes one feel better. So you can -- that trend line is important. And that trend, we can talk about the cash on hand of $5.1 million. You can divide that by 147,000, and you can see the answer is 6, that's what the 4C table ask you to do. But of course, that was just last quarter. It's not what it's going to be next quarter. So we see our cash resources as good. Earnings improvement that we're forecasting will lower that in -- after Q4 in the current quarter and beyond. Next one. So we're guiding to USD 21 million to USD 24 million. In Australian dollars, it's too subject to the exchange rate. 99% of our revenue is in U.S. dollars or euros. That is based on our -- you can take our run rate in the last quarter and multiply it by 4 and you get a very conservative number, around USD 21 million. But if we take -- as I said, if we take that midpoint of USD 22.5 million, that's 26% growth. Our shareholders have a company in the broadest terms, in a large and growing market that we're a reasonable participant in, and we'll talk about market share, we're generating a gross margin of 70-something percent, which we think can be better. And -- so we got revenue growth, good growth margin in a growing market. It is a good position to be in. And we think that, that will flow through to breakeven in FY '26 and the cash flow is expected to, as I've said, continue to improve. So they're the financial highlights, and let's just revisit some of the -- remind ourselves of the market we're in and some of the other stuff that's going on. $877 million a year is the current estimate of the market. Probably about $600 million of that is in the United States. We have a brand now that we've built up over the last 5 years in interventional glaucoma. That is the idea of intervening in the progression of glaucoma to reduce patients' reliance on medication because patient compliance with taking medication is poor. And one in five patients, and I know I've said this lots of times before, but it is a compelling value proposition for a patient and a doctor or a doctor and then to his or her patient. One in five patients who present for cataract surgery have concurrent glaucoma. That means the world's most common surgery is cataract surgery. Everybody by the time they get to 70, 75, needs to have a new lens put in their eye. And that new -- because of age and time and sun, messes up the existing lens. A patient, one in five of them has glaucoma. So that means they're probably taking one or two drops or three drops every day, and it's painful. So suddenly, they can't see at night and can't see the golf ball and they're taking three drops a day. And they go to their ophthalmologist and say, doc, can you help me? Yes, I can help you. Let's get rid of that, put you in a new lens. And while you're on the bed in the surgery, we will do a quick operation. Well, a simple -- it's not too long, but it's a simple operation to clear the blockages that are causing your glaucoma, and the patient gets up with nothing left in their eye. They don't have blood, they don't have -- they can see again. And hopefully, they're off, and in most cases, they will be off a number of medications. That offer to a patient is very compelling for a doctor and the doctor makes money and the patient is happy. That is the market we're in. We're not trying to -- the market is very real is what I'm trying to say. Next slide. How come -- people say, how come you are -- how do you compare with other devices? Doctors do have choices. People rely on doctors to tell them what they're going to do. So the sell is to the doctor. And the doctor -- this list of things that are important is compiled by all the work we do with our key opinion leaders and our customers. It describes the important things. First of all, is an indicated -- do you have an indication from the FDA to treat glaucoma? Second, what does the device do to the natural outflow pathway, that's the trabecular meshwork, the Schlemm's canal and the collector channels. They're the irrigation systems in the eye. Is there an implant? Am I stuck with an implant at the end of this? And the canal, the main drainage canal is a 360-degree channel. How easy it is to get around that in surgery? And will it preserve tissue? Am I cutting something up? There's green ticks in all of those questions for iTrack Advance with canaloplasty. And you can see in those devices underneath this, there aren't green ticks for all of them. And it's easy to say, well, you're the CEO of the business, of course, there's going to be green ticks. If we didn't -- if we had a spot where for sales footprint down the right-hand side, we probably would have a cross because we are carefully managing the number of salespeople we put in the market in the U.S. in order to make sure we have good revenue growth and good bottom line at the same time. So those other people have bigger sales forces. We have the best product. Next one. So clinical data, some of the things that have gone into the quarter, and there was a question before the meeting, before this webinar about clinical data. clinical data is central to our market activation. Most recently, the World Glaucoma Congress podium presentations of clinical data extracted from the International Glaucoma Surgery Registry, the IGSR, and the IGSR is the official registry of European Glaucoma Society. In America, they had one called IRIS, but -- which stands for something else, but the Europeans, there's no difference in credibility, and there's more than 60,000 surgeries have been entered into that by doctors. And that IGSR operates independently of Nova Eye. We can't pick and choose what's going into that registry and we can't do anything about cases that are in the registry. It's an international collaboration where all the doctors are trying to understand the outcomes of glaucoma surgery to guide evidence-based decision-making by those surgeons. So those surgeons like to see a study supported by, if you like, this is an independent study, not one supported by the company. We have to pay some money to be able to access data but we don't have any choice in what the data is. Papers are prepared by doctors using this real world data. Now real-world data is important. Collecting clinical data can be very arduous. Couple of people asked about the MAGIC study, collecting data