Streamex Corp. (STEX) Earnings Call Transcript & Summary

Welcome. We are here with Ken Londoner with BioSig Technologies. BioSig Technologies is a medical technology company commercializing a proprietary biomedical signal processing platform designed to improve signal fidelity and uncover the full range of ECG and intracardiac signals. I'll go ahead and pass it over to you for your presentation. You'll have about 10 minutes.

Thank you, and great to be here, although I missed the Luxe Hotel in Los Angeles, hopefully, next year. This is our disclaimer standard and -- BioSig Technologies, we are a long-standing participant at the LD Micro Conference. We participate in the medical technology industry. We were actually founded and raised in Santa Monica, California, but now we're on the East Coast as well. We are in the electrophysiology market. The market for rapid heart rhythms. It's a very large market, expected to be $12.2 billion by 2026, and it grows double digits, whether the economy is doing well or not. It's based on the aging of our population. It's the fourth leading disease state in the United States. Our company has patented technology, 31 patents issued, and we're totally protected. We have a unique position in our industry. We just announced our first customer on Friday, who happens to be the #1 hospital in our industry, largest volume center in the United States called Texas Cardiac Arrhythmia Institute. We have a razor and blade business model, and we're FDA-approved. The market opportunity for us, there is approximately 8,000 labs that do what are called cardiac ablation procedures. If you have a rapid heart rhythm, your heart speeding over 140 beats per minute up to 220 beats per minute and there is a minimally invasive surgical procedure called cardiac ablation. You go to a leading hospital. You're on the table for 2 to 6 hours. If they get the procedure right, you're cured of the heart rhythm and that's our industry. It's growing at 13.5% and per annum. It's the fastest-growing sector of cardiology, which is one of the largest segments of the life sciences community. And our total addressable market is $2 billion. That is our opportunity for the company. That's not the size of the market. This is what our environment looks like. On the left hand of the photo is the hospital of the University of Pennsylvania. If you look in the middle, those are our panels, the middle 2 panels. That's called the PURE EP System. If you look on the right-hand side, that's the Texas Cardiac Arrhythmia Institute. That's what our product looks like. It's installed in the operating room. And basically, there's a wire inside of the heart that's reading the heart's signals from within. That information goes to a central junction box, which is just below the physicians face. You can see the black box. We take the signal into our computer system and we're processing that information, and we're extracting all the interference from those signals. These are small, very small amplitude data. And then our algorithms are giving the physician location suggestions as to where they want to guide their surgical instruments to do the proper procedure. And this is the control room on the left and the operating room on the right. Our commercialization strategy for 2021 is going to be regionally focused in 3 areas of the country, the Northeast. Our headquarters is based in Westport, Connecticut. Down in the Southeast, centered out of Mayo Clinic Jacksonville, where we currently have a system and the Texas Cardiac Arrhythmia Institute in Texas. As you can see, these 3 regions of the country are dense with target-rich customer opportunities. We calculate the revenue potential just from these 3 territories alone is roughly $286 million. And having just announced our first commercial contract in Texas next year in 2021, we expect a full year of commercial revenues and sequential revenues every quarter -- revenue in every quarter, more revenue than the prior quarter. In terms of our business model, we said we have a razor and blade model. The PURE EP System, which you saw a picture of is a hardware sale. We sell that to the hospitals in the United States. The physician has to really like the system, so they try it for a period of 30 to 90 days. After that trial period is over, we're, in parallel, working the relationships in getting through the sales cycle in the hospital administration. So they'll purchase the hardware and then we sell them a service agreement, which includes installation; training; in-operation service, so we have somebody who's participating in every procedure and also they get a warranty. And that's about 20% of our hardware purchase price and they pay that every year per system. On top of that, we offer specific software modules, which are clinically driven to make their procedure better, faster, more effective. Those modules are selling individually. We'll probably roll out 1 to 2 modules a year. Those, we think, will sell for anywhere between $25,000 and $50,000 per module. And on top, we're working on machine learning algorithms and data sets. That business is in development right now, and we should be rolling that out the second half of 2021. In terms of the value drivers for the company, in 2020, we raised $41 million opportunistically. We have $32 million of cash currently and no debt, representing the strongest financial position in our corporate history. In 2020, we'll burn mid-teens in terms of cash burn. So you can see we're well funded going forward. We achieved our first commercial contract. We expect many more going forward. We are looking to triple our customer base in 2021. We're currently in 6 hospitals. Today, we're installing in our seventh hospital, which is in South Bend, Indiana, Memorial Hospital. And we expect a tripling of the base within the regions that we highlighted in the prior slide. We're also working on getting CE Mark approval. We're going through our auditing process in the first quarter, and we're hopeful to have CE Mark approval by the fourth quarter, which would position us to initiate a limited market release in Europe sometime in 2022, preferably the first quarter. And as I said earlier, we expect sequential revenue growth, and we think that, that will be highly attractive for investors. And that is our presentation. So panel ready for questions.

