Nova Eye Medical Limited (EYE) Earnings Call Transcript & Summary

[Audio Gap] So our first target is the sum of A, B and C, which is about 1,200 customers. When we get through to D, this D section, which is the large volume of cataract and comprehensive surgeons, we estimate about 10,000 of those in the United States. So we have a very systematic approach, starting with our active accounts. We go then to our inactive accounts. We proceed to new accounts who we call co-surgeons, and then we move to the cataract and refractive. This is our very targeted sales plan that we're working with our field sales team. Remember, we have a team of employees sales people including trainers in the United States, boots on the ground, pushing our device into the hands of surgeons. Next slide. The glaucoma opportunity is a large one. Glaucoma is -- has been treated for many years with drops, $6.1 billion market nominally. The aging population drives a prevalence and general growth in that number in developed countries. But within that market, there's a need for glaucoma surgical devices to overcome the significant drawbacks associated with medications, mainly that people don't take, they're too hard to put in your eye and the people forget. So a simple procedure or a common surgical procedure, as I said, reestablishing the flow with our beautiful catheter has the benefits of the patient of reducing or eliminating the number of drops that person has to take and at the same time, lowering the eye pressure, which is the whole market of glaucoma. Next slide. So our activities, as I've said, record global sales, $11.3 million, up 18%, equates to $16.7 million, up 26% in Australian dollars. In the U.S.A., we achieved following markets in late March. We had a good sales increase, a modest sales increase in terms of the whole year because there was only a couple of months in this fiscal year we're reporting on. But in the third bullet there, you can see that we had that acceleration was evident during July. And during the May, July period, we had a 32% growth. Outside the U.S., we had a 46% increase driven mostly by China. Sales in Europe were flat. Our focus, of course, is on the United States. We received a question, for instance, I know of our Australian market and why we don't sell into the Australian market. We do sell a few devices into the Australian market, but the reimbursement arrangements we don't have, it is a clear purchase, but it is -- the reimburse -- Australian reimbursement system does not reimburse the procedure, which limits its take-up. The effort to get that reimbursement procedure has not been undertaken. We're then prioritizing that U.S. market, so goes for Europe in many respects. Next slide. This is a reasonably busy slide, but it highlights the clinical data that we're collecting. We have -- we're very pleased with some real world -- clinical studies are one thing, but having real-world data to show that it's actually working. So far, we've got 367 patients data in there, 265 are in our target primary open-angle glaucoma and a few are in other sorts of glaucoma. 226 were classified as mild to moderate, which is the space we want to work in. The area where patients still have functioning irrigation systems and which will benefit from the pump primary nature of our advice and 12-month follow-up. And you can see down the bottom that we've had some good results of decreased IOP and medication free of the eyes that we've been studying. In the -- so that will be -- the multicenter -- sorry, the registry data comprises 20 sites in the U.S.A., Canada and Europe. So it reinforces the safety and efficacy of iTrack and it's very exciting. We can have lots of studies but what doctors really want to see is that the patients are going to be safe, and it has efficacy. And this real world data in the real world, real world data provides that. Clinical studies, however, are required, the MAGIC study, which is not a study that will drive any sort of clearance. It is a study that we wish to do to show to the world that we have an efficacious device compared with a competitive device. Patient recruited. Recruitment has been tough, but it's now moving along nicely 2024 calendar year recruitment to be completed. The details of that study referenced on the slide, the clinicaltrials.gov. In Germany, we're conducting a study on the impact of iTrack. We've compared with cataract surgery alone. Some of you know that the very act of removing the intraocular -- removing the maximal lens and replacing it with an intraocular lens provides some benefit in terms of pressure to a patient, and we're comparing CATALYST -- the CATALYST study compares