for the MAGIC study has been very, very arduous. We will -- and so this real-world data is very valuable. It can't be underestimated in it's importance. So currently, there are 500 eyes that are in that registry from North America, Europe and Australia. And very importantly, this ISGR (sic) [ IGSR ] data is considered prospective, not retrospective. And just to be clear about retrospective data, retrospective data, people can suggest, well, they're cherry picking the best results of a case of 20 case studies. That IGSR data is prospective, meaning you put it in, and what you get, you get, you don't get to cherry-pick. Very important data, very valuable as we -- and the collection of data is important for reimbursement in the United States. We currently have strong reimbursement. I'll talk about that in a sec. And maintaining that reimbursement is supported by things like the IGSR. Next slide. As I've said just earlier this month in July, the Center for Medicaid and Medicare published the proposed rates for 2026. They do that in July every year, and it is finalized in November. There is an increase in the fee that we will receive that the facility who houses the operation. This schematic describes the parties, the parties to the transaction are, us as a supplier of the product, the eye surgeon as the person conducting the surgery and the facility as the place that houses the surgery. And we build the facility, as I said, roughly 1,000, it's a bit more than that, it's a round number. And the facility bills Medicare, bills CMS $2,231 in 2026. That's up from $2,045 in 2025. So a 2% or 3% increase. The surgeon fee has fallen a little bit, but that change in the surgeon fee is applied to all glaucoma minimally invasive surgeries. I think it's -- I don't know why yet but -- so that doesn't really change the relativities. It's fallen a little bit. It doesn't really change anything. So what we have is a reimbursement platform or landscape for 2026, where the incentive to use iTrack versus -- in the first place and the incentive to use iTrack versus other devices remains constant as it is in 2025. Business as usual is really good. Next one. Validation, everybody needs validation, and I think this Needham -- the analyst at Needham is right across the area of minimally invasive glaucoma surgery, interventional -- also known as interventional glaucoma. And he has called out the outcome of his 35 U.S.A. ophthalmologists survey who are all saying they are going to use iTrack Advance more, the biggest change is going to be through iTrack Advance. Everybody else is going to stay the same or go down a bit. That's an exciting prospect. And what it actually shows is that our little sales team, which we have been increasing, I accept that, is getting the message out there. There are doctors, more and more doctors that see our iTrack Advance and the benefits of the technology, the sheet with the green ticks is what they're looking at. Mathematically, we can look at -- and this has informed our guidance. Well, it actually validates the guidance that we -- in our estimates we probably already made. But 2.4% market share in the U.S.A. in the 12 months to 30 June '25 equals $14.3 million. So you can do the math on what 3.4% would be in June '26, and I think it's about $19 million or $20 million, which is our guidance is given we've got markets outside, that's conservative guidance. Next slide. On iTrack -- sorry, on iTrack in China. We have been progressing approval, and that is a very torturous process. It's been underway for approximately 15 months. We bring it up now formally because we are now optimistic of securing approval for iTrack Advance in 2025 calendar year, the first half of the fiscal year. In the meantime, sales of our original iTrack microcatheter in China are continuing. That's important. Now why do we -- why is an approval in China important? Well, I mentioned before the cataract surgery and its role in concurrent glaucoma or patients with concurrent glaucoma. There are 4,905 cataract surgeries done in the United States with a population of 340 million people roughly. In China, the cataract surgeries are 3.6 million and there's 1.4 billion people. So given in that ratio, 1 in 5, that's for Chinese eyes as well as American eyes or outside China eyes. So as cataract surgery rates grow in China, the opportunity for concurrent interventional glaucoma surgery also grows. So you can see a vibrant market in the future in China. That's why we think it's exciting. Next one. The drug delivery idea -- not idea, the drug delivery opportunity we have with iTrack, our very small catheter, is exciting. We highlighted it back in March or early April. We have -- we are waiting on some results that we -- from the pharmaceutical company doing some work over the last -- during this current calendar year. This opportunity is -- highlights how exciting our iTrack technology is and our technology in general. And it's one of many -- we're not spending -- we are not investigating or working up prototypes for a drug delivery microcatheter because our mission is to make sure that we allocate our resources and achieve that cash flow breakeven and operational profit. And that means choices have to be made. We keep our foot on this opportunity. We don't want it to go away. We think it's fantastic, but choices have to be made when we're allocating resources. And right now, we'll just stand by. It is a very exciting opportunity, though. Next one. Now in the interest of trying to progress some more, well, future opportunities, we've been awarded a grant by the federal government that identifies a combination of some technology at the University of Adelaide with our expertise could deliver new approaches to early detection in eye disease in the indigenous community. So effectively using photons to measure very small changes in the eye structure that would give rise to early detection of disease. $488,000 is obviously non-dilutive, and it gives us a very -- it gives us an opportunity to develop new technology for a broader market. It is good, and we're not asking our shareholders for that money. The Australian government is looking at this and saying, well, this is looking pretty interesting. So they will get the government to provide that money for the time being. Next one. I think we're done, Mark.