Thank you so much for that kind and I'll invite all the panelists to open up their video and their sound. I'll just make sure that everyone can do that, and that we're not having trouble with that. Ken, if you don't mind stopping the screen share for now. We'll go ahead and just switch you over to gallery view. Okay. Perfect. Do we have anyone else here, just give me 1 moment to make sure. Okay. I believe this is it, I'm going to go ahead and exit. We have just about 10 minutes for questions.

Steve, I can start this one off. This is Chad with [indiscernible]. Can it -- So I'd like to actually go through the road and model, if we could, right? So the end result of this product is better outcomes, right, as opposed to kind of replacing any systems. And so well positioned in kind of the new paradigm of health care, right, where everything is going to be kind of outcomes based. But -- so what is the cost of install and -- so we can kind of model the revenue next year? You're talking about the installed base. So I'm curious on your first 6 hospitals, you probably don't have enough data. But what do you think is kind of the annual recurring revenue opportunity per site and...

So we historically have guided and we speak, categorically, as opposed to specifically. We think that we're -- we work in parallel with the other systems in the operating room. This happens to be an area of the hospital that has a tremendous amount of investment in technology. The average lab investment is about $20 million in terms of equipment that they have. So we're very much in the neighborhood of what are called mapping systems and recording systems. We are a signal processing platform. That's our unique ability is to offer them information they've never had before from any of their platforms. Because of our signal processing know-how in the hardware. Our hardware is unique, but it's complementary. We're not taking anything away from the existing players. So the recording system sell, on average, $175,000, and the mapping systems are in the $250,000 to $300,000 range. So we think we'll be somewhat in the neighborhood there. The average selling price, as we have more experience in the commercial market, will better be able to detail that out. But we have a list price and we go into the market with the hardware. And then the software, as I said, is about 20%. So you buy, let's say, 1 unit. You will pay us for the hardware. We recognize that upon installation of the equipment and then you will pay us that annual fee. The margins on both the hardware and the software, we believe will be in the 80s, probably low 80s on the hardware and high 80s on the software. And the modules are separate. The modules are very profitable, and we think we'll be able to get at least one of those out. So base, you want to just make an assumption, $200,000 hardware, $40-plus, software; module, $25. And then the data sets will probably be a viable business line in 2022. In the 6 centers that we're currently in, that represents 27 units of opportunity for us. Usually it takes about 12 months in the sales cycle. For the smaller, more entrepreneurial privately funded centers, that sales cycle can be less. So we have some systems that are maturing in terms of the sales cycle. Mayo Clinic, for example, we've been there for almost 9 months. So we would expect to see them come through sometime in early next year. And University of Pennsylvania, we've only been there for about 4 months. Mass General, we've been there for 2 months and so on and so forth. In 2021, we say a tripling of the base, that base will be 7% to 8% by year-end. So not every hospital is the same, though. If you want to look at the addressable market, the bigger hospitals have multiple operating rooms and we try to outfit every single room with the system. The smaller centers can be 2 to 3 operating rooms. But University of Pennsylvania is 5, Mayo would be 11. So the bigger centers more opportunity.

So just 2 more for me. So I think your reimbursement exposure is more indirect, right, as opposed to direct. But is there any trends out there in reimbursement? I would think...