iTrack with cataract surgery. Now that is also scheduled for completion around the middle of next year. We'd like to progress those, some of you have been following, that's taking a long time. Yes, clinical studies do take a long time to recruit. Next slide. This shows our operating result. On the left-hand side is the result for the year to June '22. And it shows our fiscal year '23 result in 2 parts. The first half which had us learning to build the device and rolling out the device; and the second half where we had sales progressing, particularly in the United States. The highlight for us has been the improvement in the gross margin due to the higher selling prices we were achieving in all markets and the production efficiencies as we get at our Fremont operations and in Dunedin as we get our iTrack advanced. The volume increases. We've been -- there's a small reduction in operating expenditure, but we've been managing things very tightly within our cash constraints. So we're excited about that ratio, that improvement in EBITDA and gross margin during the second half, and it is something that we think is going to continue. Next slide. A few words on 2RT, and we've received some questions for some time now, we've been talking about 2RT. This is -- 2RT is a device that we think has a wonderful future. We've got some wonderful clinical data. It is a method of action like no other device in the world. There's a very large unmet need, but the commercialization of 2RT requires funding that exceeds the resources currently available to our company, $7.4 million cash plus a bit is not enough for us to do just AlphaRET. So we have, for some time now, been talking about with potential partners to take a direct equity interest in AlphaRET in exchange of funding. So to be clear, that's not about raising money in the entity EYE. We are talking about divesting our ownership within the special purpose vehicle called AlphaRET in exchange for cash to do the funding. We've not put a timing on that. We've been talking about for a while. It's a slow-moving disease. It's a very large market, and there are many people interested in it. We are not -- we will continue to work on that partnering opportunity. And the main target we've been minimizing our corporate expenditures on AlphaRET. Next slide. So this shows our group cash flow. We had a large cash outflow in the first half, which is materially abated in the second half. That has been due to the increased selling prices and production improvements in Fremont, but also our work to tighten things on AlphaRET. We have an income tax receivable as well that we will process during the fiscal year and combining that with the cash on hand where we're happy that we have enough to achieve our glaucoma and work on growth ambitions. Next slide. So our group outlook. We are continuing to believe the evidence is continuing that the sales of the new iTrack advance in the U.S.A will drive significant growth for our company during 2024. We put our first report has been 32%, and we're excited about that. We will -- there will be an increase in operating expenditures to support the expansion, but that will come with improved revenue. And as a result, we are forecasting a continuation of the improved operating results we saw during the first -- sorry, second half of fiscal year '23. And we'll continue to work on a transaction with a partner to fund the AlphaRET, 2RT commercialization, and we'll let you know, obviously, we'll let you know as soon as that happens. The next slide, Mark, is just reminding us of the snapshot, the 2 segments of our business, which we are tackling to 2 very large causes of blindness as well in the developed world. Glaucoma, we're funded. We're going. We're working on that with your money. AlphaRET, we're seeking, as we said, we're seeking to lower our equity interest in the project in order to get that funded. Last slide, corporate snapshot of -- we're pleased with our supporting institutional shareholders. I -- as a CEO, everybody wants their share price to be higher. I'm one of them, for sure, but I am -- we are pleased with the volume of trade during March -- since March when we released -- when we did our capital raise and released the iTrack events in the United States. So a material improvement in volumes. And I believe compared to the market with -- we've done pretty well holding our own over the last -- in fact, it's a little increase over that period. So we are looking forward to moving sales along, as I said, the bottom line is sales in the United States, and we think that's what our shareholders want. So thanks. We have a couple of written questions, Mark?