We are, Tom. Thank you.

Some couple of good questions coming through. But just following on the grants and taxpayer funded biotech initiatives. So does Nova Eye plan to engage consultants and/or government programs linked to taxpayer-funded biotech or even med tech initiatives?

Well, I've been -- I'm pretty clear, we're pretty focused on initiatives that directly impact Nova Eye's commercial priorities. USD 21 million to USD 24 million of revenue, improving our operating leverage, improving our gross margin to get a bottom line and cash flow improvement. That is what -- that is the direct commercial priority. Broader sector level programs are noted and -- but they're not currently our focus.

Okay. A couple coming in here now live, which is for you to answer, which is -- and back to the device itself. Why do surgeons favor one product over the other? And does the simplicity of our offer open up the procedure to more doctors? Or is it the same?

I think our green tick schedule, if you put that back, Mark, is the best description of why doctors will buy our product or why recommend -- yes, buy our product. Absolutely the implementation of iTrack Advance versus our original iTrack which was the forcep-driven -- circumnavigation with forceps. Absolutely, it's made it more available to more doctors because the operation is -- it makes the operation -- broadens the appeal of the operation, they're the words, to more surgeons.

And also following on from that. The cataract surgery device providers, do they mostly offer the stent option? Or is there -- does it make it hard for you just to break into those cataract surgeons?

So on that list that I've got on the screen now, Alcon is the only one that has -- Alcon is the largest ophthalmology company in the world, and it is the only one that has -- of that list that has a -- that does IOLs as well as having this glaucoma option. So there are other -- the other companies that are selling IOLs are Johnson & Johnson, Bausch & Lomb, ZEISS, Bausch & Long, ZEIS, Rayner, they are all large companies that sell equipment, including IOLs, for cataract surgeries.

The one that typically always comes through is, is there an opportunity to grow sales in Australia and New Zealand.

We focus our resources on the biggest market, the biggest opportunities because we have limited resources. The biggest market, the biggest opportunities are in Europe and the U.S.A. $1 invested in America gets us $1 back very quickly. The market in Australia is small. Stated very simply, while the CMS and Medicare administrative contractors are happy with the data from iTrack and reimburse the product, the Australian authorities are not yet reimbursing the product. So for that reason, we have very -- we have some public hospital revenue, but very small. It will be nice because we have Australian accents to be able to sell to the Australian market. But it's not about Australian accents, it's about growing sales at 26% and delivering operating cash so that our shareholders get what they're asking for.

Plenty of questions through earlier and now around the drug delivery opportunity. I know we covered it but why is that drug delivery opportunity so interesting to us and where can it lead us.

Well, that is a good question. So it is -- there is a market that says it's a lot of -- it's big. Positive results could lead to collaborations, joint IP developments, licensing, manufacturing, I mean, we can manufacture the device. You can imagine it would be exciting to have a long-term manufacturing contract that provides a great baseload that could be constantly delivered. There isn't any marketing associated with it. We just get the marketing and selling done by a third party. So that there we can license to somebody else to manufacture. There's various possible revenue streams once we've established that our catheter or if we establish our catheter is a good one for the job.

Okay. A couple of questions as well. So we did talk about speaking with the pharma company. Can you confirm is that pharma -- location of that pharma company and where you're talking to them?

It's a global market. No, I won't confirm it, but we -- it's a global market. It's -- their physical location is probably nebulous anyway.

Okay. Gross margin is a topic that's being brought up in a lot of the institutional meetings we've had this week and the improvement there. One of the questions and also one from Michael Youlden is can we expect further gross margin improvements over the next 12 months, and if so, by how much.