Great question and very exciting. The whole reason for being in this sector is because it's, in my opinion, the most attractive sector in med tech. Why is that? It's growing double digit. That growth is expected to be going on for a long time. And the reimbursements are very strong. We can thank Johnson & Johnson for that. They're the market leader in our sector. Their Biosense Webster division as the second most profitable division in all of J&J's operating companies. And the reimbursement for private insurance averages $56,000 per surgery. So -- and a lot of times, people have to go back and have a second or a third. So basically, they get that reimbursement. On average, it costs them somewhere between $20,000 and $25,000 to put that procedure on. That's average. So they're making roughly $30,000 in operating profit per procedure. So when we go call on the hospitals, even though there's been disruption from COVID, they very much have an eagerness to bring new technology and that can get them more patients and do the procedure faster because they'll make more money. It's also a great marketing tool for the hospitals to get patients who are afraid to go to the hospital now to treat their illness. New technology is a good draw for these hospitals to create awareness in what we call the market referral networks. So we're working with hospital marketing departments to drive awareness through the referral networks, which improves our ability to sell during this pandemic because we draw a crowd.

And then last, your collaboration with the Mayo Clinic, it looks like that's more on kind of future research. But is there clearly a very reputable organization. Can they help with adoption in any way or...

Yes. I mean, our market electrophysiology is driven by physician desires as well as clinical evidence. So we are in the second phase of a clinical trial. We released clinical data back in September that showed that our signals are 36% more distinguished or more valuable to the users. That trial is available on our website, and we can follow up for anybody who's interested. The second leg of that trial, which will be roughly 100 patients, blinded, randomized with 3 hospitals in the trial, Mayo Clinic, Texas Cardiac Arrhythmia Institute and Mass General, we should be unblinding that data sometime in the second quarter. And data does drive commercial adoption and certainly drives patient interest.

Ken, it's Steve. Can I clarify? I think you had said a mid-teens burn rate for 2020. Is that right? And have you spoken to what you -- what that could look like in 2021 and thereafter and what the trajectory will be to improve?

Yes. So basically, we're building out our sales and marketing function. We're doubling the sales and marketing infrastructure inside the company. That's the selling unit, so to speak. We're going from roughly 14 to 31 heads that are responsible for convincing both the physician and the hospital to be a customer. We think that will produce a nice bounce in our revenue profile given that we're just starting commercialization. We will be covering the territories I mentioned. And depending on how revenues shake out in 2021, our goal is ultimately to make either this coming year or this past year the peak and cash burn with an eye towards reducing that. And because a lot of the investments that have been made over the -- our corporate history, are already made. Now the incremental spending is going largely to sales and marketing. Some clinical and R&D, we have 14 engineers in Los Angeles. We're adding to that department as well to improve our turnaround with software. But a lot of the spending now is geared towards commercialization and getting an installed base. So we haven't given projections on '21. It's really going to depend on revenue. And we're pretty optimistic given who our first customer was. That first customer has tremendous clout in the marketplace. And it's not a household name, the Texas Cardiac Arrhythmia Institute, but if you have an irregular heartbeat, most people know and widely acknowledged that, that is the one of the top centers in the country to go have that procedure done. They have a very, very good track record of success there.

Actually, 1 more for me, Ken. As you referenced kind of tripling that base next year. And so I'm curious if you can provide us with any backlog metrics or pipeline? I mean, clearly, you're pretty optimistic, but what is the average kind of selling cycle? How many do you have kind of well down the pipeline? And just any kind of metrics that you can provide that gives us comfort that you can do that.

Sure. So 6 hospitals in the backlog, although that's your term, I'm not sure I relate to it so much on this in this short session. But there are 27 units of opportunity. We just pulled down the first 3 at Texas Cardiac Arrhythmia Institute. There's another 3 at that site that we could sell, that would be a total install of 6 at TCAI. And then the others represent 24 -- excuse me, 23 units of opportunity. All that inventory has already been paid for. So that inventory is in hand. We paid for it second quarter, third quarter. And there's really no commission against that -- those sales because the team that's on board right now is not commissioned or salaried. So 23 units of opportunity in the pipeline, some of it getting very close to closing. Some of it -- if you assume a 12-month sales cycle, some of it is a little bit earlier. And then you'll see us adding installs. In the first quarter, we have a contract for 4 new hospitals, but we expect more. And as we -- our tendency is when we get in there and the center is feeling very good about what they're seeing. We work with their marketing or public relations departments, and then we'll announce that we've gone in, and then we'll also announce when we close the deal. So that will be how you'll be able to track us.

Thank you so much for your presentation, and thank you so much for your questions. We will see you on the next one.

Thank you so much. Have a good day.

Have a great day.