Yes, a couple of questions for you, Tom, that have come through on the Q&A via Zoom. First one is the gross margin of 73% in the first -- in second half, sorry. What's your expectations going forward on that margin?

So I -- I carefully -- we carefully don't make any predictions because the world is a complicated place. We're very pleased with that 73%. We're forecasting improved operating results in general. So I think it just goes into that bucket, Mark.

And the cash balance of $7.4 million plus the receivable from the ATO. What's roughly the cash at this point in time, noting the second half cash burn?

So the second half cash burn, obviously, it's -- it's never -- what we wanted to highlight on our cash -- cash slide is the material improvement. And you could imagine that, that material improvement is continuing as every month passes. So we're not forecasting, a, how many months of cash we've got left. We are saying that we are very happy with the amount of cash we have in the bank in order for us to achieve our glaucoma goals, our glaucoma goals under, not to our team.

Can you -- how confident are you with those glaucoma surgeons to win back that 300 that you noted on the pie chart?

So we had -- there's all these trade shows which are very energizing. Our sales team reported -- there was one this weekend, it's called Women in Ophthalmology, were really well attended, so many exciting leads that we got at that conference. And they continue to be impressed by the 3 reasons our device is superior to the other devices on the market. First of all, it's stent-free. The other 3 main areas are they're navigation light. The fact that a doctor can tell where the canal -- where the stent -- the catheter is in the canal is a big plus. The fact that we can do 360 degrees in a single pass, so that removes the need for pulling the catheter out and putting it back into the hole for want of a better word, which can be tiresome. And the third one is being able to flush the canal with high volumes of viscoelastic. So we think those things are telling in the market. And so we've been very pleased with the takeup.

The sales in Europe and especially Germany, where sales were flat, can you make a comment on the sales or outside of the U.S.?

We -- I liken it unfortunately a bit to the question we received about Australia. We have sales in Europe and then vaguely sales in Southern Europe. But the investment to keep moving has been made in the United States where the sale prices are higher and the investment -- return on investment for investments is stronger. So we are still working on Europe, and we've had sales. Our China sales are the same, but our priority is Europe -- our priority is America, sorry.

Can you make a comment on the LCD and MAC proposals in the U.S.?

Yes. That's a complicated one. The whole area of reimbursement is complex in the United States. And it's highlighted by the 3 things that I've noted that are going on right now. The first one is Cigna, which is a major insurer. It covers like 15 million or 20 million people in some states in the United States have now said it will cover now -- cover canal busting and including our device and a whole lot of other things as well, saying that glaucoma surgical devices are the way to treat patients. They are looking after their patients, and so we're going to -- they're going to cover it. CMS, which is the control entity that decides on the reimbursement levels have actually slightly in the lower single-digit percentages, increased the -- increased the reimbursement for iTrack procedures during -- for fiscal year '24, so that's good, a small increase, not that material but it's good that it's going up. And then we have the Medicare administrative contractors, have put out what they call a local coverage determination, saying that for public comment saying that they are thinking about not covering certain procedures. Now we're not covering certain surgical device procedures. Now the professional bodies are making their submissions. The doctors are making submissions direct. And so we, like any transaction, you can't comment on a transaction until it's completed. And so I consider that a transaction that we want. We really can't predict how that's going to come out until it's finished. There's lots of water going under the bridge. I should add that back in 2020, there was a similar local coverage determination, LCD, that came to nothing.

Considering the conference over the weekend, can you comment on the reaction of your competitors to the new device to the iTrack event?

I think -- no, actually, we try not to worry about -- we worry about competitors. But as we project ourselves we are pleased with the number of people that have entered our booth, the number of leads that came in; our branding; the fact that people like our 3 reasons: high flows of OPD, the 360 degrees and the light; and being able to get that message across, which are very distinguishing characteristics from our competitors. We were just pleased to get in front of them.

Just a final one, probably on the trials on the MAGIC and CATALYST trials that will complete in 2024. Should we expect the data from that to be received?

Well, you can't comment on data until it's finished. I mean, our view on that at the moment is that real world data is really good. And it shows that -- we shouldn't forget that we've got probably 40,000 procedures that have now been done with this device. That's a lot more than other people and other devices. And so we think that the real-world data -- real world registry data is very important. We know that doctors and shareholders like studies. So we're doing them, but we won't be able to comment on what's going to happen there until they're done.

Thanks, Tom. That completes the questions. We're limited there today. Always, please e-mail through any questions you have to Tom or myself, and we'll look to answer those as best as we can. But thank you, everyone, for joining. And we will provide an update to the market as soon as we can. Thanks very much.

Thanks, everyone. Thank you.