Yes. So Michael is a good guy, but we're not going to give specifics on gross margin percentages. We have given guidance on EBITDA at the bottom because it's a big combination. Gross margin, just to be clear, is a combination of the price we receive for the product, the materials cost that we pay to our suppliers, the efficiency with which we apply our labor to produce those devices, and last of all, the fixed overhead of the facility to manufacture the devices. Fixed overhead is by definition fixed, and therefore, scale can increase the gross margin because you amortize the same fixed cost over a larger production volume. Labor is important because as you have a good team come together, their skills increase, I mean, over time and can improve the number of units we can get out per hour. So -- and the better price we achieve obviously contributes as well. We push our suppliers on -- and changing supplies can be hard because all of them need to be validated. We have a product that goes in somebody's eye, so it needs to -- they need to meet strict quality criteria. But that's why the gross margin can never ever -- we can never leave alone cost of goods sold. It's a constant thing that we have to work on, but we're not giving specific guidance.

Okay. Another one from David at [ E&P ]. Is the Fremont manufacturing facility fully operational now and able to meet demand?

It's not at capacity, I think that's what David is asking. So we are far from capacity at Fremont. We are -- we have two clean rooms and those clean rooms are working one shift. And only -- and we're working on shift in 1.25 of the clean rooms at the moment. So that investment was made a while ago. So the impact is, we hope, very incremental. We just have to hire labor and train labor. Not just, every person, the hiring has to be done carefully. Hiring labor, training them and getting them to build catheters efficiently and effectively.

I know we've covered 2RT both in the results and its own slide, but not actively being funded at the moment. What else? Is there anything else happening with 2RT? Are there any trials that can continue to validate the technology?

We don't -- we have users in Europe and New Zealand and Australia, who think that this technology is fantastic, that the results they get in the real world are great. In order for us to take that information and tell the world about it requires commercial infrastructure, which at the moment, we have to make choices, we make choices. And that is how we have to deal with that at the moment, and we're focusing on glaucoma and iTrack. The opportunity, we've gone out of our way to find a little bit of nondilutive funding that could help in this area, I suppose, broadly speaking. But we would like a partner to come up, and I know I've been saying that for many years. But that is how we have to consider 2RT at the moment. It is highly prospective technology, but we do not -- we're not a company with the resources to explore it today, just today. Our mission today is very clear.

A couple of questions on tariffs, our favorite. What effect do you think the U.S.A. tariffs have on company, on Nova Eye?

So we are everything that the President Trump likes, which is we are manufacturing in California in the United States and selling mostly in the United States. We are exposed -- so we sell from U.S. to Europe. So if Europe in their recent discussions that were over this week, settled, if Europe had imposed a tariff on American product in retaliation to the tariff being imposed, that would have impacted us. So -- but they haven't. So that means 80% -- 90% of our -- 95% of our revenue was unaffected. With China, it's a little bit different. There has been a tariff imposed on China. And -- sorry, China has imposed a tariff on America. And so we work and we're working on sharing the impact of that with our distributor in China.

And maybe a final one, if there's no further, but our cash position and funding runway, how long is the cash -- current cash runway? And do you expect to need additional capital?

So as I've said, our operating cash flows are pleasingly headed down at a pretty good rate. Our cash is $5.1 million, and that 4C form requires you to do a little bit of arithmetic and the answer to that is 6 quarters, assuming that the cash outflow in the quarter to June is indicative of what it will be in the future, and we're already guiding that it won't be. So I think the message we're giving is that our cash is meager, but it is sufficient for our purposes to hit our targets in FY '26.

Perfect. Thank you, Tom. Some great questions. And as always, Tom and I, our details are on there. Just one last one that's just coming through quickly is can you comment on the stickiness or the retention of surgeons that have started using iTrack Advance. I think we're looking for repeat orders there.

Yes. Look, I -- we think it's good because we are growing pretty much month-on-month. So that means we're retaining customers as well as getting new ones as well as getting the old ones to use it more. So I think it is a reasonable assumption that we -- that month-on-month growth is -- means that we're getting customers that are sticky.

Yes. Thanks, Tom. That's answered all the questions we can cover today. As always, as I was mentioning, Tom and I, our details are there, phone and/or e-mail, very happy to arrange calls directly. If there's any information you need, please reach out directly and we can go from there. But thank you very much again.

Thank you, everyone.

Thanks very much, and we'll speak to you all soon.

Thanks for listening. See you later